Do We Know the Cost of Piracy?

Illegal downloading has come to the forefront of the news in recent days. Wikipedia and other websites announced that they will go dark tomorrow (Wed the 18th) in protest of the upcoming U.S. Congress votes for both Protect IP Act (PIPA) and Stop Online Piracy Act (SOPA). The supporters of these acts estimate that online piracy costs the U.S. economy about $200 to $250 BILLION per year, and is responsible for the loss of 750,000 jobs (via Freakonomics). $250 billion works out to about $800 per American head, which does seem a little high. I guess that’s why they are supporting the bill, with their made up stats.

Various studies have come out to try and quantify the ‘actual’ number, but many studies have been flawed (blame the lab rats). But can we find out the costs? Well, not very accurately. Additionally, the argument is made by Freakonomics that people often download things for the sake of downloading them. For you illegal downloaders out there, what percentage of movies or music have you downloaded and never watched? And what percentage of those downloads would you have never paid a cent for anyway, but considered it because it was available at the click of a mouse or touch pad? Should these count in the stats? (Hint: probably not)

The counter argument is that the loss of jobs (or sales) in the music and movie industry might be made up, to varying degrees, in other industries. People might buy more computers now, knowing that they can save money on illegal downloads. People need places to store and copy all of this data too, so DVDs and external hard drive sales (and production) goes up.

If one never downloads the new Lana Del Rey album, one might not discover that they actually like her, and then pay to see her in concert and buy a t-shirt, or go to a festival where she is, pay for a plane ticket, a hotel, local souvenirs, etc. How are these new “gains” quantified or re-distributed? They’re not. The argument isn’t that piracy is a viable solution to these industries, but it is also not necessary the end game – companies need to (well, needed to) learn to move with the times and capitalize where money can be (and could’ve been) made. Online streaming services and clouds are a start, but restricting websites and domains will likely just piss off the masses more – and who knows what will come out of that.