Digital Piracy Approaches: Trends andNeed for Innovation

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NIVERSITY

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Digital Piracy Approaches: Trends and

Need for Innovation

Author:

Andrei C

93/12/08

Supervisor:

Jenny L

Examiner:

Shang G

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P

A

: T

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Andrei Capastru

1_{ÖREBRO UNIVERSITY SCHOOL OF BUSINESS} andrei.capastru@gmail.com

Abstract. The industry producing digital content faces has a hard time controlling the usage distribution of their copyrighted material in times of communication technologies innovation. The demand and supply for digital content grow exponentially every year and innovation is needed on the part of producers as well. The presented research aims to combine both web content and scientific material in order to find the best approaches described in the literature in order to tackle digital piracy and increase profits with-out decreasing consumer satisfaction. The goal will be achieved by using a combination of Web Content Analysis and Literature review. There are identified 8 methods, out of which only 4 are recommended to be practiced.

Keywords:digital piracy, DRM, copyright, freemium.

Contents

Introduction . . . 2

Research method . . . 3

Conceptual framework . . . 3

Web content analysis and Literature Review . . . 4

Data collection and analysis . . . 4

Challenges and benefits of the chosen method . . . 5

Results and discussion . . . 5

Anti-piracy methods: what works and what does not . . . 6

Freemium . . . 6

Copyright and Intellectual Property Laws . . . 7

Restricted premieres . . . 8

Region specific price rates . . . 9

Subscription models . . . 9

DRM . . . 9

SE cleaning . . . 10

Sampling . . . 10

Contribution and Practical usage . . . 10

Conclusions . . . 12

Limitations and future work . . . 12

Acknowledgment . . . 12

I

NTRODUCTION

Since the explosion of WWW (World Wide Web), more and more industries are revolutionized, especially the ones that are producing consumable digital content: movies, music, games and various software products. This fact raised a lot of opportunities, such as easier access to and for potential consumers and also, easier access for unknown creators (Anderson, 2004), but also opened the doors for a new type of content stealing - digital piracy.

Digital Piracy represents the distribution or usage of copyrighted material without authorization of legal owners, which can be a digital copy of a musical composition, a movie, electronic book or any other software. (Belleflamme & Peitz, 2014) The numbers shown in the industry are indicating that piracy is one of the main contributors in decreas-ing the revenues of the producers. The most pronounced example is perhaps the music industry, which decreased from 14.6 billion dollars in 1999 to only half of it - 7.7 billion dollars in 2009 (Zhang, 2016).

The industry responded eloquently to the increasing threat to their revenue with a lot of different measures, especially with lobbying Intellectual Property (IP) policies and trying to pass legal and programmatic impediments in order to reduce digital piracy. Many countries, especially first world ones, are passing frequently laws that are meant to induce legal instruments to prosecute actors that are involved in digital piracy actions, especially the big actors that facilitate an easier access and distribution of materials. A very broad covered new was the arrest of the third co-founder of the ThePirateBay platform, Fredrik Neij, which was sentenced to 8 months in prison in Sweden after an international arrest warrant, inducing fear of such activities being practiced by other people (Russell, 2014).

The work of Joe Karaganis named Rethinking Piracy asks few but important questions about the approaches taken by industry and legal authorities towards reducing piracy. Karaganis puts the cultural, legal and financial impact of digital piracy to doubt and inspires to reevaluate the current measures. He puts copyright face to face with the innovation and technological disruptions, which made the digital piracy much more easy to achieve. The example provided could not be more suitable - Apple’s iPod (Karaganis, 2011). The same problem is more narrowly addressed by Jacqueline D. Lipton, specifically about how up to date are the copyright policies and how they cope with the current, increasingly faster pace of technological growth (Lipton, 2005). Steven Caldwell Brown calls for innovation when it comes to Digital Piracy research, as the topic appears very controversial in both scientific and non-scientific research. (Brown, 2014)

This research paper aims to address the problem about the effectiveness of popular approaches to combat Digital Piracy and, by using the content analysis method (Elo & Kyngäs, 2008; Cavanagh, 1997) in combination with Literature Review (Webster & Watson, 2002) it tries to provide an insight into the fighting methods described in online media sources and scientific literature respectively. The question this paper tries to answer is

which approaches to combat piracy work and which do not. The contribution offered by this research is represented in a form of a set methods and their description, yielded by clustering the existing knowledge.

