Liye Ma

An Empirical Analysis of the Impact of Pre-Release Movie Piracy on Box Office Revenue

Digital distribution channels raise many new challenges for managers in the media industry. This is particularly true for movie studios where high-value content can be stolen and released through illegitimate digital channels, even prior to the release of the movie in legal channels. In response to this potential threat, movie studios have spent millions of dollars to protect their content from unauthorized distribution throughout the lifecycle of films. They have focused their efforts on the pre-release period under the assumption that pre-release piracy could be particularly harmful for a movies success. However, surprisingly, there has been little rigorous research to analyze whether, and how much, pre-release movie piracy diminishes legitimate sales. In this paper, we analyze this question using data collected from a unique Internet file-sharing site. We find that, on average, pre-release piracy causes a 19.1% decrease in revenue compared to piracy that occurs post-release. Our study contributes to the growing literature on piracy and digital media consumption by presenting evidence of the impact of Internet-based movie piracy on sales and by analyzing pre-release piracy, a setting that is distinct from much of the existing literature.

The Dual Impact of Movie Piracy on Box-Office Revenue: Cannibalization and Promotion

There are two main hypothesized effects from movie piracy: a cannibalization effect which reduces legitimate sales, and a promotional effect which increases word-of-mouth and stimulates sales. While these two effects are commonly discussed, there has been no research to measure their relative impact on motion picture sales. In this paper we use a hidden Markov model adapted from MOVIEMOD to decompose, and separately measure, the cannibalization and promotional impacts of piracy.Using data from all wide release movies in the US from 2006 to 2008 we show that if piracy could be eliminated from the theatrical window then box-office revenues would increase by 15% or

A “Position Paradox” in Sponsored Search Auctions

1.3b per year. An analysis for the time period from 2011 to 2013 shows a similar increase of 14%. Our decomposition of piracy into separate cannibalization and promotional effects shows that the negative effects from piracy due to cannibalization dwarf any positive, promotional benefits: if piracy did not generate promotional effects through word-of-mouth communication then box-office revenues would drop by another 1.5%. We also find that, in rare instances (less than 3% of movies) promotional effects from pre-release piracy could increase revenue compared to piracy that occurs at release. Nonetheless, all of the movies in our counterfactual analysis would experience increased box-office revenue if piracy were eliminated altogether.