$200B Lost To Counterfeiting? Back It Up 283
An anonymous reader writes "Over the weekend, the NY Times ran a story about how the recession has impacted product counterfeiters. In it, the reporter regurgitates the oft-repeated claim that counterfeiting 'costs American businesses an estimated $200 billion a year.' Techdirt's Mike Masnick asks the Times reporter to back up that assertion, noting two recent reports (by the GAO and the OECD) that suggest the actual number is much lower, and quoting two reporters who have actually looked at the numbers and found (a) the real number is probably less than $5 billion, and (b) the $200 billion number can be traced back to a totally unsourced (read: made-up) magazine claim from two decades ago."
Re:Maybe newspaper articles should list references (Score:3, Interesting)
Do you know how long it would take them to verify all their sources. Come on, it'd take several extra hours to get a story up. There's no time for that. If you want for confirmation, you'll get scooped by someone else.
[sarcastic but unfortunately true soapbox off]
ACTA propaganda campaign? (Score:4, Interesting)
When they start using rectal numerology to prop up a story like this, I can't help but think that this is a propaganda piece to grease the skids for ACTA.
Re:Not surprising (Score:3, Interesting)
Not that I give a lot of credence to that $200 billion figure, but I think part of their claims are that people might be buying counterfeit goods thinking that they're legit. For example, it was a while back on a forum that I saw some people that had gotten fake Seymour Duncan guitar pickups off ebay. They were sold for a price nearing authentic ones, and were sold as authentic, but after scrutiny it was discovered that they were knockoffs.
That said, while it DOES happen, I think it's a lot rarer than most companies would have you believe.
Re:*illions lost to piracy, counterfeit goods... (Score:3, Interesting)
You also have to consider that the market price is artificially inflated to "cover the damage" of piracy. Thus, if there was no piracy, the prices would (hypothetically) be lower. So not only do you have to consider the sales lost rather than the total pirated, but you also have to use the "real market value" not the inflated market value. Further, you would have to subtract from this total the amount lost per sale due to the devaluation.
If the value ends up negative, then the industry is actually making money from there being pirates, as counter-intuitive as this would seem. If they were unable to sustain a higher value per item, through a lack of justification, they would end up making less money even though they sold more products.
(This justification thing featured big time when the US and UK governments investigated the music business when it was discovered that prices for producing CDs had dropped dramatically, research had all been paid for, but consumers were actually spending more per disk. Before then, the main argument for the high prices for CDs was that it cost more to make them than it did vinyl. After the showdown with Congress and Parliament, it was all about piracy.)
I'm not saying that anyone IS making money from there being piracy, but it is something that has to be considered as a possibility.
Even after all that, there are still two more factors. The first is who is doing the pirating. Competitor A may well try pirating a product of Competitor B's, particularly on those occasions when you've a sales volume war going on. That is certainly money lost to piracy, but it is the industry itself doing it and you can't blame outsiders for that. Well, you can, as clearly they do.
The second factor to consider is unpaid royalties. We have no idea how much any given company is making in profit that it is NOT entitled to. However, this value has to be estimated, because you have to subtract not only the total illicit profit from a company from the damage caused by counterfeiting, but you THEN have to subtract the total illicit profit the company WOULD have earned had the sale happened through them. That is not money they should ever have counted.
I cannot see how any figure that exists today (or any other day) could even begin to take all this into account.
Direct or Indirect? (Score:5, Interesting)
The place to start with this is doing something like purse shopping. You can go to a Coach store or Prada and find a really nice purse for $1500 and an OK one for $500. Then go to a store that sells similar knock-offs and you can see things that look more-or-less like the Prada ones for $100. Then stop by the street vendor with a absolutely faithful Prada copy for $35.
There are two things that the average Joe learns from this adventure:
What this does is by the mere presence of the counterfeit goods in the marketplace is reduce the willingness of the public to buy originals. It doesn't matter what the "original" is, obviously there has to be a cheaper counterfeit version available. This applies to everything from caviar to computers and automobile parts to luggage.
$200 billion lost because of the presence of counterfeit goods? Easy. The direct losses might only be a few million, but pushing the idea of "just as good as" in front of people pushes the originals out completely.
Re:Not surprising (Score:5, Interesting)
The "lost sales" numbers companies claim often are based on 100% of people buying the more expensive real product (which most of us would agree is a completely bogus number).
Indeed, I recently bought a fake Breitling watch for $100.-.
Even though I have to take it off in the shower (yes I bathe) I would never buy the +$4000.- real deal that's water proof to -500 meters.
Yet some lawyers would tally this as a $4000.- lost sale.
I don't see why this is a problem. (Score:4, Interesting)
Re:Can't really hurt many US jobs... (Score:5, Interesting)
It is killing retail too (Score:3, Interesting)
As well as retail. My ex-gf works in fashion down in LA and to pay the lease she needs to sell at leas a single high-end designer dress every few days. Last year she in the garment district she saw someone selling a fake Dolce Vita skirt for 20 bucks, this skirt retails for over 400. How can she compete with that? Should she start buying the fakes to stay in business, because that is what it comes down to.
Re:Maybe newspaper articles should list references (Score:3, Interesting)
"News" used to mean something. Now it's a marketing term for selling opinions dressed up in half-truths and passed as facts. I call the use of deception to sell something (whether an idea/political agenda or a channel or paper or whatever) fraud. Instead people see it as good marketing.
