Could The MegaUpload Shutdown Have Actually Hurt Box Office Returns?

The argument between movie studios and those who like to download movie content free of change has gone back and forth for years, with the MPAA winning a battle in ealy 2012 when the site MegaUpload was shuttered. MegaUpload hosted a great deal of pirated content, including films, and television, and the ire of the MPAA provided some of the force that helped shut the site down.

But a new research paper suggests a correlation between declining box office receipts and the shutdown of MegaUpload. it isn't a very compelling argument, and is worth pointing out because it will likely become a rallying cry for supporters of piracy.

The thrust of the short paper is:

In this paper we make use of a quasi-experiment in the market for illegal downloading to study movie box office revenues. Exogenous variation comes from the unexpected shutdown of the popular file hosting platform on January 19, 2012... We find that the shutdown had a negative, yet insignificant effect on box office revenues.This counterintuitive result 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 finding is that some smaller films did dip a bit, even as major films experienced a small uptick in revenue over the past year. In short, the conclusion that box office revenue fell because MegaUpload denied tastemakers access to media seems specious based on incomplete data, at best. The implication is that those who pirate simply stopped seeing movies this past January, and therefore stopped telling other people about them. The paper also does not take into account many small details of the business, from marketing budgets and efforts for smaller films, to 3D costs and multi-platform release strategies.

This follows on an October report from the Dutch Institute for Information Law, which claims that "compared to the rest of the population, file-sharers are more likely to pay for movies, books, games, concerts and box office tickets." The point there was essentially that those who download pirated content are rabid consumers of media, and therefore tend to buy more than most people. That could be a reasonable conclusion, but to draw from that the idea that pirates are better consumers because they are pirates is wrong; they simply want media, and piracy is one way to get it.