Latest study on Piracy - "moderate" piracy results in a win-win-win for the entire supply chain.

iriez · Jan 28, 2019

https://www.eurekalert.org/pub_releases/2019-01/iu-tht012519.php

BLOOMINGTON, Ind. -- HBO's popular television series "Game of Thrones" returns in April, but millions of fans continue to illegally download the program, giving it the dubious distinction of being the most pirated program.

Many may wonder why the TV network hasn't taken a more aggressive approach to combating illegal streaming services and downloaders. Perhaps it is because the benefits to the company outweigh the consequences. Research analysis by faculty in Indiana University's Kelley School of Business and two other schools found that a moderate level of piracy can have a positive impact on the bottom line for both the manufacturer and the retailer -- and not at the expense of consumers.

"When information goods are sold to consumers via a retailer, in certain situations, a moderate level of piracy seems to have a surprisingly positive impact on the profits of the manufacturer and the retailer while, at the same time, enhancing consumer welfare," wrote Antino Kim, assistant professor of operations and decision technologies at Kelley, and his co-authors.

"Such a win-win-win situation is not only good for the supply chain but is also beneficial for the overall economy."

While not condoning piracy, Kim and his colleagues were surprised to find that it can actually reduce, or completely eliminate at times, the adverse effect of double marginalization, an economic concept where both manufacturers and retailers in the same supply chain add to the price of a product, passing these markups along to consumers.

The professors found that, because piracy can affect the pricing power of both the manufacturer and the retailer, it injects "shadow" competition into an otherwise monopolistic market.

"From the manufacturer's point of view, the retailer getting squeezed is a good thing," Kim said. "It can't mark up the product as before, and the issue of double marginalization diminishes. Vice versa, if the manufacturer gets squeezed, the retailer is better off.

"What we found is, by both of them being squeezed together -- both at the upstream and the downstream levels -- they are able to get closer to the optimal retail price that a single, vertically integrated entity would charge."

In the example of "Game of Thrones," HBO is the upstream "manufacturer" in the supply chain, and cable and satellite TV operators are the downstream "retailers."

Kim and his co-authors -- Atanu Lahiri, associate professor of information systems at the University of Texas-Dallas, and Debabrata Dey, professor of information systems at the University of Washington -- presented their findings in the article, "The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain," published in the latest issue of MIS Quarterly.

They suggest that businesses, government and consumers rethink the value of anti-piracy enforcement, which can be quite costly, and consider taking a moderate approach. Australia, for instance, due to prohibitive costs, scrapped its three-strikes scheme to track down illegal downloaders and send them warning notices. Though the Australian Parliament passed a new anti-piracy law last year, its effectiveness remains unclear until after it is reviewed in two years.

As with other studies, Kim and his colleagues found that when enforcement is low and piracy is rampant, both manufacturers and retailers suffer. But they caution against becoming overzealous in prosecuting illegal downloaders or in lobbying for more enforcement.

"Our results do not imply that the legal channel should, all of a sudden, start actively encouraging piracy," they said. "The implication is simply that, situated in a real-world context, our manufacturer and retailer should recognize that a certain level of piracy or its threat might actually be beneficial and should, therefore, exercise some moderation in their anti-piracy efforts.

"This could manifest itself in them tolerating piracy to a certain level, perhaps by turning a blind eye to it," they add. "Such a strategy would indeed be consistent with how others have described HBO's attitude toward piracy of its products."

This is research confirming past research on the topic, which has also resulted surprising information - That some amount of piracy actually helps, not hurts, sales.

https://arstechnica.com/gaming/2017...acy-doesnt-hurt-game-sales-may-actually-help/

Im a little fearful of posting this here because of how this research will be misinterpreted by (probably most) people that frequent these forums. This is not an excuse for all of you to pirate games. The key word here "moderate" is used for a reason. If you are modding consoles and selling xTB systems with xgames, then you are part of the "aggressive" section of piracy and your actions probably are harmful to the ecosystem.

Natural barriers to entry (DRM) to prevent widespread piracy are critical to finding a equilibrium in the marketplace. In the recent research, it shows how piracy acts as "shadow" competition that act as a counterforce to market monopolization. In a society with top-down regulated monopolies (IPs, Patents, etc), piracy is essentially a bottom-up (consumer driven) counter-force to that monopolistic force (manufacturers/retailers), which helps reduce margin-gouging or double-marginalization where both the manufacturer and the distributor tack on large premiums passing the costs to the consumer.

The important distinction that i would like all gbatemp readers to understand here is that these conditions are very specific. It means that a small/moderate amount of piracy works against monopolies. What it does not work for is small independent distributors/creators. When these organizations with smaller fiscal power cannot utitlize the bootstrapping retail distribution channels of monopolistic forces (retail distribution, retail supply chain) and are forced to create their own distribution channels (e.g. direct to consumer) it will ultimately hurt the smaller guy if you pirate their software. Whether or not this applies to indie studies utilizing large distribution channels is uknown (to me). E.g. do small indie devs distributing through steam, nintendo/PS eshops who get pirated see long term increased sales?

I would also like to state that even though I prefer to take a research/evidence-based stance on software piracy, I still collect physical games and my personal stance is "If its good enough to play its good enough to buy". I am a human being who grew up in society however, so I understand how hard it is for the younger generations to afford such ideologies. I hope that they will follow my footsteps and perhaps engage in a moderate amount of piracy due to economic constraints, but specifically not to engage in profit-taking through piracy. Its one thing to occasionally bootleg a game/movie, its quite another to make it your dayjob to fist developers/creators. And hopefully you will all turn into fiscally stable young/adults who end up going down my road and deciding to own physical copies of all the games you love.

