Study reports higher online film sales since Megaupload demise

A Carnegie Mellon University study published on Wednesday shows an increase in digital film sales since file-sharing site Megaupload was shut down.

The paper’s authors, economics professor Brett Danaher and IT and marketing professor Michael Smith, compared levels of digital film downloads and rentals in 12 countries before and after the file-sharing site shut down in January 2012.

The paper, titled Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales, was published on the Social Science Research Network.

Danaher and Smith measured each of the 12 country’s “penetration rates”- the percentage of Internet users who visited the site in December 2011, before it shut down - and compared these to digital movie sales data in the countries, provided by two unnamed film studios.

They found that before Megaupload shut down, rates of online film sales and a country’s overall use of Megaupload were “statistically independent” from one another.

After the site shut down, the authors report a “positive and statistically significant” relationship between a country’s Megaupload penetration rate and its increase in online film sale figures.

“In [the] aggregate, our estimates suggest that, across the 12 countries in our study, revenues from digital sales and rentals for the two studios were 6-10% higher than they would have been if Megaupload hadn’t been shut down.” Danaher and Smith wrote in a blog post announcing the paper.

Adam Rendle, associate at Taylor Wessing LLP said that the report’s findings validate the creative industry’s efforts to combat online piracy, and add credence to the argument that targeting the source of pirated material is an effective measure for curbing online piracy.

Rebecca Swindells, partner at Field Fisher Waterhouse LLP, agrees that the study could be helpful in countering views that the financial damage of piracy is overinflated.

“It does suggest that these high-profile takedowns can have a positive and measurable economic effect on the copyright owners,” she said, though she added it is difficult to generalise conclusions from one study.

“You've got to consider that there are other factors which may have come into play and may have an effect on the results,” she said.

She suggested that the increase in legal movie downloads immediately after Megaupload’s shutdown may be a short-term effect as the study covers only 18 weeks and observes the potential deterrent effect of negative publicity around Megaupload, as its operator were arrested after the site shut down.

Swindells also cited a rising consumer preference for downloading high-quality legitimate content from sites like Netflix and LoveFilm as a likely factor for the study’s findings.

“We've got to be careful drawing broad-brush conclusions from this one study,” she said. “I think we need more studies.”