Re:It is killing retail too (Score:5, Interesting)
Well, did the person selling the fake skirts make it clear that they were fake (or at least, did the customers know)?
If so, then all they wanted was a skirt that looked a particular way; they didn't care who made it. Your ex's store, or the designers who supply her, can only try to compete in three ways, it seems to me.
First, quality; their skirts may be made of better materials than the fakes, or may be made with better techniques. If so, try to differentiate based on this. Of course, some people are satisfied with synthetics instead of natural materials, or poorer materials instead of finer ones, or single stitching instead of double stitching, so it won't always work, and the price difference may remain substantial. (There was an interesting article in the NY Times the other day about the Italian fashion industry and wool quality)
Second, price; how cheaply can the real skirts be made? Maybe it would be more efficient to sell skirts out of a van, instead of out of a store that is expensive to lease. It looks like the fake guys are winning on this front, but there's no reason that they necessarily have to.
Third, brand; there may be some cachet that can be used to make money out of the brand of the manufacturer or the distributor. Some people presented with identical products from different vendors at different prices may prefer the more expensive one as a form of conspicuous consumption. (You can see it elsewhere; a real Picasso is worth a lot, but a forgery, no matter how identical, is worth a lot less to people who care about this sort of thing) It can work, but it has problems. Some people don't care about brands, but just want a nice skirt. If the fake is good enough, they'll probably buy it since it costs less than the same thing from elsewhere. Some people care about brands, but are excluded due to artificially high prices set by the people controlling the brands. They'll deliberately seek out the fake skirts in order to most closely approximate the real thing.
I suspect that the ex et al have been trying to compete only on brand, and perhaps partially on materials (although usually brand justifies more of an increase in price than materials). If it's not working as well as they'd like, perhaps they ought to try a different approach?
Re:Direct or Indirect? (Score:4, Interesting)
Eh, I'd say the lesson there is 'don't buy overpriced name-brand'. I mean, I'd never buy a Rolex watch. I see a counterfeit Rolex and all that tells me is 'this is what that expensive watch is actually worth, in terms of parts and labor'. But I'm not gonna buy the counterfeit either. Instead I'll buy a Casio or a Yes.
If there's a dramatically cheaper counterfeit of something available, that means you're probably being ripped off when you buy that item. Notice that it's mostly the overpriced luxury goods that get ripped off. And movies and such, but that's just because blank DVDs are dirt cheap compared to a DVD movie - again, you're getting ripped off when you pay $20 for a piece of plastic. Money too - worth $100, costs a couple cents.
Anyway, my point is that there only has to be a cheaper version if the original version is a colossal waste of money.
Re:Maybe newspaper articles should list references (Score:3, Interesting)
Well, I've been on the receiving end of a few C&D's [wikipedia.org] for doing what Slashdot does. It all depends on who gets their panties in a wad that day. Carrying parts of their stories can be touchy. Duplicating large amounts of news is well beyond the fine gray line of copyright.
Generally, we (bloggers and aggregators) all do it with attribution (the read more links, or embedded links). It actually helps them out. Consider a Slashdot story and the Slashdot effect. If Slashdot runs a story, it'll likely get an extra 100,000 hits or so. Some of those hits will result in increased ad revenue. At very least it'll get them a bit more attention. When PoDunk Nebraska's Daily Times, who has a readership of 15 people (population of 30) runs a story, that'll be the total exposure. When someone like us runs it, it is now internationally known. You normally couldn't beg for that kind of exposure unless it's picked up as a wire service story. Even with it showing up in the wire services, it's rare that the viewers make their way back to the publication of origin.
If a publication is getting all their facts from another publication, it can seriously hurt their revenue stream. Why would I stay up and watch the 10pm news, when I know it'll be printed in the unrelated paper in the morning. I know they seed their news with mistakes, so it's traceable. For example, 15 people were injured in a major car crash, and it was a big story for the area (slow news day). The first media outlet may report 16 (oops, our mistake). When you see other outlets report 16 people were injured, it's pretty obvious that it was collected from you. It doesn't always have to be that obvious though. It could be an intentional misspelling of a name. "John Smithe" could be the subject of an article, although his name is really spelled "John Smythe". Unless the records were incorrect, (like, police or court records), that would have not been shown incorrectly twice.
There's always been a drive to get the scoop on a story, no matter what it takes. We've been getting away from real journalism though, where the journalists don't necessarily check up on the leads. Getting a lead from another publication is fine and dandy, but check your information. In the case of the article in question, it seems they jacked it straight out of an old publication rather than doing basic fact finding. Who needs fact finding these days, when rumors are more than enough to handle it. I hate it when I see false information from chain emails pop up in publications. It happens more than I'd like to see. Rather than try to check up on any of the facts, they'll just rehash the lore and publish it.
[soapbox mode off]
Re:Maybe newspaper articles should list references (Score:3, Interesting)
I'm a freakin' engineer, and this complete contravention of anything that smacks of science drives me nuts. I'm not saying AGW doesn't exist; it may well be true. I'm saying on the basis of what's been shown, and more importantly, how it's been shown, the case is definitely "not proven".
Re:It is killing retail too (Score:2, Interesting)