Tag Archives: Megaupload

Study Concludes That Megaupload Shutdown Boosted Movie Sales

Posted on by
Reply

In a study published earlier this month, professors Brett Danaher (of Wellesley College’s Department of Economics) and Michael D. Smith (from Carnegie Mellon University’s H. John Heinz III School of Public Policy and Management) conclude that the January 2012 shutdown of Megaupload positively affected the digital sales of movies for the two major film studios that provided data to the study.

Given the difficulty of collecting data in support of that conclusion — and the fact that the study was reportedly partially underwritten by the MPAA — the study is bound to be met with skepticism from copyright reform advocates and piracy sympathizers, but my reading of the study found it to be reasonable in its methodology, and quite measured in its claims, all things considered.

To cut to the chase, the study’s bottom line conclusion is that “in the 18 weeks following the (Megaupload) shutdown, digital revenues for these two studio’s movies were 6-10% higher than they would have been if not for the shutdown.”

The means by which the professors arrived at that conclusion is quite complicated, and beyond the scope of this post. Rather than focus on their methodology, I’d like to highlight some of the caveats the professors offer about their study and its conclusions — caveats that strike me as very reasonable, forthcoming and intellectually honest, but that will likely be summarily ignored by critics of the study, who are already focused on the extent of the relationship between the researchers and the studios that supplied them with data.

Early on in the study’s abstract, the authors note that anti-piracy measures are really only worth undertaking if they have a positive return for rights holders. Or, as the professors put it, “a necessary condition for supply-side anti-piracy polices to be worthwhile is that we must see a causal gain in media sales and revenues resulting from the reduction in piracy.”

The study then acknowledges that “[i]t is not clear that such a gain will be realized.”

“First, when a major filesharing site or protocol is eliminated, other alternatives exist,” the study notes. “Policy interventions against particular sites or protocols may simply transfer filesharing from one platform to another with no net effect on total piracy or sales…. Second, even if total filesharing activity decreases, if the discouraged pirates consist largely of consumers whose reservation prices for the content are lower than the market price, no sales gain will be realized. On the other hand, if the elimination of some of the largest and most convenient filesharing platforms leads some consumers to turn from piracy to purchases on legal channels, then revenues to content providers can increase. For these reasons, the question of whether shutting down major piracy platforms will causally impact sales to consumers is theoretically ambiguous and must be answered empirically.”

Even with confidence in the source data and their analysis thereof, the authors concede that their work has really just scratched the surface in terms of providing a sound basis for the development of public policy.

The following section is worth quoting at length, because it establishes (to me, at least) that the researchers are genuinely interested in producing solid data and a workable basis for policy, rather than just spouting a preconceived position in furtherance of an agenda.

“Finally, we note that while we believe our results strongly suggest that the shutdown of the popular Megaupload and Megavideo sites is causally related to an increase in digital motion picture sales, that there are several limitations associated with our study. First, Megaupload was a very well-known cyberlocker and its shutdown was highly publicized. As such, the shutdown of Megaupload influenced the policies of several other cyberlockers focused on piracy, and our results necessarily measure the “net impact” of the Megaupload shutdown across the cyberlocker industry, as opposed to just measuring the impact of Megaupload. In addition, our results only analyze the impact of Megaupload on digital motion picture sales. We are not able to measure the effect of this shutdown on other motion picture channels (e.g., DVD sales, theatrical sales) or on other product categories (e.g., music, books). Because we only observe 18 weeks following the shutdown, we also do not know whether the sales increase will persist or if these consumers will eventually find their way back to alternative piracy channels (in spite of the fact that we see no clear indication of such a reversion in the 18 weeks in our data). Finally, we note that our study only measures specific benefits of this regulation – it does not measure either tangible or intangible costs of this sort of intervention, and such costs should be considered carefully as part of any policy decisions.”

The full study can be downloaded here.

Piracy and the Entitlement Mindset

Posted on by
Reply

In reading a bit about “Mega,” the new site/service launched by alleged pirate Kim Dotcom, I did something that is really against my better judgment: I scrolled down and read through the comments posted in response to some of the articles.

