Profits and Costs of Piracy: Fact and Fiction [WIP]

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http://p2pnet.net/story/838
"The total annual gross revenues of the music industry today are estimated at $11 billion. But that's gross revenues."

http://www.pcpro.co.uk/news/106698/technology-boosts-movie-industry-box-office-sales.html
Global box-office sales totalled a record $25.8 billion in 2006, casting new doubts on the movie industry's insistence on the detrimental effect of 'piracy'.

http://www.mecfilms.com/moviepubs/memos/moviein.htm
In 2001, worldwide gross revenues generated by motion pictures in all territories and media (including music and ancillaries) amounted to over $40 billion.

http://www.gamespot.com/news/6164101.html
When hardware, software, and accessories sales are combined, the total US gaming market for the year amounted to $12.5 billion, a 19 percent jump over 2005's $10.5 billion, which was the previous highest grossing year in US gaming. December alone saw the industry bring in $3.7 billion, 27.8 percent more than the $2.9 billion it brought in for December 2005. The figures did not include sales of PC games, PC game subscriptions, or downloaded content.

http://crime.about.com/b/a/173782.htm
"Internet pirates cost U.S. industry hundreds of billions of dollars in lost revenue every year from the illegal sale of copyrighted goods and new online file-sharing technologies make their job even easier," said Assistant Secretary Garcia.

Can someone help me fill in the blanks here? I know I haven't nearly hit all the bases yet but I have this itch that says the FBI representative's statement is entirely bullshit. Once we can get the facts straight we can start talking about the implications, if there are any. My reason for bringing this up is that the statement made by Mr. Garcia was seen widely on every major news source online and offline, which if it's incorrect, may be at the least irresponsible. I could be totally wrong though so let's not talk about that until we have the facts.

Edit: I guess nobody cares that much? I'm out of time before two week internet blackout, so I can't work on this one anymore. I'll keep thinking on it, maybe I'll drop the topic here and submit it somewhere else. Cheers!

 

[Rhazdel]

I believe the FBI statement. For example, if someone downloads a movie that was just released at the box office and watches that movie at home with 2-3 of their friends, those people would probably have either gone to the movies to pay for it or rented it when it came out. A movie ticket is about $9.00 per person, so if all 4 of them went to see the movie, it would cost $36.00. Now multiply that times the number of people that pirate movies every year and you will get a drop in thousands of dollars in revenue.

CDs cost about $16 a piece.

Software piracy costs even more, because liscenses can cost anywhere from $50 - a few hundred dollars per user.

It all starts to add up. I think that if he was exaggerating, it was only slightly. Piracy is actually a rather big problem. The more people pirate, the lower the profit for the companies producing the media. The lower the profit, the less incentive that company has to continue to produce new media.

Piracy hurts more in the long run as it gains in popularity.

 

[sixtyandaquarter]

I second that Rhzadel,
and add that it does hurt small local industries as well.
My mother, my aunt, and I have at one time or another worked at Major Records here, and while the business used to be really well - even beating out a Coconuts and FYE that moved in across the street - with a large increase of bootleggers selling goods in Pathmark shopping carts, the trunks of their cars in the parking lot, and so on, the sales of CDs and more so DVDs has dropped dramatically.

While, okay, it could do with a trend in local economy, perhaps people just aren't shelling out the money like they used to, but considering that these bootleggers are in the parking lot every day - and some have been arrested and come back - to sell new goods, would indicated that business for them is, at least, good. Several times the owner of the store has talked about relocating or even selling out, this Christmas season the store cost him more money than he gained - possibly (maybe not necessarily) because of said pirated goods.

 

[LordEliwood0009]

Well look at the other quotes. I believe the FBI is just making up things to try and scare everyone away from it. Even with piracy, the profits are more noticable than the piracy losses. A little tip, if the FBI didn't mention about how people tend to pirate software and other stuff, then most wannabe pirates would end up stopping before they begin. Why mention how they make it easier unless they do it too? How else do they figure out stuff is being pirated by sharing files unless they were also using these programs. I think the FBI is just full of it, trying to put the blame on other people to avoid drawing attention to themselves..

