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Rationalizing Online Piracy

There are lots of reasons why people believe it’s acceptable to download copyrighted music for free. It is possible, for example, to believe that private property is abhorrent and that stealing is perfectly justifiable behavior. Of course, rifling through your friend’s wallet, taking money from the collection plate, or putting steaks under your sweatshirt can lead to a punch in the mouth or some other form of punishment. Downloading music on the Internet is a much less risky form of theft for those too spineless to act on their anti-property beliefs in the offline world.

But I do not believe that most non-paying downloaders are responding to deeply held philosophical beliefs about property. In fact, I am quite sure that if you were to steal the typical pirate’s iPod you would likely hear howls of anger.

The best rationale?

I think everyone knows that downloading a copyrighted sound recording, in lieu of a purchase, has the same impact on the owner of the song as theft. So why do so many people believe it’s OK to download music without paying for it? The answer is: They have come up with ways to rationalize their actions and to mollify their consciences.

There are many forms of such rationalization. One is to suggest that piracy benefits record sales. There is a recent (and poorly done) “Canadian Government Study of File-sharing,” which comes to that conclusion. Another study, the “Oberholzer-Gee/Strumpf paper,” finds downloading is having no negative impact on record sales, but most economic studies have concluded that file-sharing strongly diminishes the revenues of the recording industry — as evidenced by the steep drop in record sales since file-sharing began.

This leads to another, surprisingly common rationalization, which is the claim that artists get virtually no money from the record companies. This paints the record companies as evil ogres, so stealing from them is treated as a benign deed. Since musical acts are typically held in high regard by their fans, the pirates want to believe they are not harming the musicians. Check out the comments on my original post for examples of this belief.

Common sense should tell you that artists must receive substantial royalties from record sales. Why else would they care so much about their recording contracts? Why else would it matter whether they stay with the same company or sign recording contracts with a new company? What about the mega-deals — for artists such as REM or Janet Jackson — that received so much publicity in the mid 1990s?

To be fair, there is an otherwise solid paper, “Rockonomics: The Economics of Popular Music,” which tangentially seems to support the claim that sound recording royalties are not very important to artists. To check this claim, I decided to work out the details of the relative size of payments artists receive from concerts and payments coming from record sales.

Record royalties — from both mechanical rights and sound recording sales to customers — appear to be slightly larger than the concert revenues going to artists. Although the specific calculations are somewhat imprecise, the conclusion is quite clear: Record royalties are substantial, and probably make up the majority of artist revenues.

So piracy, self-justified as an act harming only the record companies, also harms artists. Although the music pirates glommed onto the claim that record companies really don’t pay anything to artists, that is almost certainly just a rationalization that will merely be replaced by some other rationalization when shown to be false.

The real reason for piracy

Music thieves seem unwilling to admit that their real reason is just old-fashioned selfishness — to have more money in their pockets. No different than any other form of theft. I don’t expect everyone to act honestly all the time. If you find $100 on the ground, I don’t expect you to turn it in to the police. I do expect people to at least agree on what is the honest thing to do, however, even if they do not do it.

So let’s not kid ourselves. If you detest the record companies so much, boycott their products — don’t steal them. But don’t pretend that you are not hurting the artists you profess to admire.

— Stan Liebowitz, Ashbel Smith Professor of Economics, University of Texas at Dallas

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