The shadowy nature of illegal media down­loading makes it difficult for researchers to analyze the true relation between piracy and lost sales. Does every movie download represent a theater ticket left unpurchased, as the movie industry contends? Or are most downloaders people who never would have bought a ticket in the first place?

Two researchers have come up with a clever strategy to untangle one cause-and-effect re­lation. Economists Brett Danaher of Wellesley College and Joel Waldfogel of the University of Minnesota noticed that Hollywood studios often wait weeks after the U.S. premier before releasing a movie overseas. During that time, movie fans in foreign locales can find the film on BitTorrent-based file-sharing sites but not in their local theaters. If online piracy displaces ticket sales, these release lags should hurt a movie’s international box-office receipts.

The researchers compiled a database of the weekend box-office returns for the top 10 movies in 17 different countries over three years. They then split the data into two groups: movies re­leased before BitTorrent became popular and those released after. Controlling for everything else that might affect the returns for a movie, the researchers found that post-BitTorrent films made less money than pre-BitTorrent films. The longer the lag, the more they lost.

More damning, the genres most popular with online pirates suffered the most. “After BitTorrent, the effect of release lag on science-fiction and action movies is much greater than it is for other genres,” Danaher says. He esti­mates that this type of piracy led to a $240-million annual drop in weekend box-office receipts in the 17 countries studied.

Of course, the study also proves a contention of piracy apologists: people turn to online piracy when that is the only way they can view the content. Danaher mentioned another episode from 2007, when NBC, in a contract dispute with Apple, suddenly pulled its content from the iTunes store. Traffic in pirated NBC content exploded. New laws may help steer people away from illegal downloads, but content providers need somewhere to steer them to.

This article was published in print as "Does Digital Piracy Really Hurt Movies?"

This article was originally published with the title Does Digital Piracy Really Hurt Movies?.

9 Comments

1. 1. marclevesque 10:17 AM 5/8/12

   "Two researchers have come up with a clever strategy to untangle one ***cause-and-effect*** re­lation."
   
   ?
   
   I wonder if movies that have a low presence on BitTorrent have also seen a drop in box office revenues.
   
   Personally, over the years, I've been going to movie theatres less and less, and I'm not compensating with illegal viewings, I've simply become less interested in what is being presented, especially top 10 movies.

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2. 2. electric38 06:52 PM 5/8/12

   A lot of Americans can barely afford the $1 Red box movies. Seeing millionaire actors and actresses in the glamor world lose a few bucks (poor things), does create a sense of justice. The diamond toothed rap stars may have to go to zirconium now, awww, poor things.

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3. 3. Ecomergence 06:56 PM 5/8/12

   Given that correlation, movie distributors might reevaluate their release strategy in light of new realities regarding technological alternatives (BitTorrent)and a global marketplace. I wonder what the impact of such piracy is on movies that were released simultaneously in domestic and foreign markets. In other words, assuming BitTorrent impact is inevitable, is it worth it to release movies simultaneously - surely a segment of the foreign movie-going population that needs immediate gratification may prefer to see the movie in a theater if that were an available alternative.

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4. 4. Lenedwin 07:09 PM 5/8/12

   I don't think it does. In the early days of computing it was the hackers that made MDOS 'Word' & 'Excel' so popular and boosted Microsoft into fame and fortune. These hackers couldn't afford the $300 price tag for these products so Microsoft didn't lose income but gained popularity. Same with the Movies. The viewers who watch the pirated stuff wouldn't pay to go to the theater anyway so the film makers income is affected hardly at all

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5. 5. Crasher 09:13 PM 5/8/12

   Maybe a different take on this is to be considered. Lets face it 95% of movies are down right horrid, depending on what you like. So a lot of people are clever enough to download and watch before forking out cash to watch on the big screen. Maybe the industry should shoulder some of the blame for this, in so much that they are churning out a lot of crap and then expecting people to pay good $$$ to watch it. I think good movies are not being affected by piracy (just look @ their box office figures) but crap ones are....which I think is a good thing. Personally I find the whole theatre experience these days quite poor, crowds, cost, annoying people etc so I just wait for movies to be available for rent. This way I can check others reviews to see if it may be worth watching and then enjoy a good movie in my OWN comfortable home...no crowd, no interruptions, and generally no crap.

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6. 6. jimfromcanada 09:26 PM 5/8/12

   I live far from a theatre, there is no broadcast tv here, and my isp speed is so slow that streaming movies is impossible. Now that dvd rental locations are growing rarer my only options are satellite tv or downloading either legally or illegally. what I choose depends on what is legally available.

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7. 7. ethicalfan 12:36 AM 5/10/12

   The "study" has a fundamentally flawed premise and conclusion. If I want a product that is not on sale yet and I go into the warehouse and take it because it is not on sale, I am stealing. In a society of laws, the owner of property determines how the property will be sold and marketed. Secondly, the phenomenon of piracy affects the entire catalog of products and revenue over yeras, not just within the box office window.
   The US movie industry home video and box office was approx. $28B in 2011, down from $37B in 2006. According to Sandvine 18% of US Internet traffic is P2P filesharing and 5% is used for sites like Megaupload. Additionally, search engines, internet ad networks appear to make millions if not billions from selling ads to point people to these pirate links without compensating content owners.

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8. 8. chuck_rossier 10:21 AM 5/12/12

   Long ago there were only stage shows. Movies quickly added audiences that caused changes to stage shows. Television increased audiences that caused changes to movies. Videotape first changed television then increased audiences by distribution of tapes. DVD's are just an improvement on videotape. Computers and the Internet have increased the audiences.
   
   Movie producers claim that they lose money on every movie distributed to theaters. And whine that pirating is the cause. Creative accounting is more likely the means of showing losses on the books.
   
   Publication of books and music have suffered from piracy for many centuries. Yet publishers continue to publish. Indeed, publishers violate copyright laws that produce much greater revenue than so called "pirates".

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9. 9. Quinn the Eskimo 11:34 PM 5/12/12

   Let's be honest: Most of the quality pirates are located *INSIDE* their own leaky industry. For example; copies that are out *before* the release date and with editors time marks at the bottom. Just exactly how do us "thieving citizens" get access to insider copies?

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