The impact of piracy (and P2P) on book sales

An update on the piracy projectTools of Change – Frankfurt

October 13, 2009

This morning …

• Project history• Why look at this now?• Approach and publishing partners• Primary findings to date• Next steps for this research

And… a call to action

• After this presentation:– Find out where your titles are shared– Look at the impact on sales– Measure! On an ongoing basis– Act on what you find

• On your own …• … or through this effort

Born (Wakefield, Massachusetts)

Catholic school education

College, business school

Finally left Massachusetts

Time Inc. weekly magazines

Married, kid

More kids

Hammond

Started to consult

“Faster, better, cheaper”

Got a logo

MIP 2008: Andrew Savikas and Mac

Slocum wonder, “Can we measure the

impact of piracy on book sales?”

Brian: “How about using a co-op

marketing model to assess whether it helps or hinders paid sales?”

O’Reilly’s editors: “All of our content is

pirated as soon as we publish it!”

Random House joins the research, contributing

several experiments with “free” content distribution

Intrepid NYU grad student starts tracking O’Reilly’s

2008 front list to find pirated content

Brian secretly worries that any analysis will not have a “quiet period” against which to measure baseline sales

TOC 2009: Research paper and preliminary

results are announced

Piracy research on O’Reilly titles

Search for more participants

BEA 2009: Piracy and “free” results are updated

Still consulting …

Add Thomas Nelson titles to

the piracy research

Why tell you all of this?

• You need to know me to trust me• Trust helps you hear what I have to say• Success (to me) = a fighting chance at

recruitment and participation

And I’d like you to take action …

My point of view

• Intellectual property (IP) matters• There are niches, and titles, for which piracy is

a direct loss and enforcement makes sense• There are niches, and titles, for which piracy

may help spur paid sales• This research is structured to find out which is

which

“Perhaps on the rare occasion that pursuing the right course demands an act of piracy, piracy itself can be the right course?”

Governor Swann,in “Pirates of the Caribbean”

(itself heavily pirated)

“Free” is not “new” …

• A long and successful history• Galleys, ARCs, blads, sample chapters• Digital sampling on the rise• … but only a small set of experiments using

fully “free” digital content

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Book marketing: growing content discovery and access

High Discovery

High Access

Low Discovery

Low Access

Appearance on Oprah

Coop Marketing

Corporate Web Site

Museum Stores

Amazon Promotion

Catalog & BEA

Over time, in

crease both discovery and access

Why look at this topic now?

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Our research approach

The research is data-driven, open (without compromising publisher data) and structured to share knowledge.

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• Collate experiments• Segment

attributes• Identify data

gaps

• Use a consistent data source (POS feeds)•Measure pre-

and post-piracy

• Populate a structured matrix• Look at

combined results

• Initial take on the impact of pirated content• Initial impact

of “free”

• Share the analysis• Invite

discussion• Grow the

test sample

A value in structured testing …

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•A robust set of variables

•Appropriate segmentation

•Captures content characteristics

•Can collate like experiments

•Can develop and test specific hypotheses and track results over time

A hands-on research project

• Wil Johnson• Searched P2P sites for

O’Reilly titles every day since fall 2008

• Built his own scraper• Running it made his

(roommate’s) ISP cut off service

• Figured out a way around it!

New York University, candidate for M.S. in Publishing, Dec 2009

The sample setO’Reilly Media Pioneered discussion of the distribution of free content

Active in promoting widespread access to its content

Perceived as vulnerable to a piracy threat

Random House Largest U.S. publisher

A wide range of book types reaching a variety of audiences

Engaged in a number of experiments with “free”

Since the initial working group, Thomas Nelson has joined (August 2009), and we are expanding the number and type of titles we are tracking.

