An academic study comparing box office revenues before and after the shutdown of popular file hosting platform Megaupload.com has found that box office revenues of a majority of movies did not increase after the shutdown.

The study – Piracy and Movie Revenues: Evidence from Megaupload: A Tale of the Long Tail? – was undertaken by researchers in Munich and Copenhagen, and found that 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,” they say.

“We believe that our study offers an important implication for policy. When online piracy has very different (even opposing) effects, interventions aiming at an reduction of negative welfare effects are diffcult to implement because of externalities that are able to affect product variety and ultimately market structures.

We aim to contribute this alternative perspective to the emerging empirical literature on the effects of piracy. We believe that our setting offers a unique opportunity for causal identication, which in combination with a rich data set that reflects a wide variety of movies allows to investigate eff ect heterogeneity. Our results may also contribute to the recent global debate on copyright in the digital society,” concludes the study.

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