Freedom Line Blog

Piracy of movies is wrong in and of itself, as it constitutes straightforward theft and deprives the creative community the right to the fruits of its labor and investment.  The sheer amount of money, time, creative energy and physical effort necessary to bring a film from concept to theaters is only possible where reliance upon return on investment exists.

For the viewing public, piracy also adds to the cost of a movie ticket.

That reality remains obvious, and the academic consensus confirms the high cost of piracy.  Of particular interest, however, is the specific issue of pre-release piracy of movies, as distinguished from post-release piracy.  In the case of post-release piracy, consumers obviously possess alternative legal avenues to see the film in question – one can view it in theaters, through legal streaming services, on DVD, etc.  Pre-release piracy, in contrast, occurs during a period in which legal options to view the film do not yet exist.  In recent weeks we witnessed an example, as the new film “The Expendables 3” was leaked online and viewed 189,000 times in just 24 hours.

Pre-release piracy is thus a particularly pernicious form, but quantification of its damages remained relatively unexplored.

Now, however, Carnegie Mellon University professor Michael D. Smith and his colleagues have conducted a study on film piracy that occurs during that pre-release period:

Our study was accepted for publication last month in the peer-reviewed journal Information Systems Research, making it the first peer-reviewed journal article we are aware of to analyze the impact of pre-release movie piracy.  In our study we applied standard statistical models for predicting box office revenue, but added a variable for whether a movie leaked onto pirated networks prior to its release using data obtained from the site VCDQ.com.  Our analysis concluded that, on average, pre-release movie piracy results in a 19% reduction in box office revenue relative to what would have occurred if piracy were only available after the movie’s release.  As we discuss in the paper, this result is robust to a variety of different empirical approaches and sensitivity tests.”

That’s an immediate 19% loss to piracy, in addition to piracy that might occur post-release.  That’s something that no creator or investor should have to suffer, and it therefore remains imperative that we pursue existing and potential methods to combat such theft.  For the time being, however, we can thank Smith and his colleagues for helping put a number on the damage involved and illustrating the significance of the problem.