Hollywood Sez: "Everything You Steal, You Would Have Bought"

There are four types of headlines that translate to "Bullshit Below":

• "Bonds: 'I'm Just Focusing on Winning a Championship' "
• "Bush Administration: '___________' "
• "[Politician]: We Can Do Something About Gas Prices"
• "Hollywood Estimates Piracy Losses at _____."

In spite of the comical demagoguery of any politician seeking blame and retribution for gas prices, or the White House addressing pretty much any topic at all, of the above Hollywood's bullshit supports an agenda that might be the most damaging to our future.

First of all, "Hollywood" (the major film studios) is just a piece of a broader cartel of Big Entertainment, which includes many of the television channels, magazines, and websites you consume every day, as well as the CDs (or iTunes) you buy and, inevitably, the books you pretend to read and videogames you play. While all these industries have their own piracy solutions in mind, they all have a similar concept of what "piracy" is: anything you didn't pay for.

Today's WSJ details Hollywood's latest stab at quantifying "losses" to piracy: $6.1 billion globally per year, which is abouy 75% more than the prior estimate. (WSJ: "Studios See Big Rise in Estimates of Losses to Movie Piracy.") That's right, Hollywood claims they would have earned $6.1 billion more wholesale revenue in 2005 if people weren't bootlegging or ripping or downloading. That more than the profits of Goldman Sachs, Home Depot, American Express, or PepsiCo. (Yes, I'm comparing revenue to profits, but the production costs of the content were mostly "sunk" already.)

The most obvious fallacy of the piracy "loss" estimates is that they usually assume that everything downloaded or bootlegged would have been purchased at full price. In other words, the kid on your block (or in your house) who's illegally downloaded 100 movies would have otherwise spent the $1,700 or so to buy them all on DVD. And the Chinese factory worker who bought a bootleg of Finding Nemo would have dropped two days' salary for the authorized version.

This latest report admirably -- but again, fallaciously -- attempted to account for this with survey questions:

Critics have faulted some piracy estimates for equating each pirated DVD with a lost sale, when many consumers would have skipped the movie altogether if they hadn't gotten a cheap or free unauthorized version. This time, the survey specifically asked consumers how many of their pirated movies they would have purchased in stores or seen in theaters if they didn't have an unauthorized copy, giving studios a different picture of their true losses.

Can you imagine how these questions were asked over the phone? How honest did they expect the respondents to be about activities that could get them sued or imprisoned, with increasing penalties per amount of pirate activity?

Time Warner was one of the media companies that was pushing hardest for the public release of the study; ironically, the headline to the right of the article reads "Time Warner's Net Rises 59%." Obviously downloading is killing Time Warner, in case you were wondering whether you really saw Richard Parsons squeegeeing windshields near the Holland Tunnel last year.

Of course, piracy is inherently a bad thing, but in the case of the entertainment biz, it's more about media companies failing to deliver what consumers want than consumers getting something for nothing. Napster, Morpheus, and Kazaa, after all, arose when record labels were hardly digitally distributing at all. (If you won't sell it to me, I'll steal it.) And now Hollywood is doing its best to encourage piracy with its warped business model, in which legal downloads will cost twice as much as DVDs with none of the extras. (Details at my favorite business blogger, Barry Ritholz.)

So, why is $6.1 billion of bullshit bad news for the human race? Because the MPAA and its media/entertainment brethren will use it to encourage damaging new laws and aggressive enforcement, instead of using the threat of piracy to innovate. Congress has already displayed its willingness to grab its ankles for Hollywood by extending copyright almost into infinity at the expense of the public, which doesn't have nearly as good lobbyists.

In the meantime, you should absolutely pay full price to see every movie that's worth seeing. This time of year, that shouldn't take up too much of your life.

Comments

[cedichou]

you know you sound like Mark Cuban. Did you vote Dirk for MVP?