Piracy is a market failure, not a legal one, says Canadian study

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Michael Geist, law columnist of the Canadian publication The Star, reports on this study by Canada’s International Development Research Centre:

The 440-page report challenges many of the oft-repeated claims about piracy and how address it. For example, it finds that contrary to repeated claims that there are strong links between piracy and organized crime, no such link exists. Instead, the authors conclude that “decades-old stories are recycled as proof of contemporary terrorist connections, anecdotes stand in as evidence of wider systemic linkages, and the threshold for what counts as organized crime is set very low.” …

Although the study is limited to the six emerging economies, there are important lessons for Canadian policy makers. Groups such as the Business Software Alliance have acknowledged that Canada is a low-piracy country, yet the lack of access to some content may lead some Canadians to turn to unauthorized channels. Although the failure to serve the Canadian market does not legitimize infringing activity, as in the developing world, it does help explain it.

16 Comments on Piracy is a market failure, not a legal one, says Canadian study

  1. Stealing a candy bar is not a crime! It’s a market failure! How dare the chocolate manufacturers not find a way to reach their customers at a price they are willing to pay!

  2. Bush-wa.

    (Boy, I can’t wait until Lent is over.)

  3. Excellent report. Great to see some people can penetrate the cr@p and come out the other side with a rational and sensible conclusion.

  4. @anon, what an insight. You’ve managed to distill the world’s incredibly complex IP law into a simple, easy-to-understand metaphor.

    Never mind the fact that it ignores any differences between physical and intellectual property (or consumable vs. non-consumable, if you prefer). Or that it ignores the differences (and different economic models) between selling a physical object and licensing the use of an object. Or that it encourages the notion that consumers are subject to any and all restrictions–regardless of reasonableness or fairness–that the seller chooses to impose (“Ok, you bought that Snickers bar, but don’t you DARE eat it outside our store. It’s still our Snickers bar and *WE* reserve all rights in telling you how to consume it. If you want to eat it at home, you have to buy our home-version Snickers bar.”).

    In fact,, just ignore that fact that it’s a moronic metaphor that doesn’t apply to the discussion.

  5. Oh, I agree the metaphor is overly simplistic. What I have a problem with is that just because a “market failure” exists does not give people the right to interpret the law any way they see fit or impose their own morality on stealing property, intellectual or otherwise. Unfortunately, most people who read this site are very happy to display their flexible morals, or at least scream about “offenses” against them. God forbid they have to wait a few months or pay a few dollars more to read a book!

  6. @Anon: It is more akin to being able to walk into a store and being told that you aren’t allowed to buy the candy bar while others are.

  7. @anon, sorry if I jumped down your throat. What I have a problem with is the perspective that because something is legal, it suddenly becomes ethically black and white (i.e. legal = ethical, illegal = unethical).

    To give an example of this, I would refer you to Courtney Love’s discussion of “piracy” at http://www.salon.com/technology/feature/2000/06/14/love. Especially the discussion of Mitch Glazier’s late insertion of a technical amendment into the Satellite Home Viewing Act of 1999 which had the effect of diverting vast amounts of money from recording artists to the recording industry. Laws can be used to codify high principle, and just as easily be used to screw people over. Ethics is what allows us to tell the difference. I have no intention, ever, of substituting laws for ethics.

    Unfortunately, especially in the area of IP law, laws embodying high principle are seriously lagging behind reality. So many people are more inclined to use their ethics for guidance.

    I’m sure we would have no disagreement on the underlying principle that artists need to be fairly compensated for their work, and that the presence of a “market failure” should never be an excuse for a failure to compensate.

  8. Anon, read the last sentence again. They are absolutely not saying that it gives people the ‘right.’ What they are saying is that right or not, a behavior is happening and the market failure is explaining WHY. If you want to stop the behavior, odds are you’ll have more success doing so by addressing the failure.

  9. Hey, what’s the internet without some snark? 😉

    I agree that when laws don’t make sense that people are often pushed to their own ethics, and sometimes that’s even OK. Some of the drug laws in the US come to mind (as sponsored by your local prisons!).

    However, when it comes to content, digital or otherwise, what I most often hear is whining about “the man keeping them down” combined with the economic sophistication of a college freshman (if marginal cost is 0,that must mean prices are too high!).

