|Title:||Does File-Sharing Reduce DVD Sales?|
|Citation:||Martikainen, E. (2014). Does file-sharing reduce DVD sales?. Netnomics: Economic Research and Electronic Networking, 15(1), 9-31.|
|Link(s):||Definitive , Open Access,Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||To study the short-term effect of movie downloads on DVD sales, data on weekly DVD sales and movie torrent downloads in the USA during a 13-week period from March 2 to May 31, 2009 is used.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
The short-term effect of BitTorrent file-sharing on movie DVD sales is estimated using sales data on newly released DVDs and torrent file downloads during a 13-week period between March and May 2009 in the USA. To overcome endogeneity between downloads and sales, the analysis is carried out in a dynamic panel setting. After controlling for an autoregressive component and a declining time trend in sales, the file-sharing elasticity of sales is not statistically different from zero in the difference GMM estimations. The results hold when external instruments are used. Moreover, the results suggest an upper bound of −0.21 of elasticity, indicating that the short-term sales displacement effect is moderate at worst.
Main Results of the Study
- There are some differences between the popularity of movies on sales charts and on BitTorrent. On average, blockbusters which are successful at the box office sell more in DVDs and are heavily downloaded on BitTorrent.
- Compared to top selling movies the genres of sci-fi, action and drama/thriller were overrepresented on BitTorrent's most popular titles
- People buying DVDs and people downloading are two distinct groups with different tastes and characteristics
- Supply side issues,which are not necessarily related to the overall popularity of a specific movie,play a crucial role in determining the success of a movie amongst the file-sharers
- The focus of the study is short term and the results indicate that the immediate sales replacement effect of file-sharing is surprisingly moderate.
Policy Implications as Stated By Author
File-sharing is related to the well-studied problem of optimal degree of intellectual property protection. At the heart of the problem is the trade-off between social welfare and incentives to create. Creating is costly, while the marginal cost of producing a digital copy from the original is zero. Without considering the incentives of creators and with zero marginal cost, social welfare would be maximized by allowing the product to be copied freely. However, if incentives to create are hampered due to piracy, there are no creative products to consume. In a dynamic setting, when incentives are considered, piracy can thus result in a welfare loss. However, piracy affects incentives to create through reduced revenue only if consumers who would have otherwise bought a legal product acquire an illegal copy, that is, if piracy substitutes sales.
From the creator’s perspective the consequences of copying and thus incentives to create depend on the “market harm” of copying: the way in which the availability of unauthorized copies substitutes sales and decreases revenue. The concept of market harm is crucial from legal perspective as well.It is exactly the estimation of the “harmfulness of use” which is the main focus of this paper.
Coverage of Study
|Level of aggregation:||DVD sales|
|Period of material under study:||2009|