It’s long been said that piracy represents an untapped marker or unmet need, and this has led many pundits to wonder why some creators aren’t tapping said markets. I have made that argument myself and I’ve been hearing it for the past several years, but today I would like to make an alternative suggestions.
What are the chances that a creator might be aware of the piracy but simply decide that it represents a market not worth investing in?
Take Game of Thrones, for example. Wired reported earlier this week that the finale of season 3 was the most pirated tv episode of 2013:
Three seasons in and Game of Thrones still continues to set records — both legitimate and otherwise. After hitting ratings milestones earlier this year, it now has yet another accomplishment to boast about: the most pirated show of 2013.
This latest honor comes via TorrentFreak, which found that the Season 3 finale of the show had 5.9 million downloads via BitTorrent, beating other shows like Breaking Bad and The Walking Dead by large margins. However, the fact that millions of people are pirating Game of Thrones really isn’t the story here — or, if it is, it’s not a new one. What bears examining is the extent to which that piracy is a direct product of HBO’s policies — and the network’s staunch refusal to budge in the face of mounting evidence that their policy of avoiding third-party distribution to reinforce the value of their product is accomplishing just the opposite.
At this point everyone knows that the piracy is happening, including Game of Thrones director David Petrarca who had previously admitted that piracy generated much-needed “cultural buzz” around his show. Even the CEO of Time Warner (HBO’s parent company) knows about the piracy; he sees it as a positive:
Our experience is that it leads to more paying subs. I think you’re right that Game of Thrones is the most pirated show in the world. That’s better than an Emmy.
Okay, if the highest levels of the company know about piracy and don’t appear to be responding directly to it, do they really deserve to be criticized about it?
I don’t think so. Instead I would like to posit an inverse to Hanlin’s Razor. Rather than assuming the cause to be stupidity, my new rule of thumb states that never attribute an action to stupidity that which might be explained by asymmetrical information. (In other words people aren’t as stupid as we might assume; they’re just working from different data.)
If we apply the razor here then can conclude that HBO’s response was to choose to not offer a new digital product which could compete with the pirated downloads. Rather than label this the stupid or wrong decision, let’s instead consider why HBO might have made that decision.
Here’s one suggestion: What if HBO has data that showed that some percentage of their existing subscribers are also downloading pirated copies which can be watched offline? (This makes perfect sense to me.) If HBO already knows that they’re getting money from some pirates then they might decide its not worth offering a new digital product to the rest.
And if that’s not convincing, consider this. Wired is throwing around the 5.9 million downloads like it represents a significant failure on the part of HBO, when in fact they are making the same mistake as the RIAA and others have made in the past. Wired is assuming that the 5.9 million downloads translates to 5.9 million frustrated customers, when in fact that is not true.
It’s long been established that far more people will pirate a song than will ever buy a song, and I think the same principle applies here. Rather than looking at 5.9 million subscribers, we’re looking at a potential 590,000 subscribers – and it’s probably far smaller than that. What if HBO has research data from a survey group which shows that only a very low percentage of pirates would convert to subscribers if given the chance?
What if HBO knows that their conversion rate was only 1%? It’s not out of the realm of possibility; there are many software companies with paying customers making up only 2% to 3% of their user base – MegaUpload was one such example. HBO might have concluded that the couple hundred thousand new digital subscribers weren’t worth the effort – not when it could potentially cannibalize their existing business deals (cable subscribers might want to switch over).
Update: And just to be clear, when i refer to HBO’s existing deals I am referring to the hefty fees they collect from cable companies, including the one that owns HBO.
I don’t know why HBO is not directly addressing piracy, but it has gone on long enough that it’s no longer safe to assume they are making a mistake.
P.S. If someone knows of a name for razor I coined in this post, let me know. Otherwise I will name it after myself.
image by officergleason