The impact of piracy on the music business has been studied in detail, but the relationship between illegal downloads and film revenue hasn't been explored to nearly the same degree. A new study from researchers at the University of Michigan and Wellesely College has examined the impact of BitTorrent on domestic and foreign ticket sales and come back with some interesting conclusions.
The results of the study are being somewhat erroneously reported as "Piracy doesn't hurt the movie industry" but the truth is rather more nuanced. What the researchers found was that in the US, the drop-off in movie revenue from week to week for the period 2003-2006 remained consistent. In theory, the widespread availability of BT seeds would directly impact ticket sales with an increasing amount of film revenue deriving from the few days before high-quality seeds were widely available.
Whoops. Not related to these pirates
What the team did
find is evidence that foreign box office sales are impacted by piracy, with foreign earnings falling an average of 1.3 percent for every week that a studio delays releasing a movie. This varies somewhat depending on the genre; science fiction and action movies are pirated more heavily than romances. Studios have responded to this trend by shortening the window between a film's domestic and foreign release; the overall impact of BitTorrent on foreign film earnings is estimated at seven percent.
The Big, Important Question This Study Doesn't Cover
The key point that a number of other sites have missed is that this study only focused on box office sales -- and those make up an increasingly small percentage of a movie's revenue. From page 5: "In 2004, the year after BitTorrent's release, studios grossed 45 billion US dollars worldwide, up from 32 billion in 2000 and 8.5 billion in 1980 (all in 2004 US dollars)... Box office receipts accounted for over half of studio revenues in 1980, but only 17% of revenues in 2004.
In other words, in 1980, studios made ~$4.3 billion from box office sales. In 2004, they made $7.65 billion; an increase of just 78 percent in 24 years. Over the same time period, the US population grew by more than 25%, while median family income rose by ~15%, both of which would naturally boost ticket sales. The meteoric growth in movie industry revenues, in other words, was driven by the advent of movie sales and rentals. That doesn't mean box office revenues are unimportant, but they're a small percentage of the total.
There are two additional reasons why ticket sales may be a poor predictor of piracy's impact. First, while widescreen TVs and surround sound systems have cut into the "experience" of going to a movie, there remains a qualitative difference between seeing a film on a 60-inch screen and seeing one on a 60-foot screen. Second, there's the fact that the majority of screen-capped movies available for download are lousy. High-quality cameras allow for better visuals, but there's no way to fix degraded audio and the ambient noise of the theater itself.
Even good TS films tend to suffer from washed out colors, loss of detail, and incorrect aspect ratios
So-called "TS" (telesync) versions of bootlegged films are invariably lower-quality than DVD rips, much less Blu-ray, and while there are users who will watch them regardless, the data collected here confirms that the theater "experience" is relatively well-guarded. The problem, in this case, is that box office tickets are only a fraction of industry income.
As the researchers note, there's no credible data showing that piracy replaces movie sales at a 1:1 ratio for any medium, while considerable evidence suggests that making content legally available has a direct impact on decreasing piracy. Downloading movies in lieu of buying physical discs does have a negative impact on studio revenue, but the size and nature of that impact are considerably less than Hollywood claims. Broad legal availability is still the key to reducing overall theft.