Will ‘Expendables 3’ Pre-Release Piracy Hurt Box-Office Revenue?

Expendables 3 Online Leak Piracy

Films pirated before theatrical debut take revenue hit, according to study

A pirated copy of Sylvester Stallone-starrer “The Expendables 3hit the Internet last Wednesday. There have already been nearly 2 million illegal downloads of the film so far, with its theatrical debut still 16 days away.

Could this — counterintuitively — actually be a boon for the movie’s distributor, Lionsgate, and put more butts in theater seats when it bows Aug. 15? Some argue that piracy, in this case, could be a big win for Hollywood.

“Leaking a month before its release might just be the best thing that ever happened to ‘The Expendables 3,’” wrote The Verge’s David Pierce, who admitted he downloaded and watched a copy of the movie.

The “two-plus hours of near-flawless action porn” is tailor-made to be seen on the bigscreen, so the illicit copies floating around on torrent sites will only drive up ticket sales, in Pierce’s estimation. “I’m already counting down the days until I can see it in Imax,” he wrote. “Maybe one leak will change the industry, maybe it won’t. But it won’t hurt ‘The Expendables 3.'”

However, studies indicate that this isn’t true: Piracy is decidedly not an effective promotional tool.

EARLIER: ‘Expendables 3’ Leaks Online, Pirated Copy Downloaded 189,000 Times in 24 Hours

Indeed, pre-release piracy of this kind has a particularly harmful effect on box office, according to a study by Carnegie Mellon University researchers. On average, movies that are leaked before theatrical debut have 19% lower box-office revenue compared with titles pirated after theatrical release, the study found.

“There might be people who pirated the movie and will go see it anyway — I’m not disputing that,” said Michael Smith, a professor of information technology and marketing at CMU’s Heinz College school of public policy, and one of the report’s authors. “But the main effect is (piracy) hurts sales.”

Illegal downloads of “Expendables 3” clocked in at 1.89 million as of Tuesday at 6 p.m. Eastern, according to piracy-analytics firm Excipio.

Lionsgate has declined to comment on the leak of the film.

“The huge number of infringing downloads following the leak of this movie shows the extremely damaging impact of pre-release piracy and it reinforces the need for all players in the digital ecosystem to work together to help ensure an Internet that works for everyone,” said Howard Gantman, MPAA’s VP of global strategic communications.

Multiple studies indicate piracy has a negative effect on revenue. In a recent National Bureau of Economic Research book chapter, Smith and his CMU colleagues found that 16 of 19 papers published in peer-reviewed academic journals concluded that piracy harms media sales.

“The notion that piracy hurts sales is very much an accepted truth in the academic world,” Smith said.

The CMU team’s study was accepted last month for publication by Information Systems Research, which Smith said makes it the first peer-reviewed journal article to analyze the effect of pre-release movie piracy. The researchers applied standard statistical models for predicting box-office revenue, adding a variable for whether a movie leaked onto pirated networks prior to its release using data obtained from VCDQ.com, a site that monitors popular Internet file-sharing services.

The study examined 533 movies released between February 2006 and December 2008, of which 52 were subject to pre-release piracy (including movies that were released first in international markets). The few films that were pirated before their theatrical debut anywhere in the world represented a small subset, and included Fox’s “X-Men Origins: Wolverine” as well as “Star Wars Episode III: Revenge of the Sith,” Disney’s “The Avengers” and “Ratatouille.”

SEE ALSO: ‘Game of Thrones,’ ‘Breaking Bad’ Most Pirated TV Shows of 2013

The CMU researchers cautioned that piracy may affect different types of movies in different ways, and that its study relied on self-reported user data from a single website, VCDQ.com. The report also is based on data that is more than three years old; Smith said the research team expects to update the study.

And it’s worth pointing out that when it comes to TV shows, some industry execs have suggested that piracy might have a sliver lining. Time Warner chief Jeff Bewkes last year quipped that piracy of HBO’s “Game of Thrones” was “better than an Emmy,” while “Breaking Bad” showrunner Vince Gilligan claimed that illegal downloads helped the show gain fans.

For TV series, one or two pirated episodes out in the wild would mimic the free “sampling” strategy many networks use to drive up buzz — and might, theoretically, bump up audience overall. But if every episode of every season of “Game of Thrones” or “House of Cards” were readily downloadable in a high-quality format for free, that would likely depress signups to HBO or Netflix to some extent.

