Electronic Frontiers Australia (EFA) has questioned the findings of a report released this week by the Australian Federation Against Copyright Theft (AFACT), which said illegal downloading costs the local economy $1.37 billion a year.
According to the EFA report, the organisation said the assumption that 45 per cent of downloads equalled lost sales is unproven and insufficient.
“The survey method cited is better than assuming 100 per cent of downloads are lost sales, but there is better analysis in other studies,” read the report.
“If the study was correct, sales of DVDs and attendance at cinemas would be much more reduced than the reported industry figures.”
However, EFA acknowledged that downloads have an effect on both the product downloaded and future releases.
“To the extent sales may be lost, these must be offset against other gains from advertising,” said EFA. “Gross revenue is not the relevant metric, due to variables such as investment in capital, distribution and costs of sales.
“Many of the movies downloaded may not have been available to view or buy in Australia. Profit is the metric of importance, but this is never studied.”
The organisation also said flow-on effects to other industries are wholly speculative and lost tax on profits assume the entities pay Australian company tax on sales pro rata to revenue.
EFA noted past studies have demonstrated that the entertainment industry competes for commitment of time and money with other media.
“The Internet, computer games and mobile telecommunications applications take eyeballs and dollars away from DVD and CD sales, but also sports arenas, sales of board games and printed works,” read the report.
According to EFA, change is consumer driven and it was futile for the industry to hang onto a business model and methods of content distribution which are dying with or without fierce law enforcement of copyrights.
"We question many of the assumptions underlying this report," said EFA chair, Colin Jacobs, in a statement.
"The industry has a habit of crying wolf with these sorts of numbers, trying to drum up support for tougher laws, but there are many factors they don't take into account.”
For example, Jacobs said treating downloads as lost economic activity is flawed and downloaders are actually some of the entertainment industry's best customers.
“The study also ignores the effects to the wider economy of money being spent elsewhere at Australian-owned businesses,” he said. "Instead of waging war against their customers - and trying to get government help to do so - the movie industry should focus on improving its own offering and give customers a better alternative to the peer-to-peer networks.
"History shows that customers are happy to pay a fair price for a good product and a good service."
As much as one third of the Australian adult population have been found to download, stream, burn or otherwise not paid for movie content over the 12 months to July 2010.
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