New Study Indicates Piracy is Not Promotion

Last month, I shared some thoughts on the subject of piracy as a tool for promotion, and I won’t repeat all that here.  Suffice to say, I’ve never understood why this particular argument has ever be taken seriously—other than the obvious reason that it offers a plausible sounding rationalization. But, even without thinking too deeply about the matter, just the anecdotal evidence hardly seems to support the premise at all.  Major works like blockbuster movies, which remain the most pirated content, don’t need piracy for promotion; if piracy only promotes to other “consumers” who also don’t pay, it’s a weak argument to make in the first place; and of course, there remains the inescapable logic that if the producers’ of the work didn’t ask pirates to promote for them, it’s not really a service, is it?

Still, the preposterousness rages on in the blogosphere, with any number of writers presuming to school creative producers in the orthodoxy of the future, including vague suggestions to “harness the power of piracy” rather than seek to eradicate it.  It’s a silly and often circular argument because, of course, nobody has ever really studied the comparison between direct loss vs. promotion attributable to piracy.  Until now.

Researchers at Carnegie Mellon University have, for the first time, compared the effect of cannibalization (i.e. box office losses) with the effect of promotion due to to piracy.  Conducted by Liye Ma, Alan L. Montgomery, and Michael D. Smith, their findings reveal that although piracy does have a promotional effect on actual sales, this positive is substantially outweighed by the negative effects of cannibalization.  Comparing both effects to the counterfactual of a market without any piracy at all, the study indicates that, without piracy, producers would have seen a 15% ($1.3bn) increase in box-office sales for the period from 2006-2008 and a 14% increase from 2011-2013.  Meanwhile, their findings indicate that piracy-related promotion contributes to 1.5% of current box-office sales.  So, piracy puts a little bit back, but nothing compared to what it takes away.

As with my post about the Singapore Study, I cannot comment with any authority on the methodologies use in this report.  My last math class was in the 11th grade, and I don’t know what this means:  X = ⎡⎣U C S+ S− I R ⎤⎦ʹ But the study’s conclusions do jibe with the common-sense assumption that black markets probably harm legitimate markets.

© 2016, David Newhoff. All rights reserved.

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4 Responses to New Study Indicates Piracy is Not Promotion

  1. Sam Flintlock says:

    One massive flaw with the argument is that it treats piracy in isolation, as opposed to comparing it to other promotional methods. That doesn’t work. Obscurity is obviously bad (I think most people would accept that). It’s arguably worse than piracy. Which is fine in the abstract. But not when piracy isn’t the only game in town. And what hasn’t been looked at is the question of whether piracy takes attention away from effective promotional methods like special orders and Bandcamp.

    (Standard proviso about how I’m focusing on music because I don’t understand the film industry well enough).

    • GG says:

      This is not a flaw. Your point is too liberal with the parameters of the discussion. Does piracy actually exist? Maybe you’re not sure. If you concede that, Yes it does exist, then the legitimate, legal forms of promotion (like special orders and Bandcamp) are themselves harmed by the existence of piracy (assuming these trends are similar in the music industry).

      It’s tempting to point out that services like Bandcamp may very well not exist, or would be significantly different than how they currently are, if it wasn’t for the prior existence of Napster, Kazaa, etc. But, strictly speaking, this is irrelevant to the question of whether piracy harms sales. The evidence suggests it does.

  2. Bob Olhsson says:

    Actually radio has only ever reflected popularity and today it’s mostly programmed by focus group and there is little relationship between sales and airplay. Recordings have always been sold primarily by word of mouth. The idea that broadcasting or file looting promote sales is utter B.S.

  3. Jonathan says:

    I’d be much more interested in seeing a similar study as it relates to the music industry.

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