HideTechdirt is off for the long weekend! Looking for something to read instead? Check out our new Working Futures anthology »
HideTechdirt is off for the long weekend! Looking for something to read instead? Check out our new Working Futures anthology »

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

Reader Comments

The First Word

Subscribe: RSS

View by: Time | Thread

  1. This comment has been flagged by the community. Click here to show it
    Anonymous Coward, 29 Jan 2019 @ 12:56pm

    Piracy is a FEDERAL CRIME, not "competition."

    "I am stealing your work and breaking the law for your own good" has a hollow ring to it.

    Courts have not recognized that piracy has no negative impact on the market-value of the original, a fair-use test. It is certainly not fair for some to have to pay for work that others have stolen.

    Search engines who use opt-out exclusion via robots.txt claim they are helping the sites from whom they siphon content, yet if that were the case, an opt-in search engine that complies with the law would attract all of these sites.

    Piracy in this case is being treated as a free sample, which many authors and musicians give. Authors on talk shows often say that their new book can be downloaded for free for the next twenty-four hours, and people flock to do that, with a demonstrably positive impact on sales (or they presumably wouldn't do it). Piracy, of course, is ongoing, beyond the free-trial phase, and is ILLEGAL.

    If a creator wants to give a free sample, they can do so on their own, without being extorted by pirates. Copyright law protects lots of works, not just creative. Textbooks, technical writing, board games, software (which had to tie the programs to the internet to prevent it, one of the reasons DOS had to die and there is no 16-bit emulator in Windows), and a host of other works, including advertising copy. To erode it is to wreak havoc on much more than just "big corporations" in the entertainment industry.

    The fundamental battle here is between copyright law and the internet as we know it. Some say that copyright law needs to change because enforcing it on the internet would destroy the internet as we know it, while others say that keeping the internet as it is would destroy copyright as we know it. The difference is that Copyright has constitutional protection (due to what was done with printing presses in that era), while the internet companies have no such legal leg on which to stand.

    The position in the article is tantamount to an argument against copyright itself. Just like if we're going to have Section 230, we might as well abolish libel law (which would actually have a more positive impact than 230), if we're going to allow piracy, we should abolish all copyright law, and level the playing field for everyone. Obviously, we won't do that.

    Copyright creates enormous numbers of jobs and a huge amount of tax revenue for governments, which is why it has such incredible protection. It incentivizes creation. If one says "lousy work deserves to be stolen," or "big corporations exploit creators" (they don't), that is an argument for selective copyright protection.

    If people can pirate my work, I should be allowed to pirate Disney's and create derivative works from their characters. That would be a level playing field. Allowing pirates to pick on the little guys (the ones the article seems to claim need protection) is certainly not the answer, but that's the reality we have now.

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here

Subscribe to the Techdirt Daily newsletter

Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Techdirt Gear
Show Now: Takedown
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Report this ad  |  Hide Techdirt ads
Recent Stories
Report this ad  |  Hide Techdirt ads


Email This

This feature is only available to registered users. Register or sign in to use it.