Megaupload closure boosts digital movie revenues

Megaupload closure boosted movie revenues

The closure of video download sites MegaUpload and Megavideo boosted digital revenues for film studios last year, indicating that shutting down major pirate sites does have a positive impact on studio revenues. The report, compiled by professors Brett Danaher of Wellesley College and Michael Smith from the Carnegie Mellon University, claims that online revenues for two unnamed major studios was between 6% and 10% higher in 12 different countries following the closures in January last year.

“We conclude that shutting down Megaupload and Megavideo caused some customers to shift form cyberlocker-based piracy to purchasing or renting through legal digital channels,” says the report.

The findings suggest that some pirate video users will pay for content if illegal options are cut off and will come as a boon for the movie industry, which, like the music business, has spent the last decade claiming piracy sites are negatively affecting their revenues. Critics had argued that many illegal download users could never be convinced to pay for content. The report’s authors warn that it is not clear whether this trend will continue and that consumers could soon discover new ways to get hold of pirated material. Nonetheless, the findings are only likely to strengthen lobbying against companies such as Google to do more to prevent pirate sites from operating online.

Critics claim shutting down major sites is pointless, as a dozen alternatives will spring up in their space to service demand for free content. Indeed, Megaupload founder Kim Dotcom launched a brand new filesharing service in January, claiming the site attracted more than 1m users, just 24 hours after it opened. Dotcom claims that his new site will avoid legal difficulties because it has been built from scratch with legal compliance in mind. All files uploaded to and shared on the site are one-click encrypted in a users’ browser, with the site giving users a second unique key to enable decryption. Dotcom says this puts the legal requirement to obey copyright law in the hands of individual users as Mega will not know what users are uploading and therefore cannot be held responsible.