Exclusive Netflix Content Boosted Piracy

It’s no secret that legal options are key in decreasing a country’s piracy rates. This is confirmed by a new academic study, which finds that Netflix’s failure to launch in Indonesia in 2016 lead to a 20% increase in piracy-related searches compared to other countries. This boost doesn’t only apply to Netflix exclusives.

There is little doubt that, for many people, Netflix has become a prime source of entertainment.

As a result, some people cut down on their piracy habits. At the same time, however, Netflix titles are frequently pirated as well.

Measuring the true impact of Netflix on local piracy rates is not easy. There is plenty of anecdotal evidence but this is often far from definite. With a new academic study, a group of researchers provides more insight into the link between piracy and Netflix.

Netflix Blockade as a Natural Experiment

In January 2016, Netflix expanded its worldwide reach with dozens of countries, including Indonesia. However, at the end of the month, the country’s largest ISP blocked the service, denying access to most Indonesians.

The blockade stayed in place for more than a year. The researchers used this ‘natural’ block to compare Indonesian piracy searches with those in comparable countries where Netflix launched and remained available.

The results are published in a forthcoming article in the Marketing Science journal titled: “The Effect of Over-the-Top Media Services on Piracy Search: Evidence from a Natural Experiment.” This suggests that the unavailability of Netflix boosted searches for pirate alternatives.

20% Boost in Piracy Searches

Compared to a group of Asian control countries, piracy-related searches was a nearly 20% surge in Indonesia following the Netflix blockade.

“Applying the synthetic control method to data from Indonesia and 40 Asian countries where Netflix entered and remained available, we find that Netflix’s unavailability in Indonesia leads to a 19.7% increase in piracy search in Indonesia relative to the other countries,” the paper reads.

The researchers didn’t measure piracy directly but used Google searches for piracy-related terms as a proxy. These were much higher in Indonesia, relatively speaking, compared to the control countries where Netflix remained available.

Another cautious conclusion that can be drawn from the data is that the Netflix introduction in other countries decreased piracy significantly. According to the researchers, it may have resulted in a “decrease of millions of visits” to illegal sites.

“Our findings indicate that the introduction of OTT services is an effective way to discourage people from searching for piracy,” the researchers write, noting that this should lead to an increase in revenue in the long term.

Not Only Netflix Titles are Affected

The increased interest in piracy due to Netflix’s unavailability is not limited to exclusive Netflix titles. It affects other content as well. This is an interesting finding, suggesting that the unavailability of Netflix may have had broader effects.

If more Indonesians became frequent pirates this would not just affect Netflix but also other content producers and creators, as their work is pirated more often as well.

The findings of this natural experiment confirm that site blocking and other restrictive measures are only part of the anti-piracy toolbox. The availability of good legal options may be just as important.

“From a policy perspective, while punitive measures may reduce the supply of piracy, initiatives that spur the market entry of innovative, high-value media platforms may also produce a substantial decrease in piracy,” the researchers note.

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