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

Author

Listed:
  • Liye Ma

    (Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742)

  • Alan L. Montgomery

    (Tepper School of Business and Heinz College, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Param Vir Singh

    (Tepper School of Business and Heinz College, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

  • Michael D. Smith

    (Tepper School of Business and Heinz College, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

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 movie’s 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.

Suggested Citation

  • Liye Ma & Alan L. Montgomery & Param Vir Singh & Michael D. Smith, 2014. "An Empirical Analysis of the Impact of Pre-Release Movie Piracy on Box Office Revenue," Information Systems Research, INFORMS, vol. 25(3), pages 590-603, September.
    • Handle: RePEc:inm:orisre:v:25:y:2014:i:3:p:590-603
    DOI: 10.1287/isre.2014.0530
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    References listed on IDEAS

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    Cited by:

    1. Miguel Godinho de Matos & Pedro Ferreira & Michael D. Smith, 2018. "The Effect of Subscription Video-on-Demand on Piracy: Evidence from a Household-Level Randomized Experiment," Management Science, INFORMS, vol. 64(12), pages 5610-5630, December.
    2. Shijie Lu & Xin (Shane) Wang & Neil Bendle, 2020. "Does Piracy Create Online Word of Mouth? An Empirical Analysis in the Movie Industry," Management Science, INFORMS, vol. 66(5), pages 2140-2162, May.
    3. Shijie Lu & Koushyar Rajavi & Isaac Dinner, 2021. "The Effect of Over-the-Top Media Services on Piracy Search: Evidence from a Natural Experiment," Marketing Science, INFORMS, vol. 40(3), pages 548-568, May.
    4. Bradley, Wendy A. & Kolev, Julian, 2023. "How does digital piracy affect innovation? Evidence from software firms," Research Policy, Elsevier, vol. 52(3).
    5. Wojciech Hardy & Michal Krawczyk & Joanna Tyrowicz, 2015. "Friends or foes? A meta-analysis of the link between "online piracy" and sales of cultural goods," Working Papers 2015-23, Faculty of Economic Sciences, University of Warsaw.
    6. Dan Wu & Guofang Nan & Minqiang Li, 2020. "Optimal Piracy Control: Should a Firm Implement Digital Rights Management?," Information Systems Frontiers, Springer, vol. 22(4), pages 947-960, August.
    7. Wenjuan Fan & Qiqi Zhou & Liangfei Qiu & Subodha Kumar, 2023. "Should Doctors Open Online Consultation Services? An Empirical Investigation of Their Impact on Offline Appointments," Information Systems Research, INFORMS, vol. 34(2), pages 629-651, June.
    8. Wojciech Hardy, 2018. "Pre-release leaks as one-time incentives for switching to unauthorised sources of cultural content," IBS Working Papers 03/2018, Instytut Badan Strukturalnych.
    9. Hardy, Wojciech, 2021. "Displacement from piracy in the American comic book market," Information Economics and Policy, Elsevier, vol. 57(C).
    10. Jang, Moonkyoung & Baek, Hyunmi & Kim, Seongcheol, 2021. "Movie characteristics as determinants of download-to-own performance in the Korean video-on-demand market," Telecommunications Policy, Elsevier, vol. 45(7).
    11. Tyrowicz, Joanna & Krawczyk, Michal & Hardy, Wojciech, 2020. "Friends or foes? A meta-analysis of the relationship between “online piracy” and the sales of cultural goods," Information Economics and Policy, Elsevier, vol. 53(C).
    12. Christophe Bellégo & Romain De Nijs, 2020. "The Unintended Consequences of Antipiracy Laws on Markets with Asymmetric Piracy: The Case of the French Movie Industry," Information Systems Research, INFORMS, vol. 31(4), pages 1064-1086, December.
    13. Jordi McKenzie, 2023. "The economics of movies (revisited): A survey of recent literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 480-525, April.
    14. Anthony Koschmann & Yi Qian, 2020. "Latent Estimation of Piracy Quality and its Effect on Revenues and Distribution: The Case of Motion Pictures," NBER Working Papers 27649, National Bureau of Economic Research, Inc.
    15. Wojciech Hardy, 2022. "Brace yourselves, pirates are coming! the effects of Game of Thrones leak on TV viewership," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 46(1), pages 27-55, March.
    16. Rouven Seifert & Cord Otten & Michel Clement & Sönke Albers & Ole Kleinen, 2023. "Exclusivity strategies for digital products across digital and physical markets," Journal of the Academy of Marketing Science, Springer, vol. 51(2), pages 245-265, March.
    17. Marc Bourreau & Marianne Lumeau & Francois Moreau & Jordana Viotto da Cruz, 2019. "Recent or Free? An Experimental Study of the Motivations for Pirating Movies," CESifo Working Paper Series 8036, CESifo.
    18. Christophe BELLEGO & Romain DE NIJS, 2020. "The Unintended Consequences of Anti-Piracy Laws on Markets with Asymmetric Piracy: The Case of the French Movie Industry," Working Papers 2020-03, Center for Research in Economics and Statistics.

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