Reel Piracy: The Effect of Online Film Piracy on International Box Office Sales

28 Pages Posted: 17 Jan 2012 Last revised: 20 Aug 2014

Brett Danaher

Chapman University - The George L. Argyros School of Business & Economics

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management; National Bureau of Economic Research (NBER); University of Minnesota - Twin Cities - Department of Economics

Date Written: January 16, 2012

Abstract

Hollywood films are generally released first in the United States and then later abroad, with some variation in lags across films and countries. With the growth in movie piracy since the appearance of BitTorrent in 2003, films have become available through illegal piracy immediately after release in the US, while they are not available for legal viewing abroad until their foreign premieres in each country. We make use of this variation in international release lags to ask whether longer lags – which facilitate more local pre-release piracy – depress theatrical box office receipts, particularly after the widespread adoption of BitTorrent. We find that longer release windows are associated with decreased box office returns, even after controlling for film and country fixed effects. This relationship is much stronger in contexts where piracy is more prevalent: after BitTorrent’s adoption and in heavily-pirated genres. Our findings indicate that, as a lower bound, international box office returns in our sample were at least 7% lower than they would have been in the absence of pre-release piracy. By contrast, we do not see evidence of elevated sales displacement in US box office revenue following the adoption of BitTorrent, and we suggest that delayed legal availability of the content abroad may drive the losses to piracy.

Keywords: filesharing, piracy, information goods, box office, quasi-experiment

JEL Classification: L1, L8, O30, O34

Suggested Citation

Danaher, Brett and Waldfogel, Joel, Reel Piracy: The Effect of Online Film Piracy on International Box Office Sales (January 16, 2012). Available at SSRN: https://ssrn.com/abstract=1986299 or http://dx.doi.org/10.2139/ssrn.1986299

Brett Danaher (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Joel Waldfogel

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States

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