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

The Playlist By Charlie Schmidlin | The Playlist November 26, 2012 at 11:19AM

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.
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Film Piracy

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]

This article is related to: Film Piracy


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