The research for CMU’s most recent paper, “An Empirical Analysis of the Impact of Pre-Release Movie Piracy on Box-Office Revenue,” was conducted as part of the university’s Initiative for Digital Entertainment Analytics (IDEA), which receives unrestricted funding from the MPAA (meaning the trade group does not have editorial control over any studies).

Smith noted that CMU researchers also have received grants from Google for previous piracy studies, funding that was also unrestricted.

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  3. Mariela says:

    Sabotage. It will def hurt ticket sales. Mel Gibson stigma effect? I think the idea there’s a conspiracy is not that farfetched. Really bad movie… didn’t meet my expectations.

  4. Dixie Normous says:

    Movie sucked..1 less ticket from me…

  5. Leigh Richert says:

    Yea, pre-release piracy just ravaged the box office take of “The Avengers”. Carnegie-Mellon, I was wondering if I could hire you to do a study about colleges that do studies that skew statistics and lie about results so they will make headlines. I think you may really be the guys for the job. Give me a call.

  6. Duck says:

    Seriously? You have to be a complete idiot to think that piracy is ok. You probably think shoplifting is ok too. Maybe theater prices are so high because people pirate films the same way stores increase prices to recoup shoplifted items. Asshat.

    • jedi77 says:

      Come on, let’s be realistic, shall we? Piracy could disappear tomorrow – but those prices would still be the same. No way they would go down.

    • Gavin says:

      The Avengers made over a billion dollars two years ago and that was pirated before its release. I don’t think the prices at grocery stores are that high, I’m fine with paying for groceries. The point is movie studios are doing just fine, movie attendance has never been higher. Transformers 4 is about to make one billion dollars. I don’t think it’s right to charge someone 12 dollars to see a movie when it’s made over 900 million dollars already. And as I said, 45 dollars for 10 episodes of Game of Thrones is completely ridiculous.

      • jedi77 says:

        45 dollars for 10 hours of awesome, wellproduced entertainment is completely ridiculous? What are you, crazy?
        45 dollars for 10 hours of entertainment is a very reasonable price.
        I don’t know where you’re comming from, having those opinions, but I strongly disagree with you.

        Concerning piracy, I will say this though.
        I live in a country where no stations show season 2 of Orphan Black, and it is taking every ounce of my selfcontrol to wait for it to show to turn up on Netflix, instead of just downloading it. Same goes for season 5 of Justified.
        In my mind it’s the TV to DVD window that makes people download stuff. I want to watch Justified season 5, so give the goddamn DVD!

      • Gavin says:

        I don’t think someone should have to pay 45 dollars for just 10 measly episodes, I think Game of Thrones is way over-rated. 45 dollars is way too over priced for me, and I don’t even download Game of Thrones. I the first three seasons of a bidding war on eBay for 50 dollars in total. I also agree with you that the long wait from TV to DVD influences pirating. My nephew has to wait till fall just to watch season 2 of Arrow. It’s making him nearly want to download it, but his mother won’t let him.

  7. D says:

    Reporting on a pirated movie on the biggest entertainment site is the fail here….I didn’t know it was available until now. Thanks. Stupid.

  8. jhs39 says:

    People who download premium cable programs from HBO and SHO frequently couldn’t afford cable even if they wanted it, so it’s not likely to make a huge dent in subscriptions. With cable subscriptions at 100.00 a month or more and rising cable is becoming a premium service for people with a lot of disposable income. Netflix is far more affordable so people downloading episodes of House of Cards or Orange is the New Black are far more likely to become Netflix subscribers if they like what they see than HBO down-loaders are.

    Message boards seem to suggest that a lot of people who downloaded The Expendables 3 weren’t crazy about it. I don’t see any way that doesn’t translate into depressed ticket sales.

  9. harry georgatos says:

    That’s the only angle Lionsgate has in boosting sales at the box-office through online piracy to build.up theatrical interest. I don’t buy that! I think there’s the Gibson factor. There’s powerful people that want to finish this great filmmakers career. If Gibson can’t get his Viking movie off the ground speaks volumes! Everyone has has said stupid things and everyone deserves a second chance, especially scandal driven Hollywood. I want to see Gibsons Viking movie,so give him the money to make it!

    • DREDD2 says:

      I agree! Gibson should be behind the camera on a yearly basis. He makes great movies!
      Lionsgate needs to listen to what the audience wants, more Gibson films, and more DREDD!

      Also, how does piracy compared to negative reviews, and second hand dvds via ebay turn out?

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