The Truth About Internet Piracy

I’m sure it is a common question at least thought about by everyone on both sides of the Internet piracy debate. How much does Internet piracy actually hurt the music and movie industries, and how much does it hurt the economy?

Kal Raustiala and Chris Sprigman of freakonomics.com, an organization that investigates different numbers and statistics in the economic world, have reported that groups in favor of stricter regulations to combat Internet piracy have estimated that the U.S. economy takes a $200 billion to $250 billion hit every year due to piracy, and loses 750,000 jobs.

These numbers seem incredibly high, especially when compared to what Raustiala and Sprigman report is the Institute for Policy Innovation’s estimate of only $58 billion lost each year. So which is it, $250 billion or $58 billion? According to Raustiala and Sprigman it is neither of these numbers, since both are flawed with double and triple counting along with other methodological problems.

Of course Raustiala and Sprigman do admit that at this point no one really knows the actual effect piracy has on the economy, but they do make some compelling arguments for why the numbers are much lower than estimates would suggest.

One argument they make is that every illegal download does not represent a lost sale. While some people who download a movie or song illegally and for free might have actually bought the album or movie they are downloading if they did not have the option of getting it for free, most people who download media would not have bought the movie or album. Therefore this should not be counted as a lost sale, and accounts for no economic loss.

Secondly, when an illegal download is actually in the lost sale category, it may not actually affect the job market or the economy at all. People who would have bought a movie or album but instead chose to download it are extremely likely to spend that money elsewhere in the economy. This means that they are helping the job market in another industry and still spending money in the economy. This may hurt the job market of the entertainment industry, but it is helping the job market of others.

The American people are being fed lies by the music and movie industry and being told that piracy is hurting the U.S. economy when that simply is not the case. These groups are manipulating them into trying to pass legislation that not only combats piracy, but also destroys internet freedom and civil rights. These groups should be ashamed and held accountable for these blatant misrepresentations of facts.