Information Piracy and the Bottom Line

Internet piracy is a hot issue these days. As the amount of non-text media online grows, so does the amount of pirated media. But, just how much piracy is going on has largely remained a topic of speculation.

Until now.

Putting Hard Numbers to Online Piracy

A new study conducted by the British firm Envisional has shed new light on just how widespread the piracy problem is.

According to the study, in the United States alone, 17% of the content streaming, downloading, or otherwise being viewed via the internet is pirated material. That’s nearly one-fifth of all the content viewed by Americans.

To be clear, the study measured bandwidth usage. So, Envisional is not saying that 17% of the population in the United States is pirating copyrighted materials. However, it does show that a massive amount of piracy traffic is cutting into the bottom line of many companies in several industries.

The Magnitude of the Problem

If you own your own business, you can readily understand how devastating these numbers are. Imagine if, after paying for your employees’ benefits, covering workman’s comp insurance, paying business taxes, and shelling out for all the operating costs of your business, someone took 17% of your profits and walked out the door.

In fact, you don’t even have to own a business to understand how frustrating this situation is. If you’re a U.S. employee, you’re used to getting a pay check that’s missing a large chunk of the money you’ve worked hard to earn. As the old saying goes, “Who’s FICA and why is he getting all my money.”

Take another 17% off that and imagine how happy you would be.

The Good News

There is a bright side to the Envisional study. It shows a growing online market for a variety of new media. The interest is there, if we can find a way to control widespread piracy, it will open new doors for legitimate businesses to not only make money but provide additional jobs, which, in this economy, would be a welcome sight.

You can read the full Envisional report here.

2 thoughts on “Information Piracy and the Bottom Line

  1. Max Cho

    While piracy is an issue that probably leads to lost profit and revenue for movie studios, television producers, publishers, and record studios, it’s not accurate to say that there is a 1:1 relationship between bandwidth used in copyright-infringing material and profit.

    In order to prove that bandwidth used in copyright-infringing material had a 1:1 relationship with profit, you would have to prove the following:
    • If no copyright-infringing alternatives existed, everyone that streamed or downloaded pirated material would have purchased it.
    • That material being streamed on the internet is 100% of the profit stream for creative works.
    If those two are true, then 17% of internet bandwidth usage for content would in fact remove 17% of profit for companies.
    But of course, that’s absurd: the internet is hardly the sole profit source (in fact, I doubt it’s even a major profit source for most of these content creators). And if infringing options didn’t exist, it’s likely at least some of the consumers, if not most, would forgo the luxury of entertainment entirely (entertainment is a luxury, and easily skipped on as the price increases).

    In fact, piracy and free viewership can often help some people in the creative world. Popularity and success of a television show, for instance, can affect its ad revenue and its effect in culture. Youtube, the subject of a Viacom lawsuit for infringing uploaded material that wasn’t taken down, actually showed that some of the uploads were coming from Viacom IP addresses. Why would Viacom employees want us to freely view their held material? Probably because it was of benefit to them: the interests inside a corporation might not necessarily align. Piracy also may bolster bands’ fame, improving concert ticket sales or merchandising opportunities. While this isn’t to the benefit of record companies profits, it certainly doesn’t destroy incentives for creative work.

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  2. John Bickerton Post author

    I think the argument would be that 17% income is lost to illegal downloads. Therefore the channel – Internet downloads – though not one that comprises 100% of major media companies income – this new channel is taking 17% of the business from their other established channels (theater, DVD, rental, their own budding download businesses). In other words it’s 17% lost sales regardless of channel.

    The other argument, that piracy actually helps media companies, is, to me, just a rationalization by those that take part in it. It’s like saying – “I stole a new TV from Walmart but then I showed all of my friends the new TV and they all thought it was cool and wanted one too. I’m helping the TV companies!” Well, tell that to the judge.

    If you want to know if media companies think piracy is helpful, give them a choice. A world with media piracy and a world without. Which do you think they would choose?

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