Music Industry 'Ravaged by Pirates' Report. File Under Fiction.

By Jon Newton 6/27/05

One in three music discs sold worldwide, “is an illegal copy, creating a US$4.6 billion music pirate market that destroys jobs, kills investment and funds organized crime”.

So says the Big Four record label cartel’s IFPI (International Federation of Phonographic Industry) in its Commercial Piracy Report 2005.

It is, of course, manifestly impossible for the IFPI to accurately gauge the extent to which counterfeits may or, as seems inreasingly more likely, may not be affecting the music industry’s indecently fat bottom line. In fact, the report should have been released under the Fiction category, as with all other IFPI ‘studies’

Jon Newton

“A total of 1.2 billion pirate music discs were sold in 2004,” says the IFPI, failing to explain how it arrives at this figure.

However, given that the various entertainment and software cartel companies seem to use the same creative accounting techniques, it’s reasonable to conclude the IFPI does the same.

'$30 million in illegal stampers'

The major movie studios own an organization called the MPAA (Motion Picture Association of America) which recently embarrassed itself and its owners with a look-how-clever-we-are report.

It said it had raided and "stamped out" New Century Media, an "illegal DVD/CD replicating plant" in Los Angeles, seizing “$30 million in illegal stampers and DVDs”.

Owner Jennifer Yu is, however, now accusing the MPAA of slander, saying she's in the duplicating business. And that's it. No connection to 'pirates' on land or at sea. And the MPAA “stamped out" claim notwithstanding, New Century Media is still very much open and doing business.

So how did the cartel pseudo cop unit arrive at its "$30 million in illegal stampers and DVDs" figure, widely quoted as hard fact by the mainstream media? Easy, says the MPAA.

All they had to do was estimate the value of the DVDs seized during the raid, "as well as the value of DVDs that could be produced using the equipment".

When 156 equals 421

Jennifer Yu says the $30 million (based on DVDs seized and not any criminal activity) was inflated by 2,000%.

But this shouldn't surprise anyone because this kind of calculation is child's play for Big Music, and it's routine for the mainstream press to parrot it in the same way it reports other entertainment cartel "information" as though it comes from credible sources.

In 2003, the RIAA (Recording Industry Association of America) instigated, and took part in, a New York Police Department raid which, RIAA spokeswoman Amy Weiss "estimated," resulted in the seizure of "the equivalent" of 421 CD burners.

How can you have the equivalent of 421 CD burners? - wondered Net activist Bill Evans. So he asked Weiss and it turned out the raiders had seized 156, and not 421, burners.

"We stated that the raid was the equivalent of 421 burners, as we need to put these operations in perspective based on burning capacity and output, not the number of physical slots for the discs," Weiss explained.

"Since they burn 4x burners - it is roughly 4xs the numbers of burners."

And when $29 becomes $33 billion

Nor are the movies and studios unique in coming out with spurious statistics.

In its own shock horror report, the BSA (Business Software Alliance), of which Microsoft is a staunch member, claims 'piracy' [read counterfeiting] related losses have increased from $29 billion to $33 billion.

Once again, how did the BSA arrive at this so very precise number?

The Economist figured it out. It was those creative accountants again.

In BSA or just BS? it says:

"The association's figures rely on sample data that may not be representative, assumptions about the average amount of software on PCs and, for some countries, guesses rather than hard data," it said. "Moreover, the figures are presented in an exaggerated way by the BSA and International Data Corporation (IDC), a research firm that conducts the study. They dubiously presume that each piece of software pirated equals a direct loss of revenue to software firms.

“To derive its piracy rate, IDC estimates the average amount of software that is installed on a PC per country, using data from surveys, interviews and other studies. That figure is then reduced by the known quantity of software sold per country-a calculation in which IDC specialises. The result: a (supposed) amount of piracy per country. Multiplying that figure by the revenue from legitimate sales thus yields the retail value of the unpaid-for software. This, IDC and BSA claim, equals the amount of lost revenue.”

How could you?" - asked BSA spokeslady Beth Scott indignantly!

"The implication that an industry would purposely inflate the rate of piracy and its impact to suit its political aims is ridiculous."

'Extraordinary growth'

Meanwhile, back to the IFPI, "It is no longer acceptable for governments to turn a blind eye, or to regard piracy as merely a small irritation to society," says its boss, John Kennedy.

"The illegal music trade is destroying creativity and innovation, eliminating jobs and bankrolling organized crime."

According to RIAA numbers, overall units of music formats shipped to retail distribution channels last year increased by 4.4% year-over-year, a 3.3% increase in retail value compared to 2003.

The number of CDs shipped in the US in 2004 rose 5.3%, a 2.7% increase in value compared to the previous year, and, “The DVD music video format continues to experience extraordinary growth, with a 66 percent increase in music shipments from record companies to retail outlets and special markets distribution channels and a 51.8 percent increase in value (list price).”

One of the IFPI's owners, EMI, was flush enough be able to give Joss Stone, a teenager it has under contract, $100,000 worth of uncut diamonds as a birthday prezzie.

Back in 1999 a music industry executive announced to the press that the record industry lost $3 billion that year to file sharing. One of the biggest regrets I have is not getting that execs name because the number was blatently fictional. A few months later in early 2000 the RIAA announced yet another sales record (something like their 10th in a row). It was a $13.6 billion industry and somehow instead of a 6% increase in revenues that year this exec wanted us to believe it should have been a number almost one-third of the mature industry's value. Where did he get the $3 billion number? He made it up. He made up a number so high that it would garner press attention. The unknowing press printed that number as if it were true. -- editor.


Jon Newton is the editor of and is a regular contributer to MP3 Newswire. Jon's site is devoted to the politics of digital music and his insights as well as those of his co-writers can be read there. We urge you to explore it.


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Other MP3 stories:
MP3 Players for Summer 2005 Part I
MP3 Players for Summer 2005 Part II
Sony PSP As Personal Media Player - Review


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