Impact of piracy on movie and music industry of UK - Dissertation Example

? Impact of piracy on movie and music industry of UK Table of Contents Table of Contents 2 0 Executive Summary 4 2.0 Introduction 4 2.2 Purpose of the study 5 2.3 Research Objectives 5 2.4 Research questions 5 2.5 Hypothesis 6 3.0 Literature review 7 3.1 The Financial and Non Financial damage caused to the movie and music industry 7 3.2 Impact of piracy on violation of copyright act 9 3.3 Impact of file sharing on consumers and the music and movie industry 10 4.0 Research Methodology 12 4.1 Types of Research 12 4.2 Choice of methodology 13 4.3 Data collection method 13 5.0 Findings 13 6.0 Discussions 16 7.0 Conclusion 17 8.0 Limitations 17 9.0 Recommendations 17 References 20 1.0 Executive Summary The research paper was initiated to identify the sources of audio visual piracy and the impact of piracy on movie and music industry of United Kingdom. The objective of this research study is to assess the financial and non financial damage caused to movie and music industry of UK. The study will also lay emphasis on the copyright act of UK and the consequences of the violation of copyright act. The first section of the study will analyze and evaluate the impact of piracy on the UK movie and music industry. It will also identify the various modes of piracy and the financial damage caused to the industry. The study will also analyze the consequences related to the breaking of violation of copyright act and the impact of it on consumer behaviour. The second section of the study will identify the financial loss incurred by the movie and music industry of UK through various forms of piracy. It will also lay emphasis on the counterfeiting of digitalized goods from the theory formulated by Immanuel Kant. Finally, the study will conclude with recommendations that can prevent piracy and increase the legal purchases of digitalized goods. 2.0 Introduction 2.1 Impact of music and movie piracy Music and movie piracy is defined as the unauthorized method of copying the software, digital products, documents, software, audio and video for any reason other than backup without compensation and permission from the copyright owner. It is estimated that in the year 2008 almost 40 billion songs were illegally downloaded from the internet (Vandiver, Bowman and Vega, 2008). Every year 95 percent of the songs are downloaded without payment and referring to the copyright owner of the songs and movies (Vandiver, Bowman and Vega, 2008). In recent years the sales of the CD have skyrocketed and the blame has been placed upon Peer to Peer (P2P) file sharing of songs. Internet has become one of the most celebrated democratising medium (Meissner, 2012) that renders traditional individual gatekeepers who controlled the access of information to the traditional media but also allows greater choice of information (Meissner, 2012). Audience have a greater choice for viewing a movie which has been released lately without the fear of being supervised by the gatekeepers. Prior to the internet, Movie viewing was only available through movie theatres, DVD and cable television network. The availability was finite and certain movies were not released in certain countries (Meissner, 2012). Ethics and value have changed and the consumer perception on audio visual piracy has changed. There has been a significant increase in the rise of digital piracy which reflects that consumer attitudes does not always translate into purchase intentions even though unauthorized downloading of music and piracy is prohibited (Vida et. al., 2012). 2.2 Purpose of the study The main purpose of the study is to analyze the impact of piracy on the UK movie and music industry. The study will also analyze the damage caused by file sharing and piracy on these industries and ethical values of the consumers. The study will also emphasize on the consumer attitude towards audio visual piracy and violation of copyright act. 2.3 Research Objectives The objectives of this research study are ascertained in line with the purpose of the study. They are stated below: 1) The procedure of file sharing and audio visual piracy. 2) The impact of the audio visual piracy on the movie and music industry of United Kingdom (UK). 3) The damage caused by the piracy to the movie and music industry of United Kingdom. 4) The violation of the copyright law and the impact of it on consumers. 2.4 Research questions The research questions are formulated keeping in mind the objectives of the study which are as follows: 1) What are the financial and non financial damage caused to the movie and music industry of UK? 2) What is copyright law and how is it related to audio visual piracy? 3) Is file sharing a good or bad procedure? 2.5 Hypothesis The projected justification of the phenomenon stated in the research study is called its hypothesis. Hypothesis may be either scientific or working in nature. Scientific hypothesis is based on scientific theories and observations, while working hypothesis is developed for further research (Walther, 2004). In this study the hypothesis is formulated for further research on the audio visual piracy. The hypothesis is formulated keeping in mind the objectives and questions of the study. They are stated as follows: 1) H0= There is no financial and non financial damage caused to the movie and music industry due to piracy. H1= The financial and non financial damage are two separate things and has a different impact on the movie and music industry. 