Anime and Digital Piracy

2ch and Sankaku complex is on fire again. This time, due to pirated release of anime. Here is the newest artice of insult throwing from 2ch

A Certain Magical Index- an anime I watch and download

As an Otaku, I have no choice but to pirate most of my anime. Since there is no real way of me getting hold of the official released version of the Anime.

But on the positive side, the free download of anime has convinced me to buy figures. A lot more expensive compared to buying every single Blu-ray release (if available)

I haven't have time to learn Japanese yet, since one, I take IBDP and two, if I do learn Japanese, I can't get hold of the anime in the first place!

But when someone (such as an economist) thinks about it. Isn't Digital Piracy overall good to the market?

Before I begin on the analysis, I will define some of the terms I will use in the text.

Cross Elasticity of Demand (XED)- It is a measurement of how the change of price of a certain good affect demand of another good.
Complimentary Goods- Goods that are bought along side of the main product
Price Elasticity of Supply (PES)- The responsiveness of supply to a change of price
Price Elasticity of Demand (PED)- The responsiveness of Demand to a change of Price.
Market- Where buyers and sellers meet to determine a trading price
Opportunity Cost- The cost of the next best choice (e.g. Monetary- Buying a new iPod, what else can you spend it on with the same amount of money)

The animators and the company that has the copyright of the original franchise may lose money due to us constantly downloading the illegal copies of Anime. But remember, there are complimentary goods to the anime (such as figures and posters).

Here, we have a SnD curve when Anime is provided through normal routes. We can see that there is a set price by the market on P1 and Quantity demanded at Q1.

But when anime is distributed free on the internet, the P1 is lowered from the original graph to the graph below. Since it is now free, the demand of the good would increase (since there are almost no opportunity costs related to downloading an episode of Anime

What the anime companies lost here is the revenue due to free alternatives.

Complimentary goods usually have a NEGATIVE XED, this means the increase of price in good A would decrease demand in good B. Or the decrease of price in good A would increase demand of good B.

Since the interest of an anime has increased, (due to increased exposure), and also due to the lowering of price of the anime itself. The complimentary goods will see an increase in demand (as shown in the graph below) from D1 to D2. But supply of the goods hasn't changed, so the price of the good would generally go up, and the quantity supplied would go up.

The increase of goods sold may mean the increase of revenue. Usually, the revenue of the complimentary goods is higher than the original good itself.

So in long term, it would be a better idea to provide anime for free on the internet. Since the revenue lost at the original anime may be covered by the increased sale of complimentary goods.