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Digital Piracy Essay

1772 words - 7 pages

On the demand side, the digital consumption of media products is accompanied by the emergence of digital piracy. Whilst copying had already been technically feasible during the era of video cassettes, it required certain equipment and piracy behaviour was limited (Waterman et al., 2007). The rise of the computer and World Wide Web, however, simplified the unauthorised duplication and storage of copyrighted content and caused movie piracy to soar substantially (Fetscherin, 2005). Digital piracy can generally occur offline (through the copying of discs and files) and online (through the downloading and sharing of files). A recent study revealed that approximately 24% of global internet traffic is copyright infringing, with peer-to-peer networks accounting for half of that amount (Envisional, 2011). Furthermore, internet piracy facilitates the sharing of movies during and even before their official theatrical release through either leaked insider copies or recordings in the cinema, which means that contemporary digital piracy affects all windows of the industry (Byers, 2003; Kwok, 2004).

Academically, there is little disagreement regarding the effects and the scope of piracy on the motion picture industry as a whole and on box-office revenues in particular. Whereas an overall positive impact of piracy on cinema admissions is only attested by one found study (Ji, 2007) and explained through the existence of network externalities and diffusion processes of information (Peitz & Waelbroeck, 2006), the vast majority of literature acknowledges the prevailing existence of a negative and damaging effect of movie piracy. Using a sample of 500 university students, Rob and Waldfogel (2007) found that piracy displaces paid movie consumption and, hence, damages content providers. A comparable study by Bounie et al. (2006), confirms these results for ancillary markets, but not for theatre attendance. The study, however, disregards the fact that copies of a movie are circulating before and during its theatrical run and this result can, therefore, be questioned.

Official sources from the Motion Picture Association of America (MPAA) and other trade organisations frequently report annual profit losses of several billions owed to piracy . Yar (2005) and Dohar and Braithwaite (2002) convincingly question the validity of these reports as they erroneously assume that every consumer of an unauthorised copy would have purchased a ticket to see the film if the copy didn’t exist. Thus, they reject the piracy figures published by industry sources as exaggerated and lobbying efforts . Likewise, Gayer and Shy (2001) point out that data on piracy losses tends to be overestimated because the positive and negative impacts partly offset each other. In this regard, Vany and Walls (2007) attempt to realistically quantify the revenue decline and develop a pioneering model that includes the uncertainty of the industry rather than asking what a movie would have earned in the...

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