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ESEARCH METHOD

The chosen method of research represent a combination of content analysis (CA) (Cavanagh, 1997; Elo & Kyngäs, 2008), web content analysis (WebCA) (Herring, 2009) and literature review (Webster & Watson, 2002). The choice of this combination comes from the specific of the study area: the knowledge and information about the digital piracy is very fragmented. Popular media channels tend to publish information about how to combat digital piracy, what method are working or not, providing little to no scientific evidence about it.

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Figure 1: Conceptual framework

Figure 1 represents the conceptual framework developed specifically for this research. Digital piracy represents a topic that is intersected across in many domains, yet yields a narrow problem: unauthorized access of copyrighted content and it is hard to study, especially because it represents illegal behavior (Waldfogel, 2012).

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The decision of combining these two methods arrived as a result of input data for WebCA. It is represented by evidence not exactly characterizable as scientifically accurate, even if a big part of selected inputs are online articles that provide their sources of information and also are replicable, which makes them fit to be examined with the scientific method.

The systematic literature review was performed according to Webster, J., & Watson, R. T. (2002) guidelines. The information about clusters was input in Google Scholar and University’s Summon (Primo!) search engines in form of keywords to identify the existing scientific knowledge and research about the identified topics (information clusters) from using WebCA method described previously. The search for web resources was performed through Google Search and inter-website referencing.

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Stephen Cavanagh (1997) described in his work the drawbacks and benefit of such a widely criticized method of qualitative analysis. In the work The qualitative content analysis process (Elo & Kyngäs, 2008) the authors provide insightful information about how to perform and achieve satisfactory result using this technique. The main drawback of this technique is that it is only scientifically acknowledged for medical (nursing) research. In the case of this research, the method cannot be classified as reliable, because some input sources are considered anecdotal - blog posts, online posted opinions, web and news articles. A derivation of this method, published in the International handbook of internet research, called Web Content Analysis: Expanding the Paradigm (Herring, 2009), suggests and extension of the method for analyzing the web content. According to the guidance provided, the data was collected from various online sources, analyzed and classified in information clusters.

The data for Web Content analysis was collected using Google and Bing! search en-gines. The keywords and key-phrases used to identify the resources were: "digital piracy", "piracy", "piracy means", "piracy methods". Cross referencing and recommendation were used to identify even more sources. The web sources were selected based on three criteria: to be not older than 15 years, to contain description and argumentations of piracy fighting methods and the website ranking on Alexa not lower than 5000 (Alexa represents a web service showing the raking of a website based on the number of visitors). The data then was grouped in clusters formed based on the presence frequency of terms or keywords (e.g. Freemium), presented in the Result and Discussion section.

The data for literature review was collected from two main sources: Google Scholar and University’s Summon (Primo!) search engines. The keywords used for search were the results yielded from the coding of the Content Analysis method. The inclusion criteria for the papers were: the published studies must not be older than 10 years, should address directly effectiveness of digital piracy fighting methods (present in the aim and research

question of the study).

The exclusion criteria for the studies: other language than english, the work in unpublished in a scientific journal.

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CA and WebCA research methods do not provide a high level of reliability in terms of scientific research when the input data are online resources, the knowledge extracted from those methods is highly vulnerable to confirmation (selective) bias (Plous, 1993). An observation made during this research is that these methods are very useful to identify scientific knowledge gaps and bias when it comes to popular beliefs - information promoted by broadly accessed media resources (news portals, popular blogs etc.). The Webster, J., & Watson, R. T. (2002) literature review research method is used to test the coherence between online media realm with the scientific knowledge.

