Impact of piracy (Novelists Inc)

NOVELISTS INC.OCTOBER 8, 2010

Quantifying the impact of piracy on paid content sales

Overview of today’s talk2

“Piracy 101”Research to dateSome potential applicationsSteps you can take

Our point of view3

Copyright mattersThere are niches, and titles, for which piracy

is a direct loss and enforcement makes senseThere 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)

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Image courtesy of Wikipedia entry on Governor Weatherby Swann

“Free” is not “new” …5

A long and successful historyGalleys, ARCs, blads, sample chaptersDigital sampling on the riseA small set of experiments …… but no title-level studies

Why look at this topic now?6

An evolving file-sharing landscape7

Centralized servers Decentralized Multiple sources

Source: Magellan research; “Impact of piracy” research paper (2009)

BitTorrent terms and tools8

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

Source: Magellan research; “Impact of piracy” research paper (2009)

How BitTorrent file sharing works9

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

uTorrentBitCometAzureus

Client software

Client software;

search engines

Source: Magellan research; “Impact of piracy” research paper (2009)

Our research approach10

•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 set11

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

Source: Magellan research; “Impact of piracy” research paper (2009)

What we have learned so far12

Low volume of P2P seeds and leechesInterest in seeded content peaks earlyLag time on P2P seedingPost-piracy “bump” in paid sales of O’Reilly

content

The number of seeds peaks quickly13

Source: Magellan research

Leeches peak quickly and then decline

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Source: Magellan research

Lag time before seeding varies15

Average = 19 weeks

Source: Magellan research

Quantifying the impact of piracy16

Aligned sales patterns to a common starting point

Plotted average sales per weekVisual correlation between piracy onset and

unit salesBecause 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)17

Average week at which seeded content first seen

Unreliably small sample sets

Average sales (weeks after pub date)18

Average week at which seeded content first seen

Unreliably small sample sets

Average sales (weeks after pub date)19

Average week at which seeded content first seen

Unreliably small sample sets

+108%

Four-week rolling averages20

Average week at which seeded content first seen

Unreliably small sample sets

Three useful cautions21

Correlation isn’t causalitySample skewFuture impact may vary

Still, potentially a more nuanced model

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“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 …23

Start with the reader’s experienceAvoid conclusions with limited dataChallenge assumptions about the value of

DRM

Chris Walters, BooksprungChris Walters, Booksprung

Kirk Biglione, MedialoperKirk 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

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Start with the reader experience

Sources: www.booksprung.com; www.medialoper.com

What can pirate activities reveal?25

Developing interestOpportunities to innovateOffering 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 example26

Source: www.evanglibrary.org.uk

Legitimate alternatives exist27

Source: Evangelical Library web site

Source: quantcast.com

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Attributor: piracy is a “$3 billion problem”Macmillan: a seven-point planRichard Curtis: “greatest threat”“Moral panics” replace dialogue with urgent

callsWe don’t know the answersWe 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)30

1. Kamasutra2. Adobe Photoshop

Secrets3. The Complete Idiot’s

Guide to Amazing Sex4. The Lost Notebooks of

Leonardo daVinci5. Solar House – A Guide

for the Solar Designer6. Before Pornography –

Erotic Writing In Early Modern England

7. Twilight – Complete Series

8. How To Get Anyone To Say YES – The Science Of Influence

9. Nude Photography – The Art And The Craft

10. Fix It – How To Do All Those Little Repair Jobs Around The Home

Source: TorrentFreak, via Teleread (Paul Biba)

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Sony: DRM … “allows content creators and distributors to make money from book content”

Reality: true pirates don’t worry about DRMDRM restricts readers in case they turn into

piratesThe value of DRM-restricted content? Less.

DRM does not stop piracy

On DRM restrictionsOn DRM restrictions On business modelsOn 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.

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In a pirate’s words …

Source: Richard Curtis, http://www.ereads.com/2010/02/wicked-wisdom-of-e-book-pirate.html

A call to action33

Find out where your titles are sharedWork 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.”

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Source: Stewart Brand (1984)

For more information35

A piracy research guide: http://bit.ly/buKEMa

Includes links to work cited in this presentation

Piracy blog posts: http://bit.ly/bvfka2Research paper: http://tinyurl.com/q3v4b9brian.oleary@magellanmediapartners.com