Streaming, Sharing, Stealing

Michael Smith and Rahul Telang, both at Carnegie Mellon, analyse how digital distribution changed the entertainment industries, using empirical research rather than argument from cases. Their access to industry data and their econometric approach distinguish the book from most writing on the subject.

Their central claim is that the studios' and labels' power rested on control of scarce distribution capacity: shelf space, screens, broadcast slots and marketing budgets. Digital distribution removed the scarcity and therefore removed the basis of that power, transferring it to firms that control the customer relationship and the data about what customers actually do. Netflix's commissioning of House of Cards, based on viewing data showing overlap between Kevin Spacey, David Fincher and the original British series, is their organising example.

They also present research findings on specific questions. Piracy reduces sales, and the studies establishing this are reviewed carefully. Windowing, meaning staged release across channels, loses more revenue to piracy than it gains from price discrimination when the window is long. The long tail is real but the head remains dominant. Removing a title from legitimate availability increases piracy of it. Their advice to incumbents is to compete on convenience and availability rather than on enforcement. The book is now dated by the streaming market's subsequent consolidation and by the shift from growth to profitability, but the empirical findings and the analysis of where power moved remain sound.