What’s the best way to stamp out piracy? In France, the entertainment industry was successful in pushing a ‘three strikes’ law that would boot serial infringers from the web.

That went into effect in October 2010. So how’s it doing?

According to HADOPI, the agency tasked with administering and enforcing the law of the same name, things are going just great. 

A report it released, which looked at data for the 17-month period following the law’s implementation, claims that “illegal downloading [is] clearly on the decline in France.”

In fact, it says that 95% of the individuals given a first strike don’t go on to receive a second, and that 98% of those receiving a third notice under the law get their act together when faced with the shuttering of their internet service.

More importantly, HADOPI says that P2P audience levels are down noticeably, and cites two sources showing that P2P sharing of ‘illegal data’ is down anywhere from 43% to 66%.

So are three-strikes laws a model for success? Not quite, if you’re actually hoping that they’ll boost music and movie sales.

As observed by TorrentFreak, French music industry revenues declined nearly 4% in 2011, and the movie industry there saw revenue slide 2.7% in the same year. TorrentFreak’s Ernesto comments:

To sum it up. in 2011 online piracy was slashed in half according to the Hadopi report, but despite this unprecedented decline the movie and music industries managed to generate less revenue than in 2010. If we follow the logic employed by the anti-piracy lobby during the past decade, this means that piracy is actually boosting sales.

But that would be a silly conclusion wouldn’t it?

As we’ve said in the past, we think that the entertainment industries are overlooking a very significant third factor – technology. In the music industry, for example, highly profitable CDs are being replaced by less profitable MP3s, subscription services and free streaming services such as YouTube.

If everyone is in agreement on the numbers, that would appear to be a reasonable hypothesis. Far more reasonable than the hypothesis that a reduction in piracy will result in an equal increase in sales.

The truth of the matter is that not everybody who downloads something for free from illegal filesharing services would have bought that song or movie in the first place. That’s something many in the entertainment industry have never apparently been able to grasp, and perhaps still don’t.

This, of course, doesn’t mean that fighting piracy is a fruitless exercise. The illegal distribution of copyrighted music and movies is a problem, and the entertainment industry would be foolish to ignore it.

At the same time, the way in which the industry’s efforts have been directed have often been questionable. Instead of wasting valuable resources suing grandmothers and throwing money at lobbyists in an effort to convince (or bribe depending on your perspective) politicians to reshape the face of the internet, it’s quite clear that the entertainment industry would have achieved a greater ROI by investing in better digital products.

If we can learn one thing from HADOPI’s inability to buoy the French entertainment industry, it’s this: sometimes you can get what you want but not what you need.

To get what it needs, the entertainment industry will need to shift its focus from a negative (consumer piracy) to a positive (creating happy customers).