via guardian.co.uk, Friday 5 June 2009 23.09 BST:
"I doubt that every download is lost revenue, since people who download more also buy more music"
by Ben Goldacre
You are killing our creative industries. "Downloading costs billions," said the Sun. "MORE than 7 million Brits use illegal downloading sites that cost the economy billions of pounds, government advisers said today. Researchers found more than a million people using a download site in ONE day and estimated that in a year they would use £120bn worth of material."
That's about a tenth of our GDP. No wonder the Daily Mail was worried too: "The network had 1.3 million users sharing files online at midday on a weekday. If each of those downloaded just one file per day, this would amount to 4.73bn items being consumed for free every year." Now I am always suspicious of this industry, because they have produced a lot of dodgy figures over the years. I also doubt that every download is lost revenue since, for example, people who download more also buy more music. I'd like more details.
So where do these notions of so many billions in lost revenue come from? I found the original report. It was written by some academics you can hire in a unit at UCL called Ciber, the Centre for Information Behaviour and the Evaluation of Research (which "seeks to inform by countering idle speculation and uninformed opinion with the facts"). The report was commissioned by a government body called Sabip, the Strategic Advisory Board for Intellectual Property. On the billions lost it says: "Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10bn (IP rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs."
What is the origin of this conservative figure? I hunted down the full Ciber documents, found the references section, and followed the web link, which led to a 2004 press release from a private legal firm called Rouse who specialise in intellectual property law. This press release was not about the £10bn figure. It was, in fact, a one-page document, which simply welcomed the government setting up an intellectual property theft strategy. In a short section headed "background", among five other points, it says: "Rights owners have estimated that last year alone counterfeiting and piracy cost the UK economy £10bn and 4,000 jobs." An industry estimate, as an aside, in a press release. Genius.
But what about all these other figures in the media coverage? Lots of it revolved around the figure of 4.73bn items downloaded each year, worth £120bn. This means each downloaded item, software, movie, mp3, ebook, is worth about £25. This already seems rather high. I am not an economist, but to me, for example, an appropriate comparator for someone who downloads a film to watch it once might be the rental value, not the sale value.
In any case, that's £175 a week or £8,750 a year potentially not being spent by millions of people. Is this really lost revenue for the economy, as reported in the press? Plenty will have been schoolkids, or students, and even if not, that's still about a third of the average UK wage. Before tax.
Oh, but the figures were wrong: it was actually 473m items and £12bn (so the item value was still £25) but the wrong figures were in the original executive summary, and the press release. They changed them quietly, after the errors were pointed out by a BBC journalist.
I asked what steps they took to notify journalists of their error, which exaggerated their findings by a factor of 10 and were reported around the world. Sabip refused to answer questions in emails, insisted on a phone call, told me that they had taken steps but wouldn't say what and explained something about how they couldn't be held responsible for lazy journalism, then, bizarrely, after 10 minutes, tried to tell me retrospectively that the call was off the record. I think it's OK to be confused and disappointed by this. Like I said: as far as I'm concerned, everything from this industry is false, until proven otherwise.