The following is an open letter to Chris Ruen, an author for New Republic, who writes an article attacking piracy under the Lost Sale Doctrine. This letter will address why Mr. Ruen's views do not take into account the economic nature of piracy.

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Mr. Ruen,

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            My efforts to evaluate the effects of digital piracy led me to your 2014 article “Bored with Hollywood Blockbusters? Blame Digital Piracy” on New Republic. In the digital era, piracy is astonishingly common thanks to the ease with which it can be performed, and producers of all forms of digital media report extreme annual losses due to people illegally downloading their content from pirate sites. I have been attempting to determine whether piracy is as negative for the entertainment industry as content producers make it out to be, and your article strongly asserts that it is. I have taken your message into account and learned a significant amount about the situation from your article.

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            In your article, you assert that piracy is a very real problem, and share your own epiphany where you realized that bands were not being compensated for their work. You also maintain that the various excuses for the current rates piracy are invalid: the legitimate market has expanded significantly in the past fifteen years, physical performances and albums do not bring in the necessary revenue, and censorship and takedowns of infringing sites are justified since those sites have no legal grounds to exist. You then mention that “depressingly, digital piracy continues to grow,” and provide several statistics and studies detailing the rate at which piracy is expanding. You also express hope that consumers will be cooperative in “forging an internet that takes individual rights…and sustainable progress seriously.”

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            As someone who regularly enjoys online content, I definitely appreciate your desire to protect the livelihoods of those in the creative sector. If artists are unable to make a living through their craft, then the flow of new content will subside and the industry will stagnate, as you have argued in your article. Piracy is definitely an issue, and it definitely has an impact on the entertainment industry.

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            However, I disagree that piracy is the sole cause of the issues that you have noticed in the industry. You implied that the main reason that artists are poor is because piracy cuts into profits, leaving producers with a low operating budget. This is not so. Piracy’s impact on profits is much less than the dollar value of the pirated goods, since many of those who are pirating the content would not purchase it anyway. Rather, a much larger reason for artists’ low profits is the failure of the entertainment sales model. Producers, agents, and licensers skim significant cuts off the top of sales, and to ensure their profits, raise prices. This dissuades consumers from purchasing the content, which, in turn, loses profits, leading to a vicious cycle. Many studies have shown that piracy acts in opposition to this cycle, by forcing content providers to keep their prices competitive. If this is true, it would then harm the entertainment sector to remove piracy.

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            I also disagree with the fact that piracy solely hurts artists. Aside from the notion I discussed earlier that piracy does not directly translate to losses, it also benefits artists through exposure. Pirating material is often used by people as a “free trial” for content, and many of them will later legally purchase the content, or future works by that artist.

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            Your concerns about piracy are indeed valid, and I, too, desire to see artists fairly compensated for their works. However, I do not believe that piracy is the only force preventing this from happening, and I do not think that it should be regulated to the extent that you would desire. I have faith that, eventually, we will come to a solution that preserves the freedom of the Internet while still enabling artists to be compensated.

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Sincerely,

Eliot

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