2) H0= There is no impact of piracy on violation of copyright act. H1= There is an impact of piracy on the violation of copyright act. 3) H0= File sharing does not have a positive impact on the consumers and the movie, music industry. H1= File sharing does have a positive impact on the consumers and the movie, music industry. 3.0 Literature review 3.1 The Financial and Non Financial damage caused to the movie and music industry As per a study conducted by the Home Office Study, fraud of all types is one of the costliest forms of crime accounting for 28 percent of the crimes conducted in England and Wales. However, expenses related to fraud crimes are only 5 percent of the total response costs. The total fraud costs estimate to ?937 million per annum (Oxford Economics, 2008). The different types of copyright theft in UK and other countries are as follows: 1) Camcorders: The camcording of movies on cinema releases for up loading on the internet, later sale or for home usage. The Motion Picture Association (MPA) forecasted that 90 percent of the first unauthorized version of the movies over the internet can be sourced from the camcorder (Oxford Economics, 2008). 2) Sale purchase of illegal DVD: Sellers in forums like car boot sales, markets and on the streets sell illegally copied AV materials to others. 3) Home copying: Using encryption codes on DVD in order to make duplicate copy for themselves. 4) File sharing: This involves sharing and receiving of digital files through p2p networks. Files are typically stored on personal computers or other mobile phones with users making available and receiving files while file sharing through internet (University of Wisconsin, 2013) 5) Streaming: This involves accessing of contents online continuously online rather than downloading a file onto the hard drive. The MPA has forecasted that global losses to physical and digital copyright theft amount to $18.2 billion in the year 2005. The UK AV sector had estimated that ?531 million in the year 2008 due to copyright theft that necessarily represents a lost sale (Oxford Economics, 2008). Piracy has affected the music and movie industry to a large extent for example the collapse of Apollo Video Film hire had sparked controversies in UK and other countries. The company had to shut down more than more than 100 retail outlets and it was also observed that more than 23 percent of the small and medium sized enterprises were significantly affected by piracy (House of Commons, 2009). This reflects the importance of digitization in the music industry. Modelling based on the forecasted effectiveness of the spread of anti piracy measures indicate that the direct AV benefits would be of ?268 million in gross revenue terms. The direct benefit measures to the VA sector accounts for only for part of their total economic impact on the UK economy on a whole. The worldwide motion picture industry including foreign and domestic producers, distributors, theatres, and video stores incurred a loss of $18.2 billion in the year 2005 as a result of piracy (LEK, n.d). It was observed that the typical pirate age is between 16-24 years and 44 percent of the losses incurred by the MPA Company is attributed to the college students of USA and UK (LEK, n.d). Figure 1: Loss incurred by MPA association in 2011 (Sorce: LEK, n.d). From the above chart we can observe that UK movie industry had incurred huge revenue after Mexico. The movie and music industry incurred huge expenditure because of file sharing and piracy was highest in Mexico, UK, France and Russia. Figure 2: Worldwide Motion Picture Loss (Source: LEK, n.d). It is observed that 80 percent of the losses resulted from piracy overseas and 20 percent was derived from USA itself ( LEK, n.d). The major US motion picture association lost $6.1 billion in the year 2005 due to piracy which was the highest loss incurred to any organization due to piracy (LEK, n.d). 3.2 Impact of piracy on violation of copyright act Copyright law is about the creators and their right to control the usage and distribution of creative products (Guibault and Helberger, 2012). Copyright in a work is infringed by a person who without the licence of the copyright owner does and authorises another to do, any of the acts restricted by the copyright (IPO, 2013). The digitalization of creative products has paved the path for the emergence of increasingly sophisticated digital content markets (Guibault and Helberger, 2012). Fine grained technologies permit the selling of digital book, videos, music, movies and games etc vide physical carriers like CD and DVD as well as over the internet in the form of pay per view, subscription or streaming service and download. The copyright act of UK was enforced on 01 August 1989 and is applicable to the European Union also. The UK copyright act recognizes the element of labour and skill used in compiling and creating a work and ensures that the owner is granted with a copyright protection act or database right (National Archives, 2013). The copyright law permits the authors or owners of the music, video and movies the right to control, copy, physical and online distribution of their works (Johnson, 2007). Economic rights are subject to certain restrictions and exceptions as a means to balance and protect the interests of the right owners such as private use and privacy. Illegal music consumption