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Digital Media

iLab's Digital Media Research Center (DMRC) addresses the impact of digital distribution channels on consumer behavior and firm strategy related to the marketing, distribution, and protection of digital media products.

The following are selected research projects currently being pursued by DMRC faculty:

  • Does digital distribution cannibalize physical sales such as DVD’s? Does legitimate digital distribution reduce the demand for digital pirated content?
  • What is the impact of pre-release movie piracy on theatrical revenue?
  • What is the impact of increased broadband penetration on media sales?

The DMRC’s research program is synergistic with the research program of the Social Media and Analytics Center (SMAC), also located within the iLab at the Heinz College. The SMAC studies the ways in which people collaborate, communicate and conduct commerce over online social networks including cell phones, blogs and other forms of media.

iLab's digital media research projects are guided by two highly acclaimed Heinz College professors, Michael D. Smith and Rahul Telang. Their work focuses behavior in online markets and information security. Their research has been published in leading management science, economics and marketing journals.

Selected Research Findings:

“Converting Pirates without Cannibalizing Purchasers: The Impact of Digital Distribution on Physical Sales and Internet Piracy”

Uses NBC’s decision to remove its television content from iTunes in December 2007 as a pseudo-experiment and analyzes the impact of removing the iTunes channel on demand for DVD box sets and on the demand for piracy. Main findings:

  • Digital distribution on iTunes leads consumers who would have otherwise pirated to purchase: Controlling for ABC, CBS, and FOX piracy, there was an 11.5% increase in NBC piracy on Mininova in the two weeks after NBC removed its content from iTunes. This increase is roughly equivalent to an increase of 52,000 episodes per day, about twice as large as NBC's daily iTunes sales before removal.
  • Digital distribution on iTunes does not appear to cannibalize DVD sales in the short-term: There was no statistical change in NBC's DVD box set sales on Amazon in the two weeks after removal.

“Competing with Free: The Impact of Movie Broadcasts on DVD Sales and Internet Piracy”

Analyzes the change in DVD sales and piracy for movies shown on broadcast and ad-supported cable television from 2005-2006.

  • Giving away content in one distribution can lead to increased demand in a paid channel: DVD sales at increase by approximately 120% in the one-week period after a movie is shown on broadcast television.
  • The availability of piracy at the time of broadcast does not seem to cannibalize DVD sales: We use the movie broadcast as an exogenous shock to demand for both DVDs and piracy and find no evidence that the presence of piracy reduces demand for movies shown on television (typically late in their lifecycle).

“No Meaningful Impact? The Effect of Pre-Release Piracy on Movie Box-Office Sales” (Early draft working paper available upon request)

Analyzes the impact of pre-release piracy movie leaks (e.g., The Hulk, X-Men Wolverine) on box-office revenue for all movies released from 2006-2009.

  • Pre-release piracy significantly reduces box-office revenue: After controlling for observable characteristics of a movie (number of theaters, genre, director/star appeal, etc.), the presence of a pre-release leak to piracy networks significantly reduces opening weekend box office revenue.
  • Pre-release piracy may disproportionately appeal to “fans” of the movie who would have otherwise seen the movie on the opening weekend: The presence of pre-release piracy has no statistical impact on box office revenue beyond the opening weekend, possibly because the types of consumers interested in pre-release piracy are disproportionately more likely to see movies on their opening weekend.

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Knowledge Leaders

Michael D. Smith
Heinz Career Development Associate Professor of Information Technology and Marketing, Heinz College
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Rahul Telang
Associate Professor of Information Systems, Heinz College
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Media Spotlight

Listen to Smith and Telang discuss their digital media research on the CBC's Spark podcast.


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