I’ve often expressed feelings sympathetic to piracy – piracy of intellectual property for the purpose of sharing, not calculated profit. Those feelings are based on personal experience with music and other information that would have otherwise remained inaccessible to me, as well as an ethical belief that information should be equally available to all. The library is a social good, I think we can all agree. But when the library fails us – whether for information that is not collected by libraries, or information that is collected but kept behind paywalls some can’t afford – piracy will save the day.
That kind of argument presumes that whatever damage is done by piracy to commercial interests is outweighed by the public good it can contribute. In other words, there are supra-economic reasons to tolerate piracy.
But what I want to set out here is a positive economic argument for piracy. Not a reason it should be tolerated, but the way it actually contributes to industries based on digital intellectual property.
And to make that argument more dramatic… I’m going to put the rest of this essay behind a paywall.
That means fewer will read what follows – unless, of course, it is itself pirated. I leave it to those of you with access (paid subscribers, or free subscribers who now switch to paid) to decide about that.
After all, if you believe in piracy, you’ll have access to this essay regardless. And if you don’t, I think you need to read this – so go ahead and pay for it.
[What follows was originally behind a paywall, which has been removed along with all paywalls on this newsletter.]
You can find innumerable articles asserting that piracy in the digital age has devastated industries dependent on intellectual property like film and music. But the number of academic studies on the topic is actually quite limited. In 2015, the United Nations’ World Intellectual Property Organization (WIPO) published a synthesis of these “disinterested” academic studies, to determine what the evidence on the topic is, as opposed to the usual assumptions and/or industry assertions.
The authors of that paper reported back that,
“As of 2014, we are aware of 21 studies that attempted to determine the impact of piracy on sales and that were accepted into peer-reviewed journals. Eighteen of these studies find a negative impact of piracy on sales, with only three finding no impact… In short, there is general consensus among economists who study piracy that it negatively impacts sales. This is true across various forms of media including music, television, and film.”
This “general consensus” that there is a negative impact on sales from piracy breaks down when the question becomes how much, however. In a follow-up blog post for the Technology Policy Institute, the same authors detailed the variety of conclusions drawn by all the academic studies they catalogued, adding three more since their WIPO report had been completed.
Of the now 25 total studies surveyed, five described the change only in words such as “significant,” and two estimated dollar losses for specific releases (both in the film industry, not music), but didn’t try and pinpoint broader trends.
Here are the conclusions of the remaining 18 studies that took a stab at determining the precise reduction of sales due to online piracy of intellectual property, ranked by degree of severity:
3 found 0% change
1 found a loss of 6.5%-8.5%
1 found a loss of 11.4%
1 found a loss of 13%
1 found a loss of 14%
1 found a loss of 19.1%
3 found a loss of 20%
1 found a loss of 22%-25%
1 found a loss of 30%
1 found a loss of 33.3%-66.6%
1 found a loss of 36%
2 found a loss of 50%
1 found a loss of 60%
Obviously, there is no general consensus from academic studies on the degree of impact from piracy. But let’s take what we can from this evidence, and conclude that the damage is somewhere between 0% change and a 60% reduction in sales.
This wild swing in value in fact matches other aspects of digital media.
Take the value of CDs. At present, they are either valueless ($0) – left on street corners when people clean house or move, unsorted in the dankest corner of thrift stores – or they are shockingly expensive ($60) on Discogs or eBay, where sellers know that a lack of ordinary value means scarcity for anyone who seeks out a particular title.
CDs have, at the moment, no intrinsic value. In that regard they have come to resemble their non-physical counterpart, digital downloads. Downloads never had intrinsic value – how could they, when there are no materials to help determine price? On Napster, they were free. Once Napster was shut down by recording industry lawsuits, Apple assigned a 99-cent charge for downloads on the iTunes store. Why 99 cents? The choice was random – it could have been anything, from 0 to 60.
Digital files have no natural price. And this is how I see piracy contributing economic value to intellectual property online: Piracy is a means to determine value for non-physical media.
Let’s take some specific examples. You are reading one now.
Substack told me that 10% of my readers would elect to pay for a subscription. Their prediction was based on experience with the platform and its users, not on my specific content (which they hadn’t yet seen). And so far, it has been accurate for this newsletter.
10% paid subscriptions to Substack is evidently a social fact. It is not dependent on individual readers and writers, it is an expression of their aggregate determination of value. In that regard, it is equivalent to a market-determined price - for what is essentially a free product.
All digital is essentially a free product. Even if you don’t believe that (as I do), piracy makes it so.
But piracy is also therefore a means toward determination of value, because it has a limit. A predictable segment of the market will elect to pay rather than pirate.
Here is another example, from another medium: Bandcamp gives musicians the option of removing prices from digital downloads of their recordings, letting listeners choose to pay for them or not.
For the Damon & Naomi catalogue, the response to this free/pay-as-you-wish option has been statistically consistent ever since we started using it in 2017 – 25% of our listeners elect to pay. I don’t know if this is true for other artists on Bandcamp, in the way Substack gave me a figure across newsletters by different writers. But I do know that, so far as our own recordings are concerned, we can treat 25% paid downloads as a social fact. It is not about individual choices, or particular albums. It is a collective response to the free availability of our recordings. That percentage is, in other words, the market’s determination of the value of our digital music.
This is my argument for piracy as a positive economic contribution. Digital media has no intrinsic value – that is part of the reason why the music industry, when it introduced digital via CD, boomed uncontrollably and busted just as easily. There was no natural price for CDs, and no natural price for downloads. They have been both priced too high, and priced too low, because no one could say how the market truly values them.
Piracy answers that crucial commercial question. Without it, the market for digital media will forever flip between zero and sixty.
Was this argument worth paying for? If I’ve done my job well, 90% of you shouldn’t think it is.
Listening to: The Lijadu Sisters, Danger (on an expensive used CD)
Cooking: Pasta with squash, garlic and sage
I am occasionally reminded of the home-taping version of this when I pull out an LP from the mid-80s and a card drops out with a short missive about how home taping is taking money away from the artist.
I did have a fairly substantial collection of cassettes made from friends' LPs, I'm pretty certain that those recordings pushed me to further investigate the artists in question, resulting in more purchases.
i've pirated it for you. convinced me to subscribe finally so guessing you win! we'll see if google gets free users to it (as they can't see any comment)
https://content.noloveforned.com/post/666747919285829632/an-economic-argument-for-piracy-by-damon-krukowski