The aim of this method is to broaden knowledge about a specific field or phenomenon by relating the information occurrences to their context and form information clusters groups that express the same idea or provide the same insight. For the topic of this paper -digital piracy, the inductive approach of WebCA fits most properly because it fits with the paper research question and purpose: test an existing hypothesis (Elo & Kyngäs, 2008) - and specifically question the efficiency of digital piracy approaches and the results of

action taken to overcome it, because the knowledge domain is fragmented and it helps to identify knowledge gaps.

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ESULTS AND DISCUSSION

Out of 45 identified web sources, 10 representative sources were selected. They are presented in Table 1 withbrown colored text. The scientific articles are written with black text and there are in total 17 of them. All of them are distributed among the categories in Table 1.

The domain of searching was rigorously restricted to Digital Piracy and all noncon-forming results were eliminated.

As a result of clustering of both anecdotal and scientific sources - 8 major issues (methods) were identified. All methods were discussed and characterized in the indicated resources. They were formed as a result of their presence in more resources. Some methods, like Copyright and IP (Intellectual Property) Laws or Freemium, get a better coverage in both types of resources, thus, they might present an increased interest.

The selected web sources are the ones who are most verifiable under scientific method, as they present references and data sources, thus, they are falsifiable. Yet, they should not be treated as scientific evidence.

Category Identified method Results

Digital Piracy Approaches

Freemium

Oxford, T. (2010);Ray Allison, P. (2015); Birnbaum, I. (2016); Molla, R. (2016);Ployhar, M. (2012, Sep); Belleflamme, P., & Peitz, M. (2014); Halmenschlager, C., & Waelbroeck, P. (2014);

Copyright & IP Laws

C-Scott, M. (2015);Molla, R. (2016); Lipton,

J. D. (2015); Belleflamme, P., & Peitz, M. (2014) ; Belleflamme, P., & Peitz, M. (2012); Waldfogel, J. (2012, Aug), Danaher, B. et.al (2014); Aguiar, L. et.al(2015); Frosio, G. F. (2016); Brown,

S. C. (2014)

Restricted premieres Anderson, C. (2004); Waldfogel, J. (2012);

Region specific price rates Bowman, J. (2015); Frosio, G. F. (2016); Belleflamme, P., & _{Peitz, M. (2012);}

Subscription models

Bowman, J. (2015);Ray Allison, P. (2015); Belleflamme, P., & Peitz, M. (2014); Waldfogel, J. (2012); Halmenschlager, C., &

Waelbroeck, P. (2014);

DRM

Oxford, T. (2010); Ray Allison, P. (2015); Birnbaum, I. (2016); Ployhar, M. (2012); Fenlon, W. (2016) Lipton, J. D. (2015);

Belleflamme, P., & Peitz, M. (2014); Zhang, L. (2016);

SEO cleaning Ray Allison, P. (2015); Molla, R. (2016); Frosio, G. F. (2016)

Sampling Ray Allison, P. (2015); Molla, R. (2016); _{Waelbroeck, P. (2006); Hammond, R. G. (2014)} Peitz, M., &

Table 1: Identified methods and related literature

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FREEMIUM

Freemium represents a relatively new business model where both free and premium (paid) alternatives are present (Pulkkanen & Seppänen, 2012; Belleflamme & Peitz, 2014).

This method is very welcomed and encouraged in both types of evidence. It is promoted especially for areas where the piracy represents the highest percentage of consumers: movies, music and games (Belleflamme & Peitz, 2014; Ray Allison, 2015; Halmenschlager & Waelbroeck, 2014). Companies that adopted this model are now at the top of their industries. Two most eloquent examples are Spotify (music) and Netflix (movies). They both present free and premium subscription models. Other example companies are Deezer, which almost the same freemium model (Bowman, 2015).

YouTube recently adopted the same model, transitioning from free to freemium - a service named YouTube Red. As a result from 2011 to 2015, the amount of web traffic of combined Netflix and YouTube increased from 39% to 52%, which is a relatively big result for video streaming services (Molla, 2016).

