A new study analysing the economic impact of online piracy on the supply chain of information goods, including popular movies and TV shows, suggests that at least a moderate amount of piracy can have surprising benefits for manufacturers (such as entertainment production companies), retailers (like TV service providers), and consumers.
A study, titled ‘The “Invisible Hand” of Piracy: An Economic Analysis of the Information-Goods Supply Chain’, was recently published in MIS Quarterly, a peer-reviewed academic journal. The somewhat counter-intuitive claim has come after the authors concluded from their economic impact model that a moderate amount of piracy can in fact benefit all those involved in the legitimate supply and consumption of the goods.
The study contends that piracy effectively acts as ‘shadow competition’ in an otherwise monopolistic market, which therefore acts as a limitation on the pricing power of the manufacturers and retailers. It allows the price to be set at a more optimal retail price since it prevents the manufacturers and retailers artificially marking up their products to inflated levels. Since price is kept lower to counteract piracy to some extent, this is likely to result in more legitimate consumers, ultimately then boosting the profits of the manufacturers and retailers.
The authors of the article use the example of HBO’s Game of Thrones to contextualise their findings. The series is the most pirated TV programme in history. For example, anti-piracy firm MUSO indicated that the show’s penultimate seventh season was pirated over 1 billion times total by 3 September 2017, a week after the final episode of that season’s broadcast.
Nevertheless, the authors indicate that this threat of piracy has the benefit of keeping the price of HBO cable subscriptions down, as HBO does not overcharge as a result of the ‘shadow competition’, resulting in a more optimal price point and subsequently more legitimate paying consumers.
Of course, they are not suggesting that companies like HBO suddenly begin promoting piracy as the best way to consume their products. Authors do note that when enforcement is very low and piracy is allowed to run rampant, manufacturers, retailers, and consumers all suffer as a result.
However, what is suggested is that a less aggressive approach to striking down piracy may in fact be in everyone’s best interests – not least also because it would mean reduced expense on efforts to locate and prosecute illegal downloaders, which is not an easy and economical task to be sure.
Interestingly, HBO itself has already been recognised as having not adopted an aggressive approach to preventing piracy of their products.
There are certainly many complicated issues at play when tackling online piracy, with difficulties including how varied laws in different jurisdictions hamper coordinated anti-piracy efforts, in addition to the extreme difficulty in shutting down piracy-based sites like Pirate Bay or Putlocker. Fortunately, though, the present research would seem to indicate that overzealous attempts to restrict the operation of such websites are not entirely worthwhile.
While it is problematic to condone any act of piracy given that it is illegal in many jurisdictions, and is certainly immoral from the standpoint of those that seek to profit from the work of others, perhaps there is nonetheless a silver lining here for entertainment manufacturers and retailers. They might be better served tempering resource-heavy attempts to locate and prohibit piracy given both the fact of its near impossibility to prevent in total, and the distinct possibility that a moderate amount may in fact produce more treasures than they realise.