Carnegie Mellon’s Smith: Changing Piracy Behavior No Easy Task

When a recent summer blockbuster hit theaters, pirated copies of the film were available the very next day, and yet some news reports said the box office performance of the film hadn’t been affected. Michael Smith, professor of IT and marketing for Carnegie Mellon University’s H. John Heinz III College, could only shake his head.

“People keep saying really stupid things about this,” he said, speaking July 25 at the Content Protection Summit: East event in New York. “The fact a popular movie is popular both [with] piracy and popular in the theaters tells you nothing about whether piracy had any impact on theatrical revenue.”

Piracy absolutely has a huge, negative impact on box office receipts, especially with pre-release piracy, with a film pirated before its theatrical debut having more than a 19% negative impact on ticket sales, according to research Smith shared. A vast majority of peer-reviewed academic papers on the impact of piracy on box office revenue find the same thing: piracy absolutely hurts box office revenues. “This is about as close to a consensus that you’ll find in the academic literature on this sort of complicated question,” he said.

Piracy gets at the heart of every one of the industry’s creative business models, impacting not only theatrical, but every post-theatrical release of the content, from digital to disc to TV. “Those business models only work if I can control when you get that content and in what format,” Smith said. “Piracy takes that all away.”

And while not as clear-cut as the bottom line and piracy, other papers have shown that when piracy does become rampant, studios will make less content, at least in certain genres, Smith shared. And high-quality films, those that get nominated for an Academy Award, are fewer among countries where piracy is rampant, he added.

Smith also shared data that looked at the impact of removing piracy sites altogether, and whether “maybe, if we can make piracy more difficult, they’ll switch over to something else,” he said.

Warnings from ISPs to those who pirate have shown to have an impact, with better sales of digital content in some countries that employed that deterrence, Smith said. And when giant piracy outlets like Megaupload are shut down, a noticeable uptick in content sales can also be seen, Smith noted. But that doesn’t happen all the time, and usually only when a whole host of piracy sites are removed at one time. “When the Pirate Bay was blocked, there wasn’t a whole lot of change in visits to legal sites, but there was a big increase to other piracy sites and there was a big increase in visit to sites that provide VPN services, so that was not effective in changing consumer behaviors,” he added.

More than 300 people in the media and entertainment sector attended the inaugural Microsoft Media & Entertainment Day, which included the Content Protection Summit: East event, and was held at the Microsoft Technology Center (MTC). Produced by MESA, the event featured four half-day event programs, covering content protection, video in the cloud, artificial intelligence and machine learning, and metadata’s place in the content lifecycle.