There is a lot of great discussion on this article on reddit so if you want to delve in and learn some history on this subject please be sure to read the comments.

Enjoy discussion!

PS - in a little twist of irony, I actually tried to pirate this paper and couldn't as sci-hub cannot find the paper, lol. I really wanted to digest the full research to find more specific caveats, context, etc, so my thoughts here are formulated based on others interpretation of the paper, to which they had access to in order to write a news article. But without seeing the research first hand my understanding will be limited. I will update this if i can get the paper.

the_randomizer · Jan 28, 2019

So much for piracy hurting/killing gaming and TV studios

HaloEliteLegend · Feb 3, 2019

I've kept up with similar research, and while the margin of error can be high, it seems to point to piracy at least being a minimal or even beneficial problem... In moderate amounts, and in places where a culture of piracy has not taken root.

By "piracy culture", I mean places where piracy is the default action of consumers. Piracy needs to be fought and curbed to the point where it's not a direct competitor to product sales. China is a sterling example of a piracy culture that negatively shaped the games industry in that country. Single player games were easily pirated and sold, not just online but physically, for much cheaper than the original product. So, when a game would come out, most of the copies sold would be pirated, and most consumers defaulted to seeking cheaper pirated copies. The industry faltered and eventually pivoted to an online-focused business model. Why do you see so many online MOBAs, smartphone games, and the like from China, and no single player games? Because it's harder to pirate an online game. It was a natural industry response to a rampant piracy issue in the country. Similar things happen in other countries where a "piracy culture" takes root. Once again, people default to piracy because the IP and copyright protections aren't in place and aren't enforced to allow legitimate producers and sellers to sell their product.

People should not see research like this as free reign to pirate to their heart's content, it should not be validation of the act of piracy. Rather, it's an analysis of consumer behavior, and the only way piracy can be "beneficial" is if/when pirates purchase official content.

the_randomizer · Feb 3, 2019

If companies are to combat piracy, the first and most glaring thing they need to resolve is to not resort to using invasive or unnecessarily restrictive DRM that makes legit uses suffer as a result. By making legit consumers suffer at things like Denuvo, it only causes them to want to strip the DRM from the games they legally obtain, myself included. Instead, a one-time online activation/authentication should be really all that's needed. Or, failing that, force Denuvo to be in the game during the critical period after launch for a week or two, then remove it in an update.

Always online DRM is of the devil.

HaloEliteLegend · Feb 3, 2019

the_randomizer said:
If companies are to combat piracy, the first and most glaring thing they need to resolve is to not resort to using invasive or unnecessarily restrictive DRM that makes legit uses suffer as a result. By making legit consumers suffer at things like Denuvo, it only causes them to want to strip the DRM from the games they legally obtain, myself included. Instead, a one-time online activation/authentication should be really all that's needed. Or, failing that, force Denuvo to be in the game during the critical period after launch for a week or two, then remove it in an update.

Always online DRM is of the devil.

Absolutely. Part of fighting piracy is providing a service that's better than piracy. To quote from Gabe Newell:

We think there is a fundamental misconception about piracy. Piracy is almost always a service problem and not a pricing problem. If a pirate offers a product anywhere in the world, 24 x 7, purchasable from the convenience of your personal computer, and the legal provider says the product is region-locked, will come to your country 3 months after the US release, and can only be purchased at a brick and mortar store, then the pirate's service is more valuable. The easiest way to stop piracy is not by putting antipiracy technology to work. It's by giving those people a service that's better than what they're receiving from the pirates.

the_randomizer · Feb 3, 2019

HaloEliteLegend said:
Absolutely. Part of fighting piracy is providing a service that's better than piracy. To quote from Gabe Newell:

Like, I mean I get that companies want to curtail it, and that's totally fine, but the draconian approach to DRM and anti-piracy is not very conducive and only drives away legit users IMO. The DRM that Steam has on the basic level is a prime example, it's neither invasive or draconian, and can even be used offline; this is the smart way to handle it. But when Steam DRM is used in conjunction with that hellacious and unnecessary Denuvo, well, it's an issue, and even some AV programs flag that DRM as a false positive.

Attacker3 · Feb 4, 2019

Remember to seed you torrents. Try to get to a ratio of 2, where you uploaded twice as much. Even if you limit your upload speed, you're helping the industry

the_randomizer · Feb 4, 2019

Attacker3 said:
Remember to seed you torrents. Try to get to a ratio of 2, where you uploaded twice as much. Even if you limit your upload speed, you're helping the industry

Doesn't seeding put you at risk more then simply leaching? I never seeded torrents because it makes you easier to trace IMO.

Attacker3 · Feb 4, 2019

the_randomizer said:
Doesn't seeding put you at risk more then simply leaching? I never seeded torrents because it makes you easier to trace IMO.

If you live in a place that cares, you should just use a VPN. They're quite cheap, and they help protect your privacy. Besides, they already know that you downloaded it: https://iknowwhatyoudownload.com/

8BitWonder · Feb 4, 2019

the_randomizer said:
Doesn't seeding put you at risk more then simply leaching? I never seeded torrents because it makes you easier to trace IMO.

Both leeching and seeding expose your IP to anyone in a pool that you're connected with.
It's safest to do any torrenting with a log-less VPN.

the_randomizer · Feb 4, 2019

8BitWonder said:
Both leeching and seeding expose your IP to anyone in a pool that you're connected with.
It's safest to do any torrenting with a log-less VPN.

Which usually cost money.

matthi321 · Feb 4, 2019

better to just use direct download

--------------------- MERGED ---------------------------

i think in my case its a win win win for me only

Latest study on Piracy - "moderate" piracy results in a win-win-win for the entire supply chain.

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