Crazy Calculations Behind $652,000 File-Sharing Damages

Earlier this week a torrent site user was hit with a damages claim of $652,000 for uploading one movie to the Internet. With the huge amount undoubtedly still ringing in the 28-year-old’s ears, questions are now being raised about how this figure was arrived at. It’s an amazing process that shows that sometimes copyright holders may as well just think of a number, double it, multiply it by the day of the week and then add it all to their dog’s age.

calcThis week was one to forget for an individual dubbed by copyright holders as Sweden’s “worst ever” Internet pirate. The man was a former moderator and uploader at the now-defunct Swebits site and had been tracked down and prosecuted for his sins.

After concluding in the Västmanlands District Court last month, a few days ago the Court handed down its decision.

The 28-year-old was ordered to pay $652,000 in damages for the unauthorized distribution of just one of the movies in the case. For the other 517 the man was said to have shared he was handed a suspended jail sentence and ordered to complete 160 hours of community service.

There can be no doubt that $652,000 is a shocking amount of money, so just how was that figure arrived at? ComputerSweden news editor Marcus Jerrang asked the same question and has come up with a surprising sequence of events.

Jerrang discovered the amount was based on the expert opinion of a consultant called Bertil Sandgren who specializes in licensing matters.

“The written statement Sandgren has given the court is a fantastic display of assumptions and causal relations that aren’t backed by evidence,” Jerrang explains.
How many pirates?

Sandgren began by listing the number of people who attended Beck movies in the 2000s. The movie in this case, Buried Alive, had the lowest number of visitors at just over 100,000. This, compared to the 320,000 who watched the 2001 movie “The Price of Revenge.” Sandgren decided that 30,000 more people would have watched Buried Alive if it were not for illegal file-sharing.

The consultant then took a look at how movies were being presented to the public in 2010 and noted a move to digital presentations, with many individual theaters closing down but more multiplexes being built.

“From experience, a shift of this magnitude should imply a positive visitor development over the next 2-3 years after 2010 by about 20-25 percent,” Sandgren said.

“The primary reason behind the loss of the increase is most likely illegal downloading,” Sandgren explained, without backing the statement up.
Licensing and damages

Moving on, Sandgren looked at how much it would cost to purchase a hypothetical license fee to distribute the movie for free.

Noting that one million Swedes downloaded movies in 2010, he estimated that 25% of those would have bought movies if file-sharing didn’t exist. From this Sandgren concluded that more than one million would choose to download movies for free if they could do so legally.

This would result in a 100% loss of revenue for Buried Alive in the video market, so Sandgren decided that any license would need to be based on that total loss. Since Buried Alive pulled in around $865,000 overall, Sandgren put the license price at $835,000.

Arriving at damages, Sandgren looked at how many people had allegedly downloaded another Beck film in 2007 (said to be 45% of the total viewers) and noted that of those around 25% would have paid for it if file-sharing did not exist. After juggling a few stats an amount of $175,000 was arrived at.
Other loss of revenue, TV fees and damage to goodwill

Going on to calculate additional losses, Sandgren noted that “generally speaking, a film of this nature ought to reach an audience that, carefully calculated, is 30 percent larger. That is approximately 130,000 tickets with an improved revenue of an additional [$152,000].”

Moving on to pay and free TV, an amount of just over $106,000 was added but there are still more issues to be factored in. Sandgren calculated that the free availability of the movie on file-sharing sites would mean more effort would have to be put into selling it – $76,000 more to be precise.

Furthermore, the movie’s reputation would also be damaged due to the relative low quality of video rips being made available online. That, plus another $7,500 in punitive damages, added another $53,000 to the total.

Jerrang says that the District Court believed almost everything that Sandgren presented, since he was deemed to be credible after presenting evidence in the Swedish case against The Pirate Bay.

In the end, however, the court opted to compensate for just 50% of the market, ultimately arriving at the headline $652,000. Incredibly, no complaint was filed by the file-sharers’ lawyer meaning that this “think of a number” game will almost certainly be repeated again in future.