NBCU Chief: File-sharers "The New Face of Organized Crime"

In a speech yesterday before a summit organized by the US Chamber of Commerce, NBC Universal CEO Jeff Zucker was quoted as proclaiming his industry and legislators are jointly losing the war against intellectual property piracy - a fight which impacts him personally as the chief of one of the world's principal content creators.

Though a complete transcript has yet to be made available, Broadcasting & Cable reports Zucker essentially drew an outline around both physical pirates and P2P file sharers, in an attempt to shame them all with an "axis of evil" style metaphor.

Zucker cited new numbers compiled by the Institute for Policy Innovation in a report yet to be publicly released. The report is expected to estimate losses to the US economy based on activity from both physical media pirates and illegal downloaders. Referring to them as a single group yesterday, according to B&C's account, he tagged them "the new face of organized crime."

That report estimates the cumulative value of lost economic activity in the American economy due to sales of both physical media (including CDs and DVDs) and digital downloads not realized by publishers and retailers. That cumulative figure is said to approach $60 billion annually, which also accounts for approximately 373,000 lost jobs in the retail and industrial sectors, and as much as $2.6 billion in lost tax revenue to the US government.

The IPI report Zucker cited will present cumulative totals based on studies it released in previous years, including one which solely deals with the sound recording industry just last week. BetaNews studied the methodology of this IPI report this morning.

In it, we discovered its authors estimated that roughly 4 billion songs per year were illegally downloaded by US Internet users. It then roughly estimated that those songs actually constitute 800 million songs not sold, under the theory that downloaders accumulate on average five times as many songs as they otherwise may have purchased. The report used this formula to estimate the total annual loss to US retail industries that would have sold those songs otherwise, at $890 million.

"The download piracy losses to U.S. retailers are calculated using an assumed value of 4.0 billion illegal downloaded songs in the U.S. in 2005," reads the latest IPI report, entitled, "The True Cost of Sound Recording Policy to the US Economy." "This value (based primarily on a review of confidential sources) implies that of the 20 billion illegal songs downloaded globally in 2005, some 20% or 4 billion were downloaded to U.S. consumers. Again assuming a 20% substitution rate, these 4 billion downloaded songs translate into 800 million lost legitimate sales. This figure is then adjusted for the weighted average price of legitimate purchases for download consumers and by the retail margin. These calculations lead to download piracy losses to U.S. retailers of $890 million and total U.S. retail losses (from both download and physical piracy) of $1.041 billion."

But as recent recording industry lawsuits against individuals might indicate, many downloaders accumulate tens of thousands of songs, most of which they may never listen to. If you account for those songs as lost sales - which, for purposes of legal indictment, you would have to do - the damage in each case could mount up to tens or hundreds of thousands of dollars.

The problem with that theory, however, is the presumption that had the means not been available for a downloader to have accumulated that many songs, he would have gladly purchased them otherwise. In the legal respect, theft leads to lost revenue; in the economic respect, in which sociological factors are taken into account, that's not always the case.

In other words, take a good look at the average defendant in an RIAA case, and ask yourself whether that person would have willingly spent ten grand on a CD collection had P2P never been invented.

NBCU's Zucker used these numbers to bolster his case for action on the part of content providers and carriers to thwart piracy, action which includes - but is certainly not limited to - penalizing certain high-bandwidth users. "Our unified voices will carry far more weight than the pleas of the individual industries," The Hollywood Reporter quotes Zucker as saying.

As an example, Zucker reportedly said carriers such as AT&T could implement filtering technology to scan content in transit, and could then act to throttle network access by those trafficking in content with a questionable source - people Zucker called "bandwidth hogs."

Such action would enable content providers such as NBCU, he said, to continue opening up their business models to multiple forms of digital revenue through streaming, direct downloading, repurposing, and repackaging for DVD distribution through retailers such as Amazon. Zucker did specifically cite YouTube as not doing enough to technologically combat piracy, even if technology alone cannot completely prevent it.

B&C noted that Zucker's stand against "bandwidth hogs" was clearly anti-net neutrality, on the basis that any unilateral measure to limit one group's access to Internet content in favor of another's is by definition non-neutral. Perhaps coincidentally, the Institute for Policy Innovation has also taken an antagonistic stand toward net neutrality, having praised the Federal Trade Commission last June for declining to enact new federal provisions to ensure equal access among network operators.

"The FTC demonstrated they're right on target when it comes to net neutrality," the IPI commented at the time. "For a dynamic economy, it is vital the industry be permitted to experiment with new business models, and deregulation is key to promoting the expansion of products and services."