Music Piracy Costs Europe $190 Million a Year, EU Study Estimates

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Music piracy has taken a small but noticeable bite out of potential profits for the recording industry throughout Europe, according to a new study by the European Union Intellectual Property Office. The report places an estimate on lost music sales in 19 EU states as a result of piracy in 2014, and comes up with a total of €170 million ($190 million), or 5.2 percent of all sales.

When broken down, that amounts to €113 million ($126 million) in lost digital sales and €57m ($63.5 million) in lost physical sales, the report finds. That’s the equivalent of 5.2 percent of the sector’s revenues from both physical and digital sales.

Two member states, Germany and the U.K., account for more than half of those losses. Europe’s biggest market, Germany lost €40 million ($44.5 million) in sales due to piracy, while the U.K. lost €49 million ($54.6 million). In France, where physical sales make up two-thirds of music sales, about €26.4 ($29 million) remained on the floor. And in the land of Spotify -- Sweden -- €8.9 million of the €9.1 million ($10 million) total lost was in digital formats.

European Union Intellectual Property Office

The EUIPO report analyzes direct sales of music to domestic retailers, not sales by distributors like online platforms, and is based on data from the International Federation of the Phonographic Industry (IFPI). As for the actual methodology to make the report’s key stat: "The lost sales estimated in this report represent hypothetical additional revenue that the recorded music sector would have earned, had infringement not taken place," it notes. "It is not an estimate of the value of the illegally acquired music recordings; nor is it an estimate of the substitution effect."

In other words, the report is putting an estimate on the value of all that pirated music, and not implying that each pirated album would have equaled one legitimate purchase had all those copyright-infringing avenues been cut off. Two independent models were used to quantify the effects of intellectual property rights infringements.

António Campinos, the EUIPO’s executive director, said the report verifies the music industry’s long-held position that piracy is bad for business. "The question of whether piracy reduces or increases sales of recorded music has been the subject of many studies with contradictory results. Our study’s results are in line with the prevailing consensus and find that piracy reduces the revenue of legitimate industry in both digital and physical formats."