Study ties shutdown of Megaupload to increases in movie rentals

Every so often, a movie bombs at the box office, like Kick-Ass, only to become a
"top ten most pirated " movie once it's available as a free torrent. Would such a movie have greater success if free
versions weren’t available?
Piracy is undoubtedly costing Hollywood money, and for the first time, a study is taking steps to prove it.

Following the shutdown the torrent site Megaupload in January 2012, 12
countries experienced a 6-10% increase in digital movie revenues, according to a study by two researchers from Wellesley College and Carnegie Mellon University. In the study, "Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales," they were able to determine that countries with higher usage of Megaupload, such as
Spain, experienced greater upswings in their digital movie revenues in the 18 weeks following the shutdown (the period of the study). This
finding in particular is the most statistically noteworthy. Otherwise, it’s
possible that the market as a whole rose 6-10%. This helps establish that the
increase was not due to market fluctuations but causation.

 A few things to consider. One, just because Megaupload shut
down didn’t mean that torrents weren’t available elsewhere. Many consumers
probably just switched to another free torrent provider. But some didn't. "Why didn’t consumers just switch
from Megaupload to some of those sites?," the study's authors, Brett Danaher and Michael Smith, asked in an accompanying blog post. "We think a more productive view is that competing
with free (pirated) content is just a special case of price competition...some consumers would be willing to buy through legitimate channels if
content in those channels is more valuable than the 'free' pirated
alternative." They cited "reliability,
ease-of-use, and convenience" as potential reasons why a consumer might pay for content instead of choosing another free torrent provider.

Another thing the authors don't mention is that just because
someone watches a movie for free doesn’t mean they will pay to rent the same
movie. Most of the time, people know what movies they want to see, and will try
to see them through whatever means possible. However, a lot of movies fall into
a middle category. People will watch them, but only because they’re free and
they have 2 hours they want to spend watching a movie. Anyone who has ever flipped channels and ended up watching a sup-par show or movie can vouch for this phenomenon. One million downloads of a
pirated movie might only translate to 250,000 legal rentals of the same movie. If Hollywood wants to convince legislators to pursue anti-piracy statutes, more data like this would go a long way towards demonstrating that shutting down torrent sites can make a difference.