Brett Danaher, Michael D. Smith, Rahul Telang
It is well established in the academic research that piracy harms sales for entertainment goods; and there is emerging evidence that, by reducing the profitability of content creation, piracy may reduce the quality and quantity of the content that is created.
Given these empirical results, as academic researchers, we have spent considerable effort trying to understand the effectiveness of various anti-piracy strategies that attempt to mitigate the impact of piracy on industry revenues by either making legal content more appealing or making illegal content less appealing (see for example here and here). Our latest research examines an anti-piracy strategy known as “site-blocking” adopted in many countries, including the United Kingdom where we conduct our analysis. In the U.K. courts respond to blocking requests, and where they find cause, order Internet Service Providers (ISPs) to block access to specific piracy-enabling sites.
This approach is notably different than shutting down entire sites that store pirated content: the sites and pirated content remain online worldwide, and within the affected country the blocked sites can still be accessed by technologically sophisticated users. Given these differences we decided to study the effectiveness of site-blocking strategies at changing consumer behavior, focusing on court-ordered blocks in the UK: The May 2012 block of one site, The Pirate Bay, and the October/November 2013 block of 19 major piracy sites.
Our results, which were first presented to an academic audience at the December 2014 Workshop on Information Systems and Economics, used consumer data from an Internet panel tracking company to examine the behavior of a set of UK Internet users before and after these sites were blocked. We considered users who had not visited the site(s) before the block as a control group (since they were largely unaffected by the block) and we asked how treated users – those who had used the site(s) before the block – changed their behavior after the block (relative to the control group).
Our analysis found that blocking The Pirate Bay had little impact on UK users’ consumption through legal channels. Instead blocked users switched to other piracy sites or circumvented the block by using Virtual Private Networks. However, unlike the May 2012 Pirate Bay block, our results showed that when 19 sites were blocked simultaneously, former users of these sites increased their usage of paid legal streaming sites by 12% on average, relative to the control group. The blocks caused the lightest users of the blocked sites (and thus the users who were least affected by the blocks, other than the control group) to increase their use of paid streaming sites by 3.5% while they caused the heaviest users of the blocked sites to increase paid streaming visits by 23.6%, strengthening the causal inference in our result.
As we discuss in our paper, the most likely explanation for this result — and one supported by other observations in the data — is that when only one site is blocked, most pirates have an easy time finding and switching to other piracy sites. But, blocking many sites can increase the cost of finding alternate sources of piracy enough that a significant number of former pirates will switch their behavior toward legal sources.
As with our other empirical findings, summarized above, this finding suggests that consumers behave like consumers: They make choices based on the costs and benefits of what is available, and will change their behavior based on sufficient changes in those costs and benefits.
 Importantly, our data did not allow us to determine whether this 12% increase reflected new users coming to these paid sites or simply increased usage of an already existing customer base.
Cross posted to the Technology Policy Institute blog