AFACT rebuts privacy pundits

AFACT rebuts privacy pundits

Summary: The Australian Federation Against Copyright Theft (AFACT) has brushed off criticism from internet advocates of a report it commissioned, which said that piracy costs the economy $1.4 billion a year.


The Australian Federation Against Copyright Theft (AFACT) has brushed off criticism from internet advocates of a report it commissioned, which said that piracy costs the economy $1.4 billion a year.

The group representing Hollywood's biggest studios has moved to rebut claims by Electronic Frontiers Australia (EFA) member and lawyer Kim Heitman who attacked the figures announced in the study.


(670 image by Tomer Gabel, CC BY-SA 2.0)

Heitman said the research used to produce the "gargantuan figures" was flawed, pointing to what he saw as errors in lost sales assumptions and the use of gross revenue metrics. He also said it didn't take the free promotion into account that pirate downloads gave the industry.

In its defence, AFACT said that the firms which conducted the research, IPSOS and Oxford Economics, are two of the world's most respected in the field. AFACT also issued rebuttals to points cited by the EFA.

The anti-pirate organisation said the EFA's criticism of the research assumptions is unfounded, because the study "clearly explains" the methods behind its conclusions and does not equate all pirate downloads as lost sales.

It also said gross revenue was "only one of the metrics studied", and had been used alongside Gross Domestic Product, taxes and employment figures which it said are "standard measures for an economic impact report of this nature".

The EFA criticised the report for speculation that flow-on effects from piracy affected other industries, and for claiming that lost tax on profits assumes the entities pay Australian company tax on sales pro-rata, which it said was "not intuitive or evidenced".

"It also assumes that money not spent on movies is lost to the economy, instead of helping to create jobs in other sectors," the EFA said.

AFACT said the study is not speculative and is rather based on "input-output modelling" that uses "national statistical data". It said the model is "common practice and has been employed in a vast number of contexts both within Australia and internationally".

It rebutted other EFA claims:

EFA:"Peer-to-peer file sharing is merely the latest in a sequence of technologies since the 19th century, which have been claimed to be the ruin of the creative arts ... the copyright owners said the same thing about copies of sheet music, tape recorders, every iteration of personal recording system and indeed public radio. However, 'home piracy' acts not only as a loss to industry but also as a boon to distribution, bypassing censorship and limitations on sales by official outlets."

  • AFACT:"It should be clearly noted that in almost all of these cases government or technology provided a barrier to prevent continued rampant infringement. In the case of public radio, legislation provided statutory copyright royalties. VHS and cassette tape may have been efficient technologies for recording, but in terms of cost and quality (analog degrades with time) they proved not to be efficient for distribution at that time. Laws were also designed to prevent mass distribution of pirated VHS tapes. Solutions, whether legislative, technological or otherwise are currently required to prevent or deter the unfettered digital distribution of pirated versions of copyrighted content."

EFA:"With an assumption that 'downloads = losses' unproven, all conclusions estimating the size of the loss are equally unproven."

  • AFACT:"The study does not assume that 'downloads = losses'. As stated above, some 32 per cent of respondents said that they viewed an authorised version of a movie after watching the pirated version. As a result, 32 per cent of 'all pirate views' were removed from the 'lost revenue' calculations and were treated as 'sampling'."

EFA:"The call-to-action of this report is obviously to crack down on piracy, shifting the cost of file-sharing from the industry to the taxpayer via increased law enforcement. No industry, let alone the foreign-dominated entertainment industry, deserves a free ride for its business model. If instead, the industry noted that the report says 55 per cent of downloads created a market for sales, much of which is unsatisfied due to current restrictive trade practices, then its future profitability would be in its own hands."

  • AFACT:"The study is intended to provide some objective analysis around the scale and impact of movie theft in Australia. The film community is not appealing for a free ride. On the contrary, it is simply requesting a level playing field on which to conduct its business as would all other business communities. The argument that piracy can be condoned due to so-called 'current restrictive trade practices' is a red herring and is an excuse which is long past its use by date. There are over 27 legitimate businesses in Australia offering entertainment content online with a range of different business models in place."

