Market insight
While Napster was growing in popularity, other similar
services started popping up and looked to add more value and add-ons for their
customers. For example KaZaA and Limewire entered the scene, developing a
better user interface and using suggestions for music preferences. Users are
responsible for this development and for piracy, not the companies (and they
explicitly state so in their terms of use). Because users are so engaged with
the technology, they are able to provide direct data about what they desire.
Innovation
This leads to the point that piracy increases innovation and
new markets. Knowledge and statistics about users who pirate digital music,
movies and games, has helped evolve commercial industries to gain new customers
in digital ways. Apple launched its iTunes Music store in 2003, remaining
successful to the present because people are willing to pay for music that they
can access and store with the click of a button. Piracy has pushed companies to
evaluate their business models, for example Spotify lets user pay for their
service rather than individual products (van Ooijen, 2010). Even some
executives in global companies are seeing the benefits of using piracy to their
advantage. Chief of Anti-Piracy Operations at Warner Bros, David Kaplan, says
piracy is a proxy of consumer demand which helps Warner Bros adjust their
business models with the information of what fans are looking for, when and
where (Walton, 2013).
The gaming industry has had to innovate their business
models based on piracy issues. While the
battle still rages between traditional software makers and pirates, makers of
social network games such as Farmville and Restaurant City are reaching tens of
millions (Steinberg, 2010). These popular free games make a profit from add-ons
like new adventures, or paying once you’ve reached a certain point (like a
try-before-you-buy approach).
Academics have even gone so far as
to suggest using piracy strategically.
Haruvy, Mahajan & Prasad (2004 p20) say that any software firm wants
users to adopt and use their software, the main challenge is getting people to
download and use the software enough to create a network, or a community of
sorts, which will add value to other users. Not only will using piracy strategically
to encourage downloading raise the value of the software, but it will raise the
number of potential buyers. Piracy
tolerance is an option only if the gains are more substantial than other
strategies. While the legal implications of using piracy for commercial use
seems hypocritical of the industry, it reinforces the value that piracy adds
for businesses.
Economic and creative success
Statistics say digital piracy
leads people online to make legal purchases. Creative industries have remained
stable over the last 15 years. The prophesied drastic decline of the music
industry due to piracy has not come to a head as many industry executives have
told the public. Music piracy may
actually be doing the music industry a favour!
Here’s why - according to the
European Commission’s Joint Research Centre study, evidence suggests there is a
positive link between online purchases after visiting a pirate website
(Sullivan, 2013). The study said, “If this estimate is given a causal
interpretation, it means that clicks on legal purchase websites would have been
2% lower in the absence of illegal downloading websites” (Aguiar & Martens,
2013, p.16). The researchers conclude their findings are that piracy of digital
music doesn’t have a negative effect on legal music purchases in a digital
format. They did acknowledge that intellectual property rights and other legal
implications are being harmed in pirate activity, but clearly said there is
unlikely to be much harm done to digital music revenues.
The European Commission’s Joint
Research Centre report is supported by a former study that says piracy is good
for business because it enhances longevity for the music industry. The London
School of Economics released a report showing the decline of vinyl and CD sales
has been offset by the revenues from digital music downloads (Conley, 2013). The
culture shift for accessible digital files because of pirate influence has
actually helped the industry to move online and take advantage of all the
creative opportunity of the digital world. For example, this year Beyonce chose
to cut out traditional retail by releasing her surprise “visual” album online
(including music videos and behind-the-scenes footage) and promoting through
social media channels. She was very successful, selling more than 600,000
copies in the first three days. The release will be part of a Harvard Business
School Case Study (Music Times, 2014). Her YouTube channel became a place where
she could drip-feed new videos and footage, and fans could come together and
share their opinions.
Remix culture has shifted focus
from what an artist owns to how creative they can be in a collective way. In
fact, the London School of Economics report says:
Many ways of
producing and distributing content via digital networks do not rely on
exclusive ownership of creative works. Studies show that in the case of
crowdsourcing and crowdfunding of creative projects, for example, financial
compensation is not always the primary reason that people participate in
cultural production. Exclusive ownership of intellectual works is not the only incentive
that sustains their production” (Cammaerts et al, 2013, p.9).
Artists can be challenged in a
positive way to include the digital culture that is so important to their fans.
Experiences in music, movies, gaming and software have improved because piracy
has paved the way.