Piracy and Box Office Movie Revenues: Evidence from Megaupload
In this paper we evaluate the heterogeneous effects of online copyright enforcement. We ask whether the unexpected shutdown of the popular file hosting platform Megaupload had a differential effect on box office revenues of wide release vs. niche movies. Identification comes from a comparison of movies that were available on Megaupload to those that were not. We show that only movies that premiere in a relatively large number of theaters benefitted from the shutdown of Megaupload. The average effect, however, is negative. We provide suggestive evidence that this result is driven by information externalities. The idea is that online piracy acts as a mechanism to spread information about product characteristics across consumers with different valuations for the product. Our results question the effectiveness of blanket public anti piracy policy, not only from a consumer perspective, but also from a producer perspective.