What does piracy really cost?
Googling “piracy cost” yields a front page filled with results pertaining to software piracy, and three about actual piracy. You know the type they do on the high seas where people get killed or ransomed for money?
Illegal copying seems to be a far more pressing concern. If one goes by the sheer magnitude of the numbers reported, it’s easy to see why.
Company claims
Catherine Holahan at MSNBC reported that Somali pirates collected an estimated $18 to $30 million in ransom payments for ships, crew and cargo in 2008. By comparison, the BSA claims that the “commercial value of software theft in 2009 totalled $51.4 billion,” while the RIAA cites “one credible analysis by the IPI” to pin their losses at $12.5 billion per year.
Locally, in a press release dated 11 May 2010, the BSA stated that the software piracy rate in South Africa was 35% and amounted to $324 million, or R2.4 billion.
Dubious reports and cost claims
The US Government Accountability Office (GAO) however found that the various reports being cited from industry, as well as other US government agencies, should not be used to quantify the losses due to online piracy.
Among the many assumptions made in these reports, the number of infringements that constitute a lost sale (substitution rate) stands out as the largest concern.
Basically this means that while conventional wisdom would state that every download equals a sale lost, the GAO questions that assumption. The logic behind that is if pirates couldn’t download the content freely, they would simply do without.
The real cost
So if the industry reports should be interpreted with a pinch of salt, how much does piracy really cost the industry?
David Rosen, founder of Wolfire Games, analysed some of the statistics that have been made publicly available and proposes an alternative view. According to the sources he cites, iPhone game developers report an 80% piracy rate of their games, while only 5% of iPhones in the US are actually “jailbroken” (a hack required to run pirated iPhone applications).
Interestingly enough piracy doesn’t just cost the copyright holder. There are cost implications for end users as well as the pirates themselves.
According to the Telegraph new legislation passed in the UK designed to clamp down on Internet file sharing, called the Digital Economy Bill, will end up costing each broadband user £25 a year. The Government’s own impact assessment further estimates that around 40 000 households will give up their broadband connections as a result.
Fighting piracy or embracing content sharing?
Objectively it is extremely difficult – or even impossible – to accurately determine the real cost of online piracy. The Internet has changed the way information and content is shared to such a degree that a traditional approach is difficult to apply to this new online environment.
So while many companies are trying to fight online piracy, their energy may be better spent analyzing the behavior of online pirates and developing business models that embrace new content sharing models.
The real cost of online piracy << discuss in the forum
Loading ...