Coase on Piracy

Illegal film/television streaming websites are a product of the last 20 years of technological advancements. Entire movies and television shows are uploaded online for the free consumption of viewers without legal permission or payment to the production companies who own them. These websites generate profit from advertisements, either from real brands or hackers who place malware in the ads. There are few ways for the government to regulate these websites. If one site is taken down, multiple sites pop up in its place as there are low barriers of entry. Currently, there are about 84,000 illicit entertainment sites. 

The Coasian thought model solution to this problem would be to define the property rights, hold who is liable for the damages accountable, and allow free-market negotiations to occur. This would force the quantity produced to be equal to the allocatively efficient quantity. In this case, the production companies would own the property rights, and the streaming websites would be liable. If they were to negotiate and the marginal social benefit of producing is greater than than the social marginal cost, the streaming websites would continue uploading the movies but for a cost, which would, in turn, bring down the number of films uploaded, leading to the quantity being at its efficiently allocated amount. However, if the cost is not greater than the benefit, the sites would shut down. This solution is only applicable if there are no limitations, which we know are not true. Due to the number of websites, we would face the assignment problem as we could not quantify how much damage each website produces. Neither the website nor the production studio would have an incentive to reveal this information. Further, we live in a world of transaction costs; the transaction cost of finding each website and negotiating with them would make the costs higher than the benefit of going after the website for their illegal use of the copyrighted property. Unfortunately for the production companies, they will not receive the profit from the movies being streamed on illegal websites as the costs of attempting to reclaim potential profits would outweigh the benefits.