Thursday 11 April 2013

Piracy statistics UK and France – and a little more price-elasticity

In March 2013 UK regulator Ofcom published new statistics on the infringing consumption of copyright content on the internet. This survey – referred to as “Wave 2” by Ofcom - is the second such exercise and covers online behaviour by users aged 12+ in the period August to October 2012. Conveniently, the French HADOPI published similar statistics in January 2013, addressing online behaviour in the year ending October 2012.

It seems that in the UK the piracy situation is essentially stable, as we wait for the introduction of the Graduated Response. In France, where the GR has been operating since September 2010, the proportion of consumers obtaining copyright content exclusively from legal sources has significantly increased.
When (and if) the “initial obligations code” for the UK GR comes into force, Ofcom will come under a duty under section 124F of the Communications Act 2003 to report to the Secretary of State on, among other things, “the current level of subscribers' use of internet access services to infringe copyright”. However, in 2011 the Hargreaves Review of Intellectual Property and Growth recommended that Ofcom should start collecting data at once, without waiting for its statutory duty to commence. Accordingly, the results of the first survey, “Wave 1”, were published in November 2012, describing online behaviour in the period May to July 2012.
Wave 2 indicates that levels of online infringement have not changed significantly since Wave 1, save that possibly the “hard core” of committed infringers has slightly increased. Taking all content types together, 71% of online consumers of content in the UK claimed to consume only legal content (Wave 1: 71%). This represented 41% of all internet users (Wave 1: 40%). 19% said that they consumed both legally and illegally (Wave 1: 22%) - 11% of all internet users (Wave 1: 12%). 9% admitted consuming only illegally (Wave 1: 8%) - 5% of all internet users (Wave 1: 4%).
According to Wave 2, films were the most popular target (and increasingly so) of illegal consumption among those who consumed any particular category of content online: 36% of those who watched any film content had done so illegally on at least one occasion in the 3-month survey period (Wave 1: 31%). However, this represented only 6% of the internet-using population (Wave 1: 6%). Strikingly, the survey reports that: “Online film copyright infringers were responsible for illegally downloading or streaming an estimated 47% of all digital film consumed on the internet.” The proportion found by Wave 1 was 35% - a considerable change in a few months (though one notes a large increase in volumes which may have to do with release schedules. A comparison may be misleading). For music, on the other hand, 10% of internet users had consumed illegally (Wave 1: 8%). That is to say, among content types consumed, film was most likely to be consumed illegally, but the number of infringers was smaller than in the case of music.
By comparison, in France the proportion of online content consumers obtaining content exclusively from legal sources rose from 71% in December 2011 to 78% in October 2012. The “hard core” obtaining content solely from illegal sources fell as a proportion of consumers from 6% to 3%. As a proportion of internet users, the proportion of infringing consumers (whether obtaining all or only some of their content from illegal sources) fell from 20% to 15%. (It perhaps should be noted that the definition of a content consumer was that the internet user had consumed at least one cultural good online in the preceding 12 months, as compared with a survey horizon of 3 months in the UK study.)
The daunting annexes to the Ofcom report contain rich details which must be of great interest to commercial strategists. For example, Ofcom measured the willingness-to-pay of consumers, finding – predictably – that demand rose as price fell. For downloading a hypothetical newly released film from a reliable online service, the average price that a 100% legal (so to speak) consumer was willing to pay was £4.13, a partially illegal consumer £4.53 and a 100% illegal consumer £3.18. This is consistent with Ofcom’s general conclusion that it is those who obtain content from both legal and illegal sources who are the biggest spenders on legal content.
source: Ofcom
One might infer that enforcement against such persons would produce increased legitimate sales – as seems to be happening in France (see also Danaher (2012)). Leaving that aside, Ofcom’s remarkable report is more evidence that the market for licensed content is price-elastic – as argued in my last post on the UK’s controversial proposal to introduce a private-copy exception without compensation for right holders.

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