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The MPAA’s Crackdown on Internet Piracy Has Improved Film Revenue. Or Made It Worse. It’s All Very Complicated

At the beginning of this decade, it sure as hell seemed as if the new normal was simply going to be that if one so desired to they could find pirated copies of films and TV shows with a level of effort that barely even qualifies as being described as minimal.  A simple Google search would instantly take you to copyrighted material hosted on sites with names like MegaUpload, RapidShare, and HotFile, each of them an online file-hosting service which offered its users a certain amount of storage space on their servers in exchange for a monthly fee.  It was free to download files other users had uploaded, albeit with certain file size restrictions.

Then on January 19, 2012, the United States Department of Justice (US DOJ) shocked the world by orchestrating a simultaneous multi-country, multi-government arrest and seizure of everything related to MegaUpload even though their legal ground to do so was at the very least murky.  It was part of the new legal phase of the entertainment industry’s battle against online piracy in which the enemy is no longer the customers but instead access providers.  This is a battle which is still on-going, and the MegaUpload case has yet to actually go to trial.

However, in the time since then specious logic would dictate that film grosses should have gone up due to the removal of the deleterious effect on profits exerted by MegaUpload, the leading agent of online piracy.  Last year, overall domestic box office gross for films was up 6.5% from 2011, and here in 2013 a year-to-date comparison reveals gross is on pace to ever so slightly (as in by only 0.2%) end up above the total gross for 2012.  Obviously, Avengers/Dark Knight Rises helped in 2012 as has Iron Man 3 and Despicable Me 2 this year.  However, business was down for a couple of years, and now MegaUpload is gone and business is back up.  Victory, right?  Well, there are now competing research projects on that very subject which reach different conclusions, and can you guess which one the MPAA, the lobbying organization for the film and TV industry, agrees with?

Well, I’ll just tell you right now: the studios really like the study which was published in March of this year in the free academic journal Social Science Research Network by two economists and public health policy experts from Carnegie Mellon’s Initiative for Digital Entertainment Analytics [You can read the full article here.]  Why do they like it?  Because it found a causal relationship between the shut-down of MegaUpload and a 6-10% increase in digital sales and rentals of movies post-MegaUpload.

Visual approximation of the two authors of the study.

There are limitations, though.  The authors only had access to data from two un-identified film studios, only analyzed 18 weeks of post-MegaUpload sales data in 12 countries, and did not look at other sales data such as box office gross.  However, pish-posh.  As far as the MPAA is concerned, academic research says sales down, MegaUpload gone, sales up, yay!  This would seem to support the contention that if you simply provide the consumer with a legal method of consuming their product in the avenue they prefer, such as via streaming or digital download, many will choose to do so rather than steal.

The study the MPAA doesn’t like, though, was just published last week in, again, Social Science Research Network, this time by researchers from Centers of Economic Research and Business Schools in Munich and Copenhagen [You can read the full article here].  These authors argued that, actually, the shut-down of MegaUpload has hurt film revenue.  Wait, what?

Visual approximation of one of the authors who operates out of Germany.

They analyzed weekly box office data from over 10,000 films in 50 countries, and concluded big budget blockbusters have enjoyed a minor benefit from the absence of MegaUpload while mid-range to small-budget films have seen their grosses decrease.  They speculate one possible explanation might be the shut-down of MegaUpload has disrupted what had become an important generator of buzz.  Yes, people were getting the stuff for free, but they were also recommending movies and shows they had consumed for free to friends who might be more inclined to pay (recommendation from friend is one of the leading factors in deciding what films or shows people choose to watch). The logic goes that big-budget movies don’t really need this world-of-mouth boost due to their accompanying massive marketing campaigns, which is at least true of opening weekends.

The MPAA has fairly pointed out, though, that the study is incredibly vague, not defining what they considered a big-budget or small or mid-range film.  Plus, the speculation about the disruption of the social networking is just that, speculation.  However, it’s also entirely possible that both studies are correct considering that they were both analyzing different variables, rental and digital sales in one and weekly box office gross in the other.

Meanwhile, the MPAA scored a huge legal victory against the MegaUpload-like service Hotfile earlier this week when a Florida federal judge set the first legal precedent in the United States that a cyberlocker service can actually be held liable for copyright infringement.  Sites like Hotfile aren’t really fooling anyone – it’s entirely clear that they are pretty much exclusively devoted to the trafficking of copyrighted material.  Hotfile even has an intricate rewards system in which users who upload more content are actually paid for doing so.  However, the legal system is in a constant state of catch-up to the digital age, and the trick has always been “okay, what they’re doing is clearly illegal, but is there an actual law or precedent on the books that backs that up?”  The services are, after all, merely providing users storage space to be used to upload whatever they so desire.  If those users happen to upload copyrighted material and the services becomes aware of it they will take it down (well, they’re supposed to; often don’t).  It’s the users breaking the law, not the service provider, or so the argument went.  Well, the judge in Florida said “screw” and “you” to Hotfile, and held them personally liable for copyright infringement.

game of thrones savage tv series tyrion lannister peter dinklage
This is still an on-going thing – Game of Thrones is the most pirated TV show of 2013 so far.

So, really, what are we to make of all this?  The MPAA continues its fight in courts against online piracy giants while researchers differ over whether or not the shut-down of MegaUpload has had any real significant effect on sales.  There are untold numbers of other file hosting services out there, most of which are based in foreign countries and difficult to extradite.  On the plus side, the MPAA is clearly employing a far wiser approach, legally, than the RIAA did the past two decades when they sued their own customers and lost many of them forever.

No matter what, though, you can’t beat free, and for some the new standard of living is that all forms of entertainment should be  easily obtainable for free.  The music industry is still fighting this, and struggling to actually make any money through legally free services like Spotify.  However, with the embrace of On-Demand, availability of network specific apps for smart phone and tablets, ever emerging Netflix, and attractive bundling of free digital copies with physical product there definitely doesn’t seem to be nearly as much need to pirate as there used to be.  But piracy, no piracy, bombs like R.I.P.D. and After Earth were always going to bomb.  Hollywood, after all, has to remember to make good movies, first and foremost.

What do you think of all this?  Too busy downloading Game of Thrones this very moment to respond? Or just like the fact that I said “pish-posh” in the article?  Or too afraid to even say anything for risk of implicating yourself in the event that MPAA might be reading?  If so, simply copy and paste, “I fully endorse the MPAA and all of its legal actions against online pirates, the true scourge of our time.  All hail the increased profits of faceless corporations.  I submit to their will, and whole-heartedly apologize for downloading ‘The Thong Song’ back in 1999.  If it helps, I now really hate that song” into the comments section.

3 comments

  1. If you choose, you can choose one in the Las Vegas hotels since the setting
    to your Las Vegas NV big event, reception and honeymoon. s no secret
    that illegal file sharing remains to be rampant in numerous countries,
    such as US, however, it will not be government interference that eventually leads for the end in
    the age of illegal downloads. Now, movies aren’t the only thing that piracy trackers allow links too.

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