Impact of piracy (Novelists Inc)

NOVELISTS INC. OCTOBER 8, 2010 Quantifying the impact of piracy on paid content sales

Overview of today’s talk
“ Piracy 101”
Research to date
Some potential applications
Steps you can take

Our point of view
Copyright 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
Goal: 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) Image courtesy of Wikipedia entry on Governor Weatherby Swann

“ Free” is not “new” …
A long and successful history
Galleys, ARCs, blads, sample chapters
Digital sampling on the rise
A small set of experiments …
… but no title-level studies

Why look at this topic now?

An evolving file-sharing landscape Centralized servers Decentralized Multiple sources Source: Magellan research; “Impact of piracy” research paper (2009)

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

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)

Our research approach
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 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

What we have learned so far
Low volume of P2P seeds and leeches
Interest in seeded content peaks early
Lag time on P2P seeding
Post-piracy “bump” in paid sales of O’Reilly content

The number of seeds peaks quickly Source: Magellan research

Leeches peak quickly and then decline Source: Magellan research

Lag time before seeding varies Average = 19 weeks Source: Magellan research

Quantifying the impact of piracy
Aligned sales patterns to a common starting point
Plotted average sales per week
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 +108%

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

Three useful cautions
Correlation isn’t causality
Sample skew
Future impact may vary

Still, potentially 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 …
Start with the reader’s experience
Avoid conclusions with limited data
Challenge assumptions about the value of DRM

Chris Walters, Booksprung
Kirk Biglione, Medialoper
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
Provide a high-quality consumer experience
Value consumers’ time as well as their resources
Kindle purchase: 2 clicks
Rapidshare download: 6 clicks
Start with the reader experience Sources: www.booksprung.com ; www.medialoper.com

What can pirate activities reveal?
Developing interest
Opportunities to innovate
Offering more extensive or current services
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.

A pirate-site example Source: www.evanglibrary.org.uk

Legitimate alternatives exist Source: Evangelical Library web site

Source: quantcast.com

Attributor: piracy is a “$3 billion problem”
Macmillan: a seven-point plan
Richard Curtis: “greatest threat”
“ Moral panics” replace dialogue with urgent calls
We don’t know the answers
We should develop the data to find out
Avoid conclusions using limited data Sources: Attributor.com; ereads.com; W. Patry, Moral Panics and the Copyright Wars

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)

Sony: DRM … “allows content creators and distributors to make money from book content”
Reality: true pirates don’t worry about DRM
DRM restricts readers in case they turn into pirates
The value of DRM-restricted content? Less.
DRM does not stop piracy

On DRM restrictions
On business models
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
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.
In a pirate’s words … 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
Work with your publisher
Establish the impact on sales
Invest in measurement on an ongoing basis
Learn the right lessons from other industries

An old(er) problem …
“ 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.”
Source: 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
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Impact of piracy (Novelists Inc)

by Brian O'Leary on Oct 04, 2010

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Impact of piracy (Novelists Inc) — Presentation Transcript