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Piracy Is Your Friend: Or Why Giving Stuff Away Works

MPAA being a smartass by శ్రీ on FlickrI’m not beneath saying, “I told you so.” Just two weeks ago, I gave you 4 reasons why content marketing works. Nearly 3 years ago, I wrote an article explaining that customer liberation – not piracy – was responsible for the decline in music industry revenue. What do those two stories have in common? They both require us to buy into the counter-intuitive idea that giving stuff away helps us sell more.

This week I became aware of a study by Laurina Zhang at the University of Toronto, Rotman School of Management the provides strong evidence that this strategy works. The paper is titled Intellectual Property Strategy and the Long Tail: Evidence from the Recorded Music Industry and it offers the following conclusion:

Using a large sample of albums from all four major record labels that includes multiple genres as well as hits and niche albums, I find that removing DRM increases digital music sales by 10%. However, relaxing sharing restrictions does not impact all albums equally; it increases the sales of lower-selling albums (i.e., the \long tail”) significantly (30%) but does not benefit top-selling albums. My results are consistent with theory that shows lowering search costs can facilitate the discovery of niche products.

The Music Piracy Lie

Maybe “lie” is too strong of a word. I can make room for the possibility that the music industry really believes that its dramatic revenue decline beginning around 1999 was a result of piracy; specifically, Napster. But my contention has always been that it’s because their product was overpriced to begin with. They bundled songs together into albums and published them in CDs that forced us to buy 12 songs we didn’t want in order to get the one we did want.

Digital music unbundled the albums and allowed consumers to finally balance out the price with the true demand. The music industry either didn’t understand that or wouldn’t accept it. But regardless, Zhang’s analysis shows that pirated, long-tail content ends up selling more than protected long-tail content. I can think of 3 reasons why this happens…

The Content Marketing Truth

  1. Motivation: When listeners hear a good song, they want more of it. They’re motivated to find other songs by the same artist that will give them the same enjoyment.
  2. Reciprocity: The vast majority of people are honest. When we receive a gift from someone – like a great song – we feel obligated to give back.
  3. Promotion: Making your content more discoverable by lowering barriers is what enables content marketing (and inbound marketing in general) possible.

When I first started talking to businesses about inbound marketing several years ago, there was strong pushback about giving away knowledge for free. “Why would someone pay us when they can just get it for free on our blog?” I get much less of that particular response now, but it’s still out there. I’m happy now to be able to point to an academic study that provides proof of the counter-intuitive idea that giving your stuff away will help you sell more of it.