Report: $12 billion lost to piracy

New study estimates loss of income, jobs

By WILLIAM TRIPLETT

WASHINGTON -- Recorded music bootlegging denies the U.S. economy more than $12 billion in revenues and 71,000 new jobs each year, according to a new report.

"The True Cost of Sound Recording Piracy to the U.S. Economy," released Tuesday by the Institute for Policy Innovation, is an estimate of income and employment not realized as a direct result of music piracy. Report tallies likely losses not only in the recording industry but also in related businesses, such as the advertising industry, which labels pay to promote product.

"The impact of music piracy flows throughout the U.S. economy," report said. "Piracy in one segment of the economy can affect other industries because the economy is an 'interlocking' system. Changes in supply or demand in one industry can and do affect supply and demand in other industries."

Calculations were based in large part on formulas established by the U.S. Bureau of Economic Analysis, said Bartlett Cleland, exec director of IPI's Center for Technology Freedom, which conducted the study.

Each year, according to the study, global piracy produces the following effects:

• The recording industry loses $1.6 billion to bootlegged CDs and $3.7 billion to illegal downloads and file-sharing; related businesses, including music retail outlets, lose an additional $7.2 billion, bringing the total loss of potential revenue to $12.5 billion.

• Some 22,860 new jobs are not created in the music industry, and an additional 44,200 are not created in related industries, totaling 71,060 unrealized jobs in the U.S.

• Workers in the music industry and related industries do not see an additional $2.7 billion in income.

• Accordingly, federal, state and local governments do not realize an additional $422 million in tax revenues.

"This new report vividly illustrates the serious economic harm caused by the widespread availability of illegal music either via the Internet or on the streets," said Recording Industry Assn. of America topper Mitch Bainwol in a statement.

Asked whether the report means that the music industry or the U.S. economy is in danger, Cleland said, "It really wasn't our point to say that. Rather, if piracy rates continue, we are all going to feel the pinch eventually."

RIAA figures track only domestic hard-goods piracy, claiming losses of $300 million annually.

"Getting consistently current and reliable information on the precise amount of illegal downloading and its displacement effect on sales can be exceptionally difficult," said an RIAA spokesman. "What we do know for sure is that the music industry has seen a sales drop of more than $3 billion in the past six years, which can be attributed to both physical and online piracy."