In his short research of game piracy, Matt Ployhar from Intel presents a statistic most popular games and the level of piracy, based on numbers from public data (Ployhar, 2012). He provides an interesting insight: no Free-2-Play (Freemium) games are near top piracy

charts. Although, there are freemium top games by popularity, such as Dota or World of Tanks. The last mentioned game of Wargaming.net reports that at least 20% of players have provided micro-transactions, which is very high for the Free-2-Play gaming market (Ployhar, 2012).

Providing a free version with an optimal level of restriction can reduce piracy to a record minimum, as written in the paper Fighting free with free: Freemium vs. piracy (Halmenschlager & Waelbroeck, 2014). The authors also provide an economical model demonstrating how such an approach can reduce piracy and also eliminate the need for copyright laws. An important observation made in the paper is that copyright laws are targeting customers willing to pay higher fees for respective service, although the digital piracy is represented by customers unwilling to pay those fees.

COPYRIGHT ANDINTELLECTUALPROPERTYLAWS

Copyright and Intellectual Property (IP) laws define a collection of laws of a country meant to stop the usage and distribution of copyrighted material of unauthorized actors (Cornish, Llewelyn, & Aplin, 2013). Perhaps, this method represents the most discussed topic as it involves both public (legal authorities) and private sector and directly impacts the population of a country or economic region (such as the European Union).

The set of approaches involved in this method to combat illegal use of copyrighted content is widely criticized in web resources (news, blogs, articles etc.). It is considered outdated and incompetent (C-Scott, 2015). Mark C-Scott criticize the DMCA (The Digital Millennium Copyright Act) and its recent updates, such as Copyright Amendment (Online Infringement) Bill 2015 as blocking the industry in its way to innovation as a response to increasing DP rates.

The above-mentioned laws are meant to reduce piracy by legally obliging Internet Service Providers and also Internet Hosting Services to delete or block access to specific copyrighted content, such as domain takedowns - block access to specific websites. (Molla, 2016)

Yet, it is demonstrated that passing an anti-piracy law, combined with specific promotion and involving it in education reduces the piracy level by a significant margin (Danaher, Smith, Telang, & Chen, 2014). The study is made in France for the HADOPI authority, known as Creation and Internet Law. Yet, the study is made only on one category of content - music and one channel - iTunes.

Since the first boom of internet piracy - Napster (pirated music distribution web-site), laws regulating the usage of copyrighted content were fluctuating, but becoming increasingly more strict and intrusive. Two considered successes are the legal takedowns of Napster in 2001 and Megaupload in 2012, two most popular at their activity peaks file-sharing websites (Belleflamme & Peitz, 2014). The authors tackle the approaches to piracy from a neutral standpoint. They point out that laws and takedowns may work, but do not hold in time, studies show that they are not effective or effective for short periods (from weeks to several months) until users are switching to another service or find

a workaround to access the same services.

Digital content producing companies usually access international markets, thus having a big variety of customers and laws under which those markets are working (Belleflamme & Peitz, 2012). This makes the customers appreciate the value of the provided goods (in form digital content) respective to their characteristics (financial, national, lifestyle etc.) which conduct to a different level of motivation to pirate a good or not.

The public interventions to enforce legality upon piracy websites are happening everywhere there are major actors with high vested interest, two big examples being USA and Germany. In the work Online Copyright Enforcement, Consumer Behavior, and Market Structure (Aguiar, Claussen, & Peukert, 2015; Frosio, 2016), the authors provide insights about the takedown of biggest pirated movie streaming service in Germany: kino.to. The visible effects after the authorities took down the website were the rise in popularity of other pirating resources, which renders the measure ineffective or very short-term. The amount of resources involved to take down only one service for an effect of a short period is too high. (Aguiar et al., 2015).

As the authors of Digital piracy debunked: a short note on digital threats and intermediary liability conclude: "we do not need more enforcement, either against primary or secondary infringement" (Frosio, 2016).