 

[Roph]

Yay for open source!

It looks like you're all missing a vital point. The "If I can't pirate it, I won't use it otherwise" one.

Take Photoshop, for example. $600? Don't make me laugh. There is no way in hell I am going to pay 600 dollars for photoshop, and I'll only use if if I can pirate it. Lost revenue for adobe? 0bux.

(Just an example of course, I despise Adobe and every adobe product I've ever tried )

Basically, I wouldn't bother trying to enter such a market as music / software if you have a view like, for example, ccoa's. You can moan all you like, but people will still pirate your shit (if it's worth it), and for the most part there is not a thing you can do about it. You might catch the odd kid here and there, and if that's enough to make you happy then you go enjoy doing that.

It's funny watching even people who are actually trying to purchase / legally use stuff, but be screwed over by DRM or anti-piracy things such as StarForce.

I'm enjoying seeing the uprise of (at least) free as well as open source, copyleft / GPL / CC licensed work or entirely public domain entertainment / software, games and so on.

I'd go on, but have I already said enough to warrant more infraction points or warnings? :/

 

[Ravenith]

I just got an infraction for using rmxp pk edition. Can't complain about it, cause I posted the .ini file.
But the moment someone gets an infraction for saying what he believes, in a civilised way of course, I'm outta here.

 

[Rhazdel]

Yay for open source!

It looks like you're all missing a vital point. The "If I can't pirate it, I won't use it otherwise" one.

Take Photoshop, for example. $600? Don't make me laugh. There is no way in hell I am going to pay 600 dollars for photoshop, and I'll only use if if I can pirate it. Lost revenue for adobe? 0bux.

(Just an example of course, I despise Adobe and every adobe product I've ever tried )

Basically, I wouldn't bother trying to enter such a market as music / software if you have a view like, for example, ccoa's. You can moan all you like, but people will still pirate your shit (if it's worth it), and for the most part there is not a thing you can do about it. You might catch the odd kid here and there, and if that's enough to make you happy then you go enjoy doing that.

It's funny watching even people who are actually trying to purchase / legally use stuff, but be screwed over by DRM or anti-piracy things such as StarForce.

I'm enjoying seeing the uprise of (at least) free as well as open source, copyleft / GPL / CC licensed work or entirely public domain entertainment / software, games and so on.

I'd go on, but have I already said enough to warrant more infraction points or warnings? :/

That is why you get Gimp. If you can't afford/don't want to pay for software, there are almost always other alternatives. If you pirate, you encourage companies like Adobe to continue to produce products with increased security measures. They see that people are using their products, and if they can stop the piracy, they may actually turn some of the pirates into lawful users (Whether or not that is true, is debatable, but that is the mentality).

The FBI isn't just blowing smoke here, piracy accounts for huge profit margin losses in recent years. If people continue to pirate and companies continue to fall in profits, they may start making all future software at cheaper costs. How will they drop the price? By removing features and perks. It would be like buying a $15,000 Lambourghini with a 1960 VW Beetle motor in it, no paint, etc.

And seriously, I hear everyone complain that copyrights protection is so restrictive for the average user. Am I the only one that rarely, if ever, has trouble with "restrictive copyright protective" programs?

 

[sixtyandaquarter]

And seriously, I hear everyone complain that copyrights protection is so restrictive for the average user. Am I the only one that rarely, if ever, has trouble with "restrictive copyright protective" programs?

Now see, I thought it was just me who benefited from these restrictive copyrighted programs when one of mine screws up, or when I screw up and cause a could-be-permanent malfunction.

