Cybercrime

Telecommunications Piracy

Piracy's impact on the Theatrical Movie Industry

Piracy impact on the theatrical movie industry Indiana University Department of Telecommunications Sung Wook Ji ## email not listed ## The effects of piracy on movie distributor revenues are hypothesized to be the balance of a negative effect due to substitution for theater demand and a positive effect due to network externalities and the diffusion of information (advertising effects). In this paper, I estimate the overall effect of piracy on movie industry revenues using a fixed-effects, two-stage least squares analysis of data on movie sales, admission prices, cable penetrations, and piracy rates of motion pictures, music, and business software in 20 countries over a 6 year period from 1999 to 2004. The results show that movie piracy has a positive effect on the increase of theater admissions. 1. Background and literature review Through the digitalization and advancement of network structures such as the Internet, it is now easier to illegally copy a digital product. Producers and distributors of a digital product can easily make duplications of the original and distribute them either legally or illegally over the Internet. Furthermore, an individual can duplicate and distribute a digital product through personal devices such as a computer, CD writer, or DVD writer. The Internet is one of the most popular methods to distribute these digital products. According to the Recording Industry Association of America (RIAA),the effect of piracy on music contents in the music industry has reduced the sales of music products to such an extent that it could result in a collapse of the music industry (RIAA) 1 The motion picture industry has also been affected by piracy: the Motion Picture Association of 1 RIAA reported the industry loses about $ 4.2 billion to piracy worldwide.

History and Statistics of Telecommunicatons Piracy

• Beginning with the Napster phenomenon in 1999, the craze peaked in the spring of 2003 around the time that the record industry in the United States first made good on threats to prosecute downloaders.
• At that time, some 35 million U.S. adults used the Internet to download music. Four percent said they did so on an average day.
• Downloading music has been especially popular among young adults, with 52% of those aged 18-29 involved.
• The industry had a convenient scapegoat in Napster: Its success coincided with a drop in CD (compact disc) sales, leading to the supposition that the phenomenon was being driven by the substitution of free online music for CD purchases.
• By mid-2001, the industry succeeded in shutting down the original Napster—which by that time claimed 50 million users—through court rulings that enforced the Copyright Term Extension Act of 1998.