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In a recent column, “Internet pirates will always win,” New York Times writer Nick Bilton suggested that stopping online piracy is futile because the pirates’ techniques evolve faster than efforts to stop them. This view is an article of faith for many in the tech community, but that doesn’t mean it’s true.
Michael Smith, an economist at Carnegie Mellon, is one person who doesn’t buy the “pirates always win” meme. At a legal seminar in New York last week, Smith pointed to empirical data that paints a more nuanced picture of the piracy situation. He also called out “three myths” he says are clouding the debate:
Myth No. 1: You can’t compete with “free.” This is often invoked by content owners to justify heavy handed enforcement measures against piracy sites and individual consumers. After all, why buy a song or movie when you can simply download it for free at a pirate site?
A quick look at the thriving content markets at Amazon (AMZN), iTunes (AAPL), and elsewhere shows that this notion is bunk. All these sites are successfully competing with free. As Smith points out, the lowest cost (including free) is not the only determinant of consumer purchases. Such factors as reliability, convenience, service, and quality also have a big impact on how we buy content online.
The point here is that paid sites can thrive without needing to snuff out every piracy site.
Myth No. 2: Piracy doesn’t harm sales. This myth holds that that people who use content-sharing (“stealing” if you prefer) sites would never have paid for the content in the first place, so what’s the harm? Meanwhile, “honest” consumers would never turn to piracy.
Smith pointed to evidence that piracy sites are not benign. In one prominent example, he said that when NBC removed shows from on-demand site Hulu, piracy spiked not only for NBC shows but for other networks as well. Meanwhile, no one went out and bought DVDs as a substitute for the shows that were no longer available on Hulu.
The bottom line is that piracy sites do affect the market for authorized content.
Myth No. 3: Anti-piracy laws don’t work. Laws that target file-sharing are reviled—not just as oppressive but as ineffective, too. The first part of the claim is debatable, but the second part is blatantly untrue.
Smith points to a recent study of France’s Hadopi (a new enforcement regime) to argue that anti-piracy laws do work. He noted that the advent of Hadopi coincided with a big rise in legal online music purchases, particularly in genres such as rap and hip-hop that experience high rates of piracy. At the same time, much of the increase took place before the law even went into effect; it appears that news about the statute caused people to seek out legal alternatives.
The point is that laws such as Hadopi (and presumably America’s impending “Six-Strikes” statute) can provide a clear deterrent to piracy. (Whether the U.S. can implement a sensible one is for Congress to figure out.)
People like Smith are not making bold new arguments; they’re simply showing how the piracy debate is still driven by ideology, not facts. Both sides in the debate are to blame. On one hand, apologists for illicit file-sharing sites pretend that piracy is inconsequential or inevitable. On the other, content owners too often rely on lies and fear to protect outdated business models.
Internet pirates don’t always win. Nor do content owners. We have yet to figure out this complicated back-and-forth.
Also from GigaOM:
Forecast: The Evolution of the Digital Music Industry (subscription required)