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Study Refutes Idea of Piracy’s Promotional Boost

Any positive, promotional effects that come from piracy of movies are outweighed by the amount of cannibalization caused by online infringement, a new study from Carnegie Mellon University shows.

The study analyzed movie releases from 2006 and 2008, and from 2011 and 2013, and it showed significant increases in box office revenues if piracy were eliminated during the theatrical window. The study showed that, without piracy, there was a 15% increase in box office returns for films from 2006 to 2008, and a 14% increase for movies during 2011 and 2013.

The study did show that piracy did have a promotional effect, albeit it is dwarfed by the impact of cannibalization. In some instances — less than 3% of movie releases — the promotional effects from pre-release piracy were shown to actually increase revenue, compared to the piracy that takes place at a film’s release. Still, “if piracy did not generate promotional effects through word of mouth communication then box office revenues would drop by another 1.5%,” the study showed.

The study was conducted by Michael D. Smith, professor at Heinz College; Alan L. Montgomery, associate professor at the Tepper School of Business; and Liye Ma, assistant professor at the Smith School of Business at the University of Maryland.

Smith is co-director of the Initiative for Digital Entertainment Analytics at Carnegie Mellon, which conducts research on digital entertainment and the impact of piracy. It was launched in 2012 from an unrestricted gift from the MPAA.

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