Do Pirated Video Streams Crowd Out Non-Pirated Video Streams? Evidence from Online Activity

Does watching more pirated streaming video mean spending less time watching non-pirated streaming video? This study measures whether, and how much, time spent watching pirated video crowds out time spent on streaming video apps. While prior studies have estimated the impact of piracy on sales revenues, our study measures the impact of piracy on time spent on free and paid streaming apps. We combine big data tools with standard econometric techniques, including a two-stage least squares model, to analyze 5.25 terabytes of online activity data from 19,764 American households and their 468,612 devices from 2016 to 2017. The analysis suggests that every minute spent engaged with pirated video sites crowded out about 3.5 minutes of time spent streaming video. Because pirated video files are generally more compressed than non-pirated video files and because they are frequently downloaded as entire files rather than streamed, as with non-pirate sites like Netflix and Amazon, we conclude that our results exhibit closer to a 1-to-1 crowding out effect of piracy on over-the-top streaming video services