RESTRICTED PREMIERES

A barely touched topic in both web and scientific data collected resources. For a long time, the distribution of music and movies happened in a specific order: first, it goes to the cinema (in the case of movies) or a live concert (in the case of music), or making a limited showcase for a very limited audience. (Anderson, 2004). At a lower level it applied to books: first, the print version (physical) and the e-book was released. The technological progress made it more and more difficult for these industries to keep up. The movie industry takes time to translate movies for specific regions in order to be shown, thus, boosting the willingness to illegally access that content because of no other relevant choice (Forum d’Avignon 2012, 2012). For a long time, almost all Hollywood movies were released with specific time windows even for different geographical regions: first in the USA, after that Europe and so on. This chain of action contributed significantly to an increment in piracy, especially in emergent economies (developing countries) (Forum d’Avignon 2012, 2012).

An interesting discovery made by a Harvard research is that pirated music indicates to positively and significantly influence the demand for concerts and, respectively, the price of a concert ticket (Frosio, 2016). It also can positively affect artists with a lower popularity, know as long tail (Zhang, 2016).

This approach towards needs more scientific coverage, as the current found evidence cannot confirm or infirm the conclusion provided.

REGION SPECIFIC PRICE RATES

As the leader of the market, Netflix is open about their techniques. They report usage of data mining in order to set prices based on geographical area on the globe (Bowman, 2015). Their source of data is the popularity of specific shows among local pirates and, as well, the level of piracy in that region. The technique is also applied by Apple for their Apple Music service: specific regions have different prices based on local economies. This approach in combination with a trial version seems to give a higher rate of conversion from pirates to users of free version(trial, sample) and their conversion to paying users (Frosio, 2016)

This problem is tackled from economical point of view, indicating the difference in value for a customer depending on the level of the economy one is situated in, known as well as Price Discrimination (Belleflamme & Peitz, 2012).

SUBSCRIPTION MODELS

The subscription models are becoming more and more popular across the industry of producing digital content. Presented as a very successful model, with or without a free (testing) version, it becomes adopted by many small to big businesses. An example of success is HBO with their online TV service named HBO Go. It does not provide a free trial or any other sampling option, but it is reputed for high-quality content, thus, even in emerging economies it has benefited from success, confirming once again that subscription-based models (e.g. Spotify, Netflix) are curbing down piracy level in the markets it entered (Halmenschlager & Waelbroeck, 2014).

DRM

Digital Rights Management (DRM) is already a very controversial phenomenon in both scientific and media realms. It represents a set of techniques meant to restrict usage of digital content by the provider or legal owner (Belleflamme & Peitz, 2012). The DRM approach is widely criticized, especially in news media articles because it comes with a set of limitations: limited environments of usage, unexpected locking outs because of verification errors and even legal problems - in European Union citizen are allowed to make copies for personal use if they legally bought a digital copy of specific content (Oxford, 2010; Ray Allison, 2015; Fenlon, 2016). A known case is the moment Ubisoft servers that were validating genuine copies stopped working and legitimate users that paid for the games could not play, while the pirated version worked very well, making pirated version more valuable (Oxford, 2010).

A dilemma related to DRM is tackled by Jacqueline Lipton (2005) - how DRM relates to DMCA. She provides insights in how to regulate such a powerful tool and how to balance it between copyright content owners (industry) and fair use for end users. The dilemma is partly economical because the industry is profit oriented.

Removing DRM from music content may even increase the sales (Zhang, 2016). It benefits albums that are not popular by raising sales up to 30%, indicating that piracy can be used as an indirect marketing (Ray Allison, 2015).

SE CLEANING

Search Engine Optimization (SE) cleaning is an approach that is determined by the Copyright and IP laws. Big search engines such as Google’s or Yahoo’s ones are constantly requested to remove links to piracy resources. Only Google was requested to remove up to 20 millions links per week in 2016 (Molla, 2016). The dedicated database for digital piracy resources named Lumen already contains 1.5 billions of web links.

