Yes, Piracy Costs Content Creators a Fistful of Dollars

http://www.innovationfiles.org/does-piracy-cost-content-creators-a-fistful-of-dollars/

By Adams Nager · October 8, 2015

A month ago, I examined the academic literature surrounding what turns out to be a very tricky question for empirical researchers to answer—does digital theft of music and film have a measurable negative impact on profits for content creators? Methodologies addressing the question are fraught with complications, and while the majority of papers surveyed in a recent review of the literature (Hardy et al.) find that online piracy is not, in fact, a victimless crime, some past studies remain inconclusive.

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However, research of late has been clearer in identifying significant causal impacts of piracy on profits and content creation in the music and film industries. As academics hone in on the question, results are beginning to coalesce around exactly the answer you would expect—online piracy has a negative impact on revenue and content creation in both music and film.

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Another survey, “Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales” by Smith and Telang, concludes that the vast majority (25 of 29 empirical papers) conclude that yes, digital content theft hurts media sales. Smith and Telang find the skew towards negative financial impact especially strong in papers published in highly-regarded peer review journals.

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In 2013, Carnegie Mellon University research (Ma et al.) developed a method to predict box office profits based on a variety of factors, including critical reviews, genre, advertising budgets, and other variables. They found that movies leaked early earned 20 percent less in box offices than similar films that weren’t leaked. This illustrates a very clear picture about just how much piracy can cost content creators. Clearly piracy in this case did not induce thieves to go out and watch the movie a second time at the theater.

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In 2014, Waldfogel published a paper examining the production of Indian Bollywood films before and after VCRs, a technology that allowed for widespread distribution of pirated copies of films. This time, he was able to show in a rigorous way that piracy had a profound negative impact on the creation of Bollywood films.

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current research and analysis is demonstrating more and more that piracy has a measurable, negative impact on content creation and profits, which shouldn’t be a surprise to anyone.