EFA:"Repeated studies have demonstrated that the entertainment industry vies for money and commitment of time with all other forms of entertainment. The internet, computer games and mobile telecommunication applications take 'eyeballs and dollars' away from DVD and CD sales, but also sports arenas, sales of board games and printed works … We presume that the release of this report is a precursor to a renewed campaign for tougher penalties against file sharing in Australia."

  • AFACT:"All movie titles that were said to have been pirated by respondents in the study were movie titles available in some form to view or buy legitimately in Australia … the film industry sees the internet as a medium with enormous potential for our business and there are currently 27 online business models which make rights holders' content legally available to the Australian public. And new online businesses are being launched every few months. However, the ability of the film industry to continue to deliver high quality entertainment to consumers in new and innovative ways is dependent upon our ability to protect our content."

Topics: Piracy, Government AU, Security

Darren Pauli

About Darren Pauli

Darren Pauli has been writing about technology for almost five years, he covers a gamut of news with a special focus on security, keeping readers informed about the world of cyber criminals and the safety measures needed to thwart them.

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  • AFACT:"All movie titles that were said to have been pirated by respondents in the study were movie titles available in some form to view or buy legitimately in Australia.

    Yeah, right. Only stuff that's been available elsewhere for ages before release in AU.
    Just looked online for the DVD title: "Inception" (a film you'd have to pay me to endure to the end) $54.35 with P&H for a < 50 cents region coded, DRM crippled disk I can't backup or copy to my chosen hardware.
    It's AFACT's greed & stupidity, not piracy that's killing their sales.
  • Some Introductory Excerpts:

    'Hollywood Accounting' Losing In The Courts

    from the math-is-hard dept

    If you follow the entertainment business at all, you're probably well aware of "Hollywood accounting," whereby very, very, very few entertainment products are technically "profitable," even as they earn studios millions of dollars. A couple months ago, the Planet Money folks did a great episode explaining how this works in very simple terms. The really, really, really simplified version is that Hollywood sets up a separate corporation for each movie with the intent that this corporation will take on losses. The studio then charges the "film corporation" a huge fee (which creates a large part of the "expense" that leads to the loss). The end result is that the studio still rakes in the cash, but for accounting purposes the film is a money "loser" -- which matters quite a bit for anyone who is supposed to get a cut of any profits.

    For example, a bunch of you sent in the example of how Harry Potter and the Order of the Phoenix, under "Hollywood accounting," ended up with a $167 million "loss," despite taking in $938 million in revenue.


    Hollywood Accounting and Average Joe

    p2pnet view MPAA:- We’re finally making progress on the real criminals of entertainment piracy. The MPAA ia losing court case after court case using their infamous ‘Hollywood Accounting‘, and losing consistently, primarily because jury members are finally realizing how sleazy these members of the MPAA really are.

    Honestly, how does New Line Cinema think it can gross nine Billion, that’s Billion, on the Lord of the Rings Trilogy worldwide, and then try and weasel out of paying J.R. Tolkien estate for the idea, and Peter Jackson for directing the movie, claiming it ‘lost’ 120 Million? This is probably the reason behind the delay of creating ‘The Hobbit’ movie. If I were Peter, I wouldn’t direct any movie until I got paid for the previous one.

    Hollywood Accounting is where the MPAA (insert big **** here) create a corporation for each movie, ie Lord of the Rings, LLC, and then purposely use that entity to numerically absorb money, and to reflect a loss by creatively making up numbers for advertisement, distribution, additional licensing and/or copyrights for the particular movie. They illegally and grossly bloat these numbers as ‘expenses’ for the Studio to allegedly ‘pay’ from the gross of the movie itself.

    After ‘New Line Cinemas’ paid expenses to ‘Lord of the Rings, LLC’, there apparently just wasn’t enough money left to pay the director, or the estate of J.R. Tolkien, who owns the copyrights on the idea, and wrote the books. This ensures that stakeholders in the movie itself get the ’steak’ of the profits, whereas the entitled entities, like the writer, producer, rights holder, etc, are left with the ‘peas’, if that. Typically they only get to lick the plate after the fatcat **** at the MPAA get their ill-gotten gains first.


