In their case against Megaupload, the popular file-sharing websites that was shut down in January, film production companies have claimed that the cyberlocker has cost it billions in lost revenue by providing a haven for pirated movies, television shows, and music.
That claim has been challenged by a recent study that alleges box office revenues have actually suffered since Megaupload was shuttered.
The Munich School of Management and Copenhagen Business School study “Piracy and Movie Revenues: Evidence from Megaupload” examined weekly data from 1,344 movies in 49 countries from 2007-2012 and found that the social aspects of pirating content actually improved box office revenue.
“In all specifications we find that the shutdown had a negative, yet in some cases insignificant effect on box office revenues,” the study states.
Another study done earlier this year by researchers from Wellesley College and the University of Minnesota found that piracy only coincides with significant box office losses in countries outside the U.S., where Hollywood movies premiere first. In other words, the number of options people have in terms of seeing a new film is one of the main actors in determining the extent of which a movie is pirated, the study claimed.
The Department of Justice shut down Megaupload in early January and indicted the company’s workers for violating piracy laws. Copyright holders like Universal Music Group and members of the Motion Picture Association of America accused the site of costing them more than $500 million in lost revenue.
About two weeks after the shutdown, a swarm of New Zealand police invaded Megaupload founder Kim Dotcom’s home via helicopter to arrest him.
The raid on Dotcom’s $30-million Auckland mansion included New Zealand’s elite antiterrorist police force and a ground force armed with M4 assault rifles, pistols, and a dog. Inside was an unarmed Dotcom, his wife and children, his Filipino staff, and his security manager.
The site has been down ever since, despite the fact that court later declared the raid illegal.
Although the Munich study fails to mention that 2012 is on pace to match last year’s total box office gross, despite its claims that box office revenue has suffered, the researchers believe that piracy does more good than harm.
“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,” the study states.” The information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences.”
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