MPAA: Megaupload Shutdown Was Massive Success

Ernesto December 5, 2012

In a filing to the Office of the US Trade Representative the major movie studios describe how successful the shutdown of Megaupload has been. According to the MPAA the file-hosting industry was massively disrupted, with carry-over effects to linking and BitTorrent sites. Nonetheless, the movie group says the work is not done yet and lists The Pirate Bay, Extratorrent, isoHunt, Kat.ph and several other file-hosting and linking sites as remaining threats.

Responding to a request from the Office of the US Trade Representative (USTR), the MPAA has submitted a new list of “notorious markets” they believe promote illegal distribution of movies and TV-shows.

The document dates back to September but unlike previous years it hasn’t been published in public by the MPAA. TorrentFreak managed to obtain a copy nonetheless, and there are a few things worth highlighting.

As one of the main instigators of the Megaupload investigation the MPAA tells the U.S. Government that as a direct result of the takedowns many other “rogue” sites were rendered useless.

“This year’s seizures of Megaupload.com and Megavideo.com by the Department of Justice illustrate the extent and impact that hosting hubs have on the online landscape,” MPAA’s Michael O’Leary writes.

“When these two websites were taken down, many linking websites, custom search engines, and custom streaming scripts that relied on the sites for content became inoperable. Some websites were abandoned by their operators, others lost traffic, while still others shifted their business model.”

More indirectly, the Megaupload shutdown also impacted other file-hosting businesses and their customers. Several sites disabled file-sharing and discontinued their affiliate programs which, according to the MPAA, resulted in a lowered availability of copyrighted content.

7 December 2012 From torrentfreak.com/mpaa-megaupload-shutdown-was-massive-success-121205/ “For example, Wupload.com, which was featured in MPAA’s filing last year, disabled file sharing. Affiliate programs that paid uploaders for content were also discontinued or removed by many hubs. Further, infringing content was purged by operators in bulk, which was followed by uploaders who deleted their own files to prevent the hubs from profiting on the uploads without paying incentives.”

“In sum, the impact of these seizures was massive and the hub landscape is still recovering,” O’Leary concludes.

The MPAA is right in their assessment that the Megaupload shutdown greatly impacted the file-hosting business, as we’ve pointed that out [http://torrentfreak.com/cyberlocker- ecosystem-shocked-as-big-players-take-drastic-action-120123/] on TorrentFreak in the past. However, the group ignores the chilling effect [http://torrentfreak.com/the- megaupload-shutdown-hampers-innovation-120123/] it may have had on many legitimate businesses.

Interestingly, recently published research suggests that shuttering Megaupload may have even had a negative impact on box office revenues. In a recent blog post [see below] MPAA’s head of research Julia Jenks said the short paper is “not clear or compelling,” but it’s an indication that the Megaupload shutdown might not be all that positive for the industry itself either.

In addition to discussing the Megaupload effects, the MPAA also notes that other law enforcement operations have been successful. The movie industry group specifically mentions the private BitTorrent tracker Demonoid.

“The BitTorrent landscape was measurably impacted by both regulatory and law enforcement efforts over the last year. For example, Demonoid.me (Alexa 938) went offline after Mexican officials arrested the site’s operator and coordinated seizures of the website’s servers with Ukrainian officials.”

Aside from summing up these ‘successes’, the MPAA reiterates that there is still a lot of work to do. The movie group calls out several websites including many popular BitTorrent indexes, file-hosting and linking sites including:

BitTorrent sites: ExtraTorrent.com, isoHunt.com, Kat.ph, Rutracker.org, Thepiratebay.se, Torrentz.eu and Xunlei.com.

Download/streaming: Extabit.com, Netload.in, Putlocker.com, Rapidgator.net, Simdisk.co.kr, Uploaded.net and VK.com.

Linking sites: 1channel.ch, Free-tv-video-online.me, Movie2k.to, Seriesyonkis.com, Solarmovie.eu and Telona.org

Later this month the USTR is expected to publish its own overview of “notorious” websites. The report will include many of the MPAA recommendations, as well as those URLs that were submitted by the RIAA.

7 December 2012 From torrentfreak.com/mpaa-megaupload-shutdown-was-massive-success-121205/ Editor’s note: This is the text of cited MPAA blog:

Assessing the Evidence: “Piracy and Movie Revenues: Evidence from Megaupload”

by Julia Jenks 11/30/2012 14:11 (UTC-08:00) Pacific Time (US & Canada)

An abstract released recently by researchers in Europe has gotten some blogger attention for suggesting that box office revenue for some films may be down since Megaupload shut down in January. Today, Julia Jenks, head of research here at the MPAA, is breaking down some of the serious methodological gaps in the abstract and notes that its flimsy findings raise far more questions than they answer.

