Piracy’s Ripple Effect on the Global Economy

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Written by Wayne Scholes, Guest Contributor

When most people think about the world of entertainment, first thoughts are typically of rock stars, book signings, Hollywood movie premieres, red carpets, and designer clothes. Rarely do the people behind the scenes of production come to mind. Technicians, editors, producers, hair stylists, and camera operators are just a few of the 2.4 million U.S. employees that make up the entertainment industry, an industry that contributes approximately $80 billion each year to the U.S. economy. And that number is nowhere close to what it should be. It is estimated that 750,000 jobs have been lost due to online piracy.

When most people think about the world of entertainment, first thoughts are typically of rock stars, book signings, Hollywood movie premieres, red carpets, and designer clothes. Rarely do the people behind the scenes of production come to mind. Technicians, editors, producers, hair stylists, and camera operators are just a few of the 2.4 million U.S. employees that make up the entertainment industry, an industry that contributes approximately $80 billion each year to the U.S. economy. And that number is nowhere close to what it should be. It is estimated that 750,000 jobs have been lost due to online piracy.

About 15 years ago, consumer demand for digital content started to reach mass effect. But while the industry struggled to reach a consensus on file types, security, and revenue models, free online file sharing services stepped in to fill the void. As a result, today 70 percent of online users don’t see illegal downloading as a form of “theft”. In August 2013, Russian web users protested against an anti-piracy law that passed thanks to the Russian government’s petitioning platform. Over 1,700 Russian web sites went on strike the day it went into effect, describing the new law as a “liberty killer,” and demanding for the law to be revoked, as they were accustomed to free films online, including the latest releases. It is not breaking news that pirates want content for free. In fact 95 percent of online music downloads are illegal, and the average mobile phone, iPod, or tablet contains $800 worth of pirated content.

Today, all content creators, including publishers, production studios, and record labels, suffer from piracy. But it all began with the music industry. Prior to the popular online file sharing service Napster’s debut in 1999, global music sales topped $38 billion. But over the course of two years, 60 million active Napster users changed the music industry forever. By the time Napster was shut down, serious damage had been done. As a result, music revenue dropped continuously for the next decade. It was not until 2012 that sales finally went up 3 percent thanks to services like iTunes and Amazon that made buying legal content easier than stealing it. Today, the music industry generates $16.5 billion in revenue, roughly half the amount it did 15 years ago, and only $2.9 billion of that is from digital downloads. The Guardian just recently announced that the number of tracks illegally downloaded in the UK fell by a third this past year, another positive sign for piracy in the music industry. While these are good indications, by no means has piracy been defeated.

The music industry is not alone when it comes to piracy. File sharing services like BitTorrent have quickly emerged allowing users to share larger files, like videos and software, faster than ever before. To cite just a couple of examples, in 2010, over 17 million copies of James Cameron’s groundbreaking film Avatar were pirated, and in 2012 over 4 million episodes of HBO’s Game of Thrones were illegally downloaded.

Although legal content distribution services like Netflix, Crackle, iTunes, Hulu, Amazon, Epix, and Vudu have again made accessing entertainment content legally more convenient, it is estimated that online piracy costs the U.S. economy somewhere around $250 billion per year. When content is illegally taken and distributed, income stops, jobs cannot be supported, and people are left unemployed. There is no question that content piracy has had a negative impact on everyone involved in the entertainment industry and on the overall global economy.

While I cannot reverse the doings of pirates, I can propose a solution to hopefully stunt the growth of piracy. Red Touch Media has considered the many challenges that large and small content creators face, especially piracy. Our company securely manages 2 billion files a month for its partners while our technology helps content creators maintain control of their content after it leaves their hands and lets them see how it was consumed. For the past decade our technologies have been used to strengthen the defenses of some of the largest producers of media content around the world.

Through consumption tracking and user behavior monitoring, our enterprise content distribution product has helped major and minor content producers. It has given them the ability to securely distribute and monetize their content with whomever they want around the world. It is a completely secure digital download that has analytics built in. Through this solution we can analyze who viewed a file, as well as how many times and on what device it was accessed from.

Having a reliable security solution is essential for all content creators. The ability to protect and prevent the major pain points that motion picture, television, and music studios deal with is necessary in this business. Over the past decade my company has had the chance to work with some of the world’s largest entertainment companies, and I have seen first-hand the importance of finding a solution that helps prevent piracy.

My hope is that piracy is on its way out. I am optimistic that in the years ahead most content creators will adopt a security solution that helps curb piracy. I am also confident that additional, convenient alternatives for accessing legal content will continue to increase and point consumers in the right direction.

Wayne Scholes is CEO of Red Touch Media based in Utah.