The rise in popularity of digital streaming services in the music, TV and film industries has drastically altered the way in which consumers engage with content. In the music industry, services such as Spotify have gained huge popularity at the expense of CD sales and MP3 downloads. In the TV and film industries, a similar shift has been occurring, with services such as Netflix luring consumers from traditional broadcasting and pay TV. In addition, there is evidence that legal streaming has been responsible for a decline in digital piracy. This chapter introduces some basic economic tools that can be used to analyse such problems.
This chapter reviews the academic research related to digital piracy. The chapter begins by reviewing the collection of studies that have attempted to measure the sales displacement effect caused by piracy. It discusses the various methods and data that have been used to examine this effect across different types of (digital) entertainment content. The chapter then discusses the empirical challenge faced by such studies (the endogeneity problem), before proceeding to review a related collection of research studies that have used policy and/or supply-side shocks to identify the sales displacement effect. Finally, the chapter discusses the short- and long-run welfare implication of piracy, and the effects that new streaming services (such as Spotify and Netflix) have had on the unlawful activity.
Jordi McKenzie and Sunny Y. Shin
This chapter reviews some of the main themes that studies of demand for cultural goods and services have examined over recent years. Earlier demand studies were generally related to demand for a specific category of cultural product (for example, performing arts). These studies often considered basic but necessary issues, such as demographic profiles of consumers as well as estimation of demand elasticities. Other early studies highlighted the experiential aspect of consumption and the cumulative nature of consumption capital as defining idiosyncrasies of cultural demand. More recently, demand studies on cultural industries have evolved with specific focus on demand for individual products rather than broad categories of cultural products. This has been actioned by applying increasingly more sophisticated econometric techniques as well as wider conceptual models such as (1) information asymmetry faced by consumers unable to judge quality prior to consumption, (2) demand for superstar products versus niche products, and (3) demand for domestic versus imported products. This evolution of studies on demand for cultural goods and services is also broadly related to globalisation and digitisation of cultural industries.