Do file sharing and piracy “eat at the roots” of the cinema industry?
Originally published at go2cinema.com.
While for a long time the motion picture industry was viewed as a pure source of entertainment and enjoyment, this no longer defines the industry. So now, with the evident increase in impact of media, especially movies, the cinematic industry has started to turn from a pure source of entertainment to an important economic and impact platform. Extremely important and diverse issues like psychological well-being and global warming are highlighted in the cinema with every new movie on the way. Movies are not just judged for the script and the acting, but also what they portray to the viewers.
Economically, the motion picture industry earns huge amounts of revenue, leading to more money flowing into a country’s economy and infrastructural development. It is important to know that the combined amount of taxes paid by the cinema industry and the social services that participants perform have become one an important part of social movements and betterment.
British Film Institute stated in a study that almost 698 movies were produced in the year 2013 in Hollywood alone. The amount of money spent on these movies amounts to hundreds of billions of dollars. The revenue earned is even higher.
Believe it or not, the cinema is actually helping your country quite a lot in generating money!
However, researches in the area have claimed that the industry revenue is decreasing gradually and one of the main factors that are causing this, is technology.
In this article, I summarise the findings of the research on the subject of Estimating the Effects of File-sharing on Movie Box-office.
It all started in the year 1999
Napster (1999) and eDonkey2000 (2000) were the first peer to peer (p2p) file sharing platforms. For many, the introduction of p2p platforms enabled better access to movies. However, for the entertainment industry it meant beginning of decentralised piracy. According to a study conducted on the effects of file sharing on the movie box office in 2017, three prominent results have been concluded systematically.
First, it was found that the file sharing and online piracy causes reduction in revenue gained by motioned picture industry that amounts to almost $90 million in total (1.4 % of the current box-office). Every movie on average has been calculated to lose about $0.379 million to file sharing through various portals.
Furthermore, the results of welfare analysis show that file-sharing increase consumer welfare by a total of $0.73 billion, therefore banning file-sharing service will result in a dead weight loss of $ 0.64 billion.
Finally, the research found that the amount of box office revenue displaced by file sharing of pirated movies may not be that much, i.e. there is little overlap between movie downloads and its prime box-office time. That said, it has effect on its own sale revenue on DVD/Blue-ray and the similar movies that release later.
Removal of piracy — effective?
So what would happen if the policy makers and other actors could successfully end online piracy?
The research did look into the effects of removal of piracy on the customers and the market as well. While online piracy is a menace for the movie producers and policy makers, it has provided great facility to the customers.
It has been measured that while 0.11 unit of legitimate sales decrease due to piracy, stopping it would not be much beneficial either. The reason for that is the fact that consumer welfare is increased by an amount of $0.73 billion. Even if peer to peer file sharing and online piracy is stopped, the consumers would prefer not to buy the movie due to its opportunity cost and other factors. Hence, such a control would most probably result in a dead-weight loss of $0.64 billion. The dead weight loss would include money that would benefit neither the consumers, nor the producers, leading to no role in the economy.
Changes in the consumer welfare and producer welfare (industry revenue) due to complete removal of piracy have been shown in the table below:
Even if we consider complete removal of file sharing and online piracy, there will not be quite a large change in the revenue gained by the movie industry. It would only increase by about 0.09 units, while customer welfare would decrease by quite a large amount (0.73 units).
Hence it is proved that an attempt at complete removal of pirated movies would not be significantly beneficial.
The most pirated movies
Zhuang Liu collected data from the box office and file sharing platforms for 20 weeks in 10 countries. It was found that the most pirated/ downloaded movies are mostly blockbuster action movies with high budget advertising campaigns.
It is also interesting to note that most of the downloaded movies are also the best selling movies in the market. Hence, the movies that do a good job in the market are preferred by people who file share or download them online.
Furthermore, it was observed that the amount of pirated movies downloaded somehow have a connection with the GDP of the country. Higher the GDP, higher the piracy. This was found to be true for the United States and the United Kingdom.
Another important thing to note is that most of the pirated movies are downloaded after the closure of their theatrical display. Hence, according to study, file sharing and downloads increase after better quality pirated movies are available online which were not present while the movie was in theatre. This implies that the amount of box office revenue displaced by file sharing of pirated movies may not be that much.
Conclusion
First, file sharing does not have quite as much of a negative effect on a movie’s earnings as widely cited industry estimates constantly referenced in policy making. Most of the movie downloads happen 10–15 weeks after the movie release. Therefore, the biggest effect is felt by the DVD/ Blueray industry, not the cinema industry.
Furthermore, for the sake of discussion, it is worth pointing out that another study found that the promotional effects of the pre-release piracy can increase revenue compared to piracy that occurs at release. The increase is driven by the word-of-mouth promotional effects.
Of course, neither this article or the study on which this article is based encourages consumption of pirated materials or illegal sharing of movies. Instead, this article serves as a high level overview of the current state of piracy.
It begs the question: If movie buffs appreciate the quality of the video (as evidenced by the low volume of low-quality downloads during the first weeks) what is lacking in the modern movie-going experience that causes drop in the cinema admission? Is it the price of the cinema ticket? Is it simply hard to find time for cinema in the modern busy lifestyle?
We at GO2CINEMA have high appreciation for going to the cinema, watching movies on a large screen, getting popcorn and sharing the experience with friends. We are creating a platform that allows to find movie times and buy cinema tickets. Fast, simple and secure.