Yeah, sure it's true, a lot of free programs and even some of the pirated ones have support in one form or another. But the problem is, for a huge chunk, a lot of them don't bother to care after a time. I just contacted for support on a 7 year old program, of which I received support - and a free upgrade! - from the company. Not many open source, pirated, or free in some other fashion programs have that kind of support on them.

And pirated materials almost won't certainly have that level of support.
Sure, a lot of them have it, but you often get buggy patches (such as translations) and if an entire hemisphere gets enough pirated materials of a program from across the globe - that company that produces said program may not wish to put the effort into translating and distributing that program world wide anymore. It's happened.
And we get left with buggy, and very difficult to install programs requiring Alcohol and other CD emulation techniques that - if done wrong - can really screw up a computer. Hell, even if the installation was right the program itself might still seriously screw up one's computer.

 

[Ravenith]

As an economist-in-training, I can tell you that the profit that is lost due to piracy is immense. Piracy promotes itself in every way possible, though. Corporations increase the prices of their products in order to receive increased income from those precious few who legally acquire them. It's not a high risk move. When someone could get a pirated product and still buys it, wouldn't mind paying something more. So, most customers are not lost.
Only few corporations have tried to drop the prices. It's a high risk move, because there are always those hardcore pirates, but the number of legal product pieces sold could increase seriously. It's just a matter of economic policy. For example, the production cost of Adobe's Photoshop is really much below 600$. They could sell it even below cost, for, say, 50$, just to obtain more dedicated customers. On the long run, this could mean profit.

So, corporations should try to reduce the piracy themselves, not by increasing their safety systems, but by reducing the incentive to obtain pirated stuff.

Sorry, my business englsh sucks :/

 

[Rhazdel]

That does raise an ethical question, though. Just because it is cheaper, will it really reduce piracy? I think that most hackers hack not because they can't afford the product, but because they like to hack. If people have the choice to go for a cheap $50 program or a free one, many people will still take the free one (look at all the people that us PK vs. the legal 60 USD version of RMXP!).

I know many people that download entire movies to their computer rather than spending the 16 - 20 USD to buy it, simply because they can and it's free.

It's kind of a catch 22. If a company does not try to heavily encrypt their programs, they save money and can offer the product at a lower cost. This will make the program easier to crack, and would require quite a large base of legal users to make a decent profit - OR - they can spend a lot of money on encryption/protection to try and reduce piracy, drive their costs up and then raise their product price to try and compensate for the lost profit.

Damned if they do, damned if they don't.

Heavy encryption, at the very least, causes cracked programs to return more errors than then legal version, which in itself can turn hackers into legal users just to get the support and reliability of the legal version. A program that is easy to crack may function just the same as a legal version and offers no deterrent.

Does anyone else have thoughts on this?

 

[sixtyandaquarter]

Just a note, for those really expensive goods that can be pirated...
Don't forget with programs, just like $600 Photoshop, that the price usually has a lot more to do than the actual manufacturing of the good itself. It also deals with paying those who work at the company, advertising, campaigns, customer support, flights, other resources, and in some cases is higher than it would have been normally if several other products by a company is failing - or selling horribly.

Severely lowering the price can cause a lot of revenue lose for a company - especially if that's their cornerstone in sales. While lowering the price somewhat, over time, let's say going from $600 to $550, then to $525 - and so on - can dampen the hurt, it can still cause a lose of jobs, or cause the company to drop in profit.

And people pirate more often out of convenience than inability to afford a program. I can see a movie for free, since I have a stack of movie ticket vouchers, but I can get a bootleg for free because I know the guy's daughter. Which one am I more likely to do? Use the movie ticket voucher - which though it hasn't, can still have the chance of being declined - and spend half an hour looking for a parking spot and then standing on line for popcorn? No, I'd be more likely to call up the daughter and ask her for her dad to drop off that very same movie I'd be watching. Not always, but this is the more common for me to do.
Both are the same cost to me, but one is just that much easier and pleasing.