As an employee of an anti-piracy service, I must say that there are few things more disheartening than reading comments posted to ANY story about copyright, content piracy, or related subjects. On the occasions when I peruse them, I find myself clasping my hands to the side of my head and screaming “WHAT?!?!” at the monitor as a I read (which is probably a pretty disconcerting habit from the perspective of my nearby coworkers, come to think of it).

This morning, I ran across a number of real head-scratchers in the comments, most of them being the sort of cliche, juvenile defamation one often sees/hears directed at “Big Content” or the “MAFIAA.” One comment in particular stood out for me, not because it was the most outlandish (it can’t hold a candle to the seemingly serious calls for murder of Hollywood studio executives, various rights-holders, Congressmen and judges), not because it was the least coherent, but because it is sadly representative of the entitlement mindset that is all too common among consumers when seeking to justify and rationalize their own acts of infringement.

The article the comment was posted in response to was a piece by Pat Pilcher of the New Zealand Herald, about Kim Dotcom’s five-point prescription for ending piracy. That plan, according to Pilcher, is as follows:

1. Create great stuff
2. Make it easy to buy
3. Same day worldwide release
4. Fair price
5. Works on any device

The list itself is not entirely without merit (except for the fact that, as the New Zealand recording industry association RIANZ soon pointed out, the music industry is essentially doing all those things, and online piracy of music remains rampant), but it’s also naive to believe that following Dotcom’s recipe would really eliminate piracy. It’s also telling that the list says nothing about addressing existing piracy through DMCA take down notices and/or the courts — although I suppose it might be understandable for a fellow in Dotcom’s current position to avoid mention of the merits of intellectual property rights enforcement.

Here’s what one reader (identified only as “CS”) posted in response to Dotcom’s points:

Highly commendable.
It would most likely happen as long as governments keep their beaks out of it.
I tried to buy a new album a couple of months ago but they wanted me to wait 2 or 3 days to buy it here!!!
So I downloaded it for free.
As for the artist he toured here and I bought over $1500 worth of tickets so even if I were to have a moral problem with it I don’t. His problem for not releasing it in a way it was easily able to be purchased. I will buy some fruit with his 5 or 10 dollars.
Kim is dead right once again.
Obama and his Hollywood cronies are bad news.

What kills me about that comment is the author’s apparent belief that any delay in delivery of the new content he desires is an iron-clad defense of his subsequent decision to illegally download the content, instead of waiting a trivial amount of time to obtain it legally. They wanted him to wait two or three whole days? The horror!! Have these greedy music industry suits no decency?!?!

It’s nice that this person claims to have purchased over $1500 worth of tickets to the same artist’s concerts (a claim I find dubious at best), but to justify the illicit download by decrying a two or three day wait…?

Wow. Just wow.

Note to self: Stop reading comments on articles about piracy. Instead, spend the time doing something more uplifting…. like getting a root canal.

Megaupload’s New Plan: Will It Fly, Legally?

Posted on by
Reply

In an article on Wired.com today, Kim Dotcom and Mathias Ortmann outlined their vision for a new service, called simply “Mega,” including an approach to file-hosting that the pair believes will render their service legally bulletproof with respect to the sort of prosecution they are currently facing.

As described by Dotcom and Ortmann, Mega would allow users of the service to encrypt files as they upload them, and provide the user with unique keys for decryption purposes. The users would control access to any uploaded file, and since the encryption key would not be stored by Mega, the company would have no means of viewing the files uploaded to their servers.

As it is put in the Wired article:

Dotcom’s belief is that even the broad interpretation of internet law that brought down Megaupload would be insufficient to thwart the new Mega, because what users share, how they share it, and how many people they share it with will be their responsibility and under their control, not Mega’s.

Dotcom says that according to his legal experts, the only way to stop such a service from existing is to make encryption itself illegal.

I’m not so sure Dotcom and Ortmann’s vision really comports with the Safe Harbor provisions of the DMCA. Why? Because §512(i), in pertinent part, states the following:

Conditions for Eligibility.
Accommodation of technology. — The limitations on liability established by this section shall apply to a service provider only if the service provider….accommodates and does not interfere with standard technical measures.

