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MPAA does the math, again - January 23, 2008

What sort of “human error” could have caused the MPAA to claim that 44% of total studio losses from piracy are attributable to college students when the real figure is 15%, as the Hollywood trade org now admits happened? So far the MPAA itself has been tight on the details. But here’s one way they could have overstated campus piracy by a factor of three:

The 44% figure comes from the summary of a study conducted in 2005 by LEK Consulting of Texas and paid for by the MPAA. The study used consumer surveys to estimate total losses from piracy in 11 countries including the U.S. The researchers put the global annual figure at $6.1 billion. Of that, $1.3 billion occurred in the U.S.

How the LEK researchers decided that 44% of the U.S. figure is attributable to college kids the summary doesn’t say. The figure, in fact, is referenced in the summary almost in passing, without any indication or explanation of the data on which it is based. Since the MPAA has never released the whole study, there’s no way to judge whether it bears more than a nodding acquaintance with the real world.

Taking it at face value, however, another problem becomes apparent in reading the summary. According to LEK, only one-third of total piracy losses in the U.S. are attributable to Internet piracy—presumably the kind college kids engage in. The rest is hard goods piracy (i.e. counterfeit DVDs). If only one-third of all piracy losses are attributable to Internet piracy, however, including campus and non-campus downloading, it’s hard to see how 44% of total losses can be blamed on college kids.

Here’s what Media Wonk thinks happened: LEK concluded that Internet piracy accounted of one-third of all piracy in the U.S., or $447 million of the $1.3 billion total, in 2005. In then concluded—for whatever reason—that 44% of all Internet piracy occurs on campus networks. Someone (the MPAA?) then got lost in the math and didn’t realize you need to multiply $447 million (total Internet piracy) by 0.44 (the fraction attributable to college kids) to arrive at the figure for the share of all piracy losses that can be blamed on college kids. When you do the math correctly you come up with 14.8%--suspiciously close to the MPAA’s revised figure of 15%.

Could it really have been that simple? It would be an awfully basic error for a professional research outfit to make. It's more the sort of mistake the client makes in "interpreting" the data. If that's what happened here, bringing in an outside research firm to "recheck" LEK's numbers won't get to the root of the problem.
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