C^afterly Competing with Free: The Impact

The creative industries have frequently expressed concern that they can't compete with freely available copies of their content. Competing with free is particularly concerning for movie studios, whose content may be more prone to single use consumption than other industries such as music. This issue has gained renewed importance recently with the advent of new digital video recording and distribution technologies, and the widespread availability of Internet piracy. We examine competition between 'free " and paid video con tent in two important contexts: the impact of legitimate free distribution in one channel on sales through paid channels, and the impact of illegitimate free distribution in pirated channels on sales through paid channels. We do this by studying the impact ofmovie broadcasts on D VD demand and the impact of piracy availability at the time of broadcast on DVD demand. Our data include all movies shown on over the-air and cable television during an eight-month period in 2005-2006.

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