Study Shows Piracy Can Sometimes Be Beneficial To Markets & Consumers Alike

from the another-form-of-competition dept

If you've been around Techdirt for more than a few weeks, you probably know that one of our core arguments is that piracy should be seen as a competitor, not as some kind of mad demon whose antics can only be thwarted by equally demonic countermeasures. As such the solution for piracy isn't engaging in idiotic, harmful behavior (like copyright troll lawsuits or kicking people off the internet), it's to compete with piracy by offering better, cheaper products that make piracy less appealing. And no, just because you think "competing with free" isn't fair, doesn't mean this entire paragraph isn't true.

Numerous studies (including our own) have shown that you beat piracy through innovation, not scorched earth tactics. But a new collaborative study out of the University of Indiana highlights how piracy, at least in moderation, can have an actively positive impact on both the health of a market and consumers alike. More specifically, the study highlights how piracy can act as a form of invisible competition that prevents both a manufacturer and a retailer from jacking up prices at an unreasonable rate:

"When information goods are sold to consumers via a retailer, in certain situations, a moderate level of piracy seems to have a surprisingly positive impact on the profits of the manufacturer and the retailer while, at the same time, enhancing consumer welfare," wrote Antino Kim, assistant professor of operations and decision technologies at Kelley, and his co-authors.

"Such a win-win-win situation is not only good for the supply chain but is also beneficial for the overall economy."

The researchers are quick to trot out HBO's hit show Game of Thrones, which has frequently been paraded about as one of the most pirated shows of all time, as a good example. In the researchers' examples, they note that piracy prevents both the manufacturer (HBO) and the retailer (say, Comcast) from engaging in using their positions of power to jack up rates (double marginalization), since being too aggressive on pricing would simply drive users to cut the cord and engage in piracy, reducing overall revenues.

That said, the full paywalled paper makes it clear they're not advocating for these companies to suddenly start embracing piracy, just to acknowledge that the impact of piracy on markets is not wholly negative, and therefore heavy-handed anti-piracy efforts may prove counterproductive:

"Our results do not imply that the legal channel should, all of a sudden, start actively encouraging piracy," researchers said. "The implication is simply that, situated in a real-world context, our manufacturer and retailer should recognize that a certain level of piracy or its threat might actually be beneficial and should, therefore, exercise some moderation in their anti-piracy efforts.”

While HBO has had its missteps on this front (you might recall their efforts to "poison" certain BitTorrent files in a bid to make piracy confusing and untenable), executives have generally understood that piracy isn't exclusively a negative phenomenon. Time Warner execs, for example, have noted how the piracy of Game of Thrones (and the countless articles breathlessly heralding this reality) is almost "better than an Emmy" when it comes to marketing their product. Much in the same way they see password sharing as a new form of marketing, not as some kind of diabolical evil in need of crushing.

That said, the researchers did note that with AT&T now owning HBO in the wake of its $86 billion acquisition of Time Warner, AT&T's effectively now the manufacturer and the retailer in this equation. As such, it may be incentivized to crack down harder on piracy than HBO did previously (in fact it already is). Still, the researchers were quick to point out that there's still other perks to piracy AT&T shouldn't ignore:

“However, there are other positive effects of piracy such as positive network effect (i.e., the more people use the product, the more valuable it becomes) and learning (i.e., pirate users may learn about the product and buy the legal version later on),” Kim added. “These are older insights from other papers. What we find here is in addition to those."

Given this is AT&T we're talking about, whether it gets the message is far from certain.

Filed Under: benefits, competition, copyright, economics, monopoly, piracy, studies

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  1. icon
    Stephen T. Stone (profile), 29 Jan 2019 @ 2:50pm

    Can't when you add requirement for "irrevocable".

    Okay, remove that requirement. Show me where he has advocated for the complete abolishment of copyright. And it has to be clear, without any willful misinterpretation on your part, that he openly advocated for the abolishment of copyright law.

    Any number of anomalies can show up in complex systems and yet prove nothing.

    I get the feeling that if a large number of people — let’s say, a few hundred thousand — could provide stories that you would individually write off as “anomalies”, you would still write off the totality of their experience as “anomalous” simply because it does not fit the narrative you want us to believe. You do not want to admit these stories are becoming more commonplace because to do so would undermine your worldview that artists who can make a decent living from their work without going through major corporations and without enforcing their copyrights in as Draconian a manner as possible are just “anomalies”, “one-offs”, or whatever condescending term you can think of to describe them.

    Masnick USES every anomaly he can find to attack copyright, is my point.

    And if you could come up with counterarguments for those “anomalies” that are not just “fuck Mike Masnick”, “fuck Google”, or “fuck these little pissant artists who aren’t even billionare shithead rock stars” — and present them without all the holier-than-thou condescension and baseless insults — maybe you might be worth listening to more than him.

    I've no idea why you would think it relevant

    You make it relevant when you discuss the stories you want him to publish and act as if his doing so would make you happier than if you had gotten laid by your favorite porn star. You seriously come off as someone who gets sexually excited by the notions of “pirates getting what’s coming to them” and “Mike finally published something I demanded he published a week ago”. If that gets you off, whatever, but let’s not act like you don’t have a hateboner here — and judging from everything you’ve ever written, it’s a pretty hateful boner.

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