Peukert, Claussen and Kretschmer (2015)

From Copyright Evidence
Jump to: navigation, search

Advertising Architectural Publishing of books, periodicals and other publishing Programming and broadcasting Computer programming Computer consultancy Creative, arts and entertainment Cultural education

Film and motion pictures Sound recording and music publishing Photographic activities PR and communication Software publishing (including video games) Specialised design Television programmes Translation and interpretation

1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Peukert, Claussen and Kretschmer (2015)
Title: Piracy and Box Office Movie Revenues: Evidence from Megaupload
Author(s): Christian Peukert, Jörg Claussen, Tobias Kretschmer
Year: 2015
Citation: Peukert, C., Claussen, J. and Kretschmer, T., 2015. Piracy and box office movie revenues: Evidence from megaupload. Available at SSRN 2176246.
Link(s): Definitive , Open Access
Key Related Studies:
Discipline:
Linked by:
About the Data
Data Description: The study uses weekly revenues of a set of movies in a variety of countries in 2011 and 2012 from Boxofficemojo, a commercial provider of industry statistics, and obtained data on a movie’s availability on Megaupload by accessing archived versions of the linking website Movie2k.to. Our identification strategy builds on a standard difference-in-difference approach where the first difference comes from the shutdown and the second difference from the availability of the movie on Megaupload.
Data Type: Primary and Secondary data
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: Yes
Comparative Study?: Yes
Literature review?: No
Government or policy study?: No
Time Period(s) of Collection:
  • 2011 to 2012
Funder(s):
  • ∗Support for this research by NBER’s Economics of Digitization and Copyright Initiative is gratefully acknowledged.

Abstract

In this paper we make use of a quasi-experiment in the market for illegal downloading to study movie box office revenues. The sudden shutdown of the popular file hosting platform Megaupload.com on January 19, 2012 significantly (and unexpectedly) changed the availability of illegal movie downloads overnight. We compare box office revenues of movies that were available on Megaupload to those that were not pre- and post-shutdown and find that box office revenues of a majority of movies did not increase. The average effect is even negative. We show that only movies that premiere in a relatively large number of theaters benefitted from the closure of Megaupload. This is consistent with word-of-mouth effects, where online piracy can act as a mechanism to spread information about a good from consumers with low willingness to pay to consumers with high willingness to pay. This information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences, while for movies aimed at large audiences, the substitution effect between free and paid consumption weighs more heavily.

Main Results of the Study

Quite surprising in light of previous empirical work, we find that box office revenues of a majority of movies that have been available on Megaupload do not increase in response to the shutdown. Indeed, the average effect of the shutdown on a movie that had previously been available on Megaupload was negative. In more differentiated analyses, we find that only movies that were on wide release in a relatively large number of theaters (blockbusters) benefited from the unavailability of Megaupload, while the effect on more narrowly released movies was neutral and even negative for niche movies. We subject these results to a number of robustness checks to rule out alternative explanations using different specifications and additional data. A mechanism that can explain these prima facie counterintuitive findings is that piracy generates positive externalities through information about the quality of an experience good spilling over from pirates to (potential) legal consumers. Once it becomes significantly less easy to consume pirated content online, as was the case in our empirical setting, we would expect that at least some consumers revert to legal consumption, increasing movie revenues. At the same time, the positive externalities from pirates to legal consumers vanish, so that a number of prospective legal consumers (who would pay for watching the movie) end up being less informed about specific titles, which reduces their likelihood of going to the movies. The net effect on a specific movie’s revenues then depends on how important the information externality is for the performance of this movie. Large blockbusters (i.e., wide-release movies) may be able to compensate with large advertising budgets, while word-of-mouth is likely to matter more for movies targeted at smaller audiences.

Policy Implications as Stated By Author

When online piracy has very different (even opposing) effects on heterogeneous products, blanket interventions aiming at reducing the negative welfare effects are difficult to implement because externalities may affect product variety and ultimately market structures. Similar to Luo (2014), who find that IP protection may affect different types of content producers differently in the market for ideas, we find that even post-release IP strategies can lead to different outcomes across heterogeneous products. Hence, “one size fits all” policies have to be assessed in all their dimensions and an overall assessment of the desired goals, which may include media diversity, sufficient niche content, but also aggregate welfare.

Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Green-tick.png
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Green-tick.png
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
Green-tick.png
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Green-tick.png
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Green-tick.png
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)
Green-tick.png

Datasets

Sample size: 8,234
Level of aggregation: Film
Period of material under study: 2011 to 2012


Sample size: 308
Level of aggregation: Film
Period of material under study: 2011 to 2012


Sample size: 14
Level of aggregation: Country
Period of material under study: 2011 to 2012