10/03/2013 05:33 EDT | Updated 12/04/2013 05:12 EST

Digital Piracy Not Harming Entertainment Industries: Study


A new study by researchers at the London School of Economics suggests the music and movie industries have been exaggerating the impact digital file sharing has had on their bottom line and found that for some creative industries, copyright infringement might actually be helping boost revenues.

Researchers within the British university's media department examined sales data and found that the music, gaming, movie and publishing industries are all growing and adopting new business models based on digital sharing.

The study found that internet-based revenues have been a significant component of the music industry's growth since 2004 as the industry has slowly adopted methods of distributing and consuming content modelled on those used by file-sharing sites such as BitTorrent, Pirate Bay and the now defunct Napster, which pioneered music file sharing in the 1990s.

"Contrary to the industry claims, the music industry is not in terminal decline but still holding ground and showing healthy profits," said study author Bart Cammaerts, senior lecturer in the LSE Department of Media and Communications, in a release. "Revenues from digital sales, subscription services, streaming and live performances compensate for the decline in revenues from the sale of CDs or records."

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While it acknowledges that sales have stagnated in recent years, the report points out that the overall revenue of the music industry in 2011 was almost $60 billion US, and in 2012, worldwide sales of recorded music increased for the first time since 1999, with 34 per cent of revenues for that year coming from digital channels such as streaming and downloads.

"The music industry may be stagnating, but the drastic decline in revenues warned of by the lobby associations of record labels is not in evidence," the report says.

Had the record companies adapted to a digital environment earlier, rather than resisting it, they could have witnessed growth much earlier, the authors say.

Box office revenues bigger than ever

The same holds true for the movie industry, the researchers suggest. While sales and rentals of DVDs have declined —  by about 10 per cent between 2001 and 2010 — global revenues have increased by five per cent in that same period. The U.S. film industry alone was worth a healthy $93.7 billion in 2012, the authors said.

"Despite the Motion Picture Association of America's claim that online piracy is devastating the movie industry, Hollywood achieved record-breaking global box office revenues of $35 billion US in 2012, a six per cent increase over 2011," the report says.

The video game and book publishing industries have also been successful at finding new revenue streams within the digital space and are making healthy profits, the report said. In 2013, the global book publishing industry was worth $102 billion, more than any of the other entertainment industries.

"Although revenues from print book sales have declined, this has been offset by increases in sales of e-books, and the rate of growth is not declining despite reports lamenting the 'end of the book'," the researchers write in their report.

Exclusive ownership outdated

The researchers make the argument that the digital culture that has sprung up around the file sharing of music, video games, movies and other content has spawned new models of producing and distributing creative content that don't rely on exclusive ownership of that content.

Creative Commons licences, for example, which allow artists to specify how their work is shared by the public, are increasingly being used by some musicians to release their content on music-sharing sites like SoundCloud, the report said.

"​The increasing variety of online creative practices means that some representatives of the creative industries are becoming less concerned about copyright infringement through individual file sharing," the authors write. "Many musicians share their music and are very happy for their fans to download their music, envisaging future sales. 

The report points to the 10 million user-generated videos of Gangnam Style by South-Korean musician Psy that were created on YouTube after the original song was released and went viral as evidence that digital culture thrives on the ubiquitous sharing of digital content.

Illegal sharing can boosts legal sales

Entertainment industries are beginning to realize that the sharing of films and music online generates marketing benefits and sales boosts that often offset the losses in revenue from illegal sharing of content, the authors say.

The report points to the results of a consumer tracking study by the U.K. communications regulator Ofcom that found that file sharers in the U.K. spent more on content than those who only consumed legal content.

The growing use of streaming, cloud computing, so-called digital lockers that facilitate the sharing of content and sites that offer a mix of free and paid methods of getting content will, the study predicts, spur the entertainment industries to shift their focus from pursuing illegal downloading to creating more legal avenues for getting content online.

The LSE researchers urge countries like the U.K. and the U.S. to reform their copyright enforcement regimes, which they say are out of step with such developments and with online culture generally and do not necessarily even serve the interests of the creators they claim to be protecting.

"Insisting that people will only produce creative works when they can claim exclusive ownership rights ignores the spread of practices that depend on sharing and co-creation and easy access to creative works; this insistence privileges copyright owners over these creators," the report says.