GAO RAISES AN EYEBROW OVER MPAA’S PIRACY CLAIMS

A report released on Monday by the Government Accountability Office, an agency that appraises financial issues facing Congressional lawmakers, calls into question claims by the motion picture and recording industries that they suffer tens of billions of dollars in losses annually due to piracy. In a report examining how piracy affects businesses in general but refers in specific terms to the record and movie industries, the GAO said that none of the claims of huge losses to piracy can be verified by objective data. In its report, titled, “Intellectual Property: Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods,” the GAO said that previous “U.S. government estimates of economic losses resulting from counterfeiting cannot be substantiated due to the absence of underlying studies.” For example, it pointed out, there is no data to confirm that a consumer who bought a pirated product at a reduced price would have bought the same product at full price. The GAO report in particular questioned the “assumptions” of a study that found that the motion picture industry lost $6.1 billion to piracy in 2005. It observed that while another study indicated that consumers who buy pirated records may spend 20 percent less on legitimate records, the surplus may be used for related expenditures. “Some authors have argued that companies that experience revenue losses in one line of business — such as movies — may also increase revenues in related or complementary businesses due to increased brand awareness,” the GAO report observed. “For instance, companies may experience increased revenues due to the sales of merchandise that are based on movie characters whose popularity is enhanced by sales of pirated movies.”