McKenzie, J. (2017). Graduated response policies to digital piracy: Do they increase box office revenues of movies?. Information Economics And Policy, 381-11. (Alexx)

From Digital Culture & Society

<McKenzie, J. (2017). Graduated response policies to digital piracy: Do they increase box office revenues of movies?. Information Economics And Policy, 381-11.

By: Alexx Colley-Reynolds

This study focuses on the impact of six countries and their response to digital piracy. Across the world, governments are facing increasing issues that revolve around digital piracy. Currently there are four countries, France, South Korea, Taiwan, and New Zealand that have passed ‘graduated response’ policies into their law, and with many other countries considering adding new policy regulations. Although all countries have different laws they can all learn from one another to place new laws. Other countries such as US, UK and Ireland, have introduced policies to educate people rather than punish them.

This paper also examines the effect of the “shutdown of Megaupload on digital sales and rentals of three major movie studios across 12 countries and find the closure of the illegal site boosted legitimate sales by 6.5-8.5%” (pg. 2). In addition, this study also does a quasi-natural experiment by analysing theatrical box office sales of six countries as they have introduced graduated response policies. The aim of this study is to establish if ‘average’ film revenues have increased as a result of introduced policies. The paper is designed and organized as follows: “Section 2 provides a brief history of graduated response policies specific to countries analysed; Section 3 describes the film-level data set; Section 4 describes the quasi-three-way effects difference-in-difference and pooled models used in the formals analysis; Section 5 discusses identification of the estimation strategy; Section 6 presents results; Section 7 provides a discussion of the results and robustness checks; and finally, Section 8 concludes” (pg. 2). This is a good way to organize this type of study because it has an order and can be followed easily. In Section 2, this sections talks about the brief history of graduated response policies. It is mentioned that graduated responses have been introduced in a number of countries and that many more have been considering it. It is a way to address and reduce unauthorized reproduction of copyrighted content through the internet. It is also a way to protect legitimate markets such as theatres. There are six countries that have added a graduated response tactic in regards to digital piracy.

The way this paper explains the different countries graduated response policies is very effective. It compares the six countries to one another and explains how their policies work. As a general statement, the policies were put into place between 2008 and 2010 for all six countries.

Section 3 is about the data collection of this study. This data in this study related to primarily film-level opening weeks at box offices. They also look at the revenues for 6083 unique films released over the years 2005-2013. There were a total of 31,913 country-specific film revenues that were observed in 16 countries: Argentina, Austria, Australia, Brazil, Chile, Germany, Spain, France, Italy, South Korea, Mexico, Netherlands, New Zealand, Taiwan, United Kingdom, and the United States.

The revenues that were collected were converted into US dollars. It was important to collect this data for multiple years because the researchers want to see if behaviours and attitudes have changed.

Section 4 talks about the empirical models and the “quasi-three-way effects difference-in-difference model to evaluate whether the introduction of graduated response policies have increased box office revenues in countries where they have been introduced” (pg. 4). Section 4 also talks about the pooled-model. This model considered pooling all countries together and look at their results and see if there is room for improvement.

Section 5 discusses the identification of the quasi-there-way effects difference-in-difference model. This identification strategy “is preferable as there is a higher level of correlation of individual film revenues across countries than weekly total box office sales, which would be the underlying assumption in a two-way effects (e.g. country and time) difference-in-difference model” (pg. 5). They state that this is because of different national and school holidays timings are different between different countries and therefore effecting the film and blockbuster releases.

Baseline results are talked about in the baseline results of the difference-in-difference model for each of the 6 countries. “There is weak statistical significance of increasing revenues at the 10% level in both the Taiwan and US models, but only for opening week revenue in the case of Taiwan” (pg. 5).

Section 7 then takes a look at different variables and assumptions that could have skewed the results. One assumption is that different countries have different tastes in films. There was also no significant increase in box office sales and this could have been due to the type of films considered in this study. It was also concluded that piracy is positively correlated with release delays between international markets.

In conclusion, theatrical film revenues only represent one example of copyrighted content where new laws have been designed to protect it. But film is also one of the most heavily illegal downloaded content. “The findings contrast with recent evidence on the music industry” (pg. 11). It is also stated that more and further research can be done to provide more conclusive results on the m >