29 May 2009

Why the “Copycats?” Report has a Copycat Problem

Along with death and taxes, one of the other certainties in life is the constant flow of reports from the media industries claiming that copyright infringement is causing them to lose billions of pounds of revenue each year, and that they will inevitably go to the wall if even harsher legal sanctions against infringement are not brought in (although, strangely, they have been saying this for about 10 years now, and they seem not to have gone bust yet....)

Of course, you might expect industries to paint the situation as bleak as possible – that's why they spend large chunks of their considerable revenues on expensive PR companies and lobbyists to “sex” things up a bit. But there are other kinds of reports, typically sponsored by national government departments, that claim to provide more objective information about what is happening in this field.

Sadly, those expectations of objectivity are not always fulfilled. The most blatant example occurred just this week, when some fine digging by Michael Geist showed that a report from The Conference Board of Canada, which purports to be an independent research institute, not only copied text verbatim from the International Intellectual Property Alliance (the primary film, music, and software lobby in the U.S.), but also used figures from an old Canadian Recording Industry Association press release to justify dramatic statements like the following:

As a result of lax regulation and enforcement, internet piracy appears to be on the increase in Canada. The estimated number of illicit downloads (1.3 billion) is 65 times higher than the number legal downloads (20 million), mirroring the Organisation for Economic Cooperation and Development’s conclusion that Canada has the highest per capita incidence of unauthorized file-swapping in the world.

As Geist points out:

While the release succeeded in generating attention, the report does not come close to supporting these claims. The headline-grabbing claim of 1.3 billion unauthorized downloads relies on a January 2008 Canadian Recording Industry Association press release. That release cites a 2006 Pollara survey as the basis for the statement. In other words, the Conference Board relies on a survey of 1200 people conducted more than three years ago to extrapolate to a claim of 1.3 billion unauthorized downloads (the survey itself actually ran counter to many of CRIA's claims).

After stupidly trying to defend this indefensible position, The Conference Board of Canada has now backed down, admitted that the report plagiarised material, and withdrawn it, along with two others.

Against that background, the appearance of the report “Copycats? Digital consumers in the online age”, produced by University College London's CIBER for the UK governmnent's Strategic Advisory Board for Intellectual Property Policy (what a name) takes on an added significance. Among other questions, one issue is to what extent the report manages to look objectively at the facts, rather than blithely accepting the highly-partial views of the media industry itself.

The 85-page report is detailed, and as you might expect from an academic outfit, is fully referenced, which is excellent. I strongly recommend that anyone interested in this important field read the whole thing. But for those of you slightly more pressed for time, the executive summary gives a good flavour of its approach:

The backdrop to our research on online consumer behaviour – and the impacts and implications this has on legal practice, the content industries, and governmental policy – is one of vast economic losses brought about by widespread unauthorised downloading and a huge confusion about (or denial of) the definition of what is and is not legal and copyright protected. Industry reports suggest that at least seven million British citizens have downloaded unauthorised content, many on a regular basis, and many also without ethical consideration. Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10 billion (IP Rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs. This is in the context of the “Creative Industries” providing around 8% of British GDP. And the situation is not solely a British problem, but a global one. Downloading culture (Altschuller, 2009: unpaginated) “has forced society into a muddle of uncertainty with how to incorporate it into existing social and legal structures.” Altschuller adds that: “...music downloading has become part and parcel of the social fabric of our society despite its illegal status,” (emphasis added).

Just to make it clear - this is not simply an issue of music and film downloads alone. Software losses due to what is often described as “piracy” were, for example, $48 billion worldwide in 2007 (BSA, 2007); and in the UK the figure was $1,837,000 or approximately £1.25 billion. An exploratory CIBER investigation found vast quantities of films, music, software, e-books, games and television content available to download and share without cost. On one peer-to-peer network we found that at midday on a weekday there were 1.3 million users, sharing content. If each “peer” from this network (not the largest) downloaded one file per day the resulting number of downloads (music, film, television, e-books, software and games were all available) would be 473 million items per year. If the figure for each individual is closer to five or more items per day, the lowest estimate of downloaded material (remembering that the entire season of the Fox television series “24”, or the “complete” works of the rock group Led Zeppelin can be one file) is just under 2.4 billion files. And if the average value of each file is £5 – that is a rough low average of the price of a DVD or CD, rather than the higher prices of software or E-books – we have the online members of one file sharing network consuming approximately £12 billion in content annually – for free. These figures are staggering.

Staggering indeed – and complete piffle.

Sadly, the basic problem with the whole report is made clear in the first line of the above extract: “The backdrop to our research on online consumer behaviour – and the impacts and implications this has on legal practice, the content industries, and governmental policy – is one of vast economic losses brought about by widespread unauthorised downloading”. That is, it starts from an *assumption* that unauthorised downloading is causing economic damage, rather than examining whether that is the case: clearly, this is going to skew all the results of the research, because it is seen through a particular optic – that of the media industries.

