Pre-release Piracy Hurts the International Box Office
Although the academic literature seems to agree that music piracy displaces music sales (Rob and Waldfogel 2004, Liebowitz 2006, Zentner 2010, among other studies), there is a tension in the academic literature over whether movies also experience sales displacement caused by piracy. Video files are much larger than music files and a pirated movie is not necessarily a good substitute for the theater-going experience. Published studies in the economics and IS literature have found a range of estimates, from movie piracy having no effect on sales to nearly 1-for-1 sales displacement (where each pirated download is a lost sale).
My coauthor Joel Waldfogel and I have recently finished a paper that we think will help to inform the issue. We find that international pre-release piracy (piracy that occurs after the world premiere of a film but before a country’s premiere) caused a decrease in sales in the 2005 international box office of at least 7%, although the true decrease may be larger in magnitude. To be clear, if the results from our sample of movies/countries are generalizeable, this means pre-release piracy caused a decrease of at least $1 billion in the 2005 international box office. These results should be informative to governments considering policies aimed at mitigating copyright infringement.
The paper can be found here.