Megaupload Shutdown Actually *Hurt* Box Office Revenues. Kind Of.

This one oughta get the torrent and illegal streaming crowd all fired up. The Munich School of Management and the Copenhagen Business School recently published a paper titled “Piracy and Movie Revenues: Evidence from Megaupload” that argues the shutdown of the streaming website Megaupload actually may have hurt some films’ box office revenues. I’ll give all of the diehard pirates out there a second to do some dancing and finger-wagging before I throw a little water on this.

Noting a slight but steady change in finances across the world before and after the Megaupload shutdown — taking into account inflation, Internet penetration and the site’s popularity as well — the researchers concluded that “the shutdown had a negative, yet in some cases insignificant effect, on [smaller films’] box office revenues.” Their case then goes on to explore file sharing’s role 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.”

Okaaaaaay, buuuuuuuut…

However, before studios begin feverishly directing their promotional efforts toward torrent sites galore, the Munich team did find that with blockbusters obtaining a screen count over 500, the effect is actually opposite, having found instead a financial boost following the raids. So as much “Cabin in the Woods” and “The Avengers” differed both in Joss Whedon’s involvement and eventual box-office, the film’s results left to file-sharing sites predict a much more divergent result.

So, basically, for small films with teeny budgets that open in very limited markets — typically only on the coasts — piracy can end up as a means of promotion. This makes sense, I suppose. A studio isn’t going to sink millions of dollars for billboards and commercials into a film called Reflections On a Life of Solitude starring a foreign actor most of the country has never heard of, no matter how good it is, and they’ll probably only open it in art house theaters in New York and San Francisco. But if John Q. Pirate (pictured above), who lives in Kansas and can’t see the film unless he travels halfway across the country, pirates it online and tells his friends, and they tell their friends, and so on and so forth, the word of mouth may build to the point that the studio can extend the film’s run or open it in more theaters. Hence, more revenue via the old “a single harm with the potential to create a greater good” thing. (Admittedly this is a very simple example. I got a B- in Economics. Work with me.)

On the other hand, pirating a movie like The Dark Knight Rises or Breaking Dawn takes revenue away from the studios because they don’t need your word of mouth. THOSE MOVIES ARE EVERYWHERE. The studios already put hundreds of millions of dollars into putting the actors’ faces on Big Gulps and lunch boxes, and they’re playing them 30 times a day at a movie theater five minutes from your house. They just want your money at that point.


Photo credit: Shutterstock/Minerva Studio