Seeing what you want to see. The ICC Digital Economy report.

Thirty two billion euros and six hundred thousand jobs by 2015.  Those are the losses due to piracy projected by the ICC report "Building a Digital Economy".  Scary stuff...

The report is interesting reading but not totally convincing.  If it were a climate report it's the type of publication that would have climate sceptics baying for blood.  I'll give some comment here and if you want  more analysis read on at  Technollamna, Tumbled Logic, and Open....   Overall the authors I think have done a good job of setting out what they have done, and importantly what they have assumed - and in that sense it's a valuable input to the debate that bears study.

My first and biggest problem with the report is that it sets out to evaluate the damage done by piracy - and as such finds the result it is looking for.  It isn't a holistic view of the economy and doesn't consider balancing factors - like increased bandwidth usage from non-commercial sharing stimulating the telecoms sector.

The basic premise of the report is that the creative industries and supporting sectors are a major part of the economy and are at serious risk from piracy.  They then present figures that show that piracy as they evaluate it amounts to around a 2% of creative industry value.  Noticeable but not at a level that supports the premise that piracy is killing creativity.  Moreover, they include in their assessments non core industry sectors like paper production (and production of physical recording media) which are much more at risk from the rise of the digital economy than they are from piracy.

They then evaluate piracy losses based on two scenarios - one based on forecast growth of file sharing traffic (+18% p.a) - and the other based on overall growth of consumer IP traffic (+24% p.a).  This second scenario, professionally speaking, I consider pure fantasy as consumer IP traffic is likely to be driven by legitimate online and IP-TV rather than an explosive growth in piracy. 
Both scenarios miss an important element in a holistic view - which is the consumer's ability to pay.  Predictions of traffic growth are based on significant reductions in cost per bit.  There is no assumption that consumers are prepared to pay 18-24% per year more for bandwidth - and there clearly is no rationale to think that the value of pirated content conversion to legitimate sales would rise at those rates either. 

Put another way - the study assumes a constant percentage of pirated content is lost revenues.  Households don't have limitless pockets though, so realistically if content piracy increases the hypothetical conversion is likely to fall. Without some validation of what consumer spending trends are for entertainment content the numbers given are just wishful thinking.

In fact, Tumbled Logic suggests why current trends on Torrent downloading could mean conversion of downloads to sales could be as low as 0,5% - which would cut the estimates in this study by a huge 95%.  Assumptions are crucial in reaching a trustworthy result.....

Next we hear how piracy is having huge impacts on the music industry and that reductions in physícal disc sales have collapsed and that piracy must be to blame.  This is supposition not supported by the evidence...  There is clear evidence that revenues from live performances have substantially increased and that the total music industry revenues including these are stable - and further evidence that shows that there is a switch in buying behaviour from music and other passive media to games - a sector that shows significant growth.  Less piracy may have inhibited that shift to live performance and games, but where's the evidence that less piracy would grow the overall available market?

Again, unless a study can substantiate a growth in consumer spending on media over and above existing levels (with for instance cinema attendances at record levels) how can you project huge losses?  Here in lies the rub.... as a consumer if I spend more on music, or TV or video, then I spend less on something else.  So just where is the economy going to be hit if consumers are buying all their content instead of taking a share online?

Lastly, in this whistlestop critique, is the figures for lost jobs quoted...  the hypothesis is that if we increase sales on video 'X' we have more money to employ more people and to create more content.  But is that a realistic view?  Media companies want to maximise their profits, not maximise their output -  and at the end of the day consumers have a finite budget and a finite amount of time to consume content.  Is it a given that higher sales will generate employment? Better sales per production could even have the opposite effect... we don't need to create as many films/songs to generate our sales (and profit) targets - so why dilute the market by creating more content?

Seek.. and you shall find.  But don't believe everything you read!

Piratpartiet &; The Pirate Party -  Make your voice heard.