Simpsons Solicitors

Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales

March 15th 2013

An interesting study has just been published by Brett Danaher (Wellesley College) and Michael D. Smith (Carnegie Mellon University) analysing whether the (temporary?) closure of Megaupload has made any commercial difference for the studios.  Given the significant costs and administrative time involved in preparing for and pursuing co-ordinated inter-jurisdictional copyright actions across civil and criminal breaches, the studios would want to see a significant change – turns out they did.

The abstract is below and the full paper is available (on-line and free) from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2229349:

The growth of Internet-based piracy has led to a wide-ranging debate over how copyright policy should be enforced in the digital era. While some enforcement approaches involve policies designed to deter consumers from filesharing though incentives or penalties, other approaches target the supply of piracy by shutting down Internet sites that serve as major conduits for pirated content. In this paper we analyze how one such anti-piracy intervention, the shutdown of the popular Megaupload site, affected the digital sales of movies for two major studios.

Simply examining changes in sales after the shutdown would produce an inaccurate measure of its actual effect as sales are changing over time for a variety of reasons. Instead we exploit cross-country variation in pre-shutdown usage of Megaupload as a measure of treatment intensity. Controlling for country-specific trends and the Christmas holiday, we find no statistical relationship between Megaupload penetration and changes in digital sales prior to the shutdown. However, we find a statistically significant positive relationship between a country’s Megaupload penetration and its sales change after the shutdown, such that for each additional 1% pre-shutdown Megaupload penetration, the post-shutdown sales unit change was 2.5% to 3.8% higher, suggesting that these increases are a causal effect of the shutdown.

Aggregating these increases, our analysis across 12 countries suggests that, in the 18 weeks following the shutdown, digital revenues for these two studio’s movies were 6-10% higher than they would have been if not for the shutdown. Thus our findings show that the closing of a major online piracy site can increase digital media sales, and by extension we provide evidence that Internet movie piracy displaces digital film sales.

For any enquries in relation to copyright law, please contact copyright lawyer Adam Simpson