EU study finds that piracy doesn’t really harm game sales

In 2014, the European Commission, a legislative body within the EU that has the powers to regulate the economy within the EU, commissioned a report from Dutch company Ecorys, ordering it to investigate the claims that unauthorised online consumption of copyrighted materials such as movies, books, videogames, and music, were displacing the sales of these products, thereby effectively resulting in a loss of revenue for companies who complained that their works were being pirated.

It’s long been the excuse used to promote the use of DRM in its various forms – some invasive, some downright draconian – and a lot of companies cite piracy studies into how much stuff gets pirated on the internet (sorry, Ubisoft, I’m not forgetting that one), and claim that piracy costs them a sale to those consumers. According to the study, which was buried until someone got the EC to unearth it, that’s not entirely the case. The lines are significantly more blurred than previously thought.

This is not the first time that an EU or EC report has claimed, with data to back it up, that piracy isn’t as harmful as its made out to be. In 2013, a 40-page report was released which detailed that a 10% increase in the number of people viewing content on websites like The Pirate Bay did result in a small, but notable 0.2% increase in the number of visits to websites with legal media for purchase. Similarly, a 10% increase in the number of viewers on streaming media sites like Spotify resulted in a 0.7% increase in clicks to websites selling the same media. The report ended with the following statement:

“We cannot draw policy implications at the industry-wide level, as our analysis is only confined to the digital segment of the music industry. Nonetheless, digital music revenues to record companies are growing substantially, reflecting the increasing importance of digitization in the music industry (IFPI, 2012). From that perspective, our findings suggest that digital music piracy should not be viewed as a growing concern for copyright holders in the digital era. In addition, our results indicate that new music consumption channels such as online streaming positively affect copyrights owners.”

Back then, the industry had already moved to selling music online, both in albums and in singles, and services like Spotify, Nokia Music, Microsoft Zune, and Deezer had already started ramping up listeners because people didn’t want to store media on their devices. They didn’t want to buy it either – they wanted a single charge for as much music as they could bear to listen to. That’s the same strategy started by Netflix. 2011 and 2012 was also the turning point for Youtube users using the platform for music streaming, because the company had just rolled out playlist functionality. Music sales went down, and we ended up with almost three billion views for Gangnam Style. Even Apple agrees with this, and they pioneered effective methods of selling music on the internet when Napster was still a thing.

The latest report from the EC dived deeper into the story with a different outlook on media usage and whatever correlation they could find with piracy rates. The study mixes a myriad of statistics and information gathered between 2009 and 2015, and draws it all up in a 300-plus page report. Similarly to the 2013 report, they also compiled statistics from user clicks on legal and illegal media streaming websites, and delved into why other studies on the same subject were flawed because of their use of terminology that persuaded users to falsely report their piracy habits.

In particular, the study found that questionnaires that referred to websites hosting torrents or other downloads as “illegal file sharing websites” saw a drop in the reported piracy rates, while questionnaires, including their own, which used friendlier terms tended to show a clearer image because people were being more honest.

Basically, pirates who admit to pirating in studies do so at a lower rate if they see mention of things like “VPN”, P2P”, “warez”, or “torrent” in the study questions, mostly out of paranoia. The survey the report references was carried out over six countries, and had 30,000 respondents.

The study concludes with the following findings, which I’ve summarised below:

  • The price of music directly affects music sales, while piracy does not (and on the contrary, the biggest threat to music sales are streaming services)
  • The price of other media like books, movies, videogames, and textbooks does not affect their piracy rates, or the willingness for people to purchase said media. Other factors, like availability, play a bigger role.
  • While 30 out of 100 movies will see displacement rates of 40% for first-time views, overall only 30% of all movies released in a given year will actually have any noted effects from being pirated. This rate hasn’t changed much since 2007 (and it should be noted that this has probably lowered now that movie releases are synced worldwide to improve ticket sales and curb piracy in regions that haven’t seen a release yet).
  • 51% of respondents were happy with paying €0.90 for a song purchased on the internet, while 28% were not willing to pay more than €0.90, and 21% stated that they were okay with spending more on music.
  • 41% of respondents were happy with paying €8.40 for a videogame purchased on the internet, while 32% were not willing to pay more than that, and 27% stated that they were okay with spending more for a videogame. In general, even across age ranges, the number of people not willing to pay more than the shelf price for a game dwarfed the number of people willing to pay more.
  • 21% of respondents who streamed or downloaded a movie or TV series illegally were willing to pay market price or higher if that content was no longer available online illegally. For music, videogames, and books, the range changes to between 51% to 66% of respondents willing to pay market price for the content.

Finally, the study has this last paragraph in its conclusions about piracy affecting game sales:

“The average price of one month of gaming is generally less than the average willingness to pay, and hence the price should not be an issue for most illegal downloaders.”

The study concludes that price alone, which it set out to prove, does not explain why people pirate media disproportionately, but concludes that sales for some media, like videogames, ultimately were not affected by piracy rates. There were other things at play that the report does not account for. The movie and book industry, however, suffers disproportionately, despite services like Kindle reaching readers worldwide. Hopefully Netflix co-founder Mitch Lowe’s plan to fix the movie industry bears fruit.

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