has not only increased but has also changed the perception of violation of copyright act. As observed that most of the illegal audio and visual piracy is being done by the youth which signifies that the ethical value and moral of the youth are degrading. The youth are unperturbed regarding the illegal consumption of digitalized goods and violation of copyright act. 3.3 Impact of file sharing on consumers and the music and movie industry It is observed that piracy has a negative impact on the probability to purchase music in CD format but has a positive impact on the probability of downloading the music legally. The youth considers the pirated digitalized products as a substitute to music in CD and movie in DVD formats which is wrong way to perceive consumption of goods. The economic condition and the income of the consumers also play a pivotal role in piracy. Legal purchases of digital music and movie increase with a rise in the income of the consumers, illegal consumption of digitalized goods decreased by 22 percent in UK, 13 percent in France and 50 percent less in Italy (Aguiar and Martens, 2013). The rate of illegal consumption is almost same of UK and Germany (Aguiar and Martens, 2013). The difference in the statistical data of the countries is because of the culture difference in these countries. The cross country differences in the individual consumer choices may also be due to the differences in the nation copyright enforcement laws of different countries. The impact of the violation of the copyright act on consumers can also be analyzed by observing the online behaviour of the consumers. Education does not play an important factor in the illegal consumption of digitalized goods because most of the consumers are aware that they are violating the copyright act while they are downloading or file sharing the digitalized goods illegally. We can observe that apart from the loss incurred by the movie and music industry of UK there has been an alteration in the consumer behaviour of the consumers. Illegal consumption of digitalized goods signifies that the consumers are also a major contributing factor for the loss incurred by the movie and music industry in UK. Although it can be also said that there are many consumers who have preference for music and movie of genuine quality and they are more prone to legal purchases of digitalized goods and services. Most of these websites do not have authorized permission from the copyright owner and the products are available free of cost. The websites which offer digitalized goods to consumers generally ask for payment however, most of the consumers are unaware of this information and also become a part of the violation of copyright act. As per the research conducted by the IPSOS it was observed that 16 percent of the viewers of movies and music listeners would not view or listen to the material if they were aware that it is available in unauthorized form. The consumers would opt for legal purchases of digitalized goods and services (Oxford Economics, 2008). As per the survey conducted by the IPSOS, 58 percent of viewing of pirated movies and 21 percent of the pirated TV series viewing actually counts as lost revenue to the producers and distributors (Oxford Economics, 2008). As per the survey conducted by Rob and Waldfogein the year 2007 on 500 students to enquire whether they believed that unauthorized consumption of movies displaces DVD and cinema consumption (Oxford Economics, 2008). The conclusion from the derived result was that unpaid and subsequent consumption of a movie reduces total paid consumption across consumers by 3.5 percent. The concept of file sharing would be explained with the help of the theory from the works of Immanuel Kant’s of the Injustice of Counterfeiting Books (Meissner, 2012). Kant had developed the theory keeping in mind the counterfeiting of books. We would analyze the theory in perspective of counterfeiting of digitalized goods. As per the theory Kant tries to protect an author’s fundamental right by emphasizing on his personal freedom to decide, who is authorized to speak to the audience on the behalf of the author. The author’s will be considered while making ethical judgements. In digital environment the author does not have a commercial interest with a movie but wants to reach out a larger audience, file sharing will be positive. File sharing can lead to a substitution effect which seems to be related to the mainstream cinema. If movie distributors want to generate huge amount of revenue then they should see file sharing under the positive light. However, file sharing without the authorized permission of the owners would lead to violation of ethical principles and conduct (LibriVox, 2007). The second principle of the theory revolves around the fact that contentment and happiness of the author might emerge from the monetary income, recognition, successful completion of a movie and they should focus on collaboration with other file sharers who can spread about their creative work successfully to the audience. However, it harms those producers who seek a maximum of monetary profit but suffer a substitution effect. File sharing can have its benefits but if used unethically then it would have a negative impact on the industry, consumers and the society as a whole as it will only help in degradation of ethical values (Meissner, 2012). Thus we can observe that file sharing if used judiciously can be advantageous. 