The RIAA and MPAA often warn of the devastating economic effects of internet piracy. But a new government study says...not so fast. The Government Accountability Office found recently that it's impossible to quantify just how bad piracy is for the economy. Plus, they found there may even be some upside to internet piracy. CNET's Greg Sandoval explains why the GAO report is a big deal.
Artist: Archie Bronson Outfit
BOB GARFIELD: According to a study cited by the Recording Industry Association of America, global music piracy causes 12.5 billion dollars of economic losses every year. The Motion Picture Association of America says piracy cost the global film industry 18.2 billion dollars in 2005. They call it a devastating impact. But a new report by the Government Accountability Office cries foul. For the past year, the GAO has tried to quantify the actual economic impact of counterfeiting and piracy and has found that, sure, piracy hurts those industries, but there is no way to tell exactly how much. The GAO report called into question all of the industries’ figures. Greg Sandoval covers media and digital entertainment for CNET News, and he joins us. Greg, welcome to the show.
GREG SANDOVAL: Thank you for having me.
BOB GARFIELD: This isn't the Electronic Frontier Foundation being doubtful of the claims of Hollywood and the music business. This is the GAO. It’s an arm of Congress.
GREG SANDOVAL: That's right. People like the Electronic Frontier Foundation though have been saying for a long time, show us your, your - your – what you did to come to these figures. And they haven't been able to get many answers. Now, the GAO went back and said, hey, we'd like to see your numbers, too. We're here for your benefit. Congress has told us that they want to help anti-piracy efforts. This is all about helping you guys. But somehow the data that the GAO requested from the studios did not come back to them. The MPAA or the Motion Picture Association of America said, hey, we turned over everything they asked us for. The GAO staffers that I talked to, including the author of this study, said - we didn't get it.
BOB GARFIELD: And what they were specifically looking for was the raw data and the methodology behind the MPAA’s claim that film piracy cost the industry more than 18 billion dollars four years ago or five years ago. Now, just to be clear though the GAO, while it did sort of shrug as to the question [LAUGHS] of how much this is actually costing the movie business and the recording industry, they're not suggesting that piracy is good for the economy. They suggested it’s, in fact, probably very bad for the economy, overall. They just don't know the particulars.
GREG SANDOVAL: The big problem is that the film and music industries have been trying to tie piracy to the larger economic problems of the country. They've been trying to say, hey, piracy is taking revenue away from major industries and taking jobs, and this is hurting the U.S. economy. And, to be totally honest, after talking to GAO top brass about this other day, they don't think that you’re ever going to be able to make that link. It’s too big, there’s too many variables. You have to make too many assumptions. So the GAO thinks that it may be impossible.
BOB GARFIELD: Now, music acts have been able to say, okay, so we're not selling as many records, so maybe we can just go on tour, and instead of our tour promoting our record sales, we can have a record promote our touring business, and we can make money that way. Well, okay, that, that’s swell for the acts that have enough fame to do that, but no movie can do that. Are there any options for Hollywood?
GREG SANDOVAL: In convincing Internet service providers, like AT&T, Comcast, Time-Warner to try to police their pipes, not just throttling but actually –
[OVERTALK] - when the -
BOB GARFIELD: Throttling.
GREG SANDOVAL: - entertainment industries identify someone who’s pirating, they want to be able to go to the ISP and say, hey, this person is doing this, can you send him a series of warnings. And eventually, if the studios and labels get their way, the ISP would suspend service or terminate service for the worst offenders.
BOB GARFIELD: So it must have been high fives all around a couple of weeks ago when a federal court ruled against the Federal Communications Commission in the Comcast case, ruling that, that the FCC had no jurisdiction to tell Comcast that it couldn't throttle back on bandwidth for customers who were downloading big files with BitTorrent. I guess in Hollywood they're rooting for that authority never to be put back into the hands of the FCC.
GREG SANDOVAL: Right, and there’s other - they're making other efforts. There is a treaty that’s going on between many of the western powers, and the treaty would require all members to essentially require ISPs to do this, what they call “three strikes,” a series of warnings and then a termination or a suspension of service. It’s going to be interesting with the Obama administration, which has committed to helping the entertainment industries fight piracy, how they're going to get this through and, and get it past Congress. It seems to me – I haven't taken any polls and I don't want to throw out bad numbers – but it seems to me that many Americans would hate having the threat of a shut-off of their Internet service hanging over their head.
BOB GARFIELD: All right, Greg, well, thank you so much.
GREG SANDOVAL: Thank you for having me.
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BOB GARFIELD: Greg Sandoval covers media and entertainment for CNET.