The Global Innovation Policy Center Releases Impacts of Digital Piracy on the U.S. Economy

On June 18, the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC) released a study entitled, Impacts of Digital Piracy on the U.S. Economy. This report focuses on the tremendous boon American content creation and circulation is to the economy, and how digital piracy blunts that impact.

The study can be divided into two parts. The first part estimates the revenue lost to U.S. producers by answering three questions:

(1) How many movies and TV episodes have been viewed through pirated sources?

(2) What percentage of people would have bought the movie or episode had pirating not been available?

(3) What is the revenue U.S. industries would have gained per unit?

Once the revenue lost amount was determined, the next step involved calculating the overall economic losses to the American economy. The researchers used IMPLAN, an established national macroeconomic input-output model which uses the estimated revenue loss to measure direct, indirect and induced effects on the economy.

Key Findings

Here are some of the findings in the report:

• The majority of digital video piracy is committed by non-U.S. residents.
• The American movie and television production, as well as the distribution industry, is vital to the U.S. economy, sustaining 2.6 million jobs while generating $229 billion in revenue.
• Video streaming has become a major growth component of the industry as there are 500 licensed online video portals around the world, but it is also a tool for streaming-enabled piracy which is stunting the growth of American industries.
• An estimated 26.6 and 126.7 billion pirated viewings of U.S. movies and TV episodes respectively occur per year.
• Depending on the displacement percentage (the percentage of people who would not buy a movie or TV episode if pirating was not an option), the U.S. content production industries lose anywhere between $29.2 and 71 billion, or 11-24 percent of their domestic revenue per year.
• Digital piracy results in a loss of between 230,000 and 560,000 jobs and costs the United States $47.5-115.3 billion in GDP.

Digital Piracy Dangers Require More Robust Intellectual Property Rights (IPR) Protections and Enforcement

GIPC’s study shows that digital piracy is not only a crime, but an action that has destructive ripple effects on the U.S. economy. It restricts revenue and jobs and inhibits the creative potential of America’s most innovative minds. The United States has always been a country that celebrates the creativity that underpins technology and design, however, digital piracy threatens to undermine this principle, allowing criminals to steal art from thousands of miles away robbing America’s artists and the companies that employ them of revenues earned through talent and hard work. Lost revenues often translate into lost jobs. Furthermore, digital piracy gives criminals an avenue to exploit unsuspecting people through malware or identify theft, causing even greater damage to Americans. A previous ALEC article about this phenomenon can be accessed here.

These dangers simply highlight the need for extensive intellectual property protection which ALEC has supported for years. (A link to a model policy supporting IP can be found here.) Many older trade agreements dealing with IPR are outdated with little to no reference of internet capabilities. Governments need to support negotiations that bring IPR into the digital age. USMCA’s digital trade chapter is an excellent place to start – model policy that supports is USMCA here and an ALEC Action letter supporting speedy Congressional approval for USMCA is here. One of the most obvious ways to combat digital piracy is to strengthen IPR protections and enforcement. This Report will be an invaluable resource to educate the public about digital piracy’s cost to their lives and to the nation.