The cost of U.S. music piracy: $12.5 billion

23 08 2007

Eric Bangeman is right to be sceptical of the claims made by thinktank The Institute for Policy Innovation, which has presented an alternate methodology for determining the cost of digital music piracy, based on overall impact on the U.S. economy.

While the assertion that the economic impact is broader than merely reduced legitimate sales — lost industry jobs, state sales taxes, for example — appeals to common sense, there are fundamental flaws in methodology over correlation between disparate pricing across a complex market and how that may, in turn, produce a value for lost sales etc.

More significantly, Bangeman points to the equally flawed assumption that, were it not for piracy, the music industry would be in rude health. Why not try signing some decent acts, with talent, that consumers want to buy?

Also rightly pointed out is that the decline in CD sales is interpreted in isolation, without consideration of the corresponding rise in digital downloads.

The full research, also referenced in the piece can be downloaded here.