Research shows Megaupload shutdown “had a negative effect on box office [movie] revenues”

Megaupload was shutdown by New Zealand and American authorities in January 2012. No one, even Kim Dotcom, denies Megaupload was used, to some degree, to store and share illegal copies of movies (among other copyrighted content). In fact, the Motion Pictures Association of America (MPAA) felt Megaupload was significantly used to pirate movies and thus the MPAA was involved heavily in the investigation of Megaupload. Since Megaupload was used to pirate movies, logic would tell us the closure of Megaupload would have a positive effect on the amount of people who go to see movies in theaters. A study by researchers at Munich School of Management and Copenhagen Business School suggests otherwise.

The researchers looked at weekly box office revenue data for 1,344 movies in 49 countries over a time span of five years (July 30, 2007 to August 27, 2012). Megaupload was brought down in January of 2012 and the researchers wanted to see the effect this closure would have on movie theater revenues; the start of their five year sample coincided with the launch of Megaupload’s video streaming service.

They found that, after Megaupload was closed, box office revenues — as a whole — decreased, but by an insignificant amount. In particular, small and medium sized movies suffered a more negative decline than larger releases. In fact, blockbuster releases experienced a positive gain after the loss of Megaupload.

Now you must be wondering what exactly makes a movie “small”, “medium”, or “large”. The researchers defined movie “size” based on how many theater screens a movie was released on. They found an average number of screens for a movie release across the industry, and then looked at revenue impact due to Megaupload death versus movie size. The movies that were released on the average number of screens or lower had a more negative decline in revenue than movies that were released on more than the average number of screens; movies released on 500 or more screens (i.e. blockbusters) had the positive increase I mention above.

The data has lead researchers to conclude Megaupload played a significant role in word-of-mouth campaigns for non-blockbuster films. In other words, people who participated in Megaupload-related movie piracy would tell their friends and family about movies they liked, and the friends and family would go watch the movies in theaters. Blockbuster movies were not affected by Megaupload’s word-of-mouth because everyone already knew about those movies due to large marketing budgets and/or star casts.

Of course it wouldn’t be logical to draw generalized conclusions based on this study alone. Not only are there too many variables involved to simply attribute the increase or decrease in box office revenues to just Megaupload, but this study is far from what would be considered an in depth study. Still, it is interesting, and, in a counter-intuitive way, its conclusions do make sense.

[via TorrentFreak, ‘Piracy and Movies Revenues: Evidence from Megaupload’ study]

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  • JMJ

    @clockmendergb: As brothers :-) sometimes do, I completely agree!

    You may recall the resistance the entertainment industry gave when VHS/Betamax became available. They wanted to limit/adulterate the technology to allow for only playback and not for recording. Now, with the ability to make “perfect” copies of just about anything available to just about anyyone, owners/publishers of movies, music, books, photos, drawings, etc., etc., don’t know what to do. Now, there is even legal maneuvering going on under the radar to define what, if any, limits should be placed on 3-D printing technology.

    Before his, hopefully temporary, demise, DotCom was working with the same parties who knifed him in the back to develop a distribution model that would give the consumer what s/he wanted, at a fair price AND that would make sure that those who work hard producing that material were fairly compensated. We are simply going through growing pains as a new paradigm for distribution is worked out. Only the insane or those who produce nothing themselves would “argue” that they are entitled to the works of others for free. I often wonder how those “Utopians” manage to eat since they must work for free, like they seemingly expect others to do. Most cower behind the thinning veil of anonymity the Internet offers when they commit their crimes. If it were not for that veil can you imagine them having the guts, the nerve to be real in-your-face pirates? You know, the kind who would have the cajones to confront another and say, “I can’t afford a car like yours but I want one. Give me yours.” Only cowards do in the dark what they are too afraid, too pusillanimous to do in the light of day.

    This issue will be resolved like most confrontations: Neither party will get everything they want but enough to be satisfied.

    I don’t know how big-budget affairs like movies will do it but smaller ones, like songs, seem easy to distribute fairly and safely for all concerned. That is, make each song on a CD (You and I, clockmendergb, prefer to call it “album”) a stand-alone item that can be downloaded for a nominal fee (I mean $0.10 – 0.25) or for free from an ad-supported website. The worker/artist gets paid for their creativity and work and the consumer gets exactly (and only exactly) what s/he wants. Of course, there will still be those who will steal, having convinced themselves that just because they can they should. How one can produce a $250,000,000+ movie like “Avatar” and then give it away or hope for ad revenues to reimburse costs, is beyond me.

  • JMJ

    Ashraf, knowing what your general take on this subect matter is, I applaud your including the cautionary statements in your last paragraph. As anyone who has taken Statistical Analysis 101, or who simply can count past 100, will tell you, a sample size of 1,344 movies over a FIVE YEAR (!!!) period definitively tells you extremely little.

    For example, the real cause of the down-turn in movie attendance actually was caused by the 0.2 Degree Global Temperature Anomaly recorded between 2007 and 2012. (Please see: ) The warmer temperatures made it more likely that people would enjoy outdoor recreation rather than indoor, like at movies.

    Therefore, my statistical analysis “proves” that “global warming” is destroying the movies industry.

    Besides, are we to believe that people who pirated movies for themselves then, instead of sharing their ill-gotten entertainment via copies of the movie, told their friends and loved ones to pay to see it for themselves? That conversation would go like this:

    (Me) – Hey, Ashraf, I just saw this killer movie that I downloaded from XYZ.
    (You) – Yeah? What’s it about?
    (Me) – Yada-yada-yada.
    (You) – Cool! Let me see it.
    (Me) – Sure. It’s playing at the Googleplex Cinema. Matinees only cost $ xy .
    (You) – Go &%#@!! yourself!

  • clockmendergb

    I like this article
    kept to the point and finished with a paragraph recognizing the complexities off these things.

    It does add some weight to my beliefs that sharing and copying has never been the real reason for falling profits in these industries.
    I will not download films… Ever..
    I will only download music given freely..

    Most entertainment is only as big as its publicity
    we the fans will freely give time and effort extolling the greatness of our choices.
    Free word of mouth advertising.
    In return they used to accept our making backups and accept that music was handed around.

    Now to be reasonable I will admit a digital copy is a much different beast than a cassette tape.
    The lower quality of the cassettes was enough for a friend who received a copy to want to buy the original a lot of times and the tapes did have a finite life before they became hard to listen to
    But this inclusive type of system has proven to work over many years to the benefit of all.
    Now its a one way street.
    The rules were changed without consulting with all the other parties who have an interest.
    That is a bad thing

    They were wrong to do it.

  • Bull

    Its the price that keeps me away from going to the movie theaters.

    The last time i went the movie theaters was when Lord of the Rings: Return of the King was out.

    I swear, you freaking need to take out a second mortgage to go to the movies these days.

    I dont pirate movies, but do not plan to ever go back to the movie theater, I just wait until either a movie is on redbox, netflix or just barrow a dvd from someone.

    Pirating isnt the problem, its the prices.

  • mukhi

    @kelltic: agree. i remember paying as much as $4/5 to rent a movie from hollywood movies (is that the name? forgot it…it went out of business though).

  • kelltic

    Right. I love going to movies at the theater, but I don’t go to nearly as many movies as I once did. It’s too expensive. Once we went every Saturday night, had popcorn, candy, and soda. Now we go only to “big screen” movies, maybe once every two or three months. We don’t eat popcorn, we bring our own candy and a bottle of water.

    We don’t download movies, we rent them, but with the economy – that is supposed to be improving – going from bad to worse, we’ll soon be downloading them.

  • mukhi

    get some of the file hosts shut down, increase the prices of ticket and discs,…

    so people are avoiding theaters more, going online more, downloading more,…

    AV companies are putting nails on their own grave…