File Sharing and Film Revenues: An Empirical Analysis

This study quantifies the impact of file sharing on the theatrical film industry. Using a large data set of torrent downloads observed on three popular peer-to-peer (P2P) file-sharing networks, we find evidence of a small and statistically significant sales displacement effect on theatrical box-office revenue: the estimated daily displacement elasticity for theatrical admissions is 0.3 for an increase in downloads over a four week period. The release gap between the domestic (North American) and international markets is a key contributor to piracy early in a film's theatrical life, providing a partial explanation of the industry's move toward coordinated day-and-date worldwide releases.