Economist Combats 'Myths Of Piracy' With More Myths

from the i-see-your-osiris-and-raise-you-a-zeus dept

We at Techdirt are among those constantly calling for a factual analysis of intellectual property and the laws that purport to rule it. I won't sit here and claim that disinformation has never come from people on our side of the argument as well, but we've seen time after time after time how the entertainment industry and their maximalist sympathizers tend to live in the kind of make believe world that puts anything this science fiction author has come up with to shame. The mental gymnastics required to follow along industry studies tend give my brain a sprained frontal lobe. That said, it takes a special kind of malfunction to decry supposed myths about piracy and refute them with a couple of made up myths of your own, as economist Michael Smith of Carnegie Mellon does (via Jeff John Roberts at Paid Content).

We actually start off on solid footing debunking myth numero uno, a common one espoused by the content industries: "You can't compete with free"

This myth is often invoked by content owners to justify heavy-handed enforcement measures against piracy sites and individual consumers. After all, why buy a song or movie when you can simply download it for free at a pirate site?

A quick look at the thriving content markets at Amazon, iTunes and elsewhere shows this notion is bunk. All of these sites are competing with free very successfully. As Smith points out, the lowest cost (including free) is not the only determinant of consumer purchases.

Ah, sweet, wonderful logic, with its simple formula of giving people easy access to what they want at a reasonable price as a method for staving off piracy, a symptom of unfulfilled consumer demand. One would hope that the rest of these myths are similar in nature and equally disavowed.

Not so much for myth number two: "Piracy Doesn't Harm Sales"

This myth holds that that people who use content-sharing (“stealing” if you prefer) sites will never pay for the content in the first place so what’s the harm? Meanwhile, “honest” consumers will never turn to piracy.

Smith pointed to evidence that piracy sites are not benign. In one prominent example, he said that when NBC removed shows from on-demand site Hulu, piracy spiked not only for NBC shows but for other networks as well. Meanwhile, no one went out and bought DVD’s as a substitute for the shows that were no longer available on Hulu.

If you're anything like me (and millions of single women hope that you are), reading myth two directly after reading myth one causes you to make this face.
  Translated from puppy to human: "What the &!@# are you talking about?" So, in debunking myth one we found that offering an easy legal alternative to piracy negates the harm caused by piracy. Then, for myth two, we decide that refusing to offer what customers want (streaming/digital content) is not to blame for customers not buying what they don't want (shiny plastic discs of content). A large segment of the population does not want the discs anymore and never will, but they do want disc-less content. When that was taken away, from paying customers mind you, they found it elsewhere. Pirate sites didn't hurt sales in that instance; the removal of ways to watch legitimately did. If that is the example Smith wants to use to "debunk" his second "myth", color me unconvinced.

But it's the example for debunking for the next "myth" that wins today's "I think my brain just pooped itself" award. Myth three is: "Anti-piracy initiatives don't work." And you'll never guess what legislation gets to serve as the chief example for why this supposed myth is false.

Smith points to a recent study of France’s HADOPI (a new enforcement regime) to argue that anti-piracy laws do work. He noted that the advent of HADOPI coincided with a big rise in legal online music purchases, particularly in genres like rap and hip-hop that experience high rates of piracy. At the same time, much of this increases took place before the law even went into effect; it appears that news about the law caused people to seek out legal alternatives.

The point is that laws like HADOPI (and presumably America’s impending “6-strikes” initiatives) can provide a clear deterrent to piracy.

This is a perfectly legitimate point, by which I mean it's complete crap that is itself a myth. The truth is that the French government has been so monumentally unimpressed with the performance of Hadopi, which did not show any increased sales, but cost a ton of taxpayer money, that they were seeking to slash its funding. Not exactly the kind of hallmark success you want to trot out as an example of why legislation can stamp out piracy. Separately, reports have shown that Hadopi may have temporarily decreased one kind of file sharing, but appears to have shifted it elsewhere -- which is what seems to happen every time one of these laws come along.

And so we're once again left unsatisfied by this economist, who notes at first that this is a business model issue before diving right back into the fallacies of the entertainment industry. It's bad enough to fall victim to statistics made up by certain industries, but it's even worse to use them to try to debunk supposed "myths."

