The Effect of Over-the-Top Media Services on Piracy Search: Evidence from a Natural Experiment
Marketing Science, Forthcoming
65 Pages Posted: 14 Jul 2020
Date Written: June 2020
The rise of over-the-top (OTT) video streaming services has raised the question of how this new form of digital media affects consumer search for pirated content. We address this question by using Netflix’s unexpected announcement of a global market expansion in January 2016 and the subsequent block by the primary telecommunications firm in Indonesia as an exogenous shock to the supply of OTT services in that country. Using synthetic control methods, we compare the change in piracy search between Indonesia and 40 Asian countries where Netflix simultaneously entered and remained available. Netflix’s failure to launch in Indonesia leads to a 19.7% increase in search for pirated movies and TV shows in Indonesia, relative to the other countries, suggesting a net substitution of piracy for OTT services. Comparison of treatment effects between exclusive and nonexclusive content shows that the treatment effect is driven by both a combination of an expansion of the market for piracy and a substitution between piracy and OTT services. We also find that the treatment effect is stronger for less dialogue-oriented content, which is consistent with the greater appeal of dialogue-light content to non-English-speaking consumers.
Keywords: piracy, over-the-top service, video streaming, synthetic control, natural experiment
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