Megaupload Shutdown: MPAA Rejects Findings of Piracy Study

Last week, the MPAA rejected findings of a European study that suggests the shutdown of piracy site Megaupload damaged revenues for theatrical films other than blockbusters. Megaupload was shut down by the FBI in January 2012. While researchers at Carnegie Mellon found that the shutdown boosted legitimate digital sales of movies, a new study from Ludwig Maximilians University Munich and Copenhagen Business School argues that anti-piracy measures may have unintended consequences for different kinds of movies.

“We find that box office revenues of a majority of movies did not increase,” explained the paper. “While for a mid-range of movies the e ffect of the shutdown is even negative, only large blockbusters could benefi t from the absence of Megaupload.”

“The European researchers attributed the ‘counterintuitive’ drop in theatrical grosses following the shutdown of the site to ‘social network effects, where online piracy acts as a mechanism to spread information about a good from consumers with low willingness to pay to consumers with high willingness to pay,'” reports Variety. “This network information-spreading effect of illegal downloads, they argue, ‘seems to be especially important for movies with smaller audiences.'”

In a follow-up article, Variety notes that an MPAA spokesperson dismissed the study’s conclusions: “Unfortunately, the findings in the study aren’t entirely clear and the authors’ speculation about the results and why they arrived at those results is just that — total speculation.” The MPAA believes the authors did not clearly define “big” pictures or “blockbusters.”

“An independent review of the academic research available has shown that the vast majority of research available in fact does show that piracy does harm sales,” wrote the MPAA in a statement. “And a recent study from Carnegie Mellon University found that digital sales in countries where Megaupload was popular increased after Megaupload shut down. And in fact, the Munich and Copenhagen paper also finds that box office increased after Megaupload shutdown for an important segment of titles that they don’t clearly define, although it’s hard from the study’s descriptions to determine exactly what the control and treatment sample groups are, among other key factors. Unfortunately, in order to reach its conclusion, the Munich and Copenhagen study also all but ignores a critical piece of the box office picture — how timing or other factors that are completely unrelated to Megaupload impact the box office performance of small, medium or large films.”

The Carnegie Mellon study focused on home video sales, while the European study looked primarily at theatrical grosses.

“Academic studies are published so researchers can make their data available for peer review,” explains Variety. “If the conclusions are surprising, those studies make news. But the conclusions aren’t proven; other researchers then review the data, methodologies and conclusions of the study, and where are there are experiments, try to repeat the experiments and the results. In most cases, surprising and unexpected results either aren’t replicated by other researchers, or are otherwise debunked through the peer-review process. As a result, most academic studies that generate news coverage turn out to be wrong.”