Research into online piracy comes in all shapes and sizes, often with equally mixed results. The main question is often whether piracy is hurting sales.
New research conducted by economists from the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, tries to find answers for the movie industry.
For a new paper titled “Movie Piracy and Displaced Sales in Europe,” the researchers conducted a large-scale survey among 30,000 respondents from six countries, documenting their movie consumption patterns.
Using statistical models and longitudinal data, they were able to estimate how piracy affects legal sales and if this differs from country to country.
Perhaps unsurprisingly, the findings show that not every pirated movie is a lost sale. Instead, for every hundred films that are first viewed from a pirated source, 37 viewings from paid movies are ‘lost’.
This results in a displacement rate of 0.37, which is still a high number of course, also compared to previous research.
It’s worth noting that in some cases piracy actually has a beneficial effect. This is true for movies that people have seen more than twice.
“Interestingly, we found evidence of a sampling effect: for movies that are seen more than twice, first unpaid consumption slightly increases paid second consumption,” the researchers write.
However, the sampling effect doesn’t outweigh the loss in sales. Overall the researchers estimate that online piracy leads to a significant loss in revenue for the movie industry.
“Using a back-of-the-envelope calculation, we show that this implies that unpaid movie viewings reduced movie sales in Europe by about 4.4% during the sample period,” they write.
This negative effect is driven by a relatively small group of consumers. Roughly 20% of the respondents with the highest movie consumption are responsible for 94% of lost movie sales. Or put differently, the most avid film fans pirate the most.
Interestingly, there are large between-country differences too. In Germany online movie piracy results in ‘only’ a 1.65% loss, this figure is 10.41% for Spain. The UK (2.89%), France (5.73%), Poland (7.21%) and Sweden (7.65%) rank somewhere in between.
According to the researchers, their findings can help policymakers to decide what the best anti-piracy enforcement strategies are. In addition, changes between countries could help to evaluate existing and future measures and inspire future research.
“The estimates that we provide can help policy makers to asses the efficient use of public resources to be spent on copyright enforcement of movies.”
“In particular, since we find that virtually all the lost sales of movies are due to a very small group of individuals, most damages of movie piracy could therefore potentially be prevented with well targeted policies,” the researchers conclude.