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July 1, 2013

What is the cost of free?

  Streaming Media Magazine

By Claudia Kienzle

Many recent legislative efforts to curtail online copyright infringement have been unsuccessful largely because opponents expressed concern that copyright protection measures would put too much power in the hands of law enforcement, ISPs, and other gatekeepers to restrict access to entire internet domains even if copyright infringement only occurred on a single blog or webpage. Also, if search engines were required to delete domain names, this could result in unprecedented internet censorship.

Among these recent bills is the Combating Online Infringement and Counterfeits Act (COICA) that failed to pass the U.S. Senate in 2010. It was later reissued as the Protect IP Act (PIPA), which-along with a similar, con- current House bill, Stop Online Piracy Act (SOPA)-stalled on Capitol Hill due to vocal opposition and protests.

"SOPA and PIPA were efforts at combating infringed materials and counterfeit goods and they didn't pass because they received a lot of 'push-back,'" says Daniel Castro, senior analyst for the Information Technology and Innovation Foundation (ITIF) in Washington, D.C. "While these bills offered legislative protections, we were beginning to see many in the industry initiate voluntary efforts."

For example, search engines volunteered to take down links to pirated content, and ISPs and large networks tried to be more rigorous in enforcing their standards, such as prohibiting advertising on sites that are engaged in piracy. Credit card processors volunteered not to process payments for sites that sell in- fringed materials.

"Since many perpetrators operate illegal file sharing or streaming services for profit- including ad revenues, pay per view, and other models-legal authorities can use these commercial transactions to figure out who they are and content owners can take legal action against them," Castro says. "Going after the biggest violators can have a positive impact on content piracy."

In "Targeting Websites Dedicated to Stealing American Intellectual Property," written testimony Castro submitted before the Senate Committee on the Judiciary, U.S. Senate in February 2011, he stated, "All too many internet users are choosing to download pirated digital content from illegal sites or peer-to- peer (P2P) networks. The problem has become so pervasive that at least 1 in 4 bits of traffic on the Internet is related to infringing content." He attributed this fact to David Price's report, "An Estimate of Infringing Use of the Internet," published in 2011 (

In his Senate testimony, Castro adds, "Inter- net users can easily go online and, with just a few clicks, find pirated copies of full-length Hollywood movies or television programming to watch for free. ... While the exact cost of piracy is difficult to measure, the impact is substan- tial, with one estimate finding that the U.S. motion picture, sound recording, business soft- ware, and entertainment software/vide o game industries lost over $20 billion dollars in 2005 due to piracy, and retailers lost another $2 billion, for a combined loss of over $22 billion."

Castro attributed these estimated losses to a Stephen E. Siwek September 2007 report for the Institute for Policy Innovation. When asked how he felt the numbers might look today, Castro says, "That $22 billion figure included physical goods. But digital versions are easier to pirate, so [the situation is] constantly in flux and industries are trying to adapt to the real situation they face." While it's difficult to quantify losses due to piracy, Castro adds, "There are lost sales and other losses from legitimate business models that can't compete with free."


To read the full article, please visit Streaming Media Magazine online.



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