The piracy of copyright protected digital goods is a large and growing problem in the music, computer software, videogame and film industries. Digital piracy includes the purchase of counterfeit products at a discount to the price of the copyrighted product, and illegal file sharing of copyright material over peer-to-peer computer networks. The International Federation of the Phonographic Industry (IFPI) claims that about 34% of all recorded music products sold worldwide in 2004 were pirated copies and that piracy costs the industry over $4.6 billion per annum. Not included in these figures is the cost of file sharing over peer-to-peer networks, which the IFPI blames for a fall in global music sales of some 22% between 1999 and 2004. According to an OECD study, 2.6 billion songs are downloaded every month in over 90% of cases the files swapped infringe on copyright protections. One estimate suggests that online file sharing reduced CD sales between 2000 and 2003 by as much as 30%, or about $ 4 billion per annum. In the computer software industry, research by the Business Software Alliance suggests that software worth $32 billion was pirated in 2005. The percentage of software that was pirated ranged from a low of 21% in the United States to 90% in China and 92% in Vietnam. In the film industry too, piracy is ion the rise. The Motion Picture Association of America estimates that piracy costs the industry some $3 billion annually; a figure excludes the cost of piracy over the Internet.
The scope of the piracy problem may get larger in the next decade. The rapid diffusion of broadband connections to the Internet and the rise of peer-to-peer networks make it much easier to download large files, such as those for videogames and motion pictures, raising fears of higher piracy rates. In 2004, broadband adoption by citizens in OECD countries past 100 million, suggesting that the technology has now reached a critical mass that is capable of