Streaming, Sharing, Stealing
Data economics of the shift from studios to streamers.
Summary
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.
Key takeaways 7
- Studio and label power rested on control of scarce distribution capacity, which digital distribution eliminated.
- Firms holding the customer relationship and the resulting behavioural data can commission content with better information than studios have.
- Piracy reduces legitimate sales, and the empirical research establishing this is stronger than the industry's critics allow.
- Long release windows lose more revenue to piracy than they gain through price discrimination.
- Making content unavailable through legitimate channels reliably increases its piracy.
- The long tail of niche content is real, but revenue remains concentrated in a small number of titles.
- Competing with piracy on convenience and availability works better than enforcement, which the authors support with evidence from specific markets.
Who should read it
Operators and investors in media and content businesses who want empirical findings rather than assertions about how digital distribution reallocated power.
Where it sits in the reference 2
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