Thorsten Hennig-Thurau, Victor Henning, & Henrik Sattler
Consumer File Sharing of Motion
Pictures
Illegal consumer file sharing of motion pictures is considered a major threat to the movie industry. Whereas industry
advocates and some scholars postulate a cannibalistic effect on commercial forms of movie consumption, other
researchers deny this effect, though sound evidence is lacking on both sides. Drawing on extant research and utility
theory, the authors present hypotheses on the consequences and determinants of consumer file sharing and test
them with data from a controlled longitudinal panel study of German consumers. The data contain information on
the consumers’ intentions toward and actual behavior in relation to the consumption of 25 new motion pictures,
allowing the authors to study more than 10,000 individual file-sharing opportunities. The authors test the effect of
file sharing on commercial movie consumption using a series of ReLogit regression analyses and apply partial least
squares structural equation modeling to identify the determinants of consumer file sharing. They find evidence of
substantial cannibalization of theater visits, DVD rentals, and DVD purchases responsible for annual revenue losses
of $300 million in Germany. Five categories of file-sharing behavior drive file sharing and have a significant impact
on how consumers obtain and watch illegal movie copies.
Thorsten Hennig-Thurau is Professor of Marketing and Media, Depart-
ment of Marketing and Media Research, Bauhaus-University of Weimar,
and Research Professor of Marketing, Cass Business School, London
(e-mail: tht@medien.uni-weimar.de). Victor Henning is a doctoral student
of Marketing, Department of Marketing and Media Research, Bauhaus-
University of Weimar (e-mail: victor.henning@medien.uni-weimar.de).
Henrik Sattler is Professor of Marketing, Institute of Marketing and Media,
University of Hamburg (e-mail: uni-hamburg@henriksattler.de). The
authors thank Gary King, Marc Fischer, and the four anonymous JM
reviewers for their helpful and constructive comments on previous ver-
sions of this article.
To read and contribute to reader and author dialogue on JM, visit
http://www.marketingpower.com/jmblog.
© 2007, American Marketing Association
ISSN: 0022-2429 (print), 1547-7185 (electronic)
Journal of Marketing
Vol. 71 (October 2007), 1–181
Ever since the ascent of Internet file-sharing servicesand the parallel sharp decline of the music industry’sworldwide sales, movie executives have feared that
their industry would be similarly affected by illegal file
sharing (The Economist 2002). Recent figures show that
approximately 130,000 movies are downloaded each day
through file-sharing networks in the United States alone
(Motion Picture Association of America [MPAA] 2004a),
and movie theater admissions in 2005 fell by 9% in the
United States and even more in other major markets.
Against this backdrop, the MPAA (2004b) claims that “ille-
gal movie trafficking represents the greatest threat to the
economic basis of moviemaking in its 110-year history,”
and it has declared “war on piracy” (Fritz 2005).
However, sound evidence for the proclaimed effect of
file sharing on movie consumption is lacking. A multitude
of industry reports postulates a cannibalization effect of file
sharing on movie industry revenues, but the results of acad-
emic studies are inconclusive. No peer-reviewed article has
yet investigated the effects of movie file sharing on com-
mercial distribution channels, and the limited work that
reports a negative effect of music file sharing on legal music
consumption uses highly abstract proxies, such as “Internet
penetration,” to measure consumer file sharing (e.g.,
Liebowitz 2006). At the same time, some researchers argue
that file sharing does not damage the (music) industry and
provide empirical (Oberholzer-Gee and Strumpf 2005) and
theoretical (Gopal, Bhattacharjee, and Sanders 2005) argu-
ments for the absence of a cannibalization effect—or even
the presence of a positive effect of file sharing on legal
consumption.
We shed light on this controversial issue by employing
controlled longitudinal panel data from 770 to 813 con-
sumers that encompass information on more than 10,000
movie file-sharing opportunities. We use this data to investi-
gate whether illegal movie file sharing influences revenues
generated through theatrical visits, DVD rentals, and DVD
purchases and, if so, how strong the effects are. In addition,
we present—to our knowledge, for the first time—a com-
prehensive, theory-based model of the factors that drive
consumers’ movie file-sharing activity. This model offers
the movie industry a more thorough understanding of why
consumers engage in file sharing, suggesting more effective
antipiracy strategies.
We structure the rest of the article as follows: After
reviewing the relevant literature, we derive a set of hypothe-
ses regarding the consequences and determinants of movie
file sharing from extant research and utility theory. We then
report our data set and use ReLogit regression analysis and
partial least squares (PLS) structural equation modeling to
test the hypotheses. We conclude by discussing the results
and implications.
Motion Picture File-Sharing
Literature
File-Sharing Consequences
Industry representatives unanimously argue that illegal
motion picture file sharing has a negative impact on other

2 / Journal of Marketing, October 2007
kinds of movie consumption, and industry-commissioned
studies, such as those of the German Federal Film Board
(hereinafter FFA) (2006) and MPAA (2004c), support their
claims. For example, in a study of movie piracy by the FFA
(2006), respondents indicated how movie downloading or
copying movies with a CD/DVD burner influenced their
consumption of motion pictures through other channels. Of
the respondents, 42% reduced their number of movie
theater visits (though 8% stated they went to the movies
more often), 45% said they rented fewer DVDs, and 44%
replied that they bought DVDs less often. Similarly, the
findings of an eight-country study commissioned by the
MPAA (2004c) indicate that “about one in four Internet
users (24%) have downloaded a movie” (MPAA 2004c, p.