Filed Under: competing, free, michael smith, myths, piracy

EMI VP Comes Out Against SOPA/PIPA; Says The Answer To Piracy Is Providing A Better Service

from the promote-this-guy dept

Over the years, I've definitely found that there are plenty of folks working inside the major record labels (and big studios) who really do get what's going on. The problem is often that their voices are drowned out by others (usually the older guard) who are pretty stubborn in their anti-innovation, anti-consumer ways. It's always nice, however, when someone from the inside pops up and says something sensible in public, and those folks deserve kudos. The latest is Craig Davis, EMI's VP of Urban Promotions. He recently did a Reddit AMA (for you non-Redditors -- a Q&A session), in which someone asked him his opinion of SOPA/PIPA/ACTA, and he gave a really reasonable answer:

Personally, I feel that the method they're using is incorrect. All it will do will cause headaches and issues for everyone.

However, I do believe that a person should be compensated for their work. I feel that piracy is a big issue, and things like Spotify will assist in combating this problem.

Gabe Newell is correct, it's a service issue not an issue of money. Sales have gone up from sales concerts and merchandise, it's obvious that our fans still love music. We're just not giving them their music in an easier way.

The reference to Gabe Newell, of course, concerns Newell's regular speeches about how you compete with piracy by providing a better service -- something Newell's Valve has done quite well over the years.

Davis has it exactly right here. The only thing that's been shown to work over the years as a method of dealing with widespread infringement is to offer a better service. Things like SOPA/PIPA/ACTA will cause lots of problems... and won't do a damn thing to slow down infringement. EMI is in the process of being swallowed up by Universal Music, so who knows what happens here, but if I was in charge at Universal, I'd give Davis a nice promotion. Tragically, however, in my experience, the folks who do get these things from within the major labels frequently end up outside the major labels before too long....

Filed Under: competing, craig davis, infringement, pipa, piracy, protect ip, sopa
Companies: emi

Evidence Shows You Can, In Fact, 'Compete' With 'Free'

from the but-of-course dept

I've argued in the past that the claim you "can't compete with free," is entirely bogus, not just because people do it all the time, but because the very premise of the argument is wrong. Competition has always been about a lot more than price, and the "free" part is meaningless if a competitor can drive price to a lower cost then your marginal cost -- no matter what that price is. But, now there's actually some growing empirical evidence that the claim "you can't compete with free," is really, really untrue.

Modplan points us to a recent talk given by professor Michael D. Smith at Google. Smith is from Carnegie Mellon and is discussing some of his recent papers, such as one on whether or not "piracy" acts as promotion for movies and another one on how digital sales, when set up right, don't actually cannibalize other sales. That latter one debunks the silly claim from Jeff Zucker and many others that they're "trading analog dollars for digital pennies." Some of the key points:

• Contrary to the claim that free viewability of movies decreases demand, research shows that when a movie airs on TV for free, it increases demand for the movie both in DVD sales and via file sharing. And, on top of that, the greater demand for the content in file sharing does not appear to hurt the sales of DVDs.
• One bit of research involved the natural experiment that happened when NBC Universal, due to a contract dispute with Apple, removed its TV shows from iTunes for almost a year before putting them back. So, what happened when the content got pulled? Well, first, piracy rates increased -- and not just in absolute numbers. The research compared piracy rates against the other major TV networks, and found that the rates tracked almost exactly prior to the content getting pulled from iTunes... but the second it got pulled, NBC piracy rates were noticeably higher than the other networks. In other words, not offering consumers a way to buy your content legitimately increase unauthorized access. No shock there, but nice to see the data to support that. Specifically, the data found that the "demand" for unauthorized versions increased by 11%.
• Separately, the research showed a smaller, but still significant increase in demand for unauthorized content from those other networks. The theory here is that once NBC pulled its authorized content from iTunes, people who started getting it via BitTorrent suddenly realized they might as well do the same for non-NBC content. So, NBC's decision not to offer authorized content may have actually increased demand for file sharing on other networks as well
• Here's where it gets interesting: what impact did this have on DVD sales on Amazon? Again comparing NBC data to other networks, there is no noticeable impact after the content is removed from iTunes as compared to other networks. In other words, while the action did increase "piracy," there's no indication that increased piracy decreased DVD demand.
• Next experiment involved a move in the opposite direction. Looking at the "demand" for unauthorized BitTorrents of shows from ABC right before and after ABC added its shows to Hulu, again, as compared to the other networks. And here, there was a massive decrease in "demand" for the unauthorized works on BitTorrent.
• Again, however, when the content went "free" on Hulu it did not harm DVD sales. Actually, DVD sales went slightly up (not enough to be statistically significant).
• The final study looked at what happened to demand for movies that went on HBO, which created an interesting situation, because before HBO will air a movie, it requires the studios to remove that movie from video on demand or other digital distribution channels like iTunes. So, the content disappears from those other channels for a few weeks before it shows up on HBO. The research looked at where former iTunes and video on demand customers went for content in the window between the content being pulled from those channels and when it aired on HBO.
• What the research showed was actually no statistically significant change in demand when the content got pulled from the digital distribution channels... but a big increase in demand after the movie aired on HBO.