What we have tested …Monitoring P2P (O’Reilly)

Sample set for peer-to-peer piracy

Monitored three BitTorrent sites; only one (PirateBay) had more than a handful of O’Reilly titles posted

Tracked activity of seeds (uploads) and leeches (downloads) for any 2008 O’Reilly front list titles found on these sites

Testing free (Random House)

Free PDF downloads (three for 1 day, one for 3 days, one for three weeks)

Free PDF excerpt (3 weeks)

Free ebook download (1 day)

Free PDF, MP3 and ebook downloads (3 weeks)

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What we found initially …Monitoring P2P (O’Reilly)

8 titles that were posted O’Reilly front list in 4Q 2008

Average post-seed sales were 6.5% higher in the four weeks after

Ranged from 18.2% up to 33.1% down

Low seed and leech volume

Average first seeds appeared 20 weeks after publication date

Testing free (Random House)

8 titles, 12 formats tested in the first half of 2008

Sales up 19.1% during promotional period

Sales up 6.5% during promotional and post-promotional periods

Ranged from 155% up to 74% down

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What we took away from that data

• P2P “threat” may be overstated– Low incidence– Significant lag

• The value of “free” is not binary

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The number of seeds peaks quickly

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The number of leeches peaks immediately and quickly declines

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Lag time before seeding varies

Average = 19 weeks

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Proposing a more nuanced model

“White” market

“Gray” market

“Back channel”

• Print sales• DRM-restricted

digital sales• “Trialware”

• Unprotected digital sales• Galleys, ARCs• “Free” promotions

• Unauthorized duplication

• Pirated content

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Our current question: what impact does “free” have on sales?

Some research surprises…

• Low volume of P2P seeds and leeches• Lag time on P2P seeding• Number and range of “under the radar” free

experiments available for analysis• Interest among trade publishers

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The piracy research continues …

• Found 13 more 2008 front-list titles• Average post-seed sales down 4.2% in the

four weeks after seeds first seen• Results ranged from 15.1% up to 48.7% down• Average first seeds appeared 19 weeks after

publication date

Comparing the data…Measure First sample P2P to date

Titles 8 21

Post-seed change in sales +6.5% -4.2%

Biggest gain +18.1% +15.1%

Largest loss -33.1% -48.7%

Lag before piracy 20 weeks 19 weeks

The spread in results made us wonder if we had missed something in the bigger sample set.

Where piracy may benefit …

• Looked at sales patterns of pirated and un-pirated content

• “Normed” the data to a common start point• Plotted the average sales per week for pirated

and un-pirated titles• Uncovered a visual correlation between piracy

onset and unit salesBecause of different pub dates, the average time on sale for pirated content in this

sample is shorter (35 weeks) than that for un-pirated content (47) weeks. Comparisons at the end of the on-sale period are not reliable.

Average sales (weeks after pub date)Average week at which seeded content first seen

Unreliably small sample sets

Four-week rolling averagesAverage week at which seeded content first seen

Unreliably small sample sets

Data in what is not yet pirated…Series Examples

Head First HF Servlets and JSPHF C SharpHF PHP and MySQLHF Ajax

Other Photoshop Elements 7Programming .Net 3.5Real World HaskellWindows Server 2008Learning Python

“Head First books break from the linear tradition, instead using a trajectory filled with successes, failures and lessons… The non-linear

format makes them tough to reproduce in a digital form -- they're full of illustrations, thought bubbles, photos, quizzes, etc.”

Three useful cautions

• Correlation isn’t causality• Larger data sets may uncover a sample skew• What works today may not work as well at

some future date

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Next steps

• Continue to monitor P2P activity• Seek publishers to help fill in the test matrix• Gather feedback• Continue to refine the analysis

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A call to action (a reminder)

• After this presentation:– Find out where your titles are shared– Look at the impact on sales– Measure! On an ongoing basis– Act on what you find

• On your own …• … or through us

For more information

• “Rough Cut” research paper– Includes this research and future updates– Also provides background on free and P2P– http://tinyurl.com/q3v4b9

• brian.oleary@magellanmediapartners.com

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