Increasing commissions can incentivise platforms to invest more in anti-piracy measures, though it may strain relationships with content creators, according to research from NEOMA Business School and Temple University
Illegal download sites are continuing to attract vast numbers of users worldwide. But research from Prasenjit Mandal (NEOMA) and Abhishek Roy (Temple) shows that if online platforms charged content creators higher commissions, it would encourage more proactive behaviour from platforms by incentivising greater investment in anti-piracy measures to protect revenue streams. These measures include automated content-monitoring tools, restrictions on file duplication, and traceability systems that make illegal distribution more difficult.
The challenge is that higher commissions on products and services sold through online platforms could exacerbate tensions with content creators such as authors, publishers, software and video game developers, and artists if the amount is considered excessive or financially detrimental to the creators. According to Mandal and Roy, coordination between both groups is essential for creating beneficial conditions for all parties involved: platforms, producers, and consumers.
Agency vs wholesale? The best model for progress
The study analyses the two main contract models used in digital content distribution: agency contract, in which the creator sets the final price while the platform applies a commission, and wholesale contract, in which the creator sells the content to the platform and the latter sets the final price.
While the agency contract is currently a more widespread practice, the researchers find that the wholesale model is better suited to strengthening a market plagued by piracy as a whole. This is because, under the wholesale model, the platform has more direct financial exposure. In other words, it profits more from successful sales and loses more when piracy occurs, which can further increase its motivation to invest in anti-piracy efforts.
By taking steps to make piracy more complex and risky, online platforms can encourage more consumers to turn to legal purchasing, allowing creators to benefit from higher revenues that can be reinvested into developing new products and services.
At the same time, consumers benefit from a broader range of safer, higher-quality offerings, creating a virtuous cycle that reinforces the market as a whole.
The study was published in the academic journal Manufacturing & Service Operations Management.