Shutting down Megaupload increased legal film rentals and purchases: research

Researchers from Carnege Mellon University and Wellesley College in the US monitored the effects of closing down the Megaupload site in January and believe they have found a causal link between its closure and an increase in consumer spending on films.

In the paper, published this week on the Social Science Research Network, Brett Danaher and Michael D. Smith, professors at Wellesley College and Carnegie Mellon University, respectively, explain their complex methodology for measuring the changes following the site's closure in a way that discounts events such as seasonal spikes and the release of blockbuster titles. At its heart, the paper measures Megaupload's penetration across 12 countries around the world prior to its closure and then analyzes the sales data from two unnamed "major US movie studios" regarding all digital purposes from September 2011 through to May 2012.

It established that a country's use of Megaupload and its legal digital purchases were statistically independent but following the site's closure on January 19 2012, "there was a positive and statistically significant relationship between a country's sales growth and its pre-shutdown Megaupload penetration, such that for each additional 1% (lost) penetration of Megaupload the post-shutdown sales increase was between 2.5% and 3.8% higher (depending on which of our models you believe to be most accurate). The fact that these trends didn't exist before the shutdown but existed after the shutdown suggests a causal effect of the shutdown on digital sales, and we find a similar (but slightly weaker) relationship for digital rentals," the researchers write.

Unsurprisingly, movie studios have been quick to welcome and celebrate the results of the study, as it strengthens their arguments surrounding greater copyright control.

"Reliability, ease-of-use, and convenience"

When asked to explain why there was an upturn in sales, considering that in most cases the content available through Megaupload was still available on other similar sites, the researchers put forward the following theory: "We know that people are willing to pay a few dollars more to buy books from Amazon, even if the same books could be found for lower prices at other stores. This suggests that Amazon's consumers value things like reliability, ease-of-use, and convenience, and are willing to pay more for products with these attributes.

"Applying these results to digital media channels, we would expect that some consumers would be willing to buy through legitimate channels if content in those channels is more valuable than the 'free' pirated alternative. In this view a key part of competing with free pirated content is using the same tools that Amazon uses -- reliability, ease-of-use, and convenience -- to make content on legal distribution channels more valuable than competing content piracy channels."

And, with the shutdown of Megaupload, for many people piracy became sufficiently less reliable, less easy-to-use, and less convenient than it was before, and some consumers were willing to switch from piracy to legal channels as a result.


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