Understanding Media Markets in the Digital Age: Economics and Methodology

Digitization raises a variety of important academic and managerial questions around firm strategies and public policies for the content industries, with many of these questions influenced by the erosion of copyright caused by Internet file-sharing. At the same time, digitization has created many new opportunities to empirically analyze these questions by leveraging new data sources and abundant natural experiments in media markets. In this chapter the authors describe the open "big picture" questions related to digitization and the copyright industries, and discuss methodological approaches to leverage the new data and natural experiments in digital markets to address these questions. They close the chapter with a specific proof of concept research study that analyzes an important academic and managerial question -- the impact of legitimate streaming services on the demand for piracy. They use ABC's decision to add its content to Hulu.com as a natural experiment and show that it resulted in an economically and statistically significant drop in piracy of that content.