PreMUN 2011 Piracy GA 2: The question of economic problems as a result of internet piracy

The question of economic problems as a result of internet piracy

What is internet Piracy?: Piracy is a form of theft. Specifically, it refers to the unauthorized copying or use of intellectual property. Intellectual property is knowledge or expression that is owned by someone. There are three major types of intellectual property: y creative works, including music, written material, movies, and software, which are protected by copyright law; y inventions, which are protected by patent law; y brand-name products, which are protected by trademarks. Many of the issues surrounding piracy have to do with the difference between intellectual property and physical property. A CD, for example, is a piece of physical property, but the songs on the CD are intellectual property. A customer in a record store can purchase a CD, but someone else still ownsor more precisely, has the copyright tothe songs on the CD. Why is it a problem?: Piracy is primarily a problem for the entertainment and software industries, and therefore piracy most often involves violations of copyright law. Copyright is a legal right that protects creative works from being reproduced, performed, or disseminated without permission of the copyright owner. Essentially, a copyright gives its owner the exclusive right to make copies of the material in question. Physical piracythe copying and illegal sale of hard-copy CDs, videotapes, and DVDscosts the music industry over $4 billion a year worldwide and the movie industry more than $3.5 billion. These numbers do not factor in the growing (and difficult to measure) problem of Internet piracy, in w hich music and movies are transferred to digital format and copies are made of the resulting computer file. Journalist Charles C. Mann explains why Internet piracy has the potential to be vastly more damaging to copyright industries than does physical pira cy: Since when is it a problem?: The problem of Internet piracy did not gain national attention until Napster gained an enormous following in 1999. The original Napster, created by then college student Shawn Fanning in May 1999, was an online music service that enabled users to trade digital music flies. Napster 1 PreMUN 2011 Vellesan College

PreMUN 2011 Piracy GA 2: The question of economic problems as a result of internet piracy used a technology known as peer-to-peer (P2P) networking. P2P networking essentially enables users to link their com- puters to other computers all across the network. Each user linked to the Napster network was able to share his or her music files with all the other users on the network, and each user was in turn able to download a copy of any music file on almost any other computer in the network. Napster claimed to have over 20 million users in July 2000, all of them making copies of each others music. Why does the music industry make a problem about it?: Many voices in the music industry have claimed that internet piracy has reduced sales of legitimate CDs and that illegal MP3 downloads have become a substitute for legal CD purchases. Indeed, many analysts believe that the current downturn in CDs sales is due to the increasing and uncontrollable number of illegal copies available using peer-to-peer (P2P) technologies. End -user piracy, which is different from commercial piracy, seems to be much more difficult to control. Representatives of the music industry have claimed that the ver y existence of the industry is at stake. Policy-makers and record companies have addressed internet piracy by reinforcing copyright laws, by implementing technological protection and by actively enforcing legal protection through lawsuits targeted at deve lopers and users of P2P networks. Yet, defenders of online distribution technologies have argued that MP3 downloads offer a new way for consumers to try new music. By exposing internet users to a larger variety of products, file -sharing technologies could allow them to increase the set of albums they have a potential interest in, thus increasing music sales. This is referred to as sampling or the exposure effect in the economics literature. What are the piracy rates?: Lack of information coupled with vague laws could be largely responsible for the high global piracy rate. The Business Software Alliance (BSA) has found that software piracy has risen from 37 percent in 2000 to 40 percent worldwide in 2001, and data from GartnerG2 reveals that most Americans are unaware of the legalities of backing up software and prerecorded music CDs. Robert Holleyman, president and CEO of the BSA believes education can help reduce the high piracy rate: "This study reinforces the need to continue working aggressively to educate consumers and 2 PreMUN 2011 Vellesan College

PreMUN 2011 Piracy GA 2: The question of economic problems as a result of internet piracy law enforcement agencies around the world that piracy is theft plain and simple theft that is robbing the global economy of hundreds of thousands of jobs and billions of dollars in wages and tax revenues." Lost revenue due to piracy amounted to a total of $10.97 billion worldwide in 2001, although that figure represents a decrease of more than three-quarters of a billion dollars from 2000. The BSA attributes the decline to the effects of a worldwide economic slowdown. The areas that were most negatively affected by software piracy were the Asian/Pacific region, which experienced an increase from $4.1 billion in 2000 to more than $4.7 billion in 2001 and accounted for almost half of the revenue losses worldwide, and the Eastern European region, which racked up the highest piracy rate of all the regions at 67 percent. Eastern Europe dollar losses increased from $404 million in 2000 to more than $434 million in 2001. Western Europe had the second lowest piracy rate (37 percent), bu t it experienced the second highest dollar losses, totaling almost $2.7 billion, and accounting for nearly one-quarter of the total global losses due to software piracy. Latin America experienced a decline for the third consecutive year to 57 percent, whic h cost the country nearly $865 million. The Middle East and Africa experienced a decrease in its piracy rate from 55 percent in 2000 to 52 percent in 2001, costing this region nearly $284 million. North America continued to be the region with the lowest piracy rate at 26 percent, although it increased slightly from 2000's 25 percent. Despite a steady decline over the last seven years from 32 percent, the region accounted for the third highest piracy dollar losses, totaling $1.9 billion down from $2.9 billion in 2000. In Canada, the piracy rate remained the same at 38 percent, but the dollar losses due to software theft were more than $189 million, down from $304 million in 2000. The U.S. software piracy rate registered 25 percent, up one percentage poin t from 2000, which cost the nation $1.8 billion in retail sales of business software applications and more than 111,000 jobs.

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