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GAO Report Throws Doubts on Piracy Studies April 14, 2010

Posted by Bill Rosenblatt in Economics, United States.
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The non-partisan Government Accountability Office released a report on Monday addressing the economic impact of intellectual property piracy on the U.S. economy.  While the report agrees that IP piracy is a problem with substantial negative economic impact, it discredits several studies that have attempted to quantify such impact, including some that have been widely publicized.

The GAO created this report as a directive of the  Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of 2008.  It examined several studies (listed in the report’s bibliography) that have attempted to quantify losses due to IP piracy, which includes counterfeit physical goods in addition to unauthorized copies of digital material.  Among those studies are:

  • The Business Software Alliance’s 2008 study on software piracy, which claimed over US $9 Billion in losses
  • A 2006 MPAA-sponsored study on movie piracy, which claimed more than $6 Billion in losses
  • The 2007 academic study on the effect of music file-sharing by Felix Oberholzer-Gee and Koleman Strumpf, which attempted to discredit RIAA piracy figures and thus was widely cited by the copyleft community

This report criticizes these studies — as well as many others that focus primarily on counterfeited physical goods — for their weak methodologies, lack of hard data, and over-reliance on unsubstantiated assumptions.

I’ve seen a number of these studies and have been consistently disappointed in them for these same reasons — plus the fact that some of them come from obviously biased sources.

The GAO’s conclusion is that piracy is, in fact, bad for the US economy, but it’s extremely difficult to quantify just how bad.  There is a dire need for studies that are quantitatively sound and that inspire broad confidence; this GAO report confirms my suspicion that such studies do not — and perhaps cannot — exist.

This does not bode well for the field of digital rights technologies.  If no one really knows how big the piracy problem is, then it’s not possible to measure the effectiveness of digital rights technology in reducing piracy (as opposed to its effectiveness for other purposes, such as platform lock-in, enablement of new content business models, or restriction of user experience).  And if no one knows how much the effect on piracy is, then no one will have an idea of how much those technologies are worth and who should pay for them.

The GAO is well-respected for its rigor and lack of bias.  Will its assessment be the last word in trying to determine the all-important question of quantifiability of the effects of anti-piracy technologies?  I hope not — though while I’m not an economist, I understand there’s a reason why the field is known as “the dismal science.”

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