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Megaupload Helped Box Office, New Research Shows

Posted by: , 14:57 AEDT, Wed November 28, 2012

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Did the closure of Megaupload actually hurt movie box office receipts? A new research paper suggests that's exactly what happened!
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Researchers from the Munich School of Management and Copenhagen Business School have published a short paper which suggests that pirated downloads on Megaupload may have helped certain movies at the box office.

From from theatrical release piracy being a scourge for movie studios, the paper titled 'Piracy and Movie Revenues: Evidence from Megaupload' actually found that piracy on Megaupload helped some movies attain a better performance at the box office due to word-of-mouth promotions.

Using data collected for 1344 movies in 49 countries over a five-year period, the researchers' goal was to assess the potential revenue gains for movies following the demise of Megaupload in January. But surprisingly, the researchers found that revenue was down consistently *after* the shutdown of Megaupload. 

"In all specifications we find that the shutdown had a negative, yet in some cases insignificant effect, on box office revenues," the paper states.

"Our counter-intuitive finding may suggest support for the theoretical perspective of (social) network effects where file-sharing acts 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," the researchers conclude.

The findings only correspond to low and medium budget movies, with blockbusters generally getting a boost in revenue in the periods after the closure of Megaupload. This actually backs up the word-of-mouth hypothesis, as blockbusters and other heavily promoted films generally don't require or don't benefit as much from word-of-mouth as films that have a smaller promotional budget.

"The information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences. 'Traditional' theories that predict substitution may be more applicable to blockbusters," the researchers write, referring to the "traditional' theory of piracy taking away customers from cinematic showings.


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