The effects of movie piracy on box-office revenue: an empirical analysis of the Chinese movie market

Abstract

I evaluate the substitution effects of pirated movies–the unlicensed online movies available on file-sharing websites–on their genuine counterparts, and explore the institutional and economic causes of China’s high level of movie piracy. To do this, I build a dataset including information on online piracy, theater showings, and revenues. I use the level of availability of pirated products and the download intensity of pirated movies as proxies for the piracy level. By utilizing these proxies, I estimate that the average revenue loss caused by piracy is 64%. Protectionism and censorship systems, as well as a low theater coverage rate, contribute to China’s high level of piracy. Counterfactual results show that minimizing release delays, which are mainly caused by protectionism and censorship, increases the box office returns of foreign movies by 43%.