But wait, you may say: maybe that is simply a statement of what the report found out during its objective research, which is a fair point. So let's just look at the figures cited above, and their source.

Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10 billion (IP Rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs.

A quick check in the references gives the following:

IP Rights (2004) UK Tackles counterfeiting and piracy – launch of national IP Crime Strategy, Alert, Press Release, August 2004, issue 156. Available online at: www.iprights.com/publications/Alert_156.pdf (accessed 02.03.09)

So that £10 billion figure actually comes from a press release from the UK government itself – looking good so far. But why don't we check up on what exactly that reference says? Here's the relevant paragraph:

there has been a growing recognition of the economic impact of IP crime. Rights owners have estimated that last year alone counterfeiting and piracy cost the UK economy £10 billion and 4,000 jobs.

There we have it: that cast-iron, irreproachable, UK government-guaranteed £10 billion figure is merely – you guessed it – an estimate from the media industries themselves. In other words, there is no fundamental difference here from the situation with the Canadian report, except – importantly – there is no attempt to hide the connection (provided you are prepared to follow the links). But the figure is essentially worthless: it was produced by the media industries to justify their perennial wails of anguish.

That's one pretty obvious way in which the whole context for the report is biased by the media industries' agenda. But the problems go deeper, and operate in a more subtle way. Consider, for example, this passage from the paragraphs above:

On one peer-to-peer network we found that at midday on a weekday there were 1.3 million users, sharing content. If each “peer” from this network (not the largest) downloaded one file per day the resulting number of downloads (music, film, television, e-books, software and games were all available) would be 473 million items per year. If the figure for each individual is closer to five or more items per day, the lowest estimate of downloaded material (remembering that the entire season of the Fox television series “24”, or the “complete” works of the rock group Led Zeppelin can be one file) is just under 2.4 billion files. And if the average value of each file is £5 – that is a rough low average of the price of a DVD or CD, rather than the higher prices of software or E-books – we have the online members of one file sharing network consuming approximately £12 billion in content annually – for free.

Again, this is riddled with unexamined assumptions that are taken straight from the media industries framing of the situation. For example:

“if the average value of each file is £5 – that is a rough low average of the price of a DVD or CD, rather than the higher prices of software or E-books”

This assumes many things. For example, that all these downloaded files represent real losses for the media industries – that people would have bought this stuff had it not been available online. This is a huge jump to make: it's just as likely that people are trying out stuff they would never have looked at if they needed to pay for it. In this case, it's closer to marketing materials, providing powerful free advertising. As other research indicates, people who download unauthorised material from the Internet are *more* likely to buy stuff afterwards.

Then there is the pricing - “average value of each file is £5”. This simply accepts that the pricing the media industries are trying to impose on online customers is reasonable. And yet economics teaches us that the price of goods tends to fall to their marginal cost – zero in this case. The media industries are basically trying to defy the laws of economic gravity: that prices of digital goods will inevitably fall to earth (reference is made to this later in the report, but the authors don't seem to have understood the implications).

It's the same with software: what illegal downloading has shown is that the prices Microsoft and other proprietary companies have tried to obtain for software are, in fact, unjustifiable, and essentially unenforceable in an online world. Paying several hundred pounds for something that costs effectively zero to manufacture and distributed is rightly perceived as unfair by consumers – which is why they feel little compunction in downloading it. Costs of development need to be recouped, but that doesn't justify the kind of price-gouging that has been going on in the software industry for the last few decades (just think of the profit margins that companies like Microsoft have achieved historically).

The difference is, people now have a way of manifesting their discontent by using open source, or through unauthorised downloads (which Bill Gates has admitted he prefers to the former option). And, of course, free software, as produced by open source companies, shows that there are other ways of developing code – be it drawing upon a wider community of volunteer programmers, or selling support etc. - without charging high prices for goods with zero marginal cost.

In fact, there is a larger point here, completely missed in the report, as far as I can see. One reason why people have few qualms about downloading copyrighted material – that lack of “ethical consideration” the report refers to above - is that there is growing realisation that copyright law as currently construed is totally tilted in favour of businesses. Copyright term – originally *fourteen* years – is now effectively forever, thanks to constant extensions. The basic social compact that a creative work was granted a short-term, government-backed monopoly in return for placing that work in the public domain soon afterwards has been betrayed: people effectively give lots and get nothing. Illegal downloads are a way of striving for a fairer balance in a world where the laws are completely skewed against ordinary citizens, who have no other way of obtaining a more equitable approach.

Again, the report does not reflect this, but silently assumes that copyright is good in itself, and is working as it should. In fact, the massive flouting of the law is proof that this is not the case: when “[i]ndustry reports suggest that at least seven million British citizens have downloaded unauthorised content, many on a regular basis, and many also without ethical consideration”, then clearly today's copyright system is badly – perhaps irremediably - broken.

