Study: Piracy Does Not Harm U.S. Box Office Sales

Despite the claims of the MPAA and other supporters of SOPA and PIPA, file-sharing does not negatively impact box office sales in the U.S., according to a new study conducted by economists from Wellesley College and the University of Minnesota.

The focus of the study is on lag times between U.S. release and foreign release. The study found that longer gaps between a movie’s release in America and its release in foreign countries led to increased piracy in those countries, and correspondingly lower box office sales. The study estimates that pre-release piracy impacted foreign box office sales by as much as 7%
In the U.S., however, box office sales were not impacted by piracy at all. The study concludes that the impact of piracy is driven primarily by the lack of legal availability of content in foreign markets.

The study was conducted by economists Brett Danaher and Joel Waldfogel. Danaher is an assistant professor of economics at Wellesley College. Waldfogel is a professor of applied economics at the University of Minnesota’s Carlson School of Management. The paper is currently under peer review preparatory to publication in an academic journal. Here is the 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.

Some entertainment companies are already becoming aware of the losses caused by delaying international releases. The BBC network in recent years has begun airing some of their most popular shows (e.g., Doctor Who and The Graham Norton Show) on BBC America on the same day that they air in the UK.