Impact Of Piracy And Free ( T O C F F)

The impact of piracy (and P2P) on book sales An update on the piracy project Tools of Change – Frankfurt October 13, 2009

This morning …
Project history
Why look at this now?
Approach and publishing partners
Primary findings to date
Next steps for this research

And… a call to action
After this presentation:
Find out where your titles are shared
Look at the impact on sales
Measure! On an ongoing basis
Act on what you find
On your own …
… or through this effort

Born (Wakefield, Massachusetts) Catholic school education College, business school Finally left Massachusetts Time Inc. weekly magazines Married, kid

More kids Hammond Started to consult “ Faster, better, cheaper” Got a logo

MIP 2008: Andrew Savikas and Mac Slocum wonder, “Can we measure the impact of piracy on book sales?” Brian: “How about using a co-op marketing model to assess whether it helps or hinders paid sales?” O’Reilly’s editors: “All of our content is pirated as soon as we publish it!” Random House joins the research, contributing several experiments with “free” content distribution Intrepid NYU grad student starts tracking O’Reilly’s 2008 front list to find pirated content Brian secretly worries that any analysis will not have a “quiet period” against which to measure baseline sales

TOC 2009: Research paper and preliminary results are announced Piracy research on O’Reilly titles Search for more participants BEA 2009: Piracy and “free” results are updated Still consulting … Add Thomas Nelson titles to the piracy research

Why tell you all of this?
You need to know me to trust me
Trust helps you hear what I have to say
Success (to me) = a fighting chance at recruitment and participation
And I’d like you to take action …

My 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 spur paid sales
This research is structured to find out 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 heavily pirated)

“ Free” is not “new” …
A long and successful history
Galleys, ARCs, blads, sample chapters
Digital sampling on the rise
… but only a small set of experiments using fully “free” digital content

Book marketing: growing content discovery and access High Discovery High Access Low Discovery Low Access Appearance on Oprah Coop Marketing Corporate Web Site Museum Stores Amazon Promotion Catalog & BEA Over time, increase both discovery and access

Why look at this topic now?

Our research approach The research is data-driven, open (without compromising publisher data) and structured to share knowledge.
Collate experiments
Segment attributes
Identify data gaps
Use a consistent data source (POS feeds)
Measure pre- and post-piracy
Populate a structured matrix
Look at combined results
Initial take on the impact of pirated content
Initial impact of “free”
Share the analysis
Invite discussion
Grow the test sample

A value in structured testing …
A robust set of variables
Appropriate segmentation
Captures content characteristics
Can collate like experiments
Can develop and test specific hypotheses and track results over time

A hands-on research project
Wil Johnson
Searched P2P sites for O’Reilly titles every day since fall 2008
Built his own scraper
Running it made his (roommate’s) ISP cut off service
Figured out a way around it!
New York University, candidate for M.S. in Publishing, Dec 2009

The sample set Since the initial working group, Thomas Nelson has joined (August 2009), and we are expanding the number and type of titles we are tracking. O’Reilly Media Pioneered discussion of the distribution of free content Active in promoting widespread access to its content Perceived as vulnerable to a piracy threat Random House Largest U.S. publisher A wide range of book types reaching a variety of audiences Engaged in a number of experiments with “free”

What we have tested … Monitoring P2P (O’Reilly) Sample set for peer-to-peer piracy Monitored three BitTorrent sites; only one (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 Testing free (Random House) Free PDF downloads (three for 1 day, one for 3 days, one for three weeks) Free PDF excerpt (3 weeks) Free ebook download (1 day) Free PDF, MP3 and ebook downloads (3 weeks)

What we found initially … Monitoring P2P (O’Reilly) 8 titles that were posted O’Reilly front list in 4Q 2008 Average post-seed sales were 6.5% higher in the four weeks after Ranged from 18.2% up to 33.1% down Low seed and leech volume Average first seeds appeared 20 weeks after publication date Testing free (Random House) 8 titles, 12 formats tested in the first half of 2008 Sales up 19.1% during promotional period Sales up 6.5% during promotional and post-promotional periods Ranged from 155% up to 74% down

What we took away from that data
P2P “threat” may be overstated
Low incidence
Significant lag
The value of “free” is not binary

The number of seeds peaks quickly

The number of leeches peaks immediately and quickly declines

Lag time before seeding varies Average = 19 weeks

Proposing 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 current question: what impact does “free” have on sales?

Some research surprises…
Low volume of P2P seeds and leeches
Lag time on P2P seeding
Number and range of “under the radar” free experiments available for analysis
Interest among trade publishers

The piracy research continues …
Found 13 more 2008 front-list titles
Average post-seed sales down 4.2% in the four weeks after seeds first seen
Results ranged from 15.1% up to 48.7% down
Average first seeds appeared 19 weeks after publication date

Comparing the data… The spread in results made us wonder if we had missed something in the bigger sample set. Measure First sample P2P to date Titles 8 21 Post-seed change in sales +6.5% -4.2% Biggest gain +18.1% +15.1% Largest loss -33.1% -48.7% Lag before piracy 20 weeks 19 weeks

Where piracy may benefit …
Looked at sales patterns of pirated and un-pirated content
“ Normed” the data to a common start 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

Four-week rolling averages Average week at which seeded content first seen Unreliably small sample sets

Data in what is not yet pirated… “ Head First books break from the linear tradition, instead using a trajectory filled with successes, failures and lessons… The non-linear format makes them tough to reproduce in a digital form -- they're full of illustrations, thought bubbles, photos, quizzes, etc.” Series Examples Head First HF Servlets and JSP HF C Sharp HF PHP and MySQL HF Ajax Other Photoshop Elements 7 Programming .Net 3.5 Real World Haskell Windows Server 2008 Learning Python

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

Next steps
Continue to monitor P2P activity
Seek publishers to help fill in the test matrix
Gather feedback
Continue to refine the analysis

A call to action (a reminder)
After this presentation:
Find out where your titles are shared
Look at the impact on sales
Measure! On an ongoing basis
Act on what you find
On your own …
… or through us

For more information
“ Rough Cut” research paper
Includes this research and future updates
Also provides background on free and P2P
http://tinyurl.com/q3v4b9
[email_address]

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Impact Of Piracy And Free ( T O C F F)

by Brian O'Leary

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