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Report claims MegaUpload helped smaller movies

By | Published on Thursday 29 August 2013


The shutdown of MegaUpload at the start of 2012 probably benefited big movies, but possibly hindered smaller film releases, or so reckon researchers at Ludwig Maximilian University of Munich and the Copenhagen Business School.

As much previously reported, US authorities swooped on the American-based servers of the controversial file-transfer company in January 2012, taking the service offline and seizing the firm’s assets and domain. In New Zealand, meanwhile, four of the company’s executives, including founder Kim ‘Dotcom’ Schmitz, were arrested.

Although there was little love lost between the Mega company and the music business, with Dotcom squabbling with Universal Music over his ‘Mega Song’ in the weeks before the shutdown, it was really the American movie industry that lobbied hard to encourage authorities in the country to take action against MegaUpload on copyright infringement grounds. Hollywood had identified the Mega service as a rampant source of pirated films, including new releases.

In a filing with the Office Of The US Trade Representative last year, the Motion Picture Association Of America said the Mega shutdown, and the impact the move had had on other file-transfer services, resulted in a “massive” benefit for copyright owners around the world. Meanwhile a study by two American universities reckoned an increase in revenues for key movie releases in 2012 could be attributed to the Mega closure.

In the new research, the Munich and Copenhagen academics agree that there was a minor positive impact on the revenues of blockbuster movies in 2012 that could be attributed to the shutdown of MegaUpload. However, they say, there is also evidence that the shutdown led to slightly decreased revenues for mid-sized and smaller budget films.

Although the researchers say its not entirely clear why that might be, they think that having films illegally circulating online via MegaUpload and similar services can aid word of mouth marketing for movies on social networks and suchlike, which in turn can lead to increased ticket sales at the cinema, countering any loss of sales because people have seen the film for free online.

For big movies, where massive advertising campaigns are key to generating interest, the benefit of word of mouth marketing is less substantial, and therefore doesn’t compensate for lost ticket sales. However, the academics reckon, for smaller movies with much smaller marketing budgets, the trade off between online chatter and lost sales results overall in the likes of MegaUpload having a positive effect on box office revenue.

According to the Wall Street Journal, the researchers write: “If some of this word-of-mouth effect [which MegaUpload et al supports] is then taken away with the shutdown of illegal content, performance of smaller movies is likely to be hit harder”.

The big movie and music companies are unlikely to be persuaded, though the report could well be used by Dotcom as proof Hollywood exaggerated the impact his company was having on their wider business.