So while “Copycats” is to be welcomed as an honest effort to report on the true situation of unauthorised downloads in the UK, it fails at a profound level by overlooking its own deep, ingrained biases, fruits of years of relentless propaganda campaigns waged by the media industries and their lobbyists. Ironically, then, it would seem that the authors of the “Copycats” report, which delineates a wired-up Britain permeated by the “copycat” tendency in the realm of digital artefacts, are themselves unconscious copycats, albeit of a different, more rarefied kind, in the realm of ideas.

Follow me @glynmoody on Twitter or identi.ca.

8 comments:

Roger Lancefield said...

Fine summary and commentary Glyn, many thanks for doing the leg-work.

You wrote:

"This assumes many things. For example, that all these downloaded files represent real losses for the media industries – that people would have bought this stuff had it not been available online. This is a huge jump to make: it's just as likely that people are trying out stuff they would never have looked at if they needed to pay for it."I've always felt that this was the key argument in the "piracy" debate. Take the recent Rick-Rolling fad, for example. Technically (I assume), each YouTube view was an illegal viewing of copyright protected content. But for the rights-holder to claim that they were being swizzled out of millions of dollars of royalties would have been absurd, for the whole fad only occurred *because* of the fact that i) the song was viewable for free and ii) that it was so easily accessible. To pretend, as some rights-holders do, that such viewings are stealing money from their wallets is disingenuous in the extreme, for that money was never in their wallets to be stolen.

In the case of Rick Astley and the rights-holder for his song and video, the whole craze was a win-win situation. A long forgotton and deeply unfashionable piece of music that in the pre-digital era would almost certainly have been dead and securely buried, found a huge new lease of life in the public eye - and that new lease didn't cost the rights holders a penny. It was marketing manna from heaven and any business in its right mind would have been grateful for it.

Of course, the situation changes when you move from crazes such as Rick-Rolling to deliberate downloading of movies and TV programs. But even here much of this activity only occurs, as you point out, because this stuff is available so readily for free. Force people to pay a non-trivial fee, and most of that traffic is going to go bye-bye.

Imagine a situation in which one left large numbers of cans of drink on one's front wall, which any passer-by could take without payment. It would be ludicrous to turn round, months later, and claim that the passers-by were cheating you out of your rightful position as the largest beverages retailer in your area. This is simply false. The passing "trade" is only occurring *because* of its zero-cost and availability. To become a real drinks distributor and vendor takes much, much more effort. I acknowledge a key difference, of course, that in general, rights-holders do not deliberately seed P2P networks with their material. Nevertheless, it makes little difference to the principle determining the real value of that material.

I've now lost track of the number of CDs and DVDs I have bought because of the poor sample-rate film clips, TV episodes and songs viewed "illegally" on video sharing services such as YouTube. I've never seen estimations for the value of such purchases made or acknowledged in these "piracy exposes" and the fact that both governments and the content industry are ignoring the obvious upside simply increases general cynicism and increasingly turning the content-buying public against the vendors.

Going to war with your customers can never be a viable long-term business strategy.

I think your point about Internet users using ready online availability as a means to avail themselves of some of the benefits inherent in digital media that are currently being witheld (either purposefully or through poor marketing strategies) by rights holders, is an important one.

Rehashing these arguments and debates is, for most of us I'm sure, becoming very tiresome now. The problem is that copyrighted content is clearly being viewed by some in government as a pretext for ratcheting up their control, not only of our online activity, but also of our computers themselves. For this reason at least, the debate is not going to go away anytime soon methinks.

Once again, very good post, thanks.

Andrew Katz said...

Great points, well made, Glyn.

I downloaded the report, but couldn't bear to read after the bit which talked about the "problem" exemplified by the ease with which the complete works of Dickens can be downloaded. It's a pesky old thing, the public domain, isn't it? Time to get rid of it, clearly.

glyn moody said...

@Roger: thanks for those thoughts. And yes, the BBC piece made my blood boil, too, with its unquestioning use of figures that are, in fact, completely made up and bogus.

glyn moody said...

@Andrew: thanks, I appreciate that feedback from the legal side of the readership.

Roger Lancefield said...

I've just re-read my comment. What a confused bit of gobbledygook. It made sense when I wrote it, honest!

I also managed to delete the paragraph break between my quotation from your post and my comments that follow, something which just makes it even harder to follow. My bad Internet day continues.

Oh, if anyone reading this is puzzled by Glyn's comment about the BBC article and boiling blood, it was a reference to some related comments on Twitter earlier in the day.

glyn moody said...

@Roger: thanks. And for those who want to see some poor journalism, here's the BBC link:

http://news.bbc.co.uk/1/hi/technology/8073068.stm

The Mad Hatter said...

Glyn,

You might want to ask the Daily Mail for a retraction as they are still spouting the inaccurate numbers.

glyn moody said...

@madhatter: yes, and that's a pity because the rest of the story gets it.