Copyright Industry Chiefs Offer Qualified Optimism on Growth

Preliminary 2008 numbers show copyright-industry growth continued even as the recession was quickening, said report author Stephen Siwek of Economists Inc. He predicted a “large and disproportionate contribution” from copyright in the final 2008 numbers. Critics said the numbers undermined the industries’ lobbying efforts and paled in comparison to the economic contributions from copyright exceptions.

Commerce Secretary Gary Locke said the copyright industries are “critical drivers” of the U.S. economy, with $126 billion in foreign sales in 2007. But they're “plagued by widespread piracy,” physical and online, with billions in lost revenue and hundreds of thousands of jobs lost. Piracy has an “even more insidious effect of dulling the incentives” for businesses to invest, Locke said. Commerce is working with other agencies to mitigate IP theft, with attaches in piracy hotspots such as Brazil and China and a regularly updated StopFakes.gov portal, he said. The department also is helping small businesses register and protect their IP and is working bilaterally and multilaterally with other governments on IP protection talks, Locke said.

“America has a comparative advantage” in copyright contributions, said Tom Allen, president of the Association of American Publishers, citing other countries’ studies of their own economies. Siwek’s methodology has largely been adopted by the World Intellectual Property Organization, Allen said. The core industries, represented by the alliance, contributed nearly 23 percent of the real growth in the U.S. economy in 2006 and 2007, and added $899 billion in 2007, about 6.4 percent of U.S. GDP, the report said. Jean Prewitt, president of the Independent Film and Television Alliance, said the industries can measure growth attributable to copyright much better than several years ago, which helps in negotiations for market access and IP protection in other countries. The numbers help the chiefs convince skeptical authorities that “this is the way you build your economy,” she said. Workers employed in copyright comprised about 4 percent of the U.S. workforce in 2007, with average compensation above $73,000 a year, or 30 percent higher than the U.S. average, the report said.

National Music Publishers Association President David Israelite criticized the “soft bias” against IP, which he called more deserving of protection than other forms of property. “They're easy crimes to commit, they're hard crimes to catch,” the former Justice Department IP prosecutor said. The numbers are a “wake-up call” to revise and better enforce IP laws, before the bandwidth improvements on ISP networks spread to big-file industries like film the economic harm that recorded music first experienced, he said.

Software sales abroad counted for $92 billion of the $126 billion for copyright, but sales of packaged software lagged far behind robust PC sales in piracy hotspots such as Russia and India, said Business Software Alliance President Robert Holleyman. “Piracy is an ever-present challenge to us,” though most of those losses in the U.S. are from “underlicensed” legal businesses which install unauthorized copies on some computers, he said. Despite a much lower piracy rate in the U.S., software makers estimate they lose more in the U.S. than China, which calls out for policy attention, Holleyman said.

The picture is mixed for other copyright industries as well. Major studios are seeing bumped-up box-office sales in 2009 while DVD sales plummet, said MPAA Chairman Dan Glickman. But he credited federal and state authorities for “stepping up to the plate” with anti-camcording statutes, enforcement funding and the pending nomination of a person to become U.S. IP enforcement coordinator. Book publishers have “increasing concern” about piracy, though they have no hard numbers to show losses, Allen said. And independent filmmakers are finding it difficult to distribute because mainstream-movie piracy in places like Spain “totally destroys” the margins for distributors, who become wary of taking on indie films, Prewitt said.

RIAA Chairman Mitch Bainwol took a softer tone, despite the harder hit recording has taken relative to other industries. Record sales have fallen “fairly dramatically” but “the appetite for music has grown,” Bainwol said, with listening and “access” business models replacing purchases. The “experimentation” in digital music is “starting to dent” the piracy rate, he said, pointing to a recent European study that shows legal streaming sites are growing in popularity at the expense of illicit downloading options. “We're beginning to come out of it,” Bainwol said. “There’s a light at the end of the tunnel.”

Copyright industry chiefs are also confident in their ability to cajole rogue destinations into becoming licensed. Bainwol said there was an “awkward evolution” as The Pirate Bay, recently acquired by Global Gaming Factory, and other services decided to seek the content industry’s blessing. “We'll find a way to get there” with established brands like Kazaa, whose Australia-based parent Altnet Monday formally launched its $20 a month subscription download service for full tracks and ringtones. Glickman said the growing sophistication of identification technology would flush out hidden destinations for piracy. Such technology puts the onus on content creators to develop legal alternatives that are “convenient,” Prewitt said. “It’s our job to make sure that they are.”

The economic strength of the U.S. copyright industries shows their “draconian public-policy agenda is unnecessary,” said Public Knowledge President Gigi Sohn. “Private-sector spying on everyone’s Internet content through deep-packet inspection and kicking someone off of their Internet connection merely on the accusation of copyright violations, as the industry wants, are not needed,” she said, referring to the RIAA’s as-yet unsuccessful effort to convince ISPs to progressively penalize subscribers for piracy. An RIAA spokeswoman told us talks with ISPs continued, but she said they don’t want to be identified yet. Computer and Communications Industry Association President Ed Black said the group’s 2007 study, which used WIPO’s methodology, showed that fair use and other copyright exceptions enabled more economic activity than contributed by copyright itself. “We don’t need more copyright -- we need smarter copyright,” he said.