One of this month's top intellectual property stories will surely be the MPAA's startling revelation that even it had underestimated the threat of piracy against the movie industry. This "shocking" confession scored a lengthy and largely sympathetic report in the Wall Street Journal, where we're told that "sources" had revealed that the findings in a report by LEK Consulting were so bad that some studios wanted to suppress the entire thing, and interstudio conflict ensued. What could be so bad that even the people behind Gigli and Aeon Flux and would want to see it lost at the bottom of a river?

The Journal says that it's the whopping US$6.1 billion "lost" to piracy, which they say represents "75% more than previous estimated losses of $3.5 billion in hard goods" (a claim also put forth by the BBC). The fear, it seems, is that such dramatic figures could hurt the industry by making its enforcement efforts appear "laughable," and by harming investor confidence. Yet while busily portraying this new study as as shocker that's causing problems between the studios, the Journal failed to note that the MPAA had already conducted another study, done by Smith Barney in 2003 which determined that $5.4 billion would be lost to piracy in 2005. It's an odd omission, and an important one, too. Instead of talking about a 75 percent increase in losses, we'd only be talking about 13 percent on the losses that the studios already expected.

Now contrast these statements:

WSJ authors: "But now a study shows the damage is far worse than expected" MPAA spokeswoman, indirect discourse: "She says the numbers weren't far out of line with what the industry expected."

So which is it? Far worse or not far out of line? The Journal's "source" seems to be primarily interested in drama.

Of course, the drama steals focus from the real questions (by design?), including those relating to the study's methodology. Instead, we're to assume that these studies are trustworthy, and that is a huge assumption. Why? Because whether you're the Wall Street Journal or Ars Technica, you don't get to see the study. It's private. What you get to see are "summary" points which you're supposed to take on face value. I won't repeat everything that the press materials say, because you can read them for yourself (PDF). I do want to hit some highlights, however, and note some of the massively problematic gaps in the story that should have been raised by "reporters" across the country, but weren't.

As expected, losses to "bootlegging" were the greatest, estimated at US$2.4 billion. Generally speaking, this is hard piracy, often (but not always) involving organized crime and illegal distribution (think: guy on the corner selling movies for US$5). But the rest of this towering 6.1 billion loss is largely made up of what I consider "soft" pseudo-piracy, namely, "losses" stemming from Internet downloads as well as so-called illegal copying. Consider the latter, for instance. Nearly US$1.4 billion is "lost" to illegal copying, but just what is illegal copying exactly? According to the MPAA, it is "Making illegal copies for self or receiving illegal copies from friends of a legitimate VHS/DVD/VCD." Thus, the MPAA is counting personal non-commercial backups and transformative "ripping" as piracy (ripping including decrypting DVDs so that the content can be moved to a portable player).

It's especially curious to see them argue that 62 percent of this kind of piracy happens outside of the US, because the US is one of the few countries to make the circumvention of DVD access controls illegal. I'm left suspecting that a significant portion of this estimate stems from copying happening in places where local statues do not explicitly forbid it. I'm also left suspecting that what most of us consider Fair Use is being marked as piracy. Hey, the RIAA makes the very same argument.

Normally you'd check the study, but in this case, the study can't be studied.

The real threat according to the blowhards is, of course, Internet downloading, which represents US$2.3 billion in "losses." Here the MPAA says international piracy accounts for 80 percent of such losses, but once again the age-old problem of counting those losses arises. According to the Journal, this study "specifically asked consumers how many of their pirated movies they would have purchased in stores or seen in theaters if they didn't have an unauthorized copy," supposedly alleviating the methodological problem of relating downloads to lost revenues.

What the Journal did not report on was the methodology used in mapping these consumers' poll responses to the combined domestic and international population. If these losses were calculated using a 1,000-person poll conducted in the United States, then applied to the globe as a whole, then you can see where this has gone awry (actually, you can see the problem no matter what sampling method is used: you cannot control for mass psychology and stay accurate). Unfortunately, the MPAA could not clarify this methodology for me, and no one else covering the story has any information, either. We're left with the vague assurance that "consumers" apparently admitted what they would have bought otherwise.

So in the end, the great US$6.1 billion figure looks to have a good deal of questionable padding in it, much like most other "studies" that purport to map real financial losses onto piracy, including its softer forms. This isn't to say that piracy doesn't exist, or that it's not harmful (although we do find the words "piracy" and "pirate" to be rather inappropriate). However, the contours and effects of piracy are quite open to debate, and as a result, the best ways to address the problem are up for debate, too. This is particularly clear when talking about "soft" forms of piracy, which can easy be massaged to make a situation look dire. And keeping a study private surely doesn't help, either.