    Personally, I don’t have an issue with people downloading “illegally” who are ACTUALLY unable to purchase the product in their region. Unfortunately, most people on this site seem to think those are the only people who use torrents or other filesharing sites because that fits their view of the world. Or, they somehow think HUGE CORPORATIONS (much larger than any publisher) like Amazon and Apple are looking out for them and so therefore they believe those retail giants rather the people who actually work and care about the content. It’s rather tragic and it seems no amount of education will change these people’s minds.

    Also, nice article from Courtney Love. People have said it before and I agree with it: the publishers who care about their authors and the content and truly “create more value than they capture” will survive. Those who are only in it for the money will get found out. One of the problems with this is that many consumers (especially on this site) don’t seem to think it’s possible publishers do anything in the process and want to bunch all publishers together. Their ignorance is difficult to read day after day after day.

    Quick aside on Courtney Love.: you may or may not know this (and it’s not really relevant to her point), but she was plenty, plenty rich before she became a ‘rock star’. She was born with a trust fund and spent her whole life trying to become a famous rock star. A “starving artist” she is not, no matter how much she plays up that image.

  10. Joanna: Can you please consider the fact that the companies have considered “addressing the failure” and that the reasonable outcomes don’t allow them to be profitable companies? And so they therefore don’t “address the failure”. Please, please, consider that.

  11. ” reasonable outcomes don’t allow them to be profitable companies”

    This is nonsense. There is no evidence that any of these publishers concerned have addressed he issues that are driving illegal downloading. They are pushing ahead with DRM, they are showing very little progress with geo restrictions and they are keeping prices high. They are trying to get their out dated business model to work in a completely new environment instead of changing their business model and their cost base.
    These are companies that have enjoyed easy profits for decades and are driven by policies that are short term, where bonus’ are based on short term earnings. Their very management structure is a barrier to change.

  12. “reasonable outcomes don’t allow them to be profitable companies? And so they therefore don’t “address the failure”. ”

    I happen to believe that there is some merit to this argument and that there is nothing anyone can do about it since basically the content market is flooded with free or very cheap stuff that will do most of the time.

    The analogy with newspapers is relevant here since if you think about your behavior pre-Internet you will realize that many times you picked up a paper or a magazine just to have something to read, not for its outstanding journalism; now that itch is satisfied for free online by social media, while in books it is starting to be satisfied by independent authors, not to speak of the many tools available online to get physical content much cheaply – used bookstores, library catalogs…

    On the other hand policing the internet is not cost effective either and you realize that the big enablers (Google, ISP’s…) will fight any attempt to make them do it and they will have the public on their side since empty threats “me pirated, me not write anymore” do not work since there will always be someone with the time to write; as for threats about lack of quality, considering what populates today’s bestseller list those are even hollower..

  13. At 440 pages that report is the size of my textbook! Has anybody actually read it? Using the synopsis provided they appeared to have mixed up the pirating of physical and digital goods…

    Anyway this will change nobody’s mind. Given some – rather minimum – ethical and legal standards the market is a case of anything goes. ‘Lack of access’ to drugs, kidneys or for that matter Nike shoes could be put down to market failure. There is a need that is not met thus a black market. (The selling of fake Nikes is routine in what is now called emerging economies). Social acceptance plays a much larger role here. Piracy for digital goods is not really frowned upon by many. A trade in say kidneys is a different matter.

    The real problem of anti-piracy advocates is that they have failed to convince the majority of users of digital content that piracy is a serious wrong that needs legal remedies. No evidence that is going to change anytime soon.

  14. It’s good to see some independent research bringing some rational facts to the discussion. I’ve only read the introduction and skimmed through some of the chapters but I agree with most of the findings I see. A three year study from 35 researchers across 9 institutions. I hope it brings some sanity into the ACTA type trade negotiations.

  15. I think it basically boils down to a “let them eat cake” attitude by content providers, and no these industries wouldnt be hobbled by revisiting their drm policies. People pirate because the cost of the item far outweighs the value of the item to the consumer. Region codes (movies) and the unavailability of content in certain markets (books) are another reason people pirate (as stated in a previous post). A lot of decision makers at the heads of these industries stand to lose a great deal personally if gross revenue were to decrease. I believe piracy would plummet if content providers prices were more in line with customers expectations (pricewise, deliverywise, and lending wise).

  16. The previous statement was made by a different anon than the original poster.

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