A Tale Of Two Studies On File Sharing

I’ve recently come across two separate studies concerning file sharing — that seem to come to vastly different conclusions. The first, as pointed out by Michael Scott, is a very long (128 pages), but very thorough research report analyzing pretty much everything having to do with file sharing in the Netherlands, commissioned by the government. It studies the economic angles, the legal angles, the cultural angles — and then compares the local results to international results. While you might quibble with some of the methodology here or there, the overall conclusions of the report are pretty strong and clear: file sharing is not a problem for the overall industry. File sharing has, in fact, created a net benefit to the economy and society in both the short and long term, and that will likely continue. The direct impact on sales of file sharing is minimal (though it depends on the category). In fact, the only areas actually in trouble right now may be the sale of plastic discs (CDs and DVDs), but much of the damage has nothing to do with file sharing, and there are indications that the “lost” money can be made up in other ways. The report recommends moving away from criminalizing user activities, and focusing instead on encouraging new business model development. A quick excerpt from the conclusions:

The short-term net welfare effects of file sharing are strongly positive given that it is practised by consumers whose demand is driven by a lack of purchasing power. To the extent that file sharing results in a decline in sales, we see a transfer of welfare from operators/producers to consumers, with no net welfare effect.

The market for CDs and the market for DVD/VHS rentals are the only sectors of the entertainment industry that are suffering from a slump in sales. Whereas this may be attributed in part to file-sharing activity, file sharing is not solely to blame for the decline. The markets for DVDs and console games continued grow impressively after P2P services were introduced, and the cinema market showed sustained growth between 1999 and 2007. The total entertainment market has remained more or less constant, suggesting budget competition among the various products.

As long as the markets for games and films are on the rise or remain stable, there is little reason for concern that the diversity and accessibility of content is at stake. File sharing has significantly enhanced access to a wide and diverse range of products, albeit that access tends not to have the approval of the copyright holders.

In other words, pretty much everything that plenty of folks around here have been saying for a better part of a decade is pretty much true. File sharing isn’t damaging — and, in fact, can represent a net economic improvement, and the business troubles faced by a few small parts of the industry are really business model challenges, rather than legal ones. The report makes it clear that focusing on legal solutions to dealing with file sharing is a big mistake that tends to only backfire and seems to be totally misdirected.

So, what’s the other study? It’s also quite long, but is full of fear mongering about piracy. It just so happens to be funded by the movie studios claiming that piracy is helping to promote terrorism — and because of that, the US government needs to devote stunning levels of new resources to stopping piracy at all costs. So what does this report recommend?

• Fully funding and implementing the PRO-IP Act (PL 110-403), which toughens civil and criminal laws against counterfeiting and piracy, provides enhanced IP enforcement and prosecutorial resources, and improves IP coordination within the executive branch.
• Supporting the introduction, passage and enactment of a Customs and Border Protection Reauthorization bill to better address trafficking in illicit goods.
• Supporting the Baucus-Hatch legislative improvements to the USTR’s Special 301 process to help deal with other countries that fail to live up to their international IP obligations.
• Concluding negotiations for a substantive and enforceable Anti-Counterfeiting Trade Agreement (ACTA) with major trading partners.
• Pursuing trade agreements with strong global IP protections.
• Expanding U.S. leadership on IP protection within the G8, the Security and Prosperity Partnership for North America, and other bilateral and multilateral frameworks.
• Building coalitions in favor of strong IP protections at international organizations, such as the World Health Organization, World Intellectual Property Organization, and U.N. Framework Convention on Climate Change (UNFCCC).
• Engaging Beijing to improve China’s IP legal and regulatory regimes through the implementation of new patent, trademark and copyright laws.
• Pursuing reforms on data exclusivity, incremental innovation and optical discs legislation in India.
• Working towards improved retail and copyright enforcement in Russia, as well as the successful implementation of IP reform through Part IV of its Civil Code.

Which of the two reports is more credible? Which do you think will have more impact on government policy in the next year or so? The answers to both questions are unfortunately obvious and extremely disappointing.

Source: Techdirt