Research Question: Does Movie Subscription Services Help Eliminating Piracy?
Introduction
Piracy is defined as the act involving the illegal production of multiple copies of content such as music, movies, and software without permission from the owner (Riley, 2011). The issue of privacy is prevalent as it presents the consumer with the notion of procuring something for free. Through the application of cost-benefit analysis in which case individuals evaluate the maximization of benefits through the incurrence of least costs, justifies the need to procure pirated products. However, the introduction of movie subscription services such as Netflix has led to the analysis of whether such options can reduce the rate of piracy. This paper will focus on the implications of using online streaming media, such as Netflix, on the prevalence of piracy.
Overview
Piracy has been a cancer to the entertainment industry following the adverse effects it has on revenues. In this context, movie piracy has resulted in losses of billions of dollars annually. As a result, stakeholders in the industry worry about the adverse effects the vice might have on future productions (Organization for Economic Co-operation and Development, 2008). This is tandem with the probability that significant losses might lead to potential investors shying away from the motion picture business thereby leading to reduced quality and loss of jobs. The most affected group would be the independent producers who rely on investors' contributions prior to the release of their productions. In some instances, such individuals acquire capital from financial institutions that provide the backing they need with substantial proof of their repayment ability.
Therefore, pirated content of their films have the potential of adversely affecting their business and in such instances, lead to the collapse of their production houses. In order to avoid such eventualities, content providers engage in grueling court battles that most of the times do not yield any tangible results. This is because sites that provide pirated movies hide behind computer code that makes it difficult to identify the real culprits. For instance, the reported court case involving MovieTube websites and the U.S Motion Picture Association of America (MPAA) on the basis of copyright infringement on the former, led to the identification of the case without any specific defendants, as identified by John and Jane Does, and the XYZ Corporation (Watt, 2014).
In relation to this case, it becomes impractical to proceed with legal options as in most instances; websites such as MovieTube are closed down as soon as they are reported by copyright owners. Not long after this event, other related websites prop up and continue with the devious cycle of piracy. Therefore, legal enforcement has not yielded any tangible results thereby leading to the assessment of other feasible alternatives. Some of these approaches include collaboration with movie theaters through staff training on how to prevent the use of high-quality camcorders in the theater. This would discourage potential pirates following the execution of legal considerations in dealing with the crime.
Moreover, another alternative would be to implement a tactical strategy that would involve the reduction of the gap between the official movie release date in the theatre and the online version released via the internet. As a result, this would reduce the potential of piracy perpetrators of the opportunity to release their copies. Furthermore, in order to combat piracy, it is imperative to understand the motivation behind the participation in the vice, either as the producer or the consumer. According to Leeson (2009), consumers purchase pirated movies as a result of three counts of affordability, availability, and timeliness.
In this case, the introduction of movie subscription services into the entertainment industry centers on the three variables identified above. In terms of affordability, pirated movies are available for free download through pirate sites. From a consumer’s point of view, they would rather opt for this alternative, given that they would not be charged for the same content they would acquire from a movie rental store. In order to combat this, movie subscription services have movies available for download at reasonable fees. For instance, Netflix has an $8 monthly package where users can access entertainment content. In this case, as opposed to viewing at times, bad quality content, one can opt to subscribe to such affordable packages for high-quality productions.
Availability focuses on the accessibility of content. Some movies may be unavailable in some countries due to various reasons such as legal considerations. As a result, pirated content becomes the best alternative in such cases. Therefore, promoting the availability of movies discourages pirated content. Lastly, subscription services are competing with pirated movies on the basis of timeliness. Since the latter's content is available at all times for the convenience of the consumer, movie subscription services have to their advantage, a similar model, where individuals can stream movies they would like to watch irrespective of their schedule. Most individuals pirate movies online due to lack of original copy in the market. Therefore, the availability of movie subscription services encourages viewers to subscribe movie content online since it is accessible.
For purposes of unearthing the impact that movie subscription services have on piracy, the study will adopt personal experience and analysis methodology. This is because, it is a fact that many individuals have at one point in their lives participated or knew of other people who have engaged in movie piracy, either as producers or consumers. This approach will provide for the accumulation of required data for assessment and the impact that subscription services on their purchasing decisions.
Analysis
The issue of piracy eradication has been a consistent headache for content producers such as movie and film houses. This is because this vice has led to significant losses that have threatened the sustainability of related businesses. In line with this, some countries have created laws and policies that have been described as being draconian in nature. For instance, owing to the high prevalence of piracy in the United Kingdom, legislators have taken drastic steps through the creation of the highly controversial Digital Economy Act.
According to Riley (2011), a three-strike policy is provided for illegal downloaders. In this case, upon the elapsing each strike, the Internet Service Providers (ISPs) is allowed to submit warning letters to offenders. Upon the reach of the third-strike, the offender’s details are submitted to the Copyright Owners of the associated content and from this point are allowed to take legal action against the individual. Such laws have been unpopular with the masses as they decry of privacy issues. However, the introduction of online streaming services such as Netflix has provided easy and affordable options to such legislations and associating with pirated content.
According to Segrave (2003), the downloading rates of pirated content have plummeted upon the introduction of the easily available and affordable options provide by Netflix. Netflix is an online streaming service where individuals can live stream television shows as well as movies online. One only need to purchase a package that is reflects his/her needs and as such, is able to access a wide variety of shows and movies. The service has gained popularity, not just in North America, where it enjoys a formidable and dominating lead in terms of streaming traffic, but in other parts of the world.