 

[Level10]

I generally don't download movies because I like to see them in the cinema or have the DVD, unless they're not that good and I just want to watch them for a laugh, though I do download TV shows. If a show is good enough that I download and watch an entire season, I'll buy the box set when it comes out.

 

[paslechoix]

There are two things forgotten here.

One of the reasons some peoples download pirated things is that it is more convenient. I seriously wouldn't mind paying that 5$ to rent two movies i want to watch but i need to get to the movie store. The thing also is, you need that 5$ bill and like 99% of my money is in my bank, or at least somewhere usefull like mutual funds.

For program like photoshop or rmxp illegal, im just a little user who is trying to do something fun. Everyone knows me as someone always on the computer and with rmxp i proved to all my friends that i made all the benifit from being in front of the computer, considering so much i learned. But whenever i feel ready to start a project i know i might be able to sell (or at least make people say wow), i will buy that legal version (whether rmxp or vb6). A reason to why prices are that high is that compagnies who will make maybe not millions but at least thousands are willing to pay those hundreds. If photoshop was designed uniquely for little users like me, i think it wouldn't cost that much.

 

[Rhazdel]

There are two things forgotten here.

One of the reasons some peoples download pirated things is that it is more convenient. I seriously wouldn't mind paying that 5$ to rent two movies i want to watch but i need to get to the movie store. The thing also is, you need that 5$ bill and like 99% of my money is in my bank, or at least somewhere usefull like mutual funds.

For program like photoshop or rmxp illegal, im just a little user who is trying to do something fun. Everyone knows me as someone always on the computer and with rmxp i proved to all my friends that i made all the benifit from being in front of the computer, considering so much i learned. But whenever i feel ready to start a project i know i might be able to sell (or at least make people say wow), i will buy that legal version (whether rmxp or vb6). A reason to why prices are that high is that compagnies who will make maybe not millions but at least thousands are willing to pay those hundreds. If photoshop was designed uniquely for little users like me, i think it wouldn't cost that much.

Two things:

First, get an ATM card.

Second:

Get the legal version of RMXP. This forum neither supports or condones the use of illegal software.

I love the Photoshop example people keep giving. Companies use a term called "target demographic", in which they define who they want to sell their product to, and base things like price (and adjust cost accordingly), marketing strategy, etc. off of that target demographic (the average user of the program).

Photoshop does not consider the "average consumer" or small-time user part of that demographic. Photoshop is a powerful professional tool, meant to be marketed to companies and professionals who can shell out the $600 for a licence. While the average person would like the ability to use Photoshop, it is not intended for household use. That is why it is so expensive.

Like any professional tool, you pay for all the little perks, features and support, provided at high quality. That is like going out and buying a high quality, professional camera to take pictures, and then complaining because it costs 1,500 USD. "But I can get a decent digital one for 100 USD!" Yeah, but you won't get the quality or support with the professional one, but the normal digital should work just fine for the average photographer. Wouldn't everyone like to have a camera that took professional quality photos? Yes. Everyone could benefit from that, but ultimately, there is no need for that kind of camera unless it is for a professional need. There are always cheaper alternatives, if you don't feel like paying for one of the best products on the market.

 

[Ravenith]

@Rhazdel: Two thumbs up. The photoshop example is really somewhat of a failure. Generally, let's not use examples that concern creation tools.
What wanted to show is that companies are in a dead end, or rather in uncharted waters. They don't know what to do.

And piracy has to do with other things, too. For example, in Greece the piracy rates are very high.
1) It's the law system that is flawed, and nobody actually thinks he would be ever punished for piracy.
2) It's the economic state of the area / country / user. My salary would be more than 1.5 times bigger if I lived in the US or some other leading country. Plus that stuff in more advanced countries costs generally less.

In the US, a forgotten realms novel costs about 8 USD. I have to pay about 11 - 12 EU for it. And I'm getting MUCH less money.

