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- The effect of subscription video-on-demand on piracy: evidence from a household-level randomized experimentPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Smith, Michael D.We partner with a major multinational telecommunications provider to analyze the effect of subscription video-on-demand (SVoD) services on digital piracy. For a period of 45 consecutive days, a group of randomly selected households who used BitTorrent in the past were gifted with a bundle of TV channels with movies and TV shows that could be streamed as in SVoD. We find that, on average, households that received the gift increased overall TV consumption by 4.6% and reduced Internet downloads and uploads by 4.2% and 4.5%, respectively. However, and also on average, treated households did not change their likelihood of using BitTorrent during the experiment. Our findings are heterogeneous across households and are mediated by the fit between the preferences of households in our sample for movies and the content available as part of the gifted channels. Households with preferences aligned with the gifted content reduced their probability of using BitTorrent during the experiment by 18% and decreased their amount of upload traffic by 45%. We also show using simulation that the size of the SVoD catalog and licensing window restrictions limit significantly the ability of content providers to match SVoD offerings to the preferences of BitTorrent users. Finally, we estimate that households in our sample are willing to pay at most $3.25 USD per month to access a SVoD catalog as large as Netflix's in the United States. Together, our results show that, as a stand-alone strategy, using legal SVoD to curtail piracy will require, at the minimum, offering content much earlier and at much lower prices than those currently offered in the marketplace, changes that are likely to reduce industry revenue and that may damage overall incentives to produce new content while, at the same time, curbing only a small share of piracy.
- Culling the herd: using real-world randomized experiments to measure social bias with known costly goodsPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Smith, Michael D.; Telang, RahulPeer ratings have become increasingly important sources of product information, particularly in markets for information goods. However, in spite of the increasing prevalence of this information, there are relatively few academic studies that analyze the impact of peer ratings on consumers transacting in real-world marketplaces. In this paper, we partner with a major telecommunications company to analyze the impact of peer ratings in a real-world video-on-demand market where consumer participation is organic and where movies are costly and well known to consumers. After experimentally changing the initial conditions of product information displayed to consumers, we find that, consistent with the prior literature, peer ratings influence consumer behavior independently from underlying product quality. However, we also find that, in contrast to the prior literature, there is little evidence of long-term bias as a result of herding effects, at least in our setting. Specifically, when movies are artificially promoted or demoted in peer rating lists, subsequent reviews cause them to return to their true quality position relatively quickly. One explanation for this difference is that consumers in our empirical setting likely had more outside information about the true quality of the products they were evaluating than did consumers in the studies reported in prior literature. Although tentative, this explanation suggests that in real-world marketplaces where consumers have sufficient access to outside information about true product quality, peer ratings may be more robust to herding effects and thus provide more reliable signals of true product quality than previously thought.