SOPA: How much does online piracy really cost the economy?

The Stop Online Piracy Act (SOPA) has been widely panned as a dubious idea, uniting both liberals and conservatives in opposition. But doesn’t the bill, at the very least, identify a serious problem? Isn’t online piracy inflicting all sorts of damage on the U.S. economy? That’s the argument. But the actual numbers are surprisingly hard to pin down.

(John Vizcaino - Reuters) For example, the Motion Picture Association of America estimates that piracy costs the U.S. movie industry some $20.5 billion per year. But Julian Sanchez scrutinizes these figures and finds they don’t hold up. After you remove all the double-counting and restrict the focus solely to American users — which is the only thing SOPA addresses, anyway — then, he notes, those industry-estimated losses come to just $446 million per year (“roughly the amount grossed globally by Alvin and the Chipmunks: The Squeakquel”).

And even those numbers might not be right. The Government Accountability Office has raised further questions and concerns about the copyright industry’s claims of losses here. Part of the difficulty here is that it’s not always easy to tally up the true costs of piracy. For instance, if a person illegally downloads a movie or song that he never would’ve downloaded otherwise, then it’s not clear what the losses actually amount to (the benefits, by contrast, are fairly clear).

More to the point, as the GAO observes, just because the movie and record industries lose a certain amount of money from online piracy in the United States doesn’t mean the economy as a whole suffers by that exact same amount — particularly if the money that would have been spent on those pirated movies and albums just ends up getting spent elsewhere.

Now, none of that is to suggest that online piracy is a non-issue. And these are hardly the strongest arguments against SOPA — the more substantive concerns are that the bill would impinge on free speech, impose an undue burden on companies like Google, and potentially fracture the architecture of the Internet. Still, it’s worth getting a better sense of the actual scale of the relevant problem here.