File-Sharing and Film Revenues: An Empirical Analysis

Abstract

This study examines the impact of peer-to-peer (P2P) file-sharing on the Australian theatrical film industry. Using a large data set of torrent downloads observed on three popular P2P networks, we find evidence of a sales displacement effect on box office revenues. However, although statistically significant, the economic significance of this displacement appears relatively small. To establish causality, we make use of two precedent-setting Australian Federal Court case rulings, as well as observed levels of contemporaneous downloading in geographically separated markets within Australia. We observe that the release gap between the US and Australian markets is a key contributor to piracy early in a film's theatrical life; this finding provides a partial explanation for the industry's move toward coordinated worldwide releases.