New research suggests that post-release movie piracy through The Pirate Bay is linked to increased box revenue. The counter-intuitive finding is driven by word-of-mouth promotion. The effect, which does not apply to pre-release piracy, results in rather interesting policy implications.

Late 2014 The Pirate Bay went offline after Swedish police raided a datacenter near Stockholm.

The downtime lasted over a month and many users feared that it was the end for the notorious site.

It wasn’t. The Pirate Bay came back and continued on its merry way.

While many people have since forgotten about the incident, marketing professors from business schools at the University of Houston and Western University used the downtime to research its effects on box office revenue.

Hollywood’s general logic is that piracy hurts box office revenues. However, there is also some evidence of positive effects through word-of-mouth promotion. Using the Pirate Bay downtime as a natural experiment, the researchers tried to find out if that’s indeed the case.

“It is natural to focus on the downsides of piracy for movie makers — and these can be significant — but many will be interested to note that piracy can have an upside,” Professor Shijie Lu informs TF.

Through their research, Lu and his co-authors Xin Wang and Neil Bendle, investigated the effect of this “buzz” in detail. They published their findings in a paper titled “Does Piracy Create Online Word-of-Mouth? An Empirical Analysis in Movie Industry.”

Movies shared on The Pirate Bay are the main focus. The researchers use the Pirate Bay downtime following the 2014 raid to measure its impact on word-of-mouth promotion and box office revenues.

Based on a sample of hundreds of movie torrents and data from most popular movie review sites, Lu and his colleagues estimated this effect. Their results are rather intriguing.

First off, the findings clearly show a negative effect of pre-release piracy on box office sales. This result is consistent with previous studies and an increase in “buzz” doesn’t do enough to offset the negative effect ..

“The impact of pre-release piracy is found to be negative regardless of piracy type. The total box office revenue is reduced by 11% due to the existence of piracy appearing before the movie release,” the researchers write.

This changes when the researchers look at post-release piracy. That is, piracy which occurs after a film has premiered at the box office. In this case, there’s a positive effect on box office revenue through an increase in word-of-mouth promotion (WOM).

“We find that the volume of online WOM mediates the impact of piracy on the box office. Based on counterfactual simulations, the WOM-effect from post-release piracy on the box office increases revenue by about 3.0%,” they write.

In other words, when The Pirate Bay went down, box office revenue dropped as well. This effect is significant and not linked to seasonal changes, as it wasn’t there in previous years.

The positive effect is strongest during the beginning of a movie’s release and differs per genre. Action movies, comedies, and thrillers, benefit more from a positive piracy “buzz” than dramas, for example.

While the findings suggest that The Pirate Bay does help to generate buzz and bring in more revenue, the overall effect isn’t positive. The negative pre-release piracy impact is higher than the positive post-release effect, after all.

“Pre-release piracy can have a substantial negative effect, in our data this overwhelms the positive effect we look at. That is, the overall effect of piracy is still negative,” Lu tells us.

That said, there is an interesting lesson to be learned. Based on this study, copyright enforcement should be mainly targeted on early leaks. If these are dealt with, the main problem is ‘gone.’

“Our findings suggest approaches to target scarce anti-piracy resources, such as focusing on tackling damaging pre-release piracy,” the researchers write.

These results offer yet another piece of the piracy puzzle. It’s worth noting that the number of torrents was used as a piracy indicator in this study, which isn’t perfect. Follow-up studies with more granular data and actual download estimates may provide further insight.

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