It's an interesting talk with lots of great data. The key conclusions:

• You absolutely can compete with free.
• If you offer a convenient and reasonable offering, eve people who were getting content in an unauthorized manner, will often buy (i.e., it's possible to turn "pirates" into buyers). That is, it's not the "free" part that's the driving aspect of much of their behavior, but the convenience factor.

There's obviously a lot more that can be done here, and I do wonder if all of these findings hold up over time, but it's a nice look at some of the current research.

Filed Under: competing, free, michael d. smith

Russian Publishers Taking A More Progressive View On Book 'Piracy'

from the there-are-better-ways-to-deal-with-this dept

Martin sent over an article from a Swedish publication about how some Russian book publishers are dealing with "piracy" (translated via Google from the original). While some do seem upset about the issue, others are actually figuring out ways to deal with it, including offering their own vastly cheaper ebook versions quickly (and with no DRM), or even working out deals with "pirate" sites to share some of the ad revenue. The one publisher that the article focuses on, Sergei Parchomenko, says that they're not losing money from pirate sites, but the responsibility is on him to come up with a workable business model. It's nice to see someone realizing that they need to react to the market, rather than freak out about things.

Filed Under: competing, ebooks, piracy, russia

Random Scams Won't Take Down Google

from the nice-try,-though dept

Three years ago, reporter Tom Foremski tossed out his idea for how Microsoft could kill Google in an underhanded way: offer $100 million to whoever clicked on a random Google ad. The trick would be that no one (other than the person administering the prize at Microsoft) would know what the ad is. Foremski's theory was that this would lead to massive clickfraud and anger from Google advertisers. Of course, there are a lot of assumptions in there that likely wouldn't hold up in a real world test (with the biggest being that the whole deal would stop working the second someone "won"). However, now we've got Mark Cuban tossing out a suggestion for how to take down Google that seems to come from the same "wishful thinking" playbook. Cuban's idea is that Microsoft (with Yahoo) should offer to pay the top 100,000 sites in Google to get them to remove themselves from Google, and agree to be "exclusively" in the Yahoo/Microsoft listing. The idea is that the money would serve to pay for the lost traffic from Google -- but that's highly speculative.

If Microsoft actually tried this, it would be quite difficult for the Justice Department not to call an antitrust foul, first of all. But, at a more practical level, it just wouldn't work. It's based on the false premise that those top 100k sites are really the only sites that matter. If they all disappeared from Google's index, another 100k would quickly fill in to replace them. In fact, it would get more and more difficult to convince sites to leave Google's index, since the competition for clicks would get easier and easier as others did leave. On top of that, if this actually did happen, my guess is Google would continue to index those sites anyway forcing some sort of court battle over whether or not a site can actually block a search engine from spidering it entirely. These sorts of ideas are fun to think about, but once you think past the basic idea, it's not hard to recognize why the scams would never work. Beating Google is never going to be about a scam.

Now, I should add that I started writing up this post last night. This morning, the news came out that Cuban is included on the board slate that Carl Icahn has put up to try to force Yahoo to sell to Microsoft. The timing, obviously, is no coincidence. Cuban's blog post went up just hours before he was revealed to be a potential board member. However, just because this could, conceivably, put Cuban in a position to actually push Microsoft/Yahoo to implement such a plan, it doesn't make it any more viable. In fact, it makes it that much more questionable.

Filed Under: advertising, competing, mark cuban, search engines
Companies: google, microsoft, yahoo

Can A Print Magazine Compete With Internet By Being Slower... But More Analytical?

from the depends-on-the-execution dept

The press is happily covering the news that some journalists are launching a new (paper) magazine called "Dispatches" by focusing on the supposed "contrarian" nature of the operation: it's focused on print, rather than the internet (though it will have an internet presence), and it's only going to publish once per quarter. The folks behind the magazine say they're trying to slow things down a little, and will focus on providing better analysis than the rapidfire approach of internet reporting. That makes sense -- but it's hardly new. Plenty of other press outlets have done the same thing -- and, realistically, the analyst business is based on this same premise (just with the idea that the content is paid for by companies receiving it rather than advertisers). Either way, even if the concept isn't particularly new, at the very least it's nice to see a magazine launch with a plan as to how to differentiate. That said, the differentiation is meaningless if it can't execute well and get people interested in the sort of in-depth content it hopes to provide.

Filed Under: competing, internet, journalism, news, print magazine