Piracy and Box Office Movie Revenues: Evidence from Megaupload

31 Pages Posted: 17 Nov 2012 Last revised: 29 Jun 2015

Christian Peukert

University of Zurich - Faculty of Economics, Business Administration and Information Technology

Jörg Claussen

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Copenhagen Business School - Department of Innovation and Organizational Economics

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management); Centre for Economic Policy Research (CEPR)

Date Written: June 22, 2015

Abstract

In this paper we make use of a quasi-experiment in the market for illegal downloading to study movie box office revenues. The sudden shutdown of the popular file hosting platform Megaupload.com on January 19, 2012 significantly (and unexpectedly) changed the availability of illegal movie downloads overnight. We compare box office revenues of movies that were available on Megaupload to those that were not pre- and post-shutdown and find that box office revenues of a majority of movies did not increase. The average effect is even negative. We show that only movies that premiere in a relatively large number of theaters benefitted from the closure of Megaupload. This is consistent with word-of-mouth effects, where online piracy can act as a mechanism to spread information about a good from consumers with low willingness to pay to consumers with high willingness to pay. This information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences, while for movies aimed at large audiences, the substitution effect between free and paid consumption weighs more heavily.

Keywords: Piracy, Movie Revenues, Megaupload, Natural Experiment

Suggested Citation

Peukert, Christian and Claussen, Jörg and Kretschmer, Tobias, Piracy and Box Office Movie Revenues: Evidence from Megaupload (June 22, 2015). Available at SSRN: https://ssrn.com/abstract=2176246 or http://dx.doi.org/10.2139/ssrn.2176246

Christian Peukert (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Affolternstrasse 56
Zürich, 8050
Switzerland

Jörg Claussen

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Copenhagen Business School - Department of Innovation and Organizational Economics ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tobias Kretschmer

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, 80539
Germany

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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