Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales

- Shutdown of Megaupload cyberlocker causally increased digital paid movie downloads and rentals.
- Decreasing appeal of illegal content can nudge consumers toward legal purchase.
- By implication, filesharing is demonstrated to displace paid movie downloads and rentals.

The growth of Internet-based piracy has led to a wide-ranging debate over how copyright policy should be enforced in the digital era. In this paper we analyze the impact of the US government's shutdown of a major piracy site - Megaupload.com - on digital sales and rentals of movies.Exploiting cross-country variation in pre-shutdown usage of Megaupload, we find that the shutdown of Megaupload and its associated sites caused digital revenues for three major motion picture studios to increase by 6.5-8.5%. Our results suggest that some consumers will turn to legal channels when a major filesharing site is shut down