This week, my colleagues at Crikey have been looking into the data advanced by the copyright lobby about piracy.
In recent months, the content industry has shouted about piracy using two reports supposedly showing the vast economic impact of illegal downloading in terms of lost income for media industries and fewer Australian jobs. One of them, entitled The Impact of Internet Piracy on the Australian Economy, was not even released to the general public (Crikey managed to find a copy on Wednesday). Bernard Keane analysed it yesterday, finding it “calculated piracy cost figures with virtually no reference to what is happening in Australia” and “uses projected growth rates to expand the cost figures massively”.
Today, I’m going to have a look at the other report commissioned by the Australian Federation Against Copyright Theft, entitled Economic Consequences of Movie Piracy: Australia. This one was released to the general public, and purports to be more rigorous than previous studies of this nature.
“The approach taken in building up these estimates offers a conservative view of piracy and does not treat every pirate view as a lost sale,” the report claims. “As such, readers should consider these as indicators that piracy is at the very least causing this level of harm.”
Unfortunately, this report’s methodology is also — at the very least — questionable. Electronic Frontiers Australia has already made some pretty valid criticisms of the research, but today I’m going to concentrate on the economic methodology used by the report’s author’s, Ipsos and Oxford Economics.
To start with, let’s examine their laughable “Annex 1” in the full report. This purports to explain how Australian Bureau of Statistics input-output tables are used to generate a final figure for total piracy impact in terms of lost sales and job losses. That’s important because it is these figures that AFACT has been using to argue that movie downloading represents a “$1.37 billion loss to [the] Australian economy”.
I’d like to say I carefully checked the report’s methodology for its econometric accuracy. Unfortunately, I can’t — because the authors at Oxford Economics and Ipsos don’t publish their equations; nor do they publish their raw data.
Just as an exercise, I downloaded the ABS input-output tables and attempted to match the ABS data to the AFACT report. It’s impossible. The data tables in the AFACT report which might allow that kind of scrutiny are missing.
What Annex 1 does tell us is that Oxford Economics and Ipsos have made all sorts of behind-the-scenes calculations to do with the exact value of the multipliers they use and the precise allocation of various ABS industry data to various categories of their assumptions. But they don’t tell us how these figures were arrived at.
To get a flavour of the opacity of the modelling, here’s their full explanation of two of the the multipliers they use:
“Type II multipliers of 2.5 (Gross Output) and 1.1 (GDP) were estimated. This covers activity in the Australian motion picture exhibition, production and distribution industries as well as TV VOD, internet VOD, downloads of motion pictures and the retailing of these motion pictures.”
There is no further explanation of how the numbers of “2.5” and “1.1” were “estimated” and no equation that shows us what they multiply. Hence, it is literally impossible to verify, cross-check or otherwise scrutinise these figures. Indeed, the full report contains no true methods section.
You couldn’t get this stuff published in a peer-reviewed economics journal, and it’s time journalists were smart enough to check this sort of data before they unquestioningly trumpet its findings to their readers. So, while the Ipsos/Oxford report is a slightly better effort than that produced by Sphere Analysis, it’s still opaque, unverifiable and unreliable.
Lies, damned lies and Type II multipliers.
The whole copyright thing and the “risking the future of Australian Film!!” ads on DVDs assume any pirated content would have been purchased legally, if sufficiently dire controls were in place. This is not the case as the “cheapness” of the pirated product encourages a much greater level of downloads than would often happen if the full price was being sought. The prevalence of pirating says more about the fact that Big Media has sought to corner the market and control the price and profit – and that people have just voted with their feet. Eventually (probably too late), the monopolists will realise they could make more profit by drastically reducing the price – to the point that the incentive to pirate falls away and people buy 2 or 3 albums from a newly-discovered artist rather than a single track.
Another factor is, I think, that when people see 10% of the price going to the Artist and 90% to Big Media, the “connection” with the artist and wish to reward them properly is tempered by the fact that it is largely the Distributor they are paying.
If there is to be an analysis, then please factor in the positive effect where people listening to a “possibly pirated” track are prompted go out and buy the content legally.
Finally, I’ve often thought if there was a free web site where people could easily and quickly send money directly to an artist and guarantee that 100% of it got through to the artist (ads covering the overheads) it would be a popular way of the public to “connect” with their artists – an on-line “hat” if you like.
Ben,
I think critiquing is a powerful, and valuable part of research. I also think the same in journalism. It is hard to read articles when it would seem you have gone into this with one eye opened – possibly tainted by the first research analysed and critquied by Bernard – and justifiably criticised.
I’ll refer first to this point:
“Unfortunately, this report’s methodology is also — at the very least — questionable. Electronic Frontiers Australia has already made some pretty valid criticisms of the research, but today I’m going to concentrate on the economic methodology used by the report’s author’s, Ipsos and Oxford Economics.”
AFACT put out a reply to each of the criticisms made by the EFA, located here: http://afact.org.au/pressreleases/2011/23-2-2011.html
I’m not saying that they are right or wrong – but if you are going to perform a fair analysis, it is bias to refer to someones criticisms, without looking at the response, if any.
Insofar as “behind the scenes calculations” go, can I suggest here for the formula:
http://faculty.washington.edu/krumme/systems/multp.html
There is also a lot of information on Type I/Type II multipliers only ever being estimates in any event.
I don’t have a background in economic modelling – but then, I’d suggest nor do you. If you don’t understand how economic modelling works, yet proceed to criticise it – because you don’t know how it works – is it really a fair criticism?
I agree criticism is valid and we should be sceptical of reports put out by industry (especially the entertainment industry) – but I also think we should critique (especially in mainstream journalism) in our area of expertise.
The bulk of Australian feature films, and high end television drama (miniseries and telemovies) and documentaries has – for the past forty years – been heavily subsidised by the Australian taxpayer, whether through 10BA, 10B, the 40/20 Producer Offset, or by present and past government bodies including but not limited to the AFC, the FFC, Screen Australia, Film Australia, the ABC, SBS, and all the state government funding bodies.
Whenever the AFACT mob diligently explains how piracy is ruining the Australian industry, I immediately feel inclined to ring up my local MP and ask if the government is intending to reduce its subsidy, some of which now finds its way into the risk averse world of local distributors …
By all means, rabbit on about the misuse of intellectual property rights, but the conflation of the Australian and United States industries regarding the implications for financing is just another unseemly distortion. Productions such as Candy will not go up in smoke because of ‘piracy’ but because the government decides film production is no longer a necessary or viable cultural or economic policy …
As Australia is a net importer of films and software (by a long way), piracy is not a net cost but a net gain for the Australian economy.