Megaupload May Have Helped Copyright Holders, Study Finds

By Cameron Scott 

file sharing, megaupload, copyrightThe shutdown of Megaupload adversely affected movie box office earnings, according to a paper by European researchers Christian Peukert and Jörg Claussen.

The findings support the theory that pirating acts as free advertising for products, ultimately resulting in more paid use.

“Our counterintuitive finding may suggest support for the theoretical perspective of (social) network effects where file-sharing acts as a mechanism to spread information about a good from consumers with zero or low willingness to pay to users with high willingness to pay,” the authors conclude.

The negative impact on earnings was small enough, in some cases, to fall short of statistical significance. Blockbuster films, or those showing on more than 500 screens, benefited from the shutdown.

The study contributes to a mixed body of research addressing whether pirated distribution of media financially benefits or harms copyright holders.

Its findings — drawn from box office data for more than 1,200 movies during Megaupload’s operation and after its shutdown in January 2012 — are not enough to provide a definitive answer to that question, said Eric Goldman, the director of the High Tech Law Institute at Santa Clara University.

“The study raises a great question: When does online distribution of copyrighted works act as marketing, and is that marketing benefit distributed equally,” Goldman said.

But the suggestion that Megaupload may not have materially hurt copyright owners makes the government’s move in January 2012 to shut down the file-sharing site for infringing on copyrights appear increasingly problematic, according to Goldman.

“The thing that this paper forces us to ask is did the U.S. government go after Megaupload based on false premises,” he said.