Theeconomiceffectofmoviepiracy

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The Economic Effects of Movie Piracy

The economic effects of movie piracy are immense, reaching out beyond the

movie industry to affect every aspect of the economy. While movie piracy has been

around long before the establishment of the Internet, it was not until the development of

BitTorrent in 2003 that movie piracy began to affect the entire economy. According to

Brett Danaher and Joel Waldfogel, “By the end of 2004, BitTorrent, the most popular

movie file sharing protocol, reportedly accounted for as much as 30% of all Internet

traffic” (3). Movie piracy affects the economy by reducing profits for the retail industry,

lost tax revenue, and loss of earnings for U.S. workers, even though some people argue

that movie piracy helps small films to make money.

In “The True Cost of Copyright Industry Piracy to the U.S. Economy,” Stephen

Siwek states, “Copyright piracy affects more than the companies that produce and

distribute copyrighted products” (3). Profits in the retail industry are affected as sales in

movie DVDs are reduced due to movie piracy. By downloading movies through

protocols, such as BitTorrent, the demand for the consumer to purchase a copy of a DVD

is low. The result is high supply with low demand, which is never a good combination for

economic success. According to Siwek, the total estimated loss to the retail industry due

to piracy is $2.549 billion (8). While this number includes losses from all copyrighted

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materials to the retail industry, the loss from pirated movies has a significant impact on

the total loss sustained by the retail industry.

Another area where movie piracy affects the economy is in tax revenue. While

state and local governments lose significant sales tax revenue from movie piracy, the U.S.

federal government loses a large portion of personal and corporate income tax. It is

estimated that the U.S. government lost 2.579 billion dollars in tax revenue (Siwek 14).

While the loss in tax revenue encompasses all digital piracy, movie piracy certainly plays

a major role in the loss of tax revenue.

Finally, movie piracy considerably reduces the earnings of U.S. workers. Siwek

states, “Because of piracy, American writers, artists, designers, actors, software and video

game developers and musicians are denied compensation for the fruits of their creative

efforts” (14). Not only does movie piracy affect actors, directors, and producers, but also

this type of piracy has a massive effect on the earnings of manufacturer, distributor, and

retail employees. The piracy of movies cost U.S. workers in the production, manufacture,

and distribution portion of the movie industry an estimated $14.565 billion (Siwek 13). In

the retail sector, pirated movies cost employees an estimated $1.716 billion (Siwek 13).

These numbers certainly have an enormous effect on the U.S. economy, but more

importantly, these numbers have a direct effect on the person who works in not only the

movie industry, but also the person who works in manufacturing, distribution, and retail.

Despite the effects on the U.S. economy, there are some people who claim that

pirated movies do have a positive impact on the financial success of small films.

Economists at the Munich School of Management and Copenhagen Business School

produced a report theorizing that pirated movies have a positive effect on the box-office

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Name 1 First and Last Name Professor Name Course Name Date The Economic Effects of Movie Piracy The economic effects of movie piracy are immense, reaching out beyond the movie industry to affect every aspect of the economy. While movie piracy has been around long before the establishment of the Internet, it was not until the development of BitTorrent in 2003 that movie piracy began to affect the entire economy. According to Brett Danaher and Joel Waldfogel, “By the end of 2004, BitTorrent, the most popular movie file sharing protocol, reportedly accounted for as much as 30% of all Internet traffic” (3). Movie piracy affects the economy by reducing profits for the retail industry, lost tax revenue, and loss of earnings for U.S. workers, even though some people argue that movie piracy helps small films to make money. In “The True Cost of Copyright Industry Piracy to the U.S. Economy,” Stephen Siwek states, “Copyright piracy affects more than the companies that produce and distribute copyrighted products” (3). Profits in the retail industry are affected as sales in movie DVDs are reduced due to movie piracy. By downloading movies through protocols, such as BitTorrent, the ...
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