Go Movies or Go Home?

In the digital age where convenience and accessibility are paramount, the phenomenon of piracy has emerged as a significant challenge for entertainment companies worldwide. From blockbuster movies to live sports events, television shows and chart-topping music, the allure of free content available through illicit streaming platforms poses a formidable threat to the revenue streams and creative ecosystems of legitimate content prsoviders like Netflix, Disney, ESPN and others.

Piracy-focused research firm Muso measured 215 billion global visits to piracy websites in 2022, an 18% year-over-year increase from 2021. Television, Publishing, and Film comprised over 85% of these visits.

At the heart of the issue lies the unauthorized distribution of copyrighted material. While legitimate streaming services invest substantial resources in acquiring licensing rights and producing original content, illegitimate streaming platforms offer the same content for free, circumventing the need for subscriptions or purchases. This diversion of viewership leads to a direct loss of revenue for companies that rely on subscription fees, advertising, and licensing agreements to sustain their operations and fund future projects.

At the same time, content providers such as Netflix, Disney and Amazon Prime Video are spending more money than ever before to build and acquire a wide variety of content, from pre-release material to original works, and win the war for market share in a streaming-centric entertainment landscape. Spending records have been broken year after year as a result of this fierce rivalry, which is indicative of the growing demand for engaging content in the streaming age.

Source: Company Reports, Morgan Stanley

To add further pressure to the industry, in the last couple of years in particular, these platforms have been confronted with another serious cost problem: the rising expenses linked to not only intense bidding wars between one another, but also the aftermath of the strikes in the actors' and writers' unions. The costs of developing and acquiring material are rising as a result of these labour issues, further compressing the already tight margins of content producers.

However, content providers are also up against the difficult challenge of online piracy in addition to these mounting expenses. Despite significantly greater costs, a large amount of the associated prospective revenue is diverted by people who stream others’ products illegally online. In addition to endangering the sustainability of important content developers, widespread piracy also puts the livelihoods of countless creatives who work in the content creation industry at risk. Content producers are fighting a difficult war in this environment, attempting to offer their viewers with engaging material while juggling rising production costs, resolving labour conflicts, and fighting digital piracy.

Moreover, legitimate streaming conglomerates spend billions of dollars annually to produce original content and secure licensing deals with studios and production houses. However, when consumers opt for illegal streaming platforms instead, the financial repercussions are felt acutely. The decline in subscribers and advertising revenue not only jeopardizes the viability of these companies but also undermines their ability to invest in diverse, high-quality programming.

The impact also extends beyond financial losses. Illegal streaming undermines the incentive for content creators to produce innovative and compelling material. With diminished returns on their investments, studios and artists may be forced to scale back production budgets or forego risky projects, leading to a homogenization of content and a decline in creative experimentation.

The Tragedy of the Commons

How does economic theory come into this? In the digital age, where access to entertainment is just a few clicks away, the prevalence of illegal streaming has become a significant concern for content creators, distributors and policymakers alike. This phenomenon not only challenges the integrity of intellectual property rights but also resonates deeply with a fundamental economic theory: the tragedy of the commons. By examining the parallels between illegal movie streaming and this economic concept, we can gain valuable insights into the dynamics of digital piracy and its broader implications.

The Tragedy of the Commons, popularized by biologist Garrett Hardin in 1968, describes a scenario where individuals, acting in their self-interest, exploit a shared resource to the detriment of the collective good. While Hardin’s thoughts were more geared towards natural resources, in our current digitalized society, his theory remains highly relevant. In the context of illegal movie streaming, the shared resource is digital content, and the individuals are users who access this content without proper authorization.

Online piracy fundamentally represents the digital version of the tragedy of the commons. Anybody with an internet connection can easily access a “massive commons” of digital content, including music, movies, and television shows. To maintain their businesses and pay creators for their labour, content distributors and creators depend on money from legal sales, subscriptions and advertising. Users who stream illegally jeopardize this source of income and reduce the value of the resource that is shared by all parties, which is digital content.

