Box Office Revenues Say Little About Piracy

Once again the MPAA has announced a profitable year for American motion pictures, and once again some of the usual suspects have seized upon this announcement to declare the studios hypocrites for ever saying that piracy causes real harm to the industry. Certainly, it’s easy enough to keep writing this same, careless article all the time. Cory Doctorow cobbled together a 100-word jab for BoingBoing; TorrentFreak reported essentially the same premise with a little less snark; and Ruth Reader managed to tap out this little sneer on, complete with obligatory reference to SOPA, under the unforgiveably misleading headline The Movie Industry Just Admitted Piracy Isn’t Curbing Its Massive Profits.  

I know this may be hard to imagine, but the question of piracy’s harm to the filmed-entertainment industry overall is considerably more complex than a measurement of how the top-grossing motion pictures are doing at the box office.  But before expanding on this subject (again), let me repeat the following theme as a matter of principle:  Whether piracy siphons $100 or $100 million out of the legitimate market, it’s money that belongs to the people who do the work. Sadly, this is not a sufficient rationale for many, so we have this silly conversation instead, speculating about how innocuous piracy is or isn’t.

The annual report released by the Motion Picture Association reveals worldwide box-office sales of $38.3 billion, up 5% from 2014.  And that’s good news.  But the only thing we can actually  conclude from the information in this report is that audiences around the world—and especially in Asia-Pacific—are going to theaters in numbers large enough to make the big movies profitable regardless of piracy. This isn’t all that revelatory, of course—unless you actually thought nobody would go to the theater to see the new Star Wars—but to the the above-named pundits and their ilk, these revenues appear to make the studios out to be Chicken Littles.  How can they be so aggressive about piracy when they’re clearly doing just fine?  But if anyone took the time to look at the report and to learn something about the whole industry, they could not justifiably jump to the conclusion that piracy is fundamentally harmless.

Ruth Reader notes that MPAA CEO Chris Dodd, in an address to CinemaCon this week, stated that the industry projects a $1.5bn estimated annual loss at the box office due to piracy.  This number may seem negligible next to $38 billion, but it’s worth noting that this estimate applies only to US box office, which makes the number considerably more significant relative to the $11.1 billion in sales for the US and Canada.

But assuming the $1.5 billion is accurate and still seems trifling to some readers, let’s look at it from a slightly different perspective that considers all of the 708 films included in the report.  Of these, 561 films were non-MPAA member, independent features.  And let’s imagine that 10% of that $1.5 billion could have been divided among the best 100 of those indies. That would be $1.5 million per movie, which any independent filmmaker will tell you can be life-and-death money.  In fact, Adam Leipzig of CreativeFuture used exactly that expression in this article when he noted the conservatively estimated $1.83 million the film Boyhood lost to piracy last year.  Of course, we cannot definitively say where money not spent might have gone, but by the same logic, it doesn’t make sense to blithely assume that because Jurassic World and Inside Out did great, piracy isn’t an issue across the broader market.

The fact is we can’t know exactly how much is lost due to piracy, but we can conservatively project that a relevant portion of the illegal market would be recaptured if piracy did not exist. Out of a universe of hundreds of millions of pirate site visits every month, if just 20 million consumers worldwide were to switch from illegal home-viewing channels to legal ones and spend just $13/month on filmed entertainment, that would add up to about $8 billion per year. And to put that in perspective, the top 25 grossing films of 2015 earned about $6 billion at the box office.  Or spread $8 billion across 500 idependent titles, and it would be $16m in sales per title.  I’m not suggesting revenue spreads evenly like that; of course it does not. But that’s the point. The top-grossing products may consistently earn enough to overwhelm the effects of piracy, but the smaller products—indie features, TV programs, documentaries—which operate on smaller margins are naturally going to be affected more acutely by any loss.  In fact, producer Martha De Laurentiis recently made a pretty good case for saying that piracy may have played a role in cancelling the popular series Hannibal.

Still, I realize that the pundits’ main premise, however unexamined it may be, is that the studios are the big whiners who want to fight piracy, and the studios are the ones who seem to be doing well.  But even if that logic were sound, readers should not be fooled into thinking it’s exclusively the studio execs who have a problem with piracy.  They’re just the ones who make the headlines, the ones who have the resources to try to address piracy, and the ones who are the most frequently vilified in this context. The indie filmmaker who loses money to piracy feels quite strongly about the issue, too; she just doesn’t have the muscle to do much about it.  As such, the indie filmmaker’s best hope for mitigating large-scale piracy is the costly effort being made by the studios. This is one of many reasons why “fans” cannot presume to separate the individual filmmakers from the major companies; they are co-dependent in a variety of ways.

Finally, while the temptation to bash the studios on the piracy issue will remain SOP for the lazy reporter, at least the peanut gallery might consider its own hypocrisy when criticizing these companies for producing exactly the films that consistently top the Most Pirated lists year after year.  Of the few words Cory Doctorow could be bothered to share with us on this subject, he spent some of these accusing the studios of clinging to “high-risk tentpole economics”.  In other words, the studios’ making money with tentpole films is grounds for calling them hypocrites about piracy, but then the studios should also be lambasted for making tentpole films, which is partly a response to piracy.  I know I’ve raised this issue before, but a threat of any loss in value to any commodity will drive investors to safety.  So, if you promote piracy and at the same time blame investors for producing the kind of big-spectacle fare that can earn revenue in spite of piracy, you kinda sound like you don’t know what you’re talking about.

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