1) and that, on a global level, 26% of downloaders purchase
movies “much less” or “a little less” often than in the past
(excluding Korea, the outlier, lowers the unweighted mean
from 26% to 14%). The insights generated by these and
other industry studies are limited by their methodological
approaches and lack of transparency. In all cases, the results
rely on an ex post “what-if” approach that asks consumers
who have already seen movies as illegal copies (and there-
fore know the cinematic quality) to speculate whether they
would have paid for the movies if they had not been avail-
able as illegal copies.
To the best of our knowledge, no scholarly research has
addressed the effects of sharing illegal movie copies on
commercial distribution channels. In the related context of
music file-sharing studies, researchers are split into two
opposing groups. The first group reports a negative impact
of music file sharing on industry sales (Liebowitz 2006;
Michel 2006; Montoro-Pons and Cuadrado-García 2006;
Peitz and Waelbroeck 2004; Zentner 2006), but these stud-
ies all rely on aggregate household Internet penetration in a
given city as a proxy for file sharing and do not monitor file
sharing on an individual basis. Therefore, this approach
raises serious questions regarding spurious correlations and
paves the way for alternative explanations.
The second group of researchers questions these find-
ings and argues that file sharing has either no impact or a
positive impact on industry revenues. Specifically, Gopal,
Bhattacharjee, and Sanders (2005) propose a model of
online music-sharing economics and derive implications for
consumer surplus and producer profits. Following the train
of thought that consumer file sharing represents a form of
“sampling” for experience goods, they conclude that file-
sharing networks lower the total costs of evaluating and
acquiring experience goods, which increases purchases and
industry profits. In other words, file sharing reduces con-
sumers’ risk in evaluating new music (an argument that eas-
ily extends to movies), a major obstacle in consumer deci-
sion making.
Using a different argument, Boldrin and Levine (2002)
and Grgeta (2004) model competition with sunk costs and
argue that, with certain assumptions, the decreasing costs of
reproduction that result from file sharing make it easier, not
more difficult, for the producer to recoup his or her invest-
ment and that as the rate of reproduction increases,
competitive rents increase. Their conclusion is based on the
concept of indirect appropriability, which assumes that an
original product attains greater consumer utility when it can
be copied and that this utility increase can be captured by
the producer through a price increase. However, similar to
Gopal, Bhattacharjee, and Sanders (2005), these researchers
do not provide empirical findings to substantiate their
conclusions.
Oberholzer-Gee and Strumpf (2005) present empirical
results that show no negative impact of file sharing on tradi-
tional music distribution channels. Over the course of four
months, they monitor 1.75 million file downloads on file-
sharing networks and then match the downloads to U.S.
album sales data. Their empirical analysis shows that music
file sharing has no significant impact on album sales. Again,
however, the generalizability of their findings is somewhat
limited because the authors use the “number of German
school kids on vacation” as an instrumental variable for
file-sharing activity to bypass endogeneity problems caused
by the simultaneity of downloading and purchasing activity
in their aggregate level data.
To summarize, movie industry representatives argue
that file sharing serves as a substitute for commercial movie
consumption, but no peer-reviewed research has studied this
relationship for movies, and the results from music file-
sharing research are inconclusive and limited by method-
ological constraints. Moreover, no existing study has sur-
veyed actual consumer decision making on an individual
level, and no study has used longitudinal data.
File-Sharing Determinants: Rochelandet and Le
Guel’s Model
Related to the consequences of movie file sharing for com-
mercial channels are the factors that drive consumer file
sharing. Research into these factors is also rare; we are not
aware of a single academic study that directly addresses this
question. Again, some scholars have researched file-sharing
determinants in the related context of music. Most authors
focus on the role of individual constructs for file sharing
(e.g., ethical predispositions [Gopal et al. 2004]; consumer
expertise, social networking, and moral judgments [Huang
2005]), whereas Rochelandet and Le Guel (2005) attempt to
integrate different drivers of sharing illegal music copies in
a comprehensive model.
Building on the Beckerian consumer utility framework,
Rochelandet and Le Guel (2005) propose that consumers
prefer illegal copies of music over the original product (i.e.,
a CD) when consuming the illegal copy offers greater util-
ity. More specifically, they argue that three groups of factors
influence consumers’ utility perceptions of the original and
the illegal copy: (1) the utility derived from buying an origi-
nal (including both gross utility and costs), (2) the costs of
the illegal copy (mainly transaction costs), and (3) the
degree of substitution between an original and its illegal
copies. Rochelandet and Le Guel find partial support for
their model from a convenience sample of 2500 French
consumers. With an ordered logit approach, the factors in
their model explain 10% of the music file-sharing intensity.