Measuring the Value of Digital Piracy

The goal of this paper is to measure the value derived by households from digital piracy. Our measurement strategy employs the price of paid digital goods and services (e.g. Spotify, Netflix) as a proxy for the shadow price of their illegally acquired counterparts. This is a common method for the valuation of non-market activity for national accounting purposes and is also the methodology endorsed by the European Commission in 2016 for the valuation of ecosystem services for environmental accounting. To estimate the number of individuals engaged in digital piracy, we used information from the United Kingdom’s Intellectual Property Office annual Piracy Tracker, which provides an estimate of the proportion of the UK population that engages in digital piracy. We find that, on average, the gross value from the piracy of music, video, live sports, software, computer games, and ebooks was between £3.6 billion and £7.5 billion in 2021. We also find that while the value from the final consumption of communication services has been consistently rising in the past five years, the gross value from the digital piracy of media has been falling. Our data shows that the growth in the value of final consumption from communication services would have been slower by 0.2 percentage points in 2021 had the value from the consumption of pirated content been accounted for in the estimates.