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BitTorrent is byproduct of int'l release windows in global box office losses

It is the time lag between the theatrical release of a film in the US and its release in the international market that is feeding movie piracy, argue two academics, Brett Danaher from Wellesley College and Joel Waldfogel from the University of Minnesota, in a research paper, Reel Piracy: The Effect of Online Film Piracy on International Box Office Sales. This lag depresses global theatrical box office receipts now that BitTorrent, which appeared in 2003, makes films available internationally through illegal means immediately after their release in the US.

The authors' key argument is that they see no evidence that BitTorrent is responsible for a loss of US box office receipts, and suggest that it is the shortening of the international release window that will go a long way in stamping out the loss of studios' global earnings, which they estimate to shave 7% off potential global receipts.

They find that the longer the lag between the US release and the local foreign release, the lower the local foreign box office receipts. Importantly, this relationship is larger after widespread adoption of BitTorrent than before: a movie released eight weeks after its US premiere has lower returns by about 22% in a given country in 2003-2004, but by nearly 40% in 2005- 2006.

In 2003-2004, the relationship between length of release lag and box office returns is no larger for science fiction and action movies than for others, but in 2005-2006, each week of lag decreases returns for science fiction and action movies by an additional 1.3% per week over any decrease for other genres.

Using this 1.3% reduction per week as their estimate of the effect of pre-release piracy on box office sales, the researchers reckon that international box office returns were at least 7% lower than they would have been in the absence of such piracy.

In 2005, the researchers observe that the total weekend box office returns for all movies (in the data) in each of the 16 non-US countries were $3.28 billion.

Assuming each week of lag causes a 1.3% reduction in returns due to piracy, the analysis estimates that movies would have returned a total of nearly $3.52 billion if not for piracy, implying that piracy caused films to lose $240 million in weekend box office returns in the non-US countries (in their data).

"Our finding that the cost of delaying a film's foreign release is increasing has strategic implication for the movie industry," explain the authors. "Studios already appear to be reacting to the increasing threat of piracy: while the average release window was 10.5 weeks in 2004, it had shrunk to 7.5 weeks in 2006. By 2007 the average release window was 6 weeks, and more recently in 2010 the average release window was down to 4 weeks."

The rapid growth of digital cinemas in the last 2- 3 years has significantly decreased the cost associated with worldwide simultaneous release. "Studios should continue to reduce the length of the release lag, particularly for genres that are more heavily pirated such as science fiction and action films,"? they conclude.

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Story filed 13.02.12

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