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An Empirical Analysis of the Impact of Pre-Release Movie Piracy on Box-Office Revenue

Information Systems Research, Forthcoming

30 Pages Posted: 11 Mar 2011 Last revised: 23 Oct 2014

Liye Ma

Carnegie Mellon University - David A. Tepper School of Business

Alan Montgomery

Carnegie Mellon University - Tepper School of Business

Param Vir Singh

Carnegie Mellon University - David A. Tepper School of Business

Michael D. Smith

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: July 8, 2014

Abstract

Digital distribution channels raise many new challenges for managers in the media industries. This is particularly true for movie studios where high-value content can be stolen and released through illegitimate digital channels, even prior to the release of the movie in legal channels. In response to this potential threat, movie studios have spent millions of dollars to protect their content from unauthorized distribution throughout the lifecycle of films. They have focused their efforts on the pre-release period under the assumption that pre-release piracy could be particularly harmful for a movie’s success.

However, surprisingly, there has been little rigorous research to analyze whether, and how much, pre-release movie piracy diminishes legitimate sales. In this paper, we analyze this question using data collected from a unique Internet file-sharing site. We find that, on average, pre-release piracy causes a 19.1% decrease in revenue compared to piracy that occurs post- release.

Our study contributes to the growing literature on piracy and digital media consumption by presenting evidence of the impact of Internet-based movie piracy on sales, and by analyzing pre-release piracy, a setting that is distinct from much of the extant literature.

Keywords: Movies, Digital Piracy, Theatrical Revenue

JEL Classification: M31, O30, L86

Suggested Citation

Ma, Liye and Montgomery, Alan and Singh, Param Vir and Smith, Michael D., An Empirical Analysis of the Impact of Pre-Release Movie Piracy on Box-Office Revenue (July 8, 2014). Information Systems Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1782924 or http://dx.doi.org/10.2139/ssrn.1782924

Liye Ma

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Alan Montgomery

Carnegie Mellon University - Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Param Vir Singh

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-3585 (Phone)

Michael D. Smith (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

HOME PAGE: http://www.heinz.cmu.edu/~mds

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