New Year's Resolution: Stop Stealing to Save American Jobs

The following is a guest post written by Daniel Castro, Senior Analyst, Information Technology and Innovation Foundation

Would the U.S. government turn a blind eye to the theft of hundreds of thousands of GM vehicles each year? Of course not. Yet, large-scale theft occurs every day on the Internet from U.S. companies with little recourse. And the end result is still the same--lost sales translate into lost jobs.

In early 2000, increasingly fast Internet connections and cheap storage led to a rapid growth of digital piracy--the theft of music, movies, TV programs, software, video games, books, photos and periodicals. A decade later, Internet users around the world still download pirated content at an alarming rate. Much of this stolen content originates from the United States and digital pirates are expanding into new areas such as illegally streaming live programming like sports events. The government has done relatively little to stop this, which in turn is hurting American businesses and workers alike.

Some people see Internet piracy as nothing more than a digital version of Robin Hood--stealing from the rich to give to the poor. While this "David versus Goliath" style populism is trendy--even one British priest has blessed shoplifting as long as it is from big corporations--the reality is that piracy harms the artists, both the famous and struggling, who create content. Technicians are also hurt in the process--sound engineers, editors, set designers, software and game programmers--who produce it. Moreover, many of the countries engaging most frequently in digital piracy can afford to pay. For example, China tops the lists for both countries engaging in digital piracy and countries with which the U.S. has the largest trade deficit. (China is also one of the top sources of counterfeit items like toothpaste and sneakers, further evidence of its low standards for protecting intellectual property.)

Apologists for digital piracy often make the case that there is a difference between theft in the physical world and theft in the digital world. If a shoplifter steals one Blu-ray disc from Best Buy, the store has one fewer movie to sell. If a digital pirate illegally downloads a movie, no retailer or consumers supposedly suffers. However, when illegal downloads cut into actual sales (which they do), both the producers of the content and consumers are hurt, the producers through lower profits and the consumers through higher prices.

To this argument, it has become a common defense for those engaging in digital piracy to make claims like, "I only download music I wouldn't buy" or "I end up buying the movies I like." First, this may be true in some cases, but not all. Second, the desire to "try before you buy" does not give consumers the right to steal content anymore than it gives them the right to steal a car for a test drive. Third, businesses are listening, and there are now increasing numbers of ways to access content online legally without having to purchase it. For example, "free" music can be found on legal services like Lala, Pandora and Spotify to the YouTube channels of major record labels. The reasons to support piracy have dwindled.

Some might ask, if piracy is such a problem, why has Avatar, James Cameron's new blockbuster movie set record worldwide sales? In part, it is because the film's 3D special effects make the theatrical experience better than watching a pirated copy on a home PC. But the film has also set worldwide records for illegal downloads--in seven days, almost a million copies of the movie were downloaded illegally (compared to 610,000 downloads for New Moon). More importantly, films like Avatar, which may have cost as much as half a billion dollars to produce, will not be made if studios cannot recoup their investments from legitimate sales.

Interestingly, physical piracy, selling counterfeit products such as knock-offs of designer clothing or fake pharmaceuticals, is usually taken more seriously. For example, in pre-Christmas raids across the country, Immigration and Customs Enforcement (ICE) agents seized over $26 million in counterfeit goods. Efforts at reducing piracy of physical goods are becoming more common, in part because of claims that terror organizations are funding their efforts through selling counterfeit goods. As one expert describes it, "If you sell drugs, you go to jail. If you sell counterfeit products, the penalties aren't as stiff, so terrorists see this as an easy way to make money."

Lackluster enforcement of digital piracy has allowed it to grow unchecked and become a big business online. Digital piracy has quickly devolved from a "free music" cultural movement into a competitive business, often pitting enterprising criminals abroad against legitimate U.S. businesses. Piracy is no longer the domain of just a few college students trading files with their friends--it is a multi-million dollar industry operating on a global scale. And it is dependent on the same revenue streams as legitimate businesses--online advertising for "free" content or direct sales for access to pirated content. Stopping piracy will involve not only technical measures to make piracy more difficult, it will also involve legislative and industry efforts to cut off these revenue streams, such as by getting search engines to block piracy websites and getting businesses to stop advertising on these sites. (A recent review found major brands such as, Blockbuster, British Airways, and Sprint advertising on piracy websites.).

A common complaint among those opposed to the economic shifts seen in the United States over the past few decades is that "we don't make anything anymore." Yet some of the products the U.S. makes best--movies, music, software, games and books--are stolen not just by Americans, but increasingly by foreign consumers. Yes, stopping piracy will be good for big corporations. But it will also be good for the American economy and American workers. So if Congress is looking for new ways of creating jobs in 2010, here's an easy one: work to stop piracy.

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