4.0 Research Methodology 4.1 Types of Research A research or an investigation study depends upon the research conducted by the researcher. In a research study the data collected would be identified and analyzed to derive solutions. In this particular section research methodology would be utilized and data would be analyzed. There are three types of research which are qualitative methodology, quantitative methodology and hybrid methodology. Qualitative methodology deals with the non numerical aspects of the research study (Silverman, 2011). Qualitative data is very descriptive in nature and has the ability to solve complex problems very easily. It helps in evaluating factors like cultures, beliefs, opinions (Patton and Cochran, 2002). Quantitative methodology helps in assessing the numerical and statistical aspects of the study (Flick, 2011). The derived solutions are generally specific and very concise. Hybrid methodology is a combination of qualitative and quantitative methodology (Green Book, 2013). Certain research study requires the usage of quantitative and qualitative methodology. This is because the research study requires the evaluation of data through qualitative and quantitative analysis. 4.2 Choice of methodology The main objective of the research study would be to conduct an analysis to understand the impact of audio visual piracy on consumers. The study would also analyze the financial damage caused to the music and movie industry. A qualitative analysis would be appropriate in this context as factors like opinion of consumers on audio visual piracy and the objective behind doing so would be analyzed only through a qualitative analysis. 4.3 Data collection method To conduct a research methodology data needs to be conducted from primary and secondary sources. The data collection methods depend upon the quality and category of research study. The objective of collection depends upon the object, entity, unit of the research study. Primary data needs to be collected from a survey or questionnaire (Grady, 1998).The methods of obtaining information through primary sources are by mere observation, journal, books, interviews etc (Kothari, 2008). However, secondary data is refined and can be collected in a short span of time. While obtaining data from secondary sources the researcher should keep in mind that the sources of data should be authentic and genuine to avoid inaccurate results. In this research study secondary data was collected from journals, magazines and newspaper would be analyzed as data for this relative study cannot be achieved through primary data collection method. 5.0 Findings Piracy has become a growing concern for the music, movie industry of UK and the government of UK. This is mainly due to the fact that significant amount of losses is incurred by these industries and unethical conduct is being committed by the consumers of UK. As per the latest study conducted by Zentner on 15000 consumers of UK in the year 2006 it was observed that P2P file sharing led to a decrease of probability of purchasing music by 30 percent and without illegal consumption of music and movies the revenue would have increased by 7.8 percent (Oxford Economics, 2008). As per the IPSOS survey, the piracy would be divided into three types (Europe Economics Chancery House, 2008) which are as follows: Physical piracy: These include the sale and counterfeit of home copied DVD and these forms of illegal consumption are extremely illegal (Organization for Economic Co-Operation and Development, 2009). Counterfeit DVD are usually fake DVD which are produced commercially and sold by street traders whereas home copied DVD are made and formatted by the individuals made for themselves or friends or colleagues. Digital Copyright theft: Unauthorized digitalized products which is sourced and distributed via digital platforms such as internet including digital materials which is file shared and downloaded into a computer or another device, illegally streamed, emailed or burned onto a DVD (Castro, 2011). Second market activity: The additional viewings of digital material sourced from the above two sources by individuals who did not acquire the legal copy of the material themselves as a result of which they did not have to pay for a legal source of this material. Figure 3: Estimate of the IPSOS on loss of revenue through each segment (Source: Oxford Economics, 2008) We will analyze the findings of the survey conducted by the IPSOS. Physical Digital Market Secondary market Total loss incurred by the movie and music industry would be ?89 million. Total loss incurred is ?235 million and adjust to ?225 million with anti camcording legislations. Total loss would be ?207 million and adjusts to ?196 million with anti cam cording legislations. Assumptions Illegal consumption would account for 15 percent of the total sales. Current loss would be ?12 million. Pirate activity/revenue losses roughly constant per internet user. The loss is consistent with value of primary market titles pirated. It implies that ther is 28 percent physical and 72 percent digital source. Response The enforcement of copyright act and other legislation laws on this industry has an effectivenss of 50 percent. Technical measures will be introduced by ISP if no satisfactory response from the consumers. The knock on effects from enforcement public information campaigns and newspapers. Post response Benefits would be around ?6 million and the consumer shifting is limited by demographics, awareness, restricted choice in physical sales. Notice sent to 90 percent of the infringers of whom 70 percent will stop. Benefits would be around ?142 million. 