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Responding to Piracy: What the evidence shows

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Brett Danaher, Michael D. Smith, Rahul Telang

In two previous blog posts (here and here), we reviewed the available academic evidence on whether piracy harms media sales, and whether this harm leads to reductions in the supply of creative works. Almost all the studies on the first question conclude that piracy does have an adverse effect on sales, and there is also evidence of an adverse effect on the supply of new works.

Academic researchers have also asked a third category of questions—what can be done to shift illegal consumption of creative works to legal channels? This research has focused on two broad strategies for encouraging consumers to shift from pirated content to legal content: making legal content more easily available and making pirated content more costly to consumers.

Making Legal Content More Easily Available to Consumers

Increasing the availability of content through legal digital channels clearly reduces the demand for piracy. The removal of NBC content from iTunes in 2007, for example, led to an increase in piracy of that content, and its subsequent restoration in 2008 caused a decrease in piracy. Similarly, the addition of ABC content to Hulu caused nearly a 25% reduction in piracy of that content.

Other studies have shown that reducing the time between the availability of filmed entertainment in one country and its availability in another (i.e. shortening release windows) can increase both box office and in-home video sales. A related study showed that when legal links are easier to find in search results, users are more likely to buy media legally rather than pirating it—even users who initially expressed a preference for pirated content. In short, making it easier for users to consume legal content reduces their consumption of pirated content.

While online content availability is increasing and release windows are becoming shorter, the process is not as easy as it sounds. Reducing the delay between the theatrical release and the in-home release may interfere with studios’ business model for selling content. Moreover, studio discretion may be limited—for example, in France release windows are set by government regulation. Some solutions may also require cooperation from other actors in the ecosystem; for example, making legal links easier to find in search results requires cooperation of the search engine providing the results.

Making Pirated Content More Costly to Consumers

Even though piracy declines when legal content is more available, this changes the behavior of only a fraction of pirates. The majority continue to do what they have always done. Making legal content easier to consume will only get you so far when fighting piracy.

There is, however, another strategy available: Making pirated content more costly to consume. A study on the HADOPI antipiracy law in France showed that when French citizens became aware of this law, and its associated penalties, they increased their purchases of digital music by 22-25%. The HADOPI law was a highly publicized graduated-response antipiracy law, under which Internet users could receive a series of warnings for copyright-infringing downloads before being taken to court and penalized. A related study, from a different set of authors, came to a similar conclusion concerning the IPRED antipiracy law in Sweden: they found that it led to decreased piracy and a 36% increase is music sales (although these effects disappeared after six months because of lax enforcement).

So we know that if we target consumers we can make them rely less on piracy and more on legal channels. But what about targeting the suppliers? Targeting the supply of piracy might have different effects than targeting demand simply because supply is so hard to stop. A study by Lauinger et al. (2013) showed that shutting down popular Internet filesharing sites (like Megaupload or Rapidshare) does not decrease the overall content available through piracy: whatever is removed remains available on other piracy sites and new sites soon appear to take the place of those shut down. The overall supply seems difficult to change, in other words—but consumer behavior can still change if users of the removed piracy sites have difficulty finding or learning to use the new piracy sites, or if remaining piracy sites are seen as less convenient or trustworthy.

Indeed, our study showed that the shutdown of Megaupload.com increased digital movie revenues by 6.5-8.5%. Action in the UK showed a more nuanced result. After the UK High Court ordered ISPs to block The Pirate Bay in 2012, video piracy declined only slightly and legal consumption didn’t increase.  However, after the court subsequently ordered ISPs to block 19 major video piracy sites simultaneously in 2013, piracy levels dropped dramatically and consumption via legal streaming channels like Netflix rose by 12%. Again, the literature is clear: Not all interventions are equally effective or affect all movies equally, but actions that make pirated content less appealing or more costly to obtain can cause consumers to migrate toward legal channels.

Here again, the process to accomplish these changes is harder than it sounds. Graduated response programs, site shutdowns, and site blocking efforts are frequently expensive, controversial and require cooperation among a diverse set of actors including governments, Internet service providers, and the rightsholders themselves. However, as we pointed out in our previous blog posts, these costs need to be weighed against the documented benefits of anti-piracy and pro-legal-consumption strategies for both creators and consumers.