The Slipperiness of What Might Have Been
Hollywood is circulating a new study (which they sponsored, through LEK Consulting) indicating that the film industry is losing even more money to piracy by far than we understood before. It was in yesterday's Wall Street Journal, and although I don't see it online yet (except on the WSJ's subscription site) the story should appear in coming days. The gist of it is that the largest Hollywood studios are claiming that they lost 1.3 billion dollars to movie pirates in 2005, which is more more than any previous estimates.
Industry specifics aside, I have a conceptual problem with studies like that: How can we tell how much money we don't make? That a certain amount of money is lost to various kinds of piracy in many industries is clear. However, is that amount in any real sense measurable? There are many well-known fallacies in such calculations, like considering every sale of a pirate copy a lost sale of a legitimate copy. Some percentage of people who buy (or download) pirated copies of something would have purchased legitimate copies. That percentage could well be anywhere from 0 to 100%. The studios lean toward 100% (it makes their losses more staggering) and file sharing devotees lean toward zero, to dodge responsibility. The answer (obviously) is somewhere in the middle. How do we go about finding the answer?
It's almost like trying to work out an alternate history. In another universe, where P2P networks don't exist, the studios would have made a different amount of money, but I'll be damned if I can get a grip on how to do the math. Statisticians try to "hold constant" or otherwise account for other variables, but I'm not sure that can be done in situations as complex as this, where so many things come to bear on the collective decision-making of notoriously irrational human beings. I go to fewer movies than I used to both because they cost more, and because fewer movies appear that appeal to me. Is this a broad trend, or is it just me? If you ask a group of people, will they tell the truth? Do they even know the basis of their own decisions? Will they simply tell you what they figure you want to hear?
Finally, the biggie: How useful are any such estimates, as guides for taking action? The study in question will doubtless be hauled out by Hollywood to bludgeon Congress into basically shutting down the Internet as we know it. (Of course, dropping hundreds of millions of dollars into politician pockets at the same time makes the bludgeoning go down a lot easier.) Many firms have done the same sort of alternate-history estimates, and driven themselves nuts (and sometimes to bankrupty) trying to guess how things would have gone last year with fewer (or dumber) competitors, a different regulatory climate, a broader (or narrower) product line, lower interest rates, and so on. My own position has hardened in recent years to the following: Such things are unknowable. History runs only once. One can guess, put one's finger to the wind, and perhaps think wishfully, but trying to quantify things that didn't happen is futile, and when done on such a large scale as the studios are doing, can only mean that they're using an imaginary past to construct a future more to their liking. It's time to call BS on all such studies, and insist that planning (and especially legislating) be done on the basis of what can be objectively known.