Impact of piracy (Novelists Inc)


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Presentation slides for a talk at Novelists Inc.'s 2010 conference in St. Petersburg, FL. Presentation scheduled for October 8.

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Impact of piracy (Novelists Inc)

  1. 1. NOVELISTS INC. OCTOBER 8, 2010 Quantifying the impact of piracy on paid content sales
  2. 2. Overview of today’s talk <ul><li>“ Piracy 101” </li></ul><ul><li>Research to date </li></ul><ul><li>Some potential applications </li></ul><ul><li>Steps you can take </li></ul>
  3. 3. Our point of view <ul><li>Copyright matters </li></ul><ul><li>There are niches, and titles, for which piracy is a direct loss and enforcement makes sense </li></ul><ul><li>There are niches, and titles, for which piracy may help build awareness and trial to spur paid sales </li></ul><ul><li>Goal: uncover which is which </li></ul>
  4. 4. “ 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) Image courtesy of Wikipedia entry on Governor Weatherby Swann
  5. 5. “ Free” is not “new” … <ul><li>A long and successful history </li></ul><ul><li>Galleys, ARCs, blads, sample chapters </li></ul><ul><li>Digital sampling on the rise </li></ul><ul><li>A small set of experiments … </li></ul><ul><li>… but no title-level studies </li></ul>
  6. 6. Why look at this topic now?
  7. 7. An evolving file-sharing landscape Centralized servers Decentralized Multiple sources Source: Magellan research; “Impact of piracy” research paper (2009)
  8. 8. BitTorrent terms and tools Source: Magellan research; “Impact of piracy” research paper (2009) 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 Indexes A directory of the fragments (hashes) Trackers Services that point to users with one or more fragments Client software A web interface that uses the BitTorrent protocol Creates, searches, downloads or streams .torrent files Seeds Sources of .torrent fragments Leeches Recipients of .torrent fragments; can become seeds when they receive a complete file
  9. 9. How BitTorrent file sharing works Seeds Tracker Leeches Create a .torrent file Host an index Direct leeches to content Search for content Receive files from seeds Provide hashed content Done, leeches can seed uTorrent BitComet Azureus Client software Client software; search engines Source: Magellan research; “Impact of piracy” research paper (2009)
  10. 10. Our research approach <ul><li>Collect prior work </li></ul><ul><li>Segment attributes </li></ul><ul><li>Identify data gaps </li></ul><ul><li>Use a consistent data source (POS feeds) </li></ul><ul><li>Measure sales four weeks pre- and post-piracy </li></ul><ul><li>Compare the instance of pirated content to paid sales </li></ul><ul><li>Try to assess the impact of piracy on paid sales </li></ul><ul><li>Compile results across multiple publishers </li></ul><ul><li>Look for trends and inflection points </li></ul><ul><li>Share the analysis </li></ul><ul><li>Invite discussion </li></ul><ul><li>Grow the sample set </li></ul>
  11. 11. The current sample set Source: Magellan research; “Impact of piracy” research paper (2009) O’Reilly Media Measuring the impact on front-list sales since fall 2008 Monitored BitTorrent sites Only PirateBay had more than a few of O’Reilly titles posted Tracked activity of seeds (uploads) and leeches (downloads) Thomas Nelson Began working with Thomas Nelson’s August 2009 To date, no fall 2009 titles have appeared on monitored sites Lag time for Thomas Nelson titles longer than for O’Reilly
  12. 12. What we have learned so far <ul><li>Low volume of P2P seeds and leeches </li></ul><ul><li>Interest in seeded content peaks early </li></ul><ul><li>Lag time on P2P seeding </li></ul><ul><li>Post-piracy “bump” in paid sales of O’Reilly content </li></ul>
  13. 13. The number of seeds peaks quickly Source: Magellan research
  14. 14. Leeches peak quickly and then decline Source: Magellan research
  15. 15. Lag time before seeding varies Average = 19 weeks Source: Magellan research
  16. 16. Quantifying the impact of piracy <ul><li>Aligned sales patterns to a common starting point </li></ul><ul><li>Plotted average sales per week </li></ul><ul><li>Visual correlation between piracy onset and unit sales </li></ul>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.
  17. 17. Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets
  18. 18. Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets
  19. 19. Average sales (weeks after pub date) Average week at which seeded content first seen Unreliably small sample sets +108%
  20. 20. Four-week rolling averages Average week at which seeded content first seen Unreliably small sample sets
