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Brian O'Leary - How Much Does Free Cost?
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Brian O'Leary - How Much Does Free Cost?

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As more and more digital content becomes available, the concerns about the impact of free content, piracy, and the ability or inability to protect content grows. How might digital piracy affect print ...

As more and more digital content becomes available, the concerns about the impact of free content, piracy, and the ability or inability to protect content grows. How might digital piracy affect print sales? Does free content cause sales in any format to grow or decline? In 2008, Magellan Media began monitoring file sharing of O’Reilly Media titles on peer-to-peer sites to determine its impact on paid content sales. The research has revealed a possible positive correlation between piracy and paid sales. Brian O'Leary's presentation will detail the latest findings that include 2009 updates for O'Reilly and Random titles as well as Thomas Nelson, a 2009 participant.

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    Brian O'Leary - How Much Does Free Cost? Brian O'Leary - How Much Does Free Cost? Presentation Transcript

    • The impact of piracy on paid content sales ECPA Executive Leadership Summit May 4, 2010
    • Overview of today’s talk
      • A bit of background (“piracy 101”)
      • Our research to date
      • Some practical applications
      • What you can do going forward
    • Our point of view
      • Intellectual property (IP) matters
      • There are niches, and titles, for which piracy is a direct loss and enforcement makes sense
      • There are niches, and titles, for which piracy may help build awareness and trial to spur paid sales
      • This research is structured to help uncover which is which
    • “ Perhaps on the rare occasion that pursuing the right course demands an act of piracy, piracy itself can be the right course?” Governor Swann, in “Pirates of the Caribbean” (itself pirated)
    • “ Free” is not “new” …
      • A long and successful history
      • Galleys, ARCs, blads, sample chapters
      • Digital sampling on the rise
      • A small set of experiments using “free” digital content …
      • … but no title-level studies evaluating the impact of piracy on paid content sales
    • Why look at this topic now?
    • An evolving file-sharing landscape Centralized servers Decentralized Multiple sources
    • BitTorrent terms and tools Term Explanation Content files The original document (e.g., a movie, an e-book) Torrent files A collection of fragments (hashes) made from a content file, typically created using a BitTorrent client Indexes A directory of the fragments (hashes) required to make up a complete file Trackers Services that point to users with one or more fragments (declining in use) Client software A web interface that adheres to the BitTorrent protocol; used to create, search, download or stream .torrent files Seeds Sources of .torrent fragments Leeches Recipients of .torrent fragments; can become seeds when they receive a complete file
    • How BitTorrent file sharing works
    • Our research approach The research is data-driven, open (without compromising publisher data) and structured to share knowledge.
      • Collect prior work
      • Segment attributes
      • Identify data gaps
      • Use a consistent data source (POS feeds)
      • Measure sales four weeks pre- and post-piracy
      • Compare the instance of pirated content to paid sales
      • Try to assess the impact of piracy on paid sales
      • Compile results across multiple publishers
      • Look for trends and inflection points
      • Share the analysis
      • Invite discussion
      • Grow the sample set
    • The current sample set The data provided here reflects results through April 2010. O’Reilly Media Have been measuring the impact on front-list sales since fall 2008 Monitored BitTorrent sites; only PirateBay had more than a handful of O’Reilly titles posted Tracked activity of seeds (uploads) and leeches (downloads) for any 2008 O’Reilly front list titles found on these sites Thomas Nelson Began working with Thomas Nelson’s fall 2009 list in August 2009 To dates, no fall 2009 titles have appeared on monitored sites Lag time for Thomas Nelson titles may be longer than for O’Reilly
    • What we have learned so far
      • Low volume of P2P seeds and leeches
      • Interest in seeded content peaks early
      • Lag time on P2P seeding
      • Unexplained “bump” in paid sales of O’Reilly content after piracy is noted
    • The number of seeds peaks quickly
    • Leeches peak quickly and then decline
    • Lag time before seeding varies Average = 19 weeks
    • Where piracy may help sales
      • “ Normed” the sales patterns of pirated and un-pirated content to a common starting point
      • Plotted the average sales per week for pirated and un-pirated titles
      • Uncovered a visual correlation between piracy onset and unit sales
      Because of different pub dates, the average time on sale for pirated content in this sample is shorter (35 weeks) than that for un-pirated content (47) weeks. Comparisons at the end of the on-sale period are not reliable.
    • Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets
    • Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets
    • Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets +108%
    • Four-week rolling averages Average week at which seeded content first seen Unreliably small sample sets
    • Three useful cautions
      • Correlation isn’t causality