The economic rationale behind unauthorized streaming is built on the assumption of individual benefit outweighing collective harm. When considering movies and television series to watch for free, there is no denying the appeal of having access to such a large selection. When weighed against the instant satisfaction of gaining access to desired content without having to pay, the costs of infringing copyright rules or rights or causing the legal content sector to decline may seem insignificant. People are motivated to stream illegally by this sensible calculation, which exacerbates the tragedy of the commons.

Since it costs little to nothing to for a legitimate streaming service to incrementally host an additional account on a platform after they have already paid for the content, it is crucial to understand that every streamer lost to illicit alternatives is a direct hit to these companies’ bottom lines and less money they can pay out to both shareholders and/or down the production chain.

Beyond TV and Movies

The detrimental effects of illegal streaming are not limited to the video streaming sector. Music streaming services like Spotify and Apple Music also face significant challenges from piracy. Illicit distribution of music not only deprives artists and record labels of rightful compensation but also distorts the metrics used to measure popularity and allocate royalties, skewing the music industry's ecosystem.

Athletic organizations such as the United Fighting Championship (UFC) have also had major pay disputes with athletes. Francis Ngannou, for example, walked away as the UFC’s heavyweight champion after not being able to settle on compensation. At the same time, at least part of the profit that could go to paying these fighters is taken by illegal streams. UFC President Dana White, speaking to GQ, revealed that he took down a huge streaming operation, and was quoted in the latest instalment of 'Actually Me': "I care about [the pay-per-views] dummy…That's how everybody makes their money. You're b***hing about fighters not making enough money - they get a piece of the pay-per-view revenue.”

The proliferation of illegal streaming platforms puts users and the wider internet community at danger. These platforms frequently operate outside of legal boundaries, putting users at risk of malware, phishing schemes, and other online dangers. Moreover, the normalization of piracy perpetuates a culture of disregard for intellectual property rights, undermining the foundation of the creative industries and discouraging investment in future innovation which would be for the ultimate benefit of the end consumer.

Efforts to combat illegal streaming have yielded mixed results. While legal measures such as site-blocking and enforcement actions have been implemented in some jurisdictions, the decentralized nature of online piracy presents ongoing challenges for law enforcement agencies. Additionally, technological advancements and the widespread availability of streaming devices have made it increasingly difficult to monitor and regulate illicit streaming activities effectively.

Addressing the issue of illegal streaming requires a coordinated effort involving industry stakeholders, government agencies and technology. Enhanced enforcement of intellectual property laws increased public awareness about the consequences of piracy, and the promotion of legal alternatives is essential to any comprehensive strategy to combat illicit streaming.

So What?

As consumers, we play a crucial role in shaping the future of the entertainment industry. By choosing to support legitimate streaming services and respecting intellectual property rights, we can help sustain the diversity and vibrancy of creative expression for generations to come. Only through collective action can we safeguard the integrity of the entertainment ecosystem and ensure a fair and sustainable future for all stakeholders involved.

Amazon Prime Video can probably afford to let you stream its new remake of Road House elsewhere – with the average American household spending a staggering USD $46 on streaming each month. However, the question is, should this be so widely accepted as a society given the implications to those down the supply chain in content production? Can the aspiring actor working as an extra afford to not be compensated appropriately?

Addressing illegal movie streaming requires a multifaceted approach that acknowledges the economic incentives driving piracy and the structural challenges within the entertainment industry. Strategies such as offering affordable and convenient access to legal content, improving digital rights management technologies, and fostering international cooperation in combating piracy can help mitigate the problem.

Furthermore, education and awareness campaigns are essential in changing societal norms and attitudes towards piracy. By highlighting the economic impact of piracy on content creators, distributors, and the broader economy, stakeholders can encourage consumers to make more ethical choices regarding their consumption of digital content.

In conclusion, the parallels between illegal movie streaming and the tragedy of the commons underscore the complex interplay between individual behavior, collective interests, and economic incentives in the digital landscape. By understanding piracy through the lens of economic theory, policymakers, industry stakeholders and consumers can work together to develop effective strategies for addressing this pervasive problem and ensuring the sustainability of creative industries in the digital age.

“The population problem has no technical solution; it requires a fundamental extension in morality.” – Garrett Hardin