Submitted to Statistical Challenges in Ecommerce 2006 Competing with Free: Impact of Movie Broadcasts on DVD Sales and Internet Piracy

New technologies have provided copyright holders with new sales and distribution channels for their content, while also providing consumers with new opportunities to obtain high quality free copies of this content. These opportunities and challenges are apparent in the policy debate over whether to include “broadcast flag ” copy protection in over-the-air Digital Television (DTV) standards. Movie studios have argued that without copy protection, digital over-the-air movie broadcasts will lead to increased piracy and reduced sales of DVDs and other media. Conversely, consumer groups have argued that the broadcast flag would curtail consumers ’ fair use rights while doing little to slow digital piracy. After being enacted by the FCC, and subsequently overturned in the courts, regulatory authority for the broadcast flag is currently being debated in Congress. What is striking in this debate is that neither side has advanced any empirical evidence of the impact of movie broadcasts on DVD sales or piracy to support their arguments. The goal of our research is to empirically analyze these two questions. To do this we have collected a new dataset tracking DVD sales and Internet piracy for all movies shown on over-the-air broadcast channels and on the four most popular ad-supported cable chan