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October 11, 2013

The London School of Economics Wets Itself

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My favorite tie is the London School of Economics tie. It’s purple, and my wife likes purple. Plus it’s got black in it, and I like black. No, I didn’t attend the school, but their tie is cool and I wear it.

I know it probably offends LSE grads that someone who didn’t attend the school wears the tie, but I’m about to offend LSE grads with this blog post far more than I do when I wear their tie.

That’s because the LSE dropped a big plop of barbecue sauce on their ties recently. Or, as I put it more colorfully in the title, they wet themselves.

If an institution wants a reputation for credibility and serious analysis, they shouldn’t put out a report like the LSE did in a week or so ago, entitled “Copyright & Creation: A Case for Promoting Inclusive Online Sharing” [PDF].

The paper is yet another iteration in an effort by academics and others not involved in the music industry to define how the music industry should operate in the digital age, which most commonly and most emphatically involves not enforcing copyright. And, lately, in a more focused theme, that graduated response mechanisms should not be implemented.

The overall argument is one we’ve sadly become familiar with:

The music industry is doing fine, despite complaints to the contrary. True, maybe they aren’t making as much from recordings as they used to, but they still sell a lot of tee shirts and concert tickets, so efforts to fight against piracy are a waste of time and are in fact enabling the industry to remain dependent on a tired old pre-digital business model instead of embracing the new, exciting business model of giving away their music for free. Really, the industry should embrace piracy. If you can’t beat ‘em, join ‘em.

[I’ve always wondered what the Beatles would have thought about this debate today. As is well known, at some point the Beatles decided to stop touring, stop doing concerts, and focus entirely on their craft in the recording studio, creating extraordinary and sometimes very complicated studio creations. That was a gift to the world (other than Old Brown Shoe). I suppose today’s piracy defenders would have told the Beatles that they had to get out of the studio and make their money on tickets and tee shirts. Myself, I think the world is a better place because the Beatles could choose their business model and get rich producing and selling recorded music.]

And, again, this argument is almost always made by people not involved in the music industry. [It’s always fascinating to me to observe how people who have never toiled in a particular industry almost always think they know better how that industry should operate than do those who actually are doing it.]

Specifically, in the sad excuse for a paper that I am denigrating today, the authors seek to prove that 1) the music industry is doing fine, despite their claims, and 2) that France’s experience with its graduated response regime (“HADOPI”) is a failure [see below] “mixed.”

Now, there’s a problem right off the bat, which is that, since the authors are going to be dealing with numbers and economics, it would be helpful if they were economists or something so that they could deal carefully with numbers. And I have to assume a school named the London School of Economics is filthy with economists lying about that could be prevailed upon to take a glance at their fellow researchers’ manuscript, since none of the three authors of the paper are economists themselves or even have any background at all with economics from what I can determine from their LSE biographies. They are social scientists and media communications types. They are, from what I can tell, typical experts in that the sum total of the knowledge they have about their field is to be found in the papers they’ve written (as opposed to, say, the companies they’ve built, the music they’ve written or produced, etc.).

And it shows. They botch the numbers and analysis and distort and misquote others who have done the real research on HADOPI, but they are nonetheless absolutely certain that the UK should not implement its scheduled graduated response mechanism. It’s almost as if that was their predetermined conclusion and purpose for writing the paper in the first place.

There are massive problems with the paper.

They botch the data. Josh Friedlander, who is the data guy over at the RIAA, points out in a blog entry that the authors have double-counted music industry revenues to make them appear higher than they really are. The authors add total revenues for recorded music and publishing together, although in the U.S. and other countries “the recorded music figure already includes significant amounts of the publishing figure.” Accurately stating the revenue numbers shows a decline of 27% in music revenue over the time period that the authors claim revenues were mostly level or actually growing.

As an aside, I must say that for all the bitching and moaning we received for our economic work on the impact of piracy, at least our economist author knew what he was doing with numbers and carefully adjusted numbers to arrive at defensible conclusions.

They fail to adjust their numbers for inflation. Or at least this appears to be the case. Any serious economic paper that deals with revenue numbers over a time series would make certain they were adjusting for inflation, and would make this apparent not only in the text of the paper, but also in any charts or tables. But nowhere in the LSE paper is there any reference to the authors having adjusted their numbers for inflation. If you’re comparing revenue numbers from 2004 with numbers from 2012 and don’t adjust for inflation, you are again overstating revenue in the later years.

Simple mistakes such as failing to adjust to inflation are pitfalls that await ideologues that are bound and determined to arrive at a pre-determined outcome, the data be damned, or the data not even be understood. Here’s a great example by Tom Sydnor from back in 2009 when Pam Samuelson failed to take inflation into account when she was comparing statutory damages for copyright violations over time.

