How much is really lost through downloading? A question of credibility

Via David Holland comes this link to "Home taping didn’t kill music" by Ben Goldacre, who writes the Bad Science column for The Guardian. It was published much earlier this month but I lost sight of it and have only just rediscovered it. The article reads, in relevant part:

"... “Downloading costs billions” said the Sun. “MORE than seven million Brits use illegal downloading sites that cost the economy billions of pounds, Government advisors 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 were 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 4.73 billion items being consumed for free every year.”

Now I am always suspicious of this industry .... 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 Policy.

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 £10 billion (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 £10 billion 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 4.73 billion items downloaded each year, worth £120 billion. 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 ... 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 473 million items and £12 billion (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 can find no public correction.

I asked what steps they took to notify journalists of their error, which exaggerated their findings by a factor of ten and were widely reported in news outlets around the world. SABIP refused to answer my questions in emails, insisted on a phone call (always a warning sign), told me that they had taken steps but wouldn’t say what, explained something about how they couldn’t be held responsible for lazy journalism, then, bizarrely, after ten minutes, tried to tell me retrospectively that the whole call was actually off the record, that I wasn’t allowed to use the information in my piece, but that they had answered my questions, and so they didn’t need to answer on the record, but I wasn’t allowed to use the answers, and I couldn’t say they hadn’t answered, I just couldn’t say what the answers were. Then the PR man from SABIP demanded that I acknowledge, in our phone call, formally, for reasons I still don’t fully understand, that he had been helpful.

I think it’s okay 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".

This piece was picked up by Techdirt, the Adam Smith Institute and Slashdot, but doesn't seem to have gone any further. The CIBER report can be downloaded from the SABIP website here, with a 16-page executive summary here.

I'm not sure that a workable solution to the problem of unauthorised downloads can be found, whether we have the right data concerning their commercial impact or not -- but I feel strongly that any research that seeks to quantify that impact must be reliable if it is to justify any measures that are taken to counteract the activity in question. SABIP seems to be in a huge hurry to secure commissioned research in its various target areas, putting great pressure on its suppliers of research results to do so speedily and cheaply. One may wish to ask whether this haste is counterproductive.