Piracy Funds Movies? Megaupload Shutdown May Have Hurt Box Office Revenues

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by Charlie Schmidlin
November 26, 2012 11:19 AM
6 Comments
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While the home theatre experience rapidly approaches a point preferable for many to the average cinema outing, the MPAA has had to work overtime in order to keep alternative options (namely illegal file-sharing) suppressed and theatre numbers up. The group struck a seemingly massive victory in January, when the popular website Megaupload -- one of many consistently used to host copyright-infringing films -- was raided and shut down, but now a new study has prompted a new focus on the action's repercussions, mainly by suggesting that it is not the download itself, but the recipient's reaction to it that makes all the difference.

Researchers from Munich School of Management and Copenhagen Business School have published a short paper entitled “Piracy and Movie Revenues: Evidence from Megaupload,” and within their report lies the interesting financial aftermath of the site's demise. Amassing over a five-year period weekly data from 1344 movies in 49 countries, the team found that some films actually benefited from piracy, due to the promotion caused by gradual word of mouth after the initial download.

Noting a slight but steady change in finances across the world before and after the Megaupload shutdown -- taking into account inflation, Internet penetration and the site's popularity as well -- the researchers concluded that “the shutdown had a negative, yet in some cases insignificant effect, on [smaller films'] box office revenues.” Their case then goes on to explore file sharing's role as “a mechanism to spread information about a good from consumers with zero or low willingness to pay to users with high willingness to pay.”

However, before studios begin feverishly directing their promotional efforts toward torrent sites galore, the Munich team did find that with blockbusters obtaining a screen count over 500, the effect is actually opposite, having found instead a financial boost following the raids. So as much “Cabin in the Woods” and “The Avengers” differed both in Joss Whedon's involvement and eventual box-office, the film's results left to file-sharing sites predict a much more divergent result.

Still, the findings are equally controversial and illuminating of the present state of film viewership, and while there remains a great deal of extra information needed to prove Megaupload's lasting effects, the report nonetheless adds a different perspective that may give the MPAA some pause. [TorrentFreak]

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6 Comments

  • indiefreak | April 26, 2013 8:27 AMReply

    Film Piracy majorly affects independent Filmmakers, as independent film making itself is a task and after finishing the movie the major task for filmmakers is how to market, promote and distribute it. Not all inde films can be as successful as The Blair Witch Project or Paranormal activity to name a few. Piracy not only effects the small players in the industry but, also major big studios as well and all of them are now trying to fight movie piracy.
    With new technologies and other formats such and Video On Demand (VoD) #L3 movie can now not only be self distributed but also these technologies help fight Piracy.
    At last my love for independent Cinema can be some up in these four words.
    Long Live Indie Cinema

  • GundarkHunter | November 29, 2012 12:04 PMReply

    It's time for the business model to change. Exhibitors cry poverty because the studios take as much as 100% of the first three weeks' take at the box office, which is the rationale they use to justify high concession prices. Studios cry poverty because of piracy, but the impact of piracy is unquantifiable, because the nature of piracy itself is incalculable. Do people pirate for the sake of pirating? Do they do it to "stick it to the man"? Do they do it to defeat holdbacks in world markets? Do they do it because they can't afford te prices of entertainment? These are the hard questions the industry needs to ask itself. During the Depression, the movies flourished because they were an inexpensive form of entertainment; now, the industry is bloated on ever rising admission and concession costs, all because of a wild-eyed grab for "profits above all else."

  • Zinjo | November 26, 2012 4:27 PMReply

    It is unfortunate that there are no guantitative numbers to compare the downward trend of studio profits to things like story quality, production cost inflation, middle class income deflation and the studio's increase in their portion of the ticket price driving up things like ticket and concession prices just so theaters can stay in the black. Can one blame an increasingly financially poor market to "sample" media before spending money on a purchase for home video or music? There is a greed bubble in Hollywood and until they face it, no amount of draconian measures on the market place will stop the money bleed.
    The recording industry decried the advent of cassette tape as a end of them, they adapted and survived. The film industry did the same for video cassettes, they adapted and survived. For some reason both seem incapable of adapting to this new fangled digital age and if they are not careful they may not survive...

  • ethicalfan | November 26, 2012 3:42 PMReply

    The great thing about the Internet is that anyone can write anything they want regardless of the facts. The first BitTorrent search engines debuted in 2004. US Home video sales (DVD, BluRay, PayTV, VOD, Streaming) are down 25% to $18.5B in 2011 from $25B in 2006.
    Recorded music is down worldwide from $27B in 1999 (Napster) to $15B in 2011. Video Game revenue (consoles & PC) is down 13% from 2007. All of these industries grew for decades until p2p.

  • To John | November 26, 2012 1:44 PMReply

    You can always upload the film yourself to sites like this. Many filmmakers have done so and have found increased dvd sales to thier personal sites as a result. Unless of course, your films are always picked up by a distributor.

  • JOHN | November 26, 2012 12:22 PMReply

    Makes sense to me that this will hurt those who make films outside the studio system. Wish the studios would do a better job of protecting their own stuff and leave independents out of it. I want people to see my work by any means possible, and because I don't have the funding for big name stars and a studio marketing machine file-sharing sites are just another outlet to built an audience/buzz.

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