Subscription video-on-demand effect on piracy limited

Findings from a research project undertaken by Portuguese and US academics suggest that subscription video-on-demand (SVoD) services have a limited effect on digital piracy, with earlier access to content at much lower prices than those currently offered in the marketplace more effective remedies.

In the experiment, Miguel Godinho de Matos (Católica Lisbon School of Business and Economics, Universidade Católica Portuguesa, Lisbon), Pedro Ferreira (Heinz College and Department of Engineering and Public Policy, Carnegie Mellon University, Pittsburgh and Michael D. Smith (Heinz College) partnered with a major multinational telecommunications provider to analyse the effect of subscription video-on-demand (SVoD) services on digital piracy.

For a period of 45 consecutive days, a group of randomly selected households who used BitTorrent in the past were gifted with a bundle of TV channels with movies and TV shows that could be streamed as in SVoD.

The research found that, on average, households that received the gift increased overall TV consumption by 4.6 per cent and reduced Internet downloads and uploads by 4.2 per cent and 4.5 per cent, respectively.

However, and also on average, treated households did not change their likelihood of using BitTorrent during the experiment. The findings were heterogeneous across households and are mediated by the fit between the preferences of households in the sample for movies and the content available as part of the gifted channels.

Households with preferences aligned with the gifted content reduced their probability of using BitTorrent during the experiment by 18 per cent and decreased their amount of upload traffic by 45 per cent. The researchers also showed using simulation that the size of the SVoD catalogue and licensing window restrictions limit significantly the ability of content providers to match SVoD offerings to the preferences of BitTorrent users.

Finally, they estimated that households in their sample are willing to pay at most $3.25 (€2.74) per month to access a SVoD catalogue as large as Netflix’s in the United States. “Together, our results show that, as a stand-alone strategy, using legal SVoD to curtail piracy will require, at the minimum, offering content much earlier and at much lower prices than those currently offered in the marketplace, changes that are likely to reduce industry revenue and that may damage overall incentives to produce new content while, at the same time, curbing only a small share of piracy,” they concluded.