    The End of Hollywood Accounting?

    Will 1+1 someday = 2?

    The WGA, the Teamsters and California State Senator Sheila Kuehl have just announced the introduction of the "Fair Market Value Bill." The bill seeks to prevent studios from selling programming to sister companies for below market value. This particular strain of Hollywood accounting is designed to shift profits away from the studios (where they must be shared with talent and producers and serve as a basis for pension and health contributions) to networks, where they may be enjoyed without the pesky need to pay one's "partners."

    Jahm Mittt
  • AFACT - they are so crooked even their bogus PR campaign is a lie. [] [],0,4051564.story []
    Jahm Mittt
  • AFACT members in trouble for price fixing?

    A home electronics retail store has filed a class-action lawsuit against Sony Corp., Samsung Electronics Co. Ltd., Toshiba Corp., LG Electronics Inc., Hitachi Ltd. and several subsidiaries, accusing the electronics manufacturers of colluding to fix prices in the U.S. optical disc drive (ODD) market.

    MDL Docket No. 1361 read:

    “The Plaintiffs have alleged in two separate amended complaints that the Defendants conspired to illegally fix and control the pricing of Music Products sold to consumers through Defendant Distributors’ adoption and utilization of Minimum Advertised Price (MAP) programs in violation of the Sherman Act, state antitrust and unfair competition and/or consumer protection laws. The Plaintiffs have further alleged that as a result of the conspiracy residents of the Plaintiff States and members of the Plaintiff Settlement Class have been injured by paying more for Music Products than they would have paid in the absence of the illegal conduct. The Defendants have denied and continue to deny each and all of the claims and contentions alleged by the Plaintiffs and any violation of law. The Court has not made any determination as to the merits of any of the claims or defenses of the parties to this Litigation.”

    In the hot seat were:

    * LABELS: Capitol Records, Inc d/b/a EMI Music Distribution, Virgin Records America, Inc, and Priority Records LLC; Time Warner, Inc, Warner-Elektra-Atlantic Corp, WEA, Inc, Warner Music Group, Inc, Warner Bros Records, Inc, Atlantic Recording Corporation, Elektra Entertainment Group, Inc, and Rhino Entertainment Company; Universal Music & Video Distribution Corporation, Universal Music Group, Inc, and UMG Recordings, Inc; Bertelsmann Music Group, Inc and BMG Music; and, Sony Music Entertainment Inc.

    * RETAILERS: MTS, Inc d/b/a Tower Records, Musicland Stores Corp, and Trans World Entertainment Corp.
    Jahm Mittt
  • Lol as apple already stated its big media that is to blame as they want to charge different countries more & not just because of tax, this is one reason for regional DRM its not just because of ratings bodies as they would like to make you believe.

    FTA: EU blames record labels, not Apple, for iTunes restrictions

    The European Commission has said that it sees the record companies - not Apple - as being responsible for consumers' inability to buy tracks at the lowest prices by shopping across national borders.

    'Our current view is that this is an arrangement which is imposed on Apple by the major record companies and we do not see a justification for it,' Commission spokesman Jonathan Todd told reporters.

    The world's major record companies are Vivendi's Universal Music Group, Sony BMG Music Entertainment, EMI Group and Warner Music Group.
    Jahm Mittt
  • RIAA Claims Ownership of All Artist Royalties For Internet Radio

    "With the furor over the impending rate hike for Internet radio stations, wouldn't a good solution be for streaming internet stations to simply not play RIAA-affiliated labels' music and focus on independent artists? Sounds good, except that the RIAA's affiliate organization SoundExchange claims it has the right to collect royalties for any artist, no matter if they have signed with an RIAA label or not. 'SoundExchange (the RIAA) considers any digital performance of a song as falling under their compulsory license. If any artist records a song, SoundExchange has the right to collect royalties for its performance on Internet radio. Artists can offer to download their music for free, but they cannot offer their songs to Internet radio for free ... So how it works is that SoundExchange collects money through compulsory royalties from Webcasters and holds onto the money. If a label or artist wants their share of the money, they must become a member of SoundExchange and pay a fee to collect their royalties.'"
    Jahm Mittt