The question of how much money the music industry loses through piracy has always been a controversial one, given the impossibility of ever really knowing how many illegal downloaders would have bought an album or track if they couldn’t pirate it.
We know that one illegal download doesn’t equal one lost sale, but calculations on what it does equal have always tended to be fuzzy, to say the least.
The latest body to try is the European Union Intellectual Property Office (EUIPO), which has published a report titled The Economic Cost of IPR Infringement in the Recorded Music Industry.
Its headline claim is that the EU music industry loses €170m annually due to music piracy. Or at least lost it in 2014, which is the year the report focuses on. It claims that the €170m breaks down into €57m of lost physical sales and €113m of lost digital sales.
“Our study’s results are in line with the prevailing consensus and find that piracy reduces the revenue of legitimate industry in both digital and physical formats,” said EUIPO executive director António Campinos.
The report claims that the €170m represented 5.2% of all music sales in 2014, with Germany and the UK together accounting for €89m of ‘lost sales’ – about right given that they accounted for more than half of actual sales in the EU that year.
About that methodology, though. “The lost sales estimated in this report represent hypothetical additional revenue that the recorded music sector would have earned, had infringement not taken place,” explains the report.
“It is not an estimate of the value of the illegally acquired music recordings; nor is it an estimate of the substitution effect – that is, the question of the extent to which the illegally consumed music would have been bought from legal sources had piracy not been possible.”
€170m of ‘lost hypothetical additional revenues’ sounds somewhat less scary than €170m of lost sales, and like past research in this area, the EUIPO report is likely to spark debate about the substitution effect.
We’ll expect to see its findings quoted regularly as the industry continues to put pressure on Google over search-fuelled piracy, though – even if in 2016 there’s less emphasis on recorded-music revenues lost to piracy, and more on the “value gap” between free-but-legal video streams and their payouts to rightsholders.