Piracy - Winners and Losers

The European Commission has (something that was news to me)  a Joint Research Committee. Apparently

the Digital Economy Research Programme at the JRC Institute for Prospective Technological Studies, which carries out economic research on information society and EU Digital Agenda policy issues, with a focus on growth, jobs and innovation in the Single Market. The Digital Economy Research Programme is co financed by the Directorate General Communications Networks, Content and Technology.

This quote comes from the title pages of a report commissioned from the Institute for Prospective Technological Studies , http://ipts.jrc.ec.europa.eu/> and published by the committee under the title  ‘DigitalMusic Consumption on the Internet: Evidence from Clickstream Data’. 

The report’s abstract summarises its key – and somewhat controversial finding:

The goal of this paper is to analyze the behavior of digital music consumers on the Internet. Using clickstream data on a panel of more than 16,000 European consumers, we estimate the effects of illegal downloading and legal streaming on the legal purchases of digital music. Our results suggest that Internet users do not view illegal downloading as a substitute to legal digital music. Although positive and significant, our estimated elasticities are essentially zero: a 10% increase in clicks on illegal downloading websites leads to a 0.2% increase in clicks on legal purchases websites. Online music streaming services are found to have a somewhat larger (but still small) effect on the purchases of digital sound recordings, suggesting complementarities between these two modes of music consumption. According to our results, a 10% increase in clicks on legal streaming websites lead to up to a 0.7% increase in clicks on legal digital purchases websites. We find important cross country differences in these respects.

Essentially, the argument is that online piracy actually benefits right owners as people who access material in this way are likely to increase their use of legal sources.

The study is based on investigations in 5 European counties; France, Germany, Italy, Spain and the UK so is somewhat limited in its scope. It indicates that the ‘positive’ effects are greater in the Northern European States than in Spain and Italy.

Some other studies have reached similar conclusions but the majority confirm the views of most involved in the copyright industries that  piracy is a drain on its resources. The leading industry organisation, the International Federation of the Phonographic Industry (IFPI), has responded to the publication with severecriticisms of the report’s methodology and its conclusions.

I suspect the debate will continue.