What is the real cost of Internet piracy?

For years the entertainment and software industries have said piracy is taking a huge swipe out of their sales. And while the Motion Picture Association of America and the Recording Industry Association of America recently appealed to Congress for help in sinking “The Pirate Bay,” saying piracy cost the music and movie industries up to $250 billion a year, a new study is showing that losses from piracy may have been inflated.
A report by the Australian Institute of Criminology commissioned by the Australian Attorney General’s office has concluded that industry statistics concerning financial loss due to piracy are “unverified and epistemologically unreliable” and that statistics used by the copyright holders are “absurd.”

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Of course, since this report was a confidential study that was leaked to The Australian, Mad Mad Media does not have access to the report, but this announcement is far from shocking.
I think we can all agree piracy exists. I mean you can go to any flea market and find CDs with Xerox copied covers and hand written disc art, any anyone can see fire-sharing services and BitTorrent files aren’t going anywhere, so we can all agree there is piracy.
How big the problem is has been blurred by this study.
It would seem that the recording industry may be taking a page from the anti-tobacco advocate’s handbook — if everyone agrees there’s a problem, a little white lie will add a sense of urgency to solving it.

Let me explain. We all know smoking is bad for you, but what about second-hand smoke? Some anti-tobacco advocates have gone as far to say that a half-hour of exposure to second-hand cigarette smoke can permanently damage your heart — with absolutely no scientific evidence behind the claims except that people already know smoking is bad.
Why do this? People didn’t stop smoking in public places until several key smoking surveys were released linking smoking to cancer after cancer after cancer. Now that science isn't linking it to any new diseases (there are only so many) they still have to get the word out, so some advocates decided to massage the facts.

If the AIC’s report is true, and piracy damages are being over inflated, then one could expect that groups like the International Federation of Phonographic Industries, RIAA and MPAA are doing just that — massaging the facts.
According to the IFPI’s 2006 Piracy Report, the group estimated $4.5 billion in pirated discs were sold and 20 billion tracks were illegally swapped or downloaded on the Internet in 2005. Using Apple iTunes math, $0.99 a song download, that’s $24.3 billion a year in losses for the music industry.
The same organization said there were $33.6 billion in physical CD sales in 2004 (and about $1.1 billion in digital music sales in 2005), so saying there are $24.3 billion in losses because of piracy looks like they could be stretching it a bit, even half that amount would cause a raised eyebrow.
This morning an RIAA spokeswoman said told me they had not yet heard of the survey. The IFPI’s Website had no response to the study, and because this study was not supposed to be made public, there may never be any public responses to it.
But now that it’s out there questioning these organizations statistics, it’s time to get the facts straight, especially since the US government has gotten involved, spending tax dollars to hunt down pirates they may or may not be sailing the seas of the World Wide Web.

Read the IFPI's 2006 Piracy Report HERE.

Also check out this Mad Mad Media Editorial: All of MP3: Too Legit to Quit