      • Larger data sets may uncover a sample skew
      • What works today may not work as well at some future date
    • We see a more nuanced model “ White” market “ Gray” market “ Back channel”
      • Print sales
      • DRM-restricted digital sales
      • “ Trialware”
      • Unprotected digital sales
      • Galleys, ARCs
      • “ Free” promotions
      • Unauthorized duplication
      • Pirated content
      Our continuing question: what impact does piracy have on sales?
    • Understanding piracy …
      • Pushing publishers to start with the reader’s point of view
      • There’s a risk of reaching conclusions with limited data (including our own)
      • Challenging assumptions about the value of using DRM to prevent piracy
    • Adopting the reader’s point of view
      • Chris Walters, Booksprung
      • Release digital content (don’t frustrate demand)
      • Don’t cripple content or limits its devices or uses
      • Provide high-quality (not substandard) digital editions
      • Don’t try to “solve” piracy; think about managing it
      • Kirk Biglione, Medialoper
      • Provide a high-quality consumer experience
      • Value consumers’ time as well as their resources
      • Kindle purchase: 2 clicks
      • Rapidshare download: 6 clicks
    • A pirate-site example
    • Legitimate alternatives exist
    • Traffic is low, but cyclical
    • What might you take away?
      • A snapshot of where interest may be developing?
      • An opportunity to innovate?
      • Offering services that are more extensive or current than this site can provide?
      None of this represents an argument against enforcement. However, activity like this may represent “weak signals” that can help publishers compete now and in the future.
    • Avoid conclusions using limited data
      • Attributor: piracy is a “$3 billion problem”
      • Macmillan: a seven-point plan
      • The risk: dialogue gets replaced with an urgent call to “do something”
      • We don’t know the answers, and we should develop the data to find out
    • Top 10 pirated titles (maybe)
      • Kamasutra
      • Adobe Photoshop Secrets
      • The Complete Idiot’s Guide to Amazing Sex
      • The Lost Notebooks of Leonardo daVinci
      • Solar House – A Guide for the Solar Designer
      • Before Pornography – Erotic Writing In Early Modern England
      • Twilight – Complete Series
      • How To Get Anyone To Say YES – The Science Of Influence
      • Nude Photography – The Art And The Craft
      • Fix It – How To Do All Those Little Repair Jobs Around The Home
      Source: TorrentFreak, via Teleread (Paul Biba)
    • DRM does not stop piracy
      • Sony: DRM … “allows content creators and distributors to make money from book content”
      • Reality: true pirates don’t worry about DRM
      • We’re restricting the rights of readers just in case they turn into pirates
      • The value of DRM-restricted content? Less.
    • In a pirate’s words …
      • On DRM restrictions
      • DRM is a bad idea. It decreases sales, and believe me, it has never stopped pirates.
      • When people buy ebooks, they want to do things like read that book on any present and future device. So many people break the DRM (it is easy) but breaking the DRM is unlawful, so your customers have paid to be outlaws. This is not the kind of thing that discourage piracy.
      • Every time I have bought a DRMed book I broke the DRM for the above reason and I did feel fooled because I paid but I was out of law. Just imagine which is the effect on your law-abiding customers. They get a product that is worse than what I get when I pirate. Do you want to reduce piracy? Sell your books sans DRM.
      • Btw I prefer to buy O'Reilly ebooks, they are not DRM’d
      • On business models
      • My best hint for you: don't obsess with piracy, focus on selling.
      • Part of my money went to Dan Brown's pockets. If you are interested in business, (ask) why many people go to the library, download books AND buy books. For centuries books have been bought by the very same people that go to libraries.
      • Most pirates buy content in a way or other …In fact many pirates are high spending people. And many music pirates are buying CDs, the real problem of CD market is that CD is becoming obsolete. Digital sales (iTunes and alikes) are speedily increasing. Hulu is not yet available in my country but I am willing to try it as soon as possible.
      • Do you really think a guy who is scanning a book and uploading it is trying to avoid buying it at Fictionwise? That's nonsense.
      Source: Richard Curtis, http://www.ereads.com/2010/02/wicked-wisdom-of-e-book-pirate.html
    • A call to action
      • Find out where your titles are shared
      • Establish the impact on sales
      • Invest in measurement on an ongoing basis
      • On your own … or through this work
      • Learn the right lessons from other industries
    • “ Information wants to be free. Information also wants to be expensive. Information wants to be free because it has become so cheap to distribute, copy and recombine – too cheap to meter. It wants to be expensive because it can be immeasurably valuable to the recipient. That tension will not go away. It leads to endless, wrenching debate about price, copyright, intellectual property, the moral rightness of casual distribution , because each round of new devices makes the tension worse, not better.” -- Stewart Brand (1984)
    • For more information
      • A piracy research guide: http://bit.ly/buKEMa
        • Includes links to work cited in this presentation
      • Piracy blog posts: http://bit.ly/bvfka2
      • Research paper: http://tinyurl.com/q3v4b9
      • [email_address]