Q&A with Economist Stephen E. Siwek
Wednesday, October 3rd, 2007 by Patrick Ross
A new report by economist Stephen Siwek and the
Institute for Policy Innovation (IPI), reveals that theft of
copyright-protected products, including motion pictures, video games, sound
recordings and business and entertainment software, has cost the U.S. $58
billion in annual economic output, 373,375 jobs, $16.3 billion in lost wages
annually and $2.6 billion in tax revenue annually.
Stephen
Siwek, a principal at Economists Incorporated in Washington, DC,
answered the following questions posed by the Copyright Alliance shortly after
his study was released Oct. 3.
Copyright Alliance: You
released new research this week about the "True Cost" of piracy to the economy.
What do you mean by "true cost"?
Siwek: By "true cost" I mean the full, economy-wide costs that are imposed on the U.S. as a
consequence of copyright piracy. Most studies of the impact of copyright piracy
focus narrowly on the impact of piracy on the producers of legitimate works.
These estimates generally measure the additional sales that would have
been made if pirated products had been unavailable. However, in my study these
"direct" losses make-up only one component of the overall costs of piracy to
the U.S.
economy. My study also considers lost sales among U.S. retailers of legitimate products
and lost production by the "upstream" industries that supply inputs to the
legitimate producers of copyrighted works.
Absent piracy, legitimate producers
would increase output in order to satisfy the increased demand for legitimate
products. This increase in output in turn would require greater production of
the inputs that are used to create legitimate products. This increase in the
production of inputs in turn would lead to greater production of the "indirect"
inputs that are needed and used by the industries that make the inputs used by
the copyright industries. In fact, this domino-like process is modeled across
all U.S.
industries using "multipliers" developed by the U.S. Bureau of Economic
Analysis. The multipliers also permit me to assess the costs of piracy in terms
of lost output, jobs and employee earnings. In this way, I estimate the "true"
economy-wide costs of copyright piracy.
Copyright Alliance: You have done a lot of work in the area of copyright and its economic
impact. Was there anything about these findings that surprised you?
Siwek: I was a bit surprised to find that "physical" piracy of copyright protected
works still remains a very large problem for the copyright industries despite
the recent growth in "download" piracy from peer to peer sites and other
internet sources. For example, in the recorded music industry, IFPI, an
industry research group estimates that in 2006, the piracy "rate" for the
physical piracy of music in Mexico
was greater than 50%. Nevertheless, in the same year, IFPI also cites Mexico as one
of the developing countries where the growth in broadband internet access at
"cyber cafes" has led to a "palpable" increase in online piracy.
To the extent
that physical and download piracy both remain significant problems in coming
years, the industries' anti-piracy efforts will increasingly need to reflect
multiple tools for enforcement and prevention. I would envision that in the
future, the copyright industries will place much greater emphasis on
technological methods to combat download piracy and that these efforts will be
combined with attempts to expand the diplomatic, educational and legal methods
that have generally been used in response to physical piracy.
Copyright Alliance: There are a lot of copyright industries not covered by your report -
publishers, photographers, graphic artists. Would you agree your findings are
conservative?
Siwek: Yes. My study is conservative for a number of reasons including the fact
that not all "copyright" industries could be included. First of all, in order
to assess whether we could even begin to study an industries' piracy losses, we
reviewed the public and member provided data that were available for that
industry. In some instances, these data were insufficient to support any
additional efforts and thus the industry could not be included. Secondly, in
some cases data were not available for all the geographic markets in which an
industry experienced losses from copyright piracy. In these instances I derived
estimates for some of the missing markets but not for all markets. Finally, in
the course of the study, I introduced several adjustments to the piracy loss
figures developed by some of the industries so that the results across
industries would be reasonably consistent. However, these adjustments generally
tended to reduce the piracy losses used in the study below the levels reported
by the industry itself. For all of these reasons, I believe that my findings
are reasonable and conservative.
Copyright Alliance: Is it your estimation that the importance of copyright industries to the
overall U.S.
economic picture is increasing or decreasing?
Siwek: I have been studying the economic contributions of the Copyright Industries
to the U.S.
economy since 1990. My most recent study of these contributions (on behalf of
the International Intellectual Property Alliance) was the eleventh report I
have published on this issue. In that time span, the importance of the
copyright industries has consistently grown in terms of value-added to GDP,
employment, employee earnings and foreign trade. In addition, as new economic
tools have become available, we can see the contributions of the copyright
industries more clearly than ever. In my most recent study for example, I used
newly developed estimates of current and constant dollar value added from the
US Bureau of Economic Analysis to measure the copyright industries'
contributions to real growth in U.S. GDP. For the years 2003, 2004 and 2005,
both the "core" copyright industries and the more broadly defined "total"
copyright industries have achieved real annual growth rates that are at least
double the real growth rates reported for the U.S. economy as a whole. Given
these figures, the economic importance of the copyright industries is clearly
increasing over time.
