With the rise of Napster, BitTorrent, and other tools facilitating Internet piracy, rights holders
have understandably become very concerned with the development of strategies to mitigate the
impact of piracy on sales. These tools fall into three general categories: litigation,
countermeasures, and competition. The literature has addressed the effectiveness of the first two
anti-piracy strategies. In this paper we address the third strategy using NBC’s decision to remove
its content from Apple’s iTunes store in December 2007 as a natural shock to the legitimate
supply of digital content.
To address this question we collect two large datasets from Mininova and Amazon.com
documenting the levels of piracy and DVD sales for both NBC and other major networks’
content around this event. We then analyze this data in a difference-in-difference model and find
that NBC’s decision to remove its content from iTunes is causally associated with a 19.99%
increase in the demand for NBC's pirated content. This is roughly equivalent to an increase of
92,612 downloads a day for NBC’s content. Moreover, we see no change in demand for NBC’s
DVD content associated with this change.