New Study: Piracy Increases The Quality Of Content

Studies

from the well-that's-not-going-to-play-well... dept

Eric Goldman points us to a very, very interesting new research paper by Atanu Lahiri and Debabrata Day, showing all sorts of real examples about how “piracy” appears to increase the quality of the related goods that are being infringed upon. Of course, this counters the “common sense” argument that such infringement inevitably lowers the quality of content, since the creators and distributors of said content can no longer invest as much in the content.

The key explanatory factor here: the best way to compete with piracy is to offer a better product yourself. And one way to do that is to increase the quality. For example:

A case in point is the European unit of the cable TV channel HBO, which is fighting against unauthorized distribution of its content by illegal torrent websites by raising the quality of its offerings. The piracy rate faced by HBO is estimated to be between 30% to 50%. HBO has responded to this high piracy rate by churning out new high quality contents in different European languages (Briel 2010). New contents are available through both HBO?s cable TV channels as well as its new IPTV channels. HBO?s innovative offerings have reduced piracy and brought in new subscribers. Valve, a video game manufacturer, has also adopted a similar strategy. Since releasing its game Team Fortress 2 in 2007, it has made frequent quality enhancements, including addition of new weapons and avatars. This strategy has encouraged enthusiastic gamers, who have a strong preference for the latest version, to switch to legal downloads.

The study doesn’t just look at such anecdotal cases. It digs in on some evidence as well, showing how investments in R&D from software companies continues to increase, almost directly in line with claims that “piracy” rates for those companies has increased. The conclusion: less enforcement of copyright laws will likely lead to greater quality in output in many cases, and conversely that greater enforcement likely leads to less social benefit as the quality decreases, in markets facing the same conditions. In fact, they find that content creators (or distributors) are likely to increase profits by focusing on product quality, rather than enforcement.

Most of the paper focuses on creating and testing an economic model that explains this behavior, and highlights when such factors apply and when they don’t, for the purpose of trying to optimize policy as well as an individual copyright holder’s response to piracy. That is, they do find some conditions under which the traditional “common sense” view holds, but it seems relatively rare. In fact, one part of the study models whether or not there are “ethical” consumers who don’t infringe for ethical reasons — and finds that in such a world, there tends to be even fewer reasons for increasing enforcement.

Of course, when you think about much of this, it makes sense. We’ve argued from the beginning that there are tons of ways to “compete” with unauthorized access, and providing quality is definitely one such way. It’s nice to see this bit of research adding deeply to this debate, both with real world examples of this happening today and a detailed economic model that explains the behavior.

And yet… our policy makers continue to think that the best answer is simply to keep on ratcheting up enforcement.

Filed Under: competition, content, copyright, infringement, piracy, policy, quality