Assessing the Evidence: “Piracy and Movie Revenues: Evidence from Megaupload”

Researchers at the Munich School of Management and the Copenhagen Business School1 recently posted a two page summary abstract on the Social Science Research Network entitled “Piracy and Movie Revenues: Evidence from Megaupload” that has caught the attention of some bloggers. While independent review of the academic literature has shown that the vast majority of it, particularly the literature published in the top peer reviewed journals, finds evidence that piracy harms media sales (for more on that literature, see: “Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales”),2 some bloggers have focused on a seemingly contrary conclusion from this new abstract, regarding box office revenue in time periods before and after the Megaupload website shutdown in January 2012.

The reality is that it is impossible to evaluate the validity of the approach or the reliability of the conclusions based solely on the abstract, which does not fully present the methodology or results of the study. In fact, in its present form, this summary abstract raises more questions than it answers, including:

Are the conclusions being presented and interpreted correctly? From the two page abstract it is unclear, for example, which results are or are not statistically significant, what are the definitions for the variables in the statistical tables, and whether and how the results differ for the films that showed on more than 500 screens, which the authors suggest experienced a positive box office effect post the shutdown. Specifically, the regression tables seem to indicate that the Megaupload shutdown caused an increase in box office revenue for movies that were shown on more than 500 screens (which is a large number of films), but the tables are unclear and could also be interpreted as also showing an increase in sales for all films after the Megaupload shutdown.3

Which system was used for “matching” like movies? The abstract’s conclusions rest on the assumption that it is possible to create a “matched” control group of movies from the time period prior to January 2012 (pre shutdown), which accurately predict the potential box office performance of similar movies in the post January 2012 time period (post shut down) had the Megaupload shutdown not happened. This is an extremely difficult proposition, even with the most sophisticated econometric techniques,

From blog.mpaa.org/BlogOS/post/2012/11/30/Assessing-the-Evidence-%E2%80%9CPiracy-and-Movie- Revenues-Evidence-from-Megaupload%E2%80%9D.aspx 7 December 2012 particularly for specialty films4 – or there would be no box office surprises. In this case, it’s impossible to assess the validity of the control group without information about the matching technique and methodology, and the actual matching factors. The only potential factor visible, genre, is very weak. In fact, it is well known in both the industry and peer-reviewed academic literature that box office revenue is affected by a myriad of both observable and unobservable characteristics (e.g. audience taste).

How does the research account for box office trends independent of the Megaupload shutdown? The “matching movies” approach taken seems to assume that the only thing that changed in terms of box office for films in the time period, covering the last five years, was the Megaupload shutdown. The authors do state that they did some testing of alternative shutdown dates, but they provide no information on how this was performed or whether this adequately accounted for other changes in box office revenue over the last five years that are unrelated to the Megaupload shutdown. Box office trends not accounted for in the estimation and independent of Megaupload being shut down would lead to a different set of conclusions.

As currently presented, the conclusions in this abstract are not clear or compelling. We hope that when the final paper is released, these and other related questions are addressed, and a detailed methodological description provided, so that it will be possible to interpret the conclusions presented, and evaluate their reliability.

______

1Christian Peukert, a Ph.D. student at Ludwig-Maximilians-University Munich, Institute for Strategy, Technology and Organization, and Jörg Claussen, a post-doctoral researcher at Copenhagen Business School - Department of Innovation and Organizational Economics.

2The abstract erroneously cites the academic paper “Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales,” as stating that “privacy [sic] negatively impacts sales.”

3Films that are shown on more than 500 screens are a large and important universe. According to Box Office Mojo, the data source used, all 100 of the top 100 films, and more than 150 films in total, released in the U.S. in 2011 were shown on more than 500 screens.* Given that the total sample of movies in the study (1,344) works out to about 270 films per year, this suggests that in certain years films that were shown in more than 500 screens may actually be a majority of the sample, more than 50% of the total. *Box Office Mojo actually presents “theaters” not “screens,” but since the Munich paper uses Box Office Mojo and presents the information as “screens” we’re using the same nomenclature.

4e.g. Films showing on 500 or fewer screen

From blog.mpaa.org/BlogOS/post/2012/11/30/Assessing-the-Evidence-%E2%80%9CPiracy-and-Movie- Revenues-Evidence-from-Megaupload%E2%80%9D.aspx 7 December 2012