A few years ago Europe witnessed the largest piracy-related busts in history with the raid of the popular movie streaming portal Kino.to.
Police officers in Germany, Spain, France and the Netherlands raided several residential addresses, data centers and arrested more than a dozen individuals connected to the site.
The operation wiped out the largest unauthorized streaming portal in Europe and was praised as a massive success. However, new research from the European Commission’s Joint Research Centre shows that the effect on end users was short-lived and relatively limited.
In a working paper titled “Online Copyright Enforcement, Consumer Behavior, and Market Structure” researchers examined clickstream data for a set of 5,000 German Internet users to see how their legal and illegal consumption habits changed in response to the shutdown.
One of the main conclusions is that the kino.to raid led to a short-lived decrease in piracy, after which piracy levels returned to normal. At the same time, the researchers observed only a small increase in the use of legal services.
“While users of kino.to decreased their levels of piracy consumption by 30% during the four weeks following the intervention, their consumption through licensed movie platforms increased by only 2.5%,” the paper reads.
Based on the above the researchers conclude that if the costs of the raids and prosecution are factored in, the shutdown probably had no positive effect.
“Taken at face value, these results indicate that the intervention mainly converted consumer surplus into deadweight loss. If we were to take the costs of the intervention into account, our results would suggest that the shutdown of kino.to has not had a positive effect on overall welfare,” the researchers write.
Perhaps more worrying is the fact that Kino.to was soon replaced by several new streaming services. This so-called “Hydra” effect means that a landscape which was previously dominated by one site, now consists of several smaller sites that together have roughly the same number of visitors.
The researchers note that Movie2k.to and KinoX.to quickly filled the gap, and that the scattered piracy landscape would make future shutdowns more costly.
“Our analysis shows that the shutdown of kino.to resulted in a much more fragmented structure of the market for unlicensed movie streaming,” the paper reads.
“This potentially makes future law enforcement interventions either more costly – as there would not be a single dominant platform to shutdown anymore – or less effective if only a single website is targeted by the intervention”
One of the policy implications could be to advise against these type of large piracy raids, as they do very little to solve the problem at hand.
However, the researchers note that the results should be interpreted with caution. For example, it doesn’t include any data on offline sales. Similarly, back in 2011 there were relatively few legal options available, so the effects may be different now.
That said, the current findings shed an interesting light on the limited effectiveness of international law enforcement actions directed at piracy sites. Also, it’s the first research paper we know of that provides strong evidence for the frequently mentioned Hydra effect.