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.
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."