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Yes, Kim Dotcom's site, really DID cost movie studios money, say researchers


By Noel Young, Correspondent

March 7, 2013 | 3 min read

Shutting down major piracy websites can increase online revenue for movie studios, according to new research released today.

Kim Dotcom: Now in New Zealand

The closure of the "cyberlocker" site Megaupload and its sibling Megavideo last year led to more digital sales and rentals for two major movie studios in 12 countries including the US, said the Wall Street Journal, citing the findings of two researchers.

"We conclude that shutting down Megaupload and Megavideo caused some customers to shift from cyberlocker-based piracy to purchasing or renting through legal digital channels," they said.

Online revenue was between 6 per cent and 10 per cent higher than it would have otherwise been, said Brett Danaher, assistant professor of economics at Wellesley College, Massachusetts, and Carnegie Mellon University professor of information technology Michael Smith.

Two (unnamed) studios gave them data on digital transactions in the months following the January 2012 closing of Megaupload and arrest of its controversial head,Kim Dotcom, currently fighting moves to extradite him from the New Zealand to the USA.

The shutdown of Megaupload saw weekly digital sales of movies from the two studios grow by between 10,500 and 15,300 units from what would otherwise have been expected, the study said. Rentals grew between 13,700 and 24,000 units a week.

Megaupload allowed users to easily share files and was allegedly one of the internet's most popular sources of video piracy, said the WSJ.

Studios have argued that piracy harms their businesses - and this appears to back them up.

The researchers studied online sales and rentals, not DVD sales or cinema ticket sales. Their data extended only 18 weeks after the closure of Megaupload.

"We…do not know whether the sales increase will persist or if these new consumers will eventually find their way back to alternative piracy channels," said Danaher and Smith.


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