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Study Suggests Megaupload Shutdown Boosted Legal Movie Sales

Music bizzers also reported higher digital sales

Hollywood studios are quick to offer figures on the cost of piracy, but a new study sheds light on whether efforts to combat it is at all working.

A study conducted by Carnegie Mellon’s Initiative for Digital Entertainment Analytics suggests that the shutdown of cyberlocker giant Megaupload last year had the effect of boosting the sales of digital movies. The findings showed a “positive and statistically significant relationship between a country’s sales growth and its pre-shutdown Megaupload penetration,” according to the authors of the study, Brett Danaher and Michael D. Smith. Their estimates suggested that of 12 countries studied, revenues from digital sales and rentals for two studios were 6% to 10% higher than they would have been had Megaupload not been shut down.

Their results lend credence to arguments that one of the solutions to fighting piracy is to make available easy-to-use alternatives. Although the entertainment industry has argued that piracy puts it at a competitive disadvantage — you can’t compete with free, the saying goes — the authors noted that after Megaupload was shut down on Jan. 19, 2012, consumers still had the option to just move to other pirated content from other cyber lockers.

“In this view a key part of competing with free pirated content is using the same tools that Amazon uses — reliability, ease-of-use, and convenience — to make content on legal distribution channels more valuable than competing content piracy channels,” the authors wrote.

Their study did not study the long term impact of the shutdown, or whether consumers eventually reverted back to pirated sites. Nor did they study the costs associated with the shutdown, which came after an extensive investigation by the Department of Justice and international operation that led to the high profile arrest of Megaupload founder Kim Dotcom in New Zealand. Authorities are seeking his extradition to the U.S.

The full study is available here.

After the seizure of Megaupload, representatives in the music business also reported an uptick in digital sales.

The two studios that participated in the study provided research data, but had no control or oversight of the findings, the authors said. The names of the studios were not disclosed.

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