93 percent of physical source losses, 37 percent of digital source losses will occur in primary markets. Total benefits will be around ?89 million. Revised loss ?78 million ?83 million ?103 milion (Source: Oxford Economics, 2008) 6.0 Discussions From the above findings we can observe that the most of the illegal consumption of digitalized products have been through the internet medium and this has affected the movie industry of UK significantly. One of the recent controversies sparked in UK was the bankruptcy of His Master's Voice (HMV) a leading retail company of UK, whose stock market value had become zero in January, 2013 (Shah and Marlow, 2013). This was because music piracy had led to the decrease of the sales of the company (Rundle, 2013). The damage caused by the internet piracy had a negative effect on HMV and their suppliers had funded them with ?40 million (Graham, 2012). At the present moment the market value of the company is just ?14 million (Graham, 2012). The UK government needs to implement strict measures against internet pirates, in Canada it is illegal to download copied music files for personal usage (Wise Geek, 2013). 7.0 Conclusion From the above research study we can observe that digital reality has changed the public perceptions of copyright protected works for good. The image of piracy as heroic act needs to be transferred into the perception of piracy as a less acceptable behavior. We have observed that illegal consumption has a negative impact on the movie and music industry and provides fewer benefits to the consumer. There is less respect for the violation of copyright and intellectual property rights among the youngsters. The music industry has faced a lot of changes and has embraced digitization with open arms. Although, the digital music revenue has increased more than 1000 percent during the tenure 2004-2010 and is growing at a rate of 8 percent in the year 2011 to an estimated $5.2 billion (Aguiar and Martens, 2013). Although illegal consumption is a like trespassing a private property right or copyright act, there is no major damage caused to the movie and music industry. Major damage would have been caused only if there would have been sales displacement, if piracy leads to substantial amount of sales displacement of digitalized music. 8.0 Limitations There were certain limitations to this project; firstly insufficient data was available regarding the volume of the digitalized products being downloaded. Secondly, data availability regarding the loss incurred by the music and movie industry was limited. 9.0 Recommendations As mentioned before that in spite of the negative impact of piracy the UK movie and music industry had generated huge amount of revenue which can be utilized effectively to reduce piracy. Improvement of the theater experience: The exhibitors of cinema hall should reinvest the increased revenues received. This could include upgrading and refurbishing the movie halls or constructing new ones. Increased revenue may also help to fund the rollout the innovation like digital and 3D cinema across United Kingdom (Oxford Economics, 2008). Higher spending on the sets: If the UK movie industry and USA Movie studios collaborate then the revenue generated would be enormous. Higher budgets would lead to higher quality productions and increased levels of employment in related industries such as costume design, lighting etc (Oxford Economics, 2008). Improved visual effects: Higher revenue generated would allow improved techniques and visual effects for both UK films and production (Oxford Economics, 2008). Increased production: The production of films might increase due to USA and UK productions given the certainty of higher returns. However, this would be dependent on variety of movie financing and investment decisions (Oxford Economics, 2008). Anti Piracy Law: It should be seen that the anti piracy laws that are enforced should be effective, like recording movies through camcorders should be strictly prohibited in the cinema halls (Fight Film Theft, 2013). The cinema halls should be supervised thoroughly (Oxford Economics, 2008). Music Blogs to be monitored: The music blog websites should be monitored and tracked regularly by the government officials. This would prevent selling of the music online without violation of copyright act. It would be important to consider that if the above recommendations are not considered or stringent measures are not implemented against audio visual piracy then it might affect the reputation of the movie and music industry of UK. UK is an important film market and a number of important movies are released and premiered in UK. When film producers consider London as a premier venue then it brings additional advantage and also attracts film investors to the country. However, the absence of an anti camcording legislation law instils a fear in the movie producers that the movie will be recorded in the cinema halls by a camcorder and then released across the world. This might prohibit movie producers to premier in that country further which might be bad for the reputation of the country. References Aguiar, L., and Martens, B. 2013. 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