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Economist: no significant financial impact from pirated films

updated 03:35 pm EDT, Tue July 15, 2014

Data collected from BitTorrent, Hollywood Stock Exchange used to find figures

Economist Kolem Strumpf of the University of Kansas School of Business recently conducted a study looking into the financial impact of movie piracy on film revenues. Using data from BitTorrent and the Hollywood Stock Exchange (HSX), Strumpf looked at the top 150 films each year from 2003 to 2009. The study found that there's a "quite small" revenue displacement caused by the illegal films.

The paper, first discovered by TorrentFreak, looks at a total of 1,057 films to find a direct link between lost revenues and the early leak of a film on the Internet. In the findings, Strumpf looked extensively at factors that could influence the HSX value of a film, including movie trailers and press surrounding it.

Strumpf was unable to conclude that illegal films released on the Internet have no impact on revenues, giving some truth to the idea of studios losing out on money. However, the loss isn't significant when looking at the highest grossing films of each year, which make up around 95 percent of the industry's revenues.

In fact, Strumpf told TorrentFreak that a "best guess estimate" would see a reduction of $200 million during the time period for first-month box office revenues. Strumpf adds that the loss is only three-tenths of a percent of what the movies earned cumulatively.

"There is no evidence in my empirical results of file-sharing having a significant impact on theatrical revenue," said Strumpf.

One of the higher-profile leaks during the time frame, X-Men Origins: Wolverine, was singled out in the study due to the potential impact it could have had. The film hit the Internet nearly a month before the film reached theaters, reaching 4.5 million downloads before it was officially released. The HSX value of the film shot up after the illegal copy surfaced.

This lead Strumpf to believe that an early release of a film had no significant negative effect on revenues. Seeing an early pirated copy surface before a film release actually often had a consistent positive effect on revenue, even though it was only considered modest.

However, there's a catch with the study using data from the Hollywood Stock Exchange. While the HSX is generally a good benchmark for revenue forecasts, it isn't an exact science, since the figures are only estimates. This could mean that some of the actual cost and revenue figures are off from the HSX, leaving a wider margin of error.

By Electronista Staff


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