According to the Swedish Patent and Registration Office, around 80 percent of the value of Swedish businesses is comprised of intangible assets. To Sweden's knowledge economy, these assets are becoming increasingly important for growth, export and tax revenue.
Meanwhile almost a third of Swedes admit that they commit intellectual property infringements by watching films via illicit online sites. Few are able to muster any sympathy for the billion dollar industry in Hollywood, which loses a few kronor every time someone watches a movie without paying. This is precisely the reason why very little has happened to stop the emergence of a huge illegal market.
It is David versus Goliath, where Goliath is the film industry and David is the little pirate. This is a view many have embraced, but presents a grossly misleading picture of reality.
First, the “pirates” providing copied films are no longer happy amateurs. According to calculations in our new report 'Illicit file sharing and streaming: An ecosystem perspective', leading piracy sites make more than an estimated 30 million kronor ($3.5 million) a year.
But the really important point is that the piracy sites actually earn very little compared to the value they destroy for the copyright holders, and above all, other players indirectly make considerably more on this illegal trade. It is estimated that almost a quarter of total online traffic is driven by piracy. Advertisers on piracy sites, search engines that drive internet users to the sites and payment solutions that charge for the transactions all earn more than the pirates themselves. However, the really big winners of the extensive traffic related to intellectual property infringement online are the internet operators. More traffic means increased demand for faster and more expensive internet access and greater demand for mobile data.
According to our calculations, such revenue for Swedish internet providers potentially exceeds two-and-a-half billion kronor a year, much more than the pirate sites earn. In addition, internet providers are uniquely placed to prevent copyright infringement; they have unique insight into their customers online activity and are able to block websites.
Sweden's “piracy debate” has the wrong focus. It should not be on the pirates. The basic problem is that the biggest players in the digital ecosystem enable extensive piracy and moreover earn huge sums on doing so.
Considering that internet providers earn an estimated two-and-a-half billion kronor and more on traffic generated by piracy, it is relevant that Sweden has a minister for culture who represents a party which rather than reducing this theft wants to legalize file sharing.
Perhaps it is not perceived as a particularly strategic issue if people copy a few movies, music and computer games. But the reality is that this is billions of kronor of revenue lost, and it does not affect “entertainment” alone. Map services, e-books and professional software are also very much affected.
The fact that almost a third of Swedes say they steal copyrighted material indicates that the digital market, which is a prerequisite for the emerging knowledge economy, is dysfunctional. The state has failed in its mission to maintain law and order and protect private property. In the process, the state apparatus has meanwhile lost important tax revenue. A similar theft rate in any other area would have caused an outcry.
As the knowledge economy grows, even bigger sums will be lost due to the ongoing mass theft of intangible assets. Eventually Culture Minister Alice Bah Kuhnke, of the Green Party, or her successor, will have to face the music and admit that “we have been too naive”. Let's hope this happens sooner rather than later.
Although it is politically inconvenient to act, theft of intellectual assets is too important to ignore. Mark Getty, co-founder of photo agency Getty Images, has said: “Intellectual property is the oil of the 21st century. Look at the richest men a hundred years ago: they all made their money extracting natural resources or moving them around. All today's richest men have made their money out of intellectual property.”
Sweden is ranked as the third most innovative country in the 2015 Global Innovation Index. Sweden's interest in defending intellectual property is crystal clear.
There are a number of important areas in which our elected officials have to do more. Some of the most critical are:
1. If market self-regulation does not work, the state has a responsibility to enforce responsible behaviour through legislation. Internet providers cannot be allowed to keep ignoring the theft they are both enabling and making money from.
2. The public should be informed that illegal streaming and file sharing exposes users to heightened risk of their computers being infected by malware and cyber crime. Cyber security is becoming increasingly important and targeted information campaigns could play an important role in minimizing risk behaviour.
3. The justice system needs more resources and opportunities to proactively combat intellectual property crime. Today's resources are totally inadequate in relation to the extent of the theft. The money used to protect intellectual property should not be seen as a cost, but rather as an investement which will contribute to increased economic growth and tax revenue.
This is a translation of an opinion piece first published by Dagens Nyheter. It is written by Karl Lallerstedt, co-founder of Black Market Watch, and science journalist Waldemar Ingdahl, who have co-authored the report 'Illicit file sharing and streaming: An ecosystem perspective'.