OECD report shows IP industries exaggerate cost of piracy by 3x

Every year, groups like the MPAA and their international cohorts run to Congress and other governmental bodies to complain about the cost of so-called "piracy" to their industries.

However, these reports are usually extremely biased, lack peer review, and are built on poor economic assumptions.  For instance, they will often assume that every single bootlegged or downloaded copy of one of their films is a "lost sale" that costs them the full price of a DVD or theater ticket.

Yet many of these bootlegs or downloads are acquired by people who won't or can't pay the full price charged.  (Think of a poor worker in Vietnam who earns the equivalent of $40 per month and is expected to pay $29.99 for the latest release of Superman II on DVD.) Thus, they don't actually constitute a lost sale because there was never the potential for any sale in the first place. That's not to say there aren't some lost sales due to downloading or bootlegging, but IMO it hurts the IP Owners arguments to exaggerate the numbers so much.

Recently, the Financial Times reported on an OECD study on some of these losses and found out that are approximately three times smaller than industry groups estimate:

International trade losses due to product counterfeiting and piracy are much lower than estimated by business lobby groups, according to the most detailed global study to date.

Trade losses in 2005 were “up to $200bn”, according to the executive summary of a report by the Organisation for Economic Co-operation and Development, obtained by the Financial Times.

This compares with the business estimates for international trade losses, ranging upwards from $600bn.

The report, due for endorsement by the OECD board later this month, could prove embarrassing for international business lobbies, which have used the higher estimates to lift intellectual property rights up the global political agenda and to demand crackdowns in China and elsewhere.