Does encrypting every file “accommodate” technical measures like the spiders used by services such as DMCA Force to ferret out possible online infringements on our clients’ intellectual property?

Ortmann apparently doesn’t see that as a concern, telling Wired “If the copyright holder finds publicly posted links and decryption keys and verifies that the file is an infringement of their copyright, they can send a DMCA takedown notice to have that file removed, just like before.”

Ultimately, the answer to my question will probably come from the courts — and my hunch is that if Mega follows through on its plan, the courts will be given the opportunity to weigh in on the question sooner rather than later. Major rights-holders aren’t likely to simply take Dotcom and Ortmann’s word for it that Mega is legally bulletproof, after all.

Is There Such a Thing as a ‘Legitimate’ Cyberlocker?

Posted on by
Reply

Whether you call them “cyberlockers,” “file lockers” or “cloud hosting services,” sites that offer both file storage and file sharing capabilities to their users have been in the news a lot lately, often not in a positive context.

In the midst of the ongoing Megaupload story and Australian webmaster Robert King’s mission to make life difficult for various allegedly illicit cyberlockers, an interesting question comes to mind: Is there any such thing as a legitimate and/or responsible cyberlocker?

Despite the potential for abuse inherent in the way cyberlockers function (those that offer a financial incentive to encourage file sharing by their members, in particular), DMCAForce’s answer to that question is a resounding “yes.” The problem with cyberlockers is not the technology itself; the problem is in what some unscrupulous site operators do with that technology.

Take the allegations in the Megaupload case, for example; if the prosecution proves its claims concerning the alleged willful acts of copyright violation (including a mass ‘scraping’ of YouTube’s video library in 2006) the consequences for Megaupload won’t be a function of having run a file locker, they will be a function of having run a criminal enterprise. In other words, it’s not about a site’s technology, it’s about that site operators’ conduct.

In our view, any file locker that pays account-holders based on the number of views or downloads generated by the content uploaded by those account-holders is playing something of a dangerous game, because to many rights-holders, that sort of arrangement between a cyberlocker and its users looks an awful lot like providing customers with an incentive to infringe. Indeed, if you look at what the most popular, most downloaded and most viewed content on cyberlockers (and/or on the torrents), there aren’t too many home videos to be found on the list; the most popular files are, by and large, Hollywood movies, and usually relatively recently released ones, to boot.

While it’s unreasonable to expect a site the size of Megaupload to be entirely aware of all the files uploaded and shared across its system, there is such a thing as willful blindness, and in some cases cyberlocker providers are likely a whole lot more aware of the illegal activity taking place on their site and network than they will publicly admit. Some operators might not only be aware of the illegal acts, they might be the ones committing those acts, as well.

So, if illicit cyberlockers are ones that turn a blind eye to infringement (or worse, are operated by those who engage in infringement directly) how does a legitimate cyberlocker conduct itself, by contrast?

For starters, any site that publishes or provides access to “user-generated content” (UGC) should abide by the safe harbor provisions of the DMCA. Even for sites based outside of the U.S., run by operators who may not believe themselves to be subject to U.S. law, it is still a good business practice to abide by the DMCA.

Beyond DMCA compliance, we also believe it isn’t a good sign if a cyberlocker includes an affiliate program that pays users based on the number of views and/or downloads that their uploaded content generates. Inevitably, such an arrangement invites users to upload the content that they believe will be the most popular with other users, and thereby the most profitable, as well. If you think about how many views the new Batman movie would attract, as opposed to the number generated by some random amateur homemade video, we think it is fair to say the former would be the bigger draw. For a lot of cyberlocker uploaders seeking to make money off of these affiliate programs, many of whom hail from countries with depressed economies and few job opportunities, the ease and speed of making money from content piracy is too great a temptation to withstand.

In short, there’s no reason why a cyberlocker can’t be a valid, law-abiding business. For that matter, cyberlockers enjoy a great deal of leeway under the law (more leeway than a lot of rights-holders are comfortable with, in fact). Running a cyberlocker as a legal, legitimate service doesn’t require a superhuman effort, just respect for the law, common sense, and the ability to resist the temptation of the “easy money” that piracy and other crimes often represent.