Effects of Ad-Blockers Adoption on Digital Piracy: A Blessing or a Curse?

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DatePublished - 2017
Original languageEnglish

Abstract

 This paper contributes to the current literature by studying the effect of ad-blockers adoption on digital piracy in a duopoly market with a legal platform (e.g. Netflix) offering video-on-demand (VOD) contents and a pirate platform monetising users' traffic via (invasive) ads. We consider two types of consumer-oriented ad-blocking technology: i) a purely consumer-oriented, that cares only about the consumer welfare, and ii) a concerned consumer-oriented ad-blocker, that is (to some extent) concerned with the sustainability of ad-sponsored companies. We consider a pre-adoption (benchmark) and a post-adoption market. In the post-adoption market, in equilibrium, the ad-blocker chooses to provide either a full blocking of invasive ads on the pirate platform (whenever there are no fixed costs or when the ad-blocker is purely consumer-oriented) or a partial blocking (when concerned with the survival of ad-based firms). Depending on the type of blocking, the copyright holder, consumers and the society can see ads avoidance either as a blessing or as a curse. Notably, we establish the conditions under which ad-blocking technologies turn out altering the market structure depending on whether the legal platform leads or follows the game. Policy implications are also discussed. 

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