movie pirates
November 29, 2012

Study Shows MegaUpload Had Positive Effect On Blockbuster Movies

Michael Harper for — Your Universe Online

The online piracy debate is not a new one. People have been swapping movies, music and software for many years. As technology progressed, connections became faster and files became easier to share and piracy became less of a problem and more of an epidemic.

While record labels and film studios argue that piracy is actually taking money from their pockets, the pirates themselves often argue that music and movie execs should be glad they have an audience and should work to make the material freely available.

Still, others have argued that piracy does little to affect large franchises, such as Top 40 Pop Stars or Summer Blockbuster Hits, and actually benefits smaller, independent acts by giving them a larger audience.

Investigating the issue first hand, Christian Peukert from Ludwig-Maximilians-University, Munich and Jörg Claussen from Copenhagen Business School recently compiled a report which suggests shutting down piracy sites, specifically MegaUpload, has very little effect on big films. Conversely, the report suggests that any harm MegaUpload had on Hollywood was towards the smaller, independent studios.

The report, entitled “Piracy and Movie Revenues: Evidence from MegaUpload,” compares the performance of certain film titles before and after Megaupload was removed from the web.

The file storage/file sharing site was targeted this January by the FBI and the US Department of Justice. These agencies conducted a raid on Megaupload´s CEO and founder Kim Schmitz´s mansion in New Zealand, shutting down the Web site and confiscating some of Schmitz´s computers and personal effects.

Kim Schmitz (better known as Kim Dotcom) has since become somewhat of a poster child for online piracy and online file sharing.

To conduct this study, Claussen and Peukert used weekly data from more than 1,300 movies in 49 countries spanning from mid-2007 to mid-2012, or when Megaupload´s video streaming service began until shortly after the site had been shut down.

According to their study, box office revenues for movies which were shown on an “average” number of screens (not huge, blockbuster hits) had been affected negatively by Megaupload, but the report claims this effect was “not statistically significant.”

The Blockbuster hits may have actually been positively affected by Megaupload, depending on several variables, such as the availability of the Internet and the popularity of Megaupload.

Based on their findings, Claussen and Peukert suggest that the social aspect of file-sharing may actually be good for Hollywood.

“Our counterintuitive 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,” reads the report.

The pair also writes that the information-sharing aspect of piracy (or word-of-mouth nature of it) is actually a good thing for those smaller movies who may not have such a large advertising budget.

The duo said they hope their results will contribute to the ongoing debate about online piracy.

This debate is likely far from settled. Consumers are always looking for ways to watch their favorite movies and television shows as soon as they can. Many studios, however, remain stuck to their old release schedules, making consumers wait for months before they can legitimately purchase the content. Many consumers say this is why they´re driven to piracy; To watch the content they want sooner, rather than steal it or harm the content providers.