They mischaracterize the experience thus far with graduated response in France. Interestingly, as the MPAA points out in a blog, an earlier version of the paper says that there was no evidence that France’s graduated response regime resulted in a decrease in piracy that corresponded with an increase in iTunes sales, which is directly contrary to the evidence. So then in a “correction” the authors try to deflect by saying that the increase in iTunes sales was a result of HADOPI’s “education component” rather than to enforcement. In other words, they’re scrambling to say anything other than the fact that HADOPI resulted in a decrease in piracy and an increase in legitimate music consumption, which is what it was intended to do, and coincidentally is exactly what happened after authorities shut down Megaupload, another piracy site.

But even that deflection is dishonest. They’ve misquoted the conclusions of the major analysis of France’s HADOPI regime. In that study, professor Brett Danaher and colleagues found that:

[O]ur results suggest that the HADOPI law (and the education and media attention surrounding it) increased iTunes single sales by 90,000 units per week on average. If we assume an average song price of €1 per song, this equates to an increase of €4.7 million ($6.3 million) in annual iTunes track revenues [text following note 22].

But here is how Danaher’s conclusion was stated by the LSE ideologues:

The evidence was that the increased sales observed were more strongly related to the education component of HADOPI than to the enforcement component of the implementation measures.

That was NOT, of course, Danaher’s conclusion. And don’t forget that in the author’s earlier draft, they entirely denied that HADOPI resulted in a decrease in piracy and a corresponding increase in iTunes sales.

This is dishonesty, not research.

They assume that a rich sharing culture is incompatible with property rights. Stated simply, if you want to create for free, give it away, and have no control over what happens to your work, you’re free to do so. You’ve always been free to do so. Copyright is not your enemy. But if someone else does not want to follow that model, and wants to be compensated for their work, that business model is completely consistent with the historical and legal traditional framework of copyright.

But that is not enough for them. It’s not enough that people be able to share work that was intended to be freely shared with little or not conditions. They demand the right to share work that was never intended to be freely shared, for which they are not authorized to do so. They want the right to trespass, essentially, which brings me to my final point.

Ultimately, their beef is with “exclusive ownership.” Now, I’m not at all surprised by this, and I wrote an extended rant on this theme not too long ago, so I won’t repeat it here. But this paper is just further proof of my thesis, that ultimately, these ideological critics of copyright simply don’t like ownership and control.

What I WILL point out here is that the exception does not make the rule. Saying “exclusive ownership of intellectual works is not the only incentive that sustains their production” (p. 9) is simply a deflection of the fact that exclusive ownership IS the MAJOR incentive. Saying “many ways of producing and distributing content via digital networks do not rely on exclusive ownership of creative works” is true but almost entirely irrelevant to the question of whether or not an artist is entitled to own his creation. It is truly astonishing the degree to which these supposed proponents of creativity and innovation entirely ignore artists rights.

But the artists are noticing. “Radiohead producer Nigel Godrich ‘distraught’ over LSE report on music piracy” screams the blog entry over at NME. “The authors are pro piracy and they wish to influence the UK government’s upcoming review of digital copyright law. It’s madness.”

He’s right.

[Incidentally, you might remember Radiohead as that group that was a favorite of the CopyLeft crowd because Radiohead decided to experiment with giving their stuff away and letting fans remunerate them as they thought appropriate. It didn't work.]

It’s becoming painfully obvious that a number of academics are engaged in a campaign to achieve a particular goal, instead of simply observing reality and researching what is actually happening. They have a leftist bias against property rights and against ownership, they are anti-business, they have some strangely nihilistic view of creativity that denigrates original creativity and celebrates derivative works as more creative than the original creation, and they believe almost religiously that anything that gets in the way of free is wrong. You can guess the conclusions such an approach is going to have when it comes to copyright.

Policymakers should thus ignore these biased papers. Besides, it is not the place of academics or government bureaucrats to decide how much money a particular industry should be making, or whether it is doing “okay” or “well enough.” Really?--We are to calibrate the degree to which we enforce rule of law to whether an industry is doing “okay” in some academic’s estimation? So, if your industry is making a lot of money, we no longer enforce rule of law for your industry, but if an industry is struggling, then we will be very careful to enforce the law? This is nuts.

Taunton smThe job of government is to enforce the rule of law consistently, across-the-board, and let consumers and markets determine outcomes. Government should not decide that, well, it looks to us like the music industry is doing okay even with these massive violations of the rule of law, so we’re going to just wink at the illegal activity, since they seem to be selling plenty of tee shirts. That’s absurd.

The inherent bias, gross mishandling of data, and misrepresentation of the research conclusions of others that characterize this LSE paper should embarrass the London School of Economics. Particularly its economists.

Then again, expecting the LSE to care about its image is probably a waste of time. They did, after all, sell Muammar Gaddafi’s son Saif a Ph.D.

Come to think of it, maybe I need to pick out a new favorite tie. Old Tauntonian, anyone?

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