  21. 21. Three useful cautions <ul><li>Correlation isn’t causality </li></ul><ul><li>Sample skew </li></ul><ul><li>Future impact may vary </li></ul>
  22. 22. Still, potentially a more nuanced model “ White” market “ Gray” market “ Back channel” <ul><li>Print sales </li></ul><ul><li>DRM-restricted digital sales </li></ul><ul><li>“ Trialware” </li></ul><ul><li>Unprotected digital sales </li></ul><ul><li>Galleys, ARCs </li></ul><ul><li>“ Free” promotions </li></ul><ul><li>Unauthorized duplication </li></ul><ul><li>Pirated content </li></ul>Our continuing question: what impact does piracy have on sales?
  23. 23. Understanding piracy … <ul><li>Start with the reader’s experience </li></ul><ul><li>Avoid conclusions with limited data </li></ul><ul><li>Challenge assumptions about the value of DRM </li></ul>
  24. 24. <ul><li>Chris Walters, Booksprung </li></ul><ul><li>Kirk Biglione, Medialoper </li></ul><ul><li>Release digital content (don’t frustrate demand) </li></ul><ul><li>Don’t cripple content or limits its devices or uses </li></ul><ul><li>Provide high-quality (not substandard) digital editions </li></ul><ul><li>Don’t try to “solve” piracy; think about managing it </li></ul><ul><li>Provide a high-quality consumer experience </li></ul><ul><li>Value consumers’ time as well as their resources </li></ul><ul><li>Kindle purchase: 2 clicks </li></ul><ul><li>Rapidshare download: 6 clicks </li></ul>Start with the reader experience Sources: ;
  25. 25. What can pirate activities reveal? <ul><li>Developing interest </li></ul><ul><li>Opportunities to innovate </li></ul><ul><li>Offering more extensive or current services </li></ul>None of this represents an argument against enforcement. However, activity like this may represent “weak signals” that can help publishing compete now and in the future.
  26. 26. A pirate-site example Source:
  27. 27. Legitimate alternatives exist Source: Evangelical Library web site
  28. 28. Source:
  29. 29. <ul><li>Attributor: piracy is a “$3 billion problem” </li></ul><ul><li>Macmillan: a seven-point plan </li></ul><ul><li>Richard Curtis: “greatest threat” </li></ul><ul><li>“ Moral panics” replace dialogue with urgent calls </li></ul><ul><li>We don’t know the answers </li></ul><ul><li>We should develop the data to find out </li></ul>Avoid conclusions using limited data Sources:;; W. Patry, Moral Panics and the Copyright Wars
  30. 30. Top 10 pirated titles (maybe) <ul><li>Kamasutra </li></ul><ul><li>Adobe Photoshop Secrets </li></ul><ul><li>The Complete Idiot’s Guide to Amazing Sex </li></ul><ul><li>The Lost Notebooks of Leonardo daVinci </li></ul><ul><li>Solar House – A Guide for the Solar Designer </li></ul><ul><li>Before Pornography – Erotic Writing In Early Modern England </li></ul><ul><li>Twilight – Complete Series </li></ul><ul><li>How To Get Anyone To Say YES – The Science Of Influence </li></ul><ul><li>Nude Photography – The Art And The Craft </li></ul><ul><li>Fix It – How To Do All Those Little Repair Jobs Around The Home </li></ul>Source: TorrentFreak, via Teleread (Paul Biba)
  31. 31. <ul><li>Sony: DRM … “allows content creators and distributors to make money from book content” </li></ul><ul><li>Reality: true pirates don’t worry about DRM </li></ul><ul><li>DRM restricts readers in case they turn into pirates </li></ul><ul><li>The value of DRM-restricted content? Less. </li></ul>DRM does not stop piracy
  32. 32. <ul><li>On DRM restrictions </li></ul><ul><li>On business models </li></ul><ul><li>DRM is a bad idea. It decreases sales, and believe me, it has never stopped pirates. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>Btw I prefer to buy O'Reilly ebooks, they are not DRM’d </li></ul><ul><li>My best hint for you: don't obsess with piracy, focus on selling. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul><ul><li>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. </li></ul>In a pirate’s words … Source: Richard Curtis,
  33. 33. A call to action <ul><li>Find out where your titles are shared </li></ul><ul><li>Work with your publisher </li></ul><ul><ul><li>Establish the impact on sales </li></ul></ul><ul><ul><li>Invest in measurement on an ongoing basis </li></ul></ul><ul><li>Learn the right lessons from other industries </li></ul>
  34. 34. An old(er) problem … <ul><li>“ 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.” </li></ul>Source: Stewart Brand (1984)
  35. 35. For more information <ul><li>A piracy research guide: </li></ul><ul><ul><li>Includes links to work cited in this presentation </li></ul></ul><ul><li>Piracy blog posts: </li></ul><ul><li>Research paper: </li></ul><ul><li>[email_address] </li></ul>