Piracy is partially an outcome of globalisation. The uneven economic state of different countries can offer an incentive:
Example: Mr. A lives in Greece. He works hard (no matter what kind of job). His chat pal, Mr. B from the US, does the exact same job. They talk on MSN, and Mr.B tells Mr.A how great a game "Big Adventure" is.
Mr.A in Greece goes to buy it, and sees that it's more expensive than in the US. And he gets less money. That makes the actual price of the game much higher in Greece, not only in money, but even more in actual value.
Mr.A sees this as an injustice.

If it was about a car, Mr. A would have to do with some alternative, because he cannot get the desired product.
But piracy offers him what he wants, for free.
I don't think that using a piracy product is "morally correct", but I understand why people do it.

Now, there are people who do piracy only for the fun of it. They keep screwing all my arguments :P

 

[Eivien]

While piracy itself is morally wrong, i do believe that the losses are overblown a little.
You assume that because someone downloads ten movies that he would have otherwise gone out and bought thosse ten movies which isn't true at all. A lot of my friends have got ridiculous amounts of downloaded movies, and when i ask them they tell me that the majority of them they maybe watched 5 minutes of and got bored. While it was wrong of them to download those movies, they certainly would not have gone out and bought them otherwise so its not lost profit as such.

However i do find the heavy handed tactics of the MPAA and other such associations morally questionable as well. Some of they things they do there is just no call for at all, and they have far to much power as it is.

This sums up these people nicely! http://www.youtube.com/watch?v=0C93_0L2Z9c

 

[Anonymous]

did you know that the head of disney has children? did you also know that these children where found downloading movies,music and other stuff from the internet for free that should have cost them did you also know that they never got done for it.

 

[sixtyandaquarter]

And the relevance is?

 

[itachi-hime]

All the things the government says about piracy is BS. I had to do a paper on this and in actuality they're aren't really loosing money (i don't know about the movie industry, but they make too much anyway) I'm talking about artists. Downloading music hurts the RECORD company. NOT the artist. Plus, you probably buy their merchandise and what not. Alot of artists SUPPORT the downloading of music believe it or not because it is FREE advertising. Nothing is free. Radio spots are expensive.

Sure it might hurt bigger artist a bit. So what? If it makes the little guy heard (like an indie band playlist you could download illegally) in the long run it might actually help them become more popular.

I did the math awhile a go. If 5 cents was charged for every song downloaded the company would make 500,000 dollars a day or something along those lines. I think that the record companies are being very greedy.

Tidbit: When the VCR first came out they tried to outlaw blank tapes because it was 'stealing' television. Lol!

 

[sixtyandaquarter]

If it hurts the record company it hurts the artist. If you work at a deli, and suddenly the deli is making less money, you could very easily be hurt by that. You could get a lower pay, a less frequent pay (such as a few days late, etc), or even get fired. This doesn't happen with music companies?

I work at a record store, a local record store, who had to compete with a chain store opening up 'cross the street. It hurt the store, and I got paid less frequent, and less. I lost what could have been my 35 cent raise, and didn't get it till FYE closed up their store. If they hadn't, I would never have gotten the raise at all. And with bootleggers in the plaza's parking lot, our movie sales are so low we barely order any movies unless they are guaranteed to fly off the shelves.

And it doesn't hurt the bigger artists much, many have guaranteed contracts now that will take from various different funds (such as merchandise) to compensate - but it will hurt that little band who got signed, and not to long later wasn't a money maker anymore. They were before, but now that CD sales drop some, the company doesn't want to lose all it's profit, so it let's go of the indie band, and keeps all the money that would have been spent.

And yes, they tried to make blank tapes illegal, and if it wasn't for Mr. Rogers and his neighborhood (and a small handful of others) the fight very well might have lost - but that's irrelevant, we're talking bootlegs not blank tapes that can be used for anything - including stealing, yes, but also home movies and the like.