Thursday, April 7, 2011

Exploring the Myth of Piracy, was the RIAA right?

First, let's get this out of the way, stealing something from another person is bad, plain and simple, and I think most reasonable people would agree with moral foundation of that claim. But the RIAA didn't fight it's piracy battle from a moral standpoint, they didn't try to press any offenders into criminal proceedings. They waged their war arguing the economics of their case; the ensuing legal battle raged coast to coast, and it's casualties included some real pirates, an internet company or two, and even a few grandmothers. But was their claim entirely correct, was piracy as economically devastating to them as they claimed? Based on the empirical evidence on this week's reading assignment, I'd have to say no, there is an element of loss, but i'd argue it is a very small one.

The RIAA's argument is that if a person has pirated an item for free, now they don't have to go to the store and pay for it, thus depriving the Artist of their rightful profit. This may sound reasonable, but it's not entirely logical. The underlying assumption is that the person doing the pirating was going to buy the pirated item in the first place. I would argue that most, not quite all, but most of the items being pirated weren't going to be purchased in the first place, thus negating their claim of loss on all pirated items.

Though we've had differing formats, file sharing software has been relatively easy to use. This created somewhat of a novelty effect, in that is was just as easy to download swarms of files as is was to download just one. Sure the pirate may have just wanted to steal one song, but clicked everything that was on the screen instead. Is there an element of theft involved? Sure, but a pirate having a massive number of songs that 1) they probably won't listen to, and 2) had no intention of buying in the first place, doesn't severely harm the RIAA. Which the statistics at the time of their lawsuits clearly show.

The following excerpt outlines the numbers:

In 2002, the RIAA reported that CD sales had fallen by 8.9 percent, from 882 million to 803 million units; revenues fell 6.7 percent

In the same period that the RIAA estimates that 803 million CDs were sold, the RIAA estimates that 2.1 billion CDs were downloaded for free.

The empirical claim is that the 2.1 billion CDs that were pirated caused a drop in sales by 8.9%, and a drop in revenue of 6.7%. So, just to clarify it further, a product was pirated at a the rate that was 260% more than its total annual sales, and revenues only dropped 6.7%. I think these numbers actually hurt the RIAA and their claim, and call into question whether piracy is a big issue for them, or is it a bigger issue for other industries.

The 6.7% drop in income could be explained by any number of circumstances that don't include piracy: economic downturn, increase in business costs, and even lack of consumer interest based on the quality of the product that year. I'm not saying that piracy had zero effect on the drop, but just how much above zero it contributed, is certainly up for debate.


  1. Dropping the moral argument and looking strictly at the numbers makes the RIAA look ridiculous. They see that 2.1 billion CDs downloaded not as a loss of revenues but as a market they have no clue how to monetize.

  2. Like your first sentence states "stealing something from another person is bad, plain and simple, and I think most reasonable people would agree with moral foundation of that claim." No matter what it is that people are stealing, it is just plain wrong... regardless of what it is or who it is from. eather it takes away from the Artist, the store, a grandma, or a young kid walking down the street. To me it is just another type of theft that has to be dealt with and should receive a punishment.