This procedure is not only provided upon search engine providers, but also internet service providers, using legal instruments. (Frosio, 2016)

This method is still unsure and needs more research in order to provide insights about its effectiveness. Currently, it seems like a short-term solution, because of the constant appearance of new pirating sources and increasing number of complaints from the legal owners of digital content.

SAMPLING

Sampling represents a form of digital content distribution, free of charge, having a marketing-oriented role. It is similar to freemium model as a concept, but has a different goal. (Ray Allison, 2015)

In terms of digital piracy, sampling represents the process of getting for free digital content that is originally not free. A study published in 2006 (Peitz & Waelbroeck, 2006) shows how the sampling is influencing the market in a positive way - it keeps the con-sumers’ taste heterogeneous and maintains the product diversity. The model provided by the authors indicates that the profit actually grows for a specific set of parameters that attributes for the most albums.

A similar study suggests that illegal file-sharing benefits the retail industry, espe-cially the top selling albums (Hammond, 2014), which is very different from the results provided by Laurina Zhang (2016), where the removal of DRM, which allows easy distri-bution, benefits the "long tail" (unpopular artists). This lead to the conclusion that pirated sampling stays as a promoting tool for the music industry.

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ONTRIBUTION AND

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RACTICAL USAGE

There is very little research on the comparison of different methods to combat digital piracy. By reading this study, both researchers and practical users (digital content creators) can get scientifically backed information about what methods they should use for their specific needs. Researchers can have a point to start a new study (e.g. prove or disprove the effectiveness of a method through a quantitative or experimental method).

This research aims to show the benefits and challenges using certain identified methods to fight piracy. The global companies aiming to increase their revenues and improve customer experience can use the results of this research in order to do so. The selected methods: freemium, subscription models, region specific price rates and sampling are the methods to use, especially for an international company that creates digital content.

Figure 2: Information clusters and subcategories

In Figure 2 are represented all the identified methods to combat digital piracy (some of them with subcategories). Thegreencolored approaches are approved as piracy reduc-tion methods in both online media and scientific research and also to be very productive. The orangelabeled approaches are controversial and/or need more research,

further-more, some of them even being criticized as unproductive and even reduce profits (e.g. Restricted premieres).

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ONCLUSIONS

There is no unique solution to such a complex problem as digital piracy. It is inter-nally very diverse and it depends on a lot of factors: consumer’s characteristics(income, age, education), country economy, local or regional laws, legal access to content, and many others, although stays narrow as a concept.

All the identified approaches were covered by both anecdotal and scientific evidence at the accessible level.

The approaches that were positively depicted are Freemium, Subscription Models, Region Specific Price rates and Sampling. The common characteristic shown by all of them is the call for innovation, as mostly all of them became used on a larger scale in last 10-20 years. All of them are also commonly used by the industry leaders: Apple, Spotify, Netflix.

The approaches that were controversial or negatively labeled are Copyright and IP Laws, Restricted premieres, DRM and SEO Cleaning. Copyright and IP Laws and DRM usage require and update or an innovative reset in order to bring best results. Restricted Premieres and SEO Cleaning is controversial and under-researched at the moment, but both are inclining to the negative direction, mostly because they provide only temporary, very short-termed solution to reduce the impact of digital piracy and increase profits.

An unexpected result present across scientific literature is the recommendation to use digital piracy as a launchpad for innovation and profit growth (Frosio, 2016; Hammond, 2014; Peitz & Waelbroeck, 2006; Belleflamme & Peitz, 2014).

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In order to complete this research, it was chosen to combine WebCa (Herring, 2009) with Literature Review (Webster & Watson, 2002) because of the incompleteness of choos-ing only one.

The research was limited by two main factors: time span of the research and analyz-ing potential for the content analysis. In pursuance of better and more meananalyz-ingful results, more time and input data is required. For WebCa, as a derivation of CA (Cavanagh, 1997; Elo & Kyngäs, 2008), next step is to gather more input and to employ more coders and train them specifically to cluster the collected data, or use Machine Learning tools for data collectors and analyzers, in order to significantly increase the amount of processed data and also improve the relevance of information clusters.

ACKNOWLEDGMENT

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