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GAO Questions DVD Piracy Claims

13 Apr, 2010 By: Erik Gruenwedel

The Government Accountability Office (GAO), the nonpartisan federal investigative arm of Congress, has issued a report that questions industry estimates regarding the impact of counterfeiting and piracy of intellectual property, including DVD movies.

In response to the 2008 Prioritizing Resources and Organization for Intellectual Property Act, the GAO was asked by Congress to quantify the influence of piracy in order to better protect the rights of content owners.

In the April 12 report, the GAO found that widespread counterfeiting and piracy of intellectual property exists but that the federal government had failed to “systematically collect data and perform analysis” that could yield verifiable documentation on the impact of piracy.

“We concluded that it was not feasible to develop our own estimates or attempt to quantify the economic impact of counterfeiting and piracy on the U.S. economy,” the GAO said. “In many cases, assessments rely excessively on fragmentary and anecdotal information; where data are lacking, unsubstantiated opinions are often treated as facts.”

The report puts a ding into some widely circulated reports, including a 2005 study commissioned by the Motion Picture Association of America that claimed studios lost $6.1 billion that year to piracy of Hollywood movies and DVDs.

“It is difficult, based on the information provided in the [MPAA] study, to determine how the authors handled key assumptions such as substitution rates and extrapolation from the survey sample to the broader population,” the report reads.

The substitution rate is at which a consumer is willing to switch from purchasing a fake DVD movie to the genuine product.

The GAO did find that seizure of pirated media, which includes DVD movies and music CDs, represented about 4% of $14.8 billion of domestic value of goods seized in 2009.

Then again, the report said actual commercial value of pirated content varied. The GAO cited a January seizure by Customs and Border Protection of more than 252,000 DVD movies with an estimated retail value of $7.1 million — and actual domestic street value of just $204,000.

In addition the report found that quantifying infringement of digital content through peer-to-peer Web sites, streaming platforms and hosting services was nearly impossible.

“There is no government agency that systematically collects or tracks data on the extent of digital copyright piracy,” the report reads.

Indeed, the GAO said there was evidence that the “knowing consumption of pirated or counterfeit goods” such as “samples” of music, movies, games and software actually lead to increased sales of legitimate goods.

MPAA spokesperson Howard Gantman acknowledged that quantifying damages related to piracy can be difficult.

He said the GAO report underscores the negative impact of piracy and the importantance that additional steps be taken by government agencies and businesses to protect American jobs and economic development related to intellectual property.

“The GAO report clearly documents that piracy is rampant and poses a serious threat to job creation, innovation and economic growth,” Gantman said.

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