In this regard, Netflix enjoys a 37.1% of all streaming content, becoming a market leader in the industry (Riley, 2011). What is interesting is the fact that the introduction of Netflix offering in different markets has substantially reduced piracy. This can be illustrated by a report released by Sandvine that indicates that the traffic attributed to audio and video streaming services such as Netflix have soared, while that of BitTorrrent; a company mostly associated with online piracy has declined considerably. BitTorrent is a peer-to-peer file sharing company that allows individuals to share data files online. This platform, though operating as a data transfer company has been associated with piracy. This is because its platform is heavily associated with piracy, owing to its provision of free use of its service, easily accessible and used by those transferring pirated content. This data has been assessed over a five-year period, that proves that the traffic attributed to these services have significantly improved at the expense of BitTorrent.
In this case, approximately 70% of night internet-use has been identified as related to streaming services, almost double what streaming services were enjoying five years ago. This concept has been supported by Bently, Davis, and Ginsburg, who indicates that in every market that Netflix has ventured in to, there has been a drastic decline in BitTorrent’s traffic (2010). In this regard, BitTorrent’s market share in terms of internet traffic has dropped from 31% to a measly 5% of all traffic in North America over a five year period. However, BitTorrent has indicated that its technology allows for the allocation of traffic to more data-intensive services hence explaining the sharp decline. All in all, consumer experience solidifies Bently’s stance on the declining rate of the use of sites such as BitTorrent (2010). For instance, according to OECD (2008), a survey in Australia indicated that a higher percentage of individuals preferred to use Netflix as opposed to downloading pirated copies. This is due to the improved quality content provided by Netflix at a reasonable fee. In addition, factors surrounding availability and timeliness as described above attributed to the Netflix’s success and popularity.
Discussion
Netflix’s business model revolves around license arrangements with content producers. In this regard, the former party grants Netflix the right to avail the content for their audience in accordance with a defined arrangement as stipulated in the license contract. In this regard, a revenue-sharing arrangement is involved in which case the two parties agree on the value of the license and the amount in fees payable by Netflix in the license agreement, in accordance with the agreed terms (Bently, et. al, 2010). For instance, Netflix can submit the license fees in terms of installments within a stipulated duration to content distributors. In this case, every content is different and as such has different requirements. For instance, if the show is popular, the content distributor is likely going to demand higher licensing fees from Netflix, as opposed to one that does not have a large audience. On other cases, Netflix does not have access to some content irrespective of its popularity (Bulayenko, 2011). This situation occurs in instances where the content is owned exclusively by the provider and therefore sensible for its licensing to be done by the provider’s streaming service. A typical example of this case is a situation involving the popular series, Game of Thrones. Being an original HBO series, it would make sense to have it streamed exclusively in HBO Go, a streaming service, similar to Netflix, as opposed to having it in the latter. In this instance, such content would not be available on Netflix.
There has been a prevailing discussion surrounding the payment consideration of movie producers who have their content used by legal streaming services. This situation has elicited mixed reactions, with opponents indicating that movie producers would receive considerably less to have their content available on such sites.
On the other hand, proponents indicate that it makes good financial sense to have their content on such legal platforms, as opposed to having their product available on pirate sites. In response to this situation, it is almost impossible to know the amount movie producers as well as other content distributors receive from online streaming sites (Segrave, 2003). This is because the terms agreed between the two parties are closely guarded due to competition. Some situations may have Non-Disclosure Agreements, as the agreed terms are highly confidential. In addition, these sites also do not make their viewership statistics available to content distributors. As a result, the latter lacks the crucial element in their negotiations as they are not able to ascertain the popularity of their TV show or movie.
However, it is considerably better to have content streamed on such sites when it comes to content distributors. In this case, regardless of the amount they receive as per their respective agreements, it is a good financial model as they receive revenue owed to them by virtue of the licensing fees submitted by streaming sites as opposed to instances where they do not receive any form of compensation by pirate sites, as their content is distributed at negligible prices.
The advantage that streaming services provide viewers also border along timeliness of content. This situation is contested by virtue of the streamed content cannibalizing potential box office revenues. it is a well-known fact that movie companies rake millions of dollars in box office revenues, that is, for successful and popular movies. However, some movies may not earn considerable amounts of money on their theatre releases. The advantage of providing such content to streaming companies rests on the premise that the licensing fees payable by such sites to content owners has a stability concept related to the contractual arrangement between the two parties (Segrave, 2003).
In this case, in spite of the earning potential of movies during their box releases, even though they may amass substantial amounts of revenues in theaters, the revenues are not sustainable as they become considerably less as other movies are released. In order to counter such situations, a licensing arrangement would allow content owners receive, less amounts than compared to box office revenues, but which stretch for a longer period of time, provided the content is still available on the respective streaming sites (Strangelove, 2015). This situation makes a sensible financial model that has proven to work while at the same time providing convenience to the consumers. As such, their participation in pirated content as dropped drastically as indicated above, thereby translating to increased revenues for content owners and distributors.
Conclusion
Online streaming companies bank on the three variables of affordability, availability, and the timely nature of their product offerings. In this regard, the arrangement with content owners to ensure timeliness of their product ensures the reduction in the rate of availability of pirated content. This signifies increased revenues to such firms for a considerably longer period of time. Despite the revenues being considerably lower than compared to theatre arrangements, the availability of such content on legally-recognized platforms for viewing ensures content owners and distributors receive their agreed portion for a defined period of time through licensing agreements made between such firms and online streaming services. All in all, as proven above, Netflix, and other streaming services, is indeed the answer to the eradication of movie piracy.
References
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