Content Cafe


Industry Voices: Michael D. Smith and Rahul Telang, Carnegie Mellon University

by Content Café, 26 October 2021

Each month we hear from industry insiders in Australia and abroad to get their take on content piracy. Is content protection improving? How do we stop piracy? How does Australia compare to the rest of the world? These are some of the questions we are exploring with leaders across the content industry.

Michael D. Smith (L) & Rahul Telang (R)

Michael D. Smith is the J. Erik Jonsson Professor of Information Technology and Marketing and Rahul Telang is the Trustee’s Professor of Information Systems at Carnegie Mellon University’s Heinz College where they co-direct the Initiative for Digital Entertainment Analytics. Their research analyzes markets for digital entertainment, with a particular focus on measuring the effectiveness of public policies and firm strategies to protect intellectual property online. In 2016 they co-authored the book Streaming, Sharing, Stealing: Big Data and the Future of Entertainment (MIT Press).

Who are you and what is your role in the creative industry eco-system? 

We are professors at Carnegie Mellon University and we co-direct CMU’s Initiative for Digital Entertainment Analytics. The goal of this research initiative is to use data and statistical analysis to separate fact from fiction in the world of digital entertainment. 

Does piracy affect the creative industries? How? 

A major thrust of our research is separating fact from fiction around impact of digital piracy. We’ve been doing this research for nearly 20 years, and our research, along with the research of other colleagues in academia, has resulted in three main findings about piracy and its impact on the creative industries—findings we summarized in a recent Piracy Landscape Study for the U.S. Patent and Trademark Office.  

The first finding is that piracy hurts sales. Read enough Internet blogs and you might conclude that no one knows whether piracy affects legal markets. You’d be wrong.  

Our review of the literature showed that 29 of the 33 papers published in peer-reviewed academic journals that study this question found that piracy causes statistically and economically significant harm to legal markets.  

In short, there is a near consensus in the academic literature that piracy does exactly what you’d expect it would do: It makes it harder for rightsholders to make a return on their investment in creative content. 

The second finding is that piracy hurts consumers. Again, if you read enough Internet blogs you’ll hear people say that even if piracy might hurt rightsholders, it’s a boon for consumers who can now get content for free that they otherwise would have to pay for. That sounds great, right? But here’s the problem:  

Our research (see here and here) shows that, in addition to hurting rightsholders, piracy hurts consumers because when rightsholders can’t make a return on their investment in creative content they understandably reduce their overall investment in high-quality creative output. 

The third finding is that anti-piracy efforts can be effective at reversing the harm piracy causes to rightsholders and consumers. Here again, you might have heard bloggers argue that piracy is a game of Whac-a-Mole, and that because you’ll never hit all the piracy “Moles,” it’s pointless to even try. But this fundamentally misunderstands both the rules of Whac-a-Mole and the basics of consumer behavior. To win at Whac-a-Mole you don’t have to hit all the moles, you just have to hit enough to score points.  

In the same way, you don’t have to eliminate piracy to change consumer behavior, you just have to make piracy sufficiently difficult to access that some pirates will switch back to legal channels.  

Is there any evidence to show that can happen? Yes there is.  

Our research has shown that legal noticessite shutdownssearch engine takedowns, and website blocking have all been effective at reducing piracy and increasing legal sales.

What is the biggest challenge in the fight against piracy? 

We believe the biggest challenge in the fight against piracy is the fight against misinformation about piracy, and we hope that our academic research is helpful in separating fact from fiction on how piracy impacts legal markets for creative content. 

How do you think Australia is measuring up in tackling piracy? 

Australia is a leader in the fight against piracy, particularly in the context of making it harder for Australian citizens to discover pirate sites through search engines and to block access to sites dedicated to infringing content.  

As we mentioned above, our research found that website blocking efforts in the UK caused a significant reduction in piracy consumption and a corresponding increase in subscriptions to legal streaming channels, and we expect that the laws in Australia are having a similar effect. 

What are you watching and recommending to friends at the moment? 

Right now, we are enjoying Ted Lasso on AppleTV, Aaron Sorkin’s The Newsroom on HBO Max, and The Family Man and The Squid Game on Netflix. 

What excites you about the future of your industry sector? 

We are excited about the ability of academic research to provide independent, evidence-based, analysis to inform important government decisions about how to protect rightsholders and consumers from the threats posed by Internet piracy. We are thrilled to be a part of this effort. 

Before you go, check out last month’s interviews with Bridget Fair, CEO of Free TV Australia and Adam Suckling, CEO of Copyright Agency