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Only Big Films Helped By Megaupload's End?

By Garth Franklin Monday August 26th 2013 11:22AM

Two researchers from the Munich School of Management and one from Copenhagen Business School have teamed up to publish a paper explaining an interesting study.

Their aim was to compare movie box office revenues before and after the shutdown of the popular file hosting platform Megaupload.com in January last year. The study incorporated six years of data from fifty countries and covering over 10,000 films.

The result in short? The big-budget blockbusters benefitted from the shutdown. Everyone else though, from the mid-range studio titles to the indies, may have been negatively impacted. The study says:

"We find that box office revenues of a majority of movies did not increase. While for a mid-range of movies the effect of the shutdown is even negative, only large blockbusters could benefit from the absence of Megaupload.

We argue that this is due to social network effects, where online piracy acts as a mechanism to spread information about a good from consumers with low willingness to pay to consumers with high willingness to pay. This information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences.

The researchers do admit that an alternative explanation for their results is that the Megaupload shutdown happened at the same time as online piracy on the whole has been trending down due to the rise of legal digital movie download/streaming services such as iTunes or Netflix. As a result, "this would lead our estimates to be biased downwards."

Download the full paper at SSRN.com

Source: Deadline

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