In the early 2000s, one of my high school classmates saved what he could of the humble wage he earned while working at a local fish and chips restaurant and purchased a CD writer and proceeded to cut CDs for those willing to pay. Orders started flooding in and it wasn't long before he told the owner of the store that he wasn't interested in waiting tables any longer. This was essentially our first experience with piracy, and it quickly served to render Now! That's what I call music compilations irrelevant. Later with the advent of DVDs, our tastes for piracy extended to movies and everyone became relatively comfortable watching footage crudely recorded in a cinema by an audience member with very shaky hands. The tenure of pirated DVDs was however short lived, as they were replaced by torrents and later streams. The quality of these streams was often bad at best and downright unwatchable at worst, but viewers still downloaded the content, making Kim Dotcom a multi-millionaire and Pirate Bay a household name in the process.
Digital piracy has certainly had a good run, but it now seems to be on its way down. A nationwide survey of 1,650 movie watchers commissioned by Flicks.co.nz, shows that the proportion of respondents who usually watch from an illegal source has declined from 87 percent of online content viewers in 2011 to just 43 percent this year—and this has nothing to do with Kiwi audiences being struck by a sudden bout of piracy guilt. In fact, the study showed that the percentage of people completely opposed to piracy has dropped from 40 percent in 2011 to 33 percent in 2015.
“Interestingly, anti-piracy attitudes have softened, suggesting that this drop isn’t driven by ethical or moral considerations, but solely by content availability,” said Flicks editor Steve Newall in a statement accompanying the release of the research.
The explosion of legitimate online streaming services onto the market over the last year has seen significant numbers of Kiwis switch their media consumption from inconsistent illegal streams to the legal alternative. Quickflix, Lightbox, Neon and Netflix all offer reasonably large catalogues of video content that users can access at a whim.
So instant was the impact of Netflix in the local market that by 12 May—only about three weeks after the 24 March launch date—CallPlus Group (recently acquired by M2) reported that streaming through the service accounted for between 15 and 20 percent of all its broadband usage. M2 says that this has since lifted to upwards of 30 percent, and the company's consumer general manager Taryn Hamilton says P2P traffic (often used for piracy) is declining slightly, month on month.
“Normally we see a spike in the winter months, but this year winter traffic is actually down around 25 percent on autumn traffic,” says Hamilton. “Netflix traffic volumes in July are double what they were in May and with no sign of slowing down. Although interestingly M2 Group has not noticed any material traffic volumes from the Lightbox service.”
According to Mumbrella, Netflix Australia already has over one million subscribers and it's all but won the streaming battle in that market. Researcher Roy Morgan was approached for similar data relating to New Zealand, but the comms team told StopPress that the company is only releasing a study within the next month or so.
But the downward trend of piracy isn't limited to video content. The emergence of Spotify, Pandora, iHeartRadio, Apple Music have also given music fans a means by which to access their favourite artists without having to pirate content. And the millions of hours streamed via these services have come at the expense of music streamed illegally.
Rights owners are also starting to win some key battles against noted pirates. As illustrated by the recent closure of Grooveshark and Pirate Bay, the online environment isn't quite as conducive to pirating as it once was. Contained several paragraphs down in a grovelling apology posted on the Grooveshark website, the founders of the music service allude to how the industry has changed and provided countless legitimate services to users.
"At the time of our launch, few music services provided the experience we wanted to offer – and think you deserve," says the letter. "Fortunately, that's no longer the case. There are now hundreds of fan friendly, affordable services available for you to choose from ..."
And what's more is that users are willing to pay for these services.
Spotify doesn't release local stats, but the company says that of its 75 million global users, 20 million are paying subscribers who willingly fork out the monthly (or annual) fee to avoid ad interruptions. This when viewed alongside the fact that subscribers are happy to also set aside a monthly budget for Netflix illustrates that online users are happy to pay for content if they deem it good or new enough.
The willingness of people to pay for content is of course what subscription TV models have relied on for decades. And as illustrated by the continued upward trajectory of Sky TV's user base and revenue, Kiwis are still willing to pay for access the breadth of content available via the service. Whether Sky is able to retain this level growth as the online streaming market matures is yet to be seen, but the company is also making moves into this space through the introduction of services such as Neon.
In much the same way that piracy was tipped as a threat to Sky TV's hold on the entertainment market, so too was cinema placed on the list of threatened media channels. And despite the predictions from the industry's doomsday prophets, cinema has maintained its audiences in recent years.
Data from Nielsen shows that the number of people visiting the cinema has remained relatively stable over the past three years, dropping only slightly in that time. This decline in cinema goers has however not affected the revenue of cinema with ad spend in the channel increasing from $7 to $9 million between 2012 and 2014 and because ticket prices have increased over the years.
If anything, the Flicks study shows that the price of movie tickets might be the biggest threat to cinema, with 82 percent of respondents claiming that tickets were too expensive (up from 74 percent in 2011). When asked how much cheaper tickets would need to be to double Kiwis’ movie-going, nearly two in three respondents replied $3 to $5 cheaper. And while only hypothetical, Flicks says that a $3 reduction in price could result in an annual increase of $25 million to the New Zealand box office.
While piracy is on the decline, it's far from disappearing entirely. But this isn't necessarily a bad thing. A 2013 study conducted by European Commission’s Joint Research Centre found that piracy can in fact be good for business, in that it can encourage people to visit legitimate sites after encountering artists via pirated content. In addition to this, piracy also gives artists an indication of regions where there's a high demand for their music.
This information can then be used to determine where they should tour or increase their merchandise investment, thereby driving revenue. The legitimate services, of course, provide these services as well today through their analytics tools, but until they came to the fore piracy did prove useful in identifying viable audiences—and it did, after all, help to keep the likes of Rodriguez alive in South Africa at a time when censorship stopped his music from entering the country.
- Here's the full Flicks report: