A new study (abstract) published by researchers Munich School of Management and the Copenhagen Business School is being used by piracy apologists to bolster the tired meme that piracy is “good” for business.  Titled “Piracy and Movie Revenues: Evidence from Megaupload” the summary claims that the shutdown of Megaupload actually hurt, rather than helped, those in the business of making movies:

Box office revenues of movies shown on the average number of screens and below were affected negatively, but the total effect is not statistically significant. For blockbusters (shown on more than 500 screens) the sign is positive (and significant, depending on the specification).

Reading the headlines that followed the study’s release it seems that most who reported on the story neglected to note the equivocation the authors used assessing the impact on  revenues for more “average” movies characterizing the “total effect” as not “not statistically significant” yet for blockbusters, it was “significant.”  In addition to this convoluted conclusion, upon reading the entire summary, there seem to be more questions than answers.

The MPAA, not surprisingly, posted a cogent critical response on its blog, questioning the abstract’s lack of specificity with regard to its statistical approach:

 The reality is that it is impossible to evaluate the validity of the approach or the reliability of the conclusions based solely on the abstract, which does not fully present the methodology or results of the study. In fact, in its present form, this summary abstract raises more questions than it answers…

The post, by Julia Jenks, also raised specific questions about the researchers’ approach asking:

  • Are the conclusions being presented and interpreted correctly?
  • Which system was used for “matching” like movies?
  • How does the research account for box office trends independent of the Megaupload shutdown?

All are good questions that have yet to be answered.  In the meantime, I have some questions and criticisms of my own.  Per usual, piracy apologists seem only to focus their debate on  “big” Hollywood.  Reaction to this study is no different.  Researchers based their conclusions on (vague) data and box office revenue totals aggregated by Boxofficemojo.com.  They noted:

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 information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences.

Press reports and reactions interpreted this observation into splashy headlines like “Piracy Funds Movies” and “Piracy is Good for You!”  A number of bloggers seemed eager to conclude that independent films (non-blockbuster types) benefited from Megaupload’s piracy and resultant buzz generated via social networks.  It’s a claim that has little basis in fact.  These claims also conveniently ignore the fact that box office returns are only a small piece of the story.

If we are going to be honest in our efforts to quantify the impact that movie piracy has on revenue, it’s imperative to look well beyond the box office figures.  Today, revenues generated on the back-end via legit downloads, streaming, TV, DVD, etc. are integral to the financial success for any production.

Also, what about the thousands of independent films that don’t have theatrical releases and thus zero box office revenue?  How can you make assumptions about piracy’s impact without factoring them into the analysis?  These non-theatrical titles are entirely dependent on back-end revenue for revenue.    When a site like Megaupload streamed those films for free online it doesn’t take a rocket scientist to comprehend the negative impact it had on legit sales.  I’m sorry but how many people watched a film via Megaupload, then purchased  it on iTunes or buy the DVD?  I’d wager not many.

As for social networking, there’s no doubt that it’s integral to successfully promoting any film, indie or otherwise. However, aren’t such initiatives better left to a film’s own producers than to purveyors of pirated content?  Having ventured to many online forums where download links are shared and promoted I don’t see much discussion about a film beyond questions asking “Where can I download it?” and “Why isn’t it the link working?”

The users who populate such sites are seeking free and easy access to films.  Some are like hoarders, looking to acquire as many movies as possible to add to their no-cost collections, while others are there because they want to watch a particular film and, rather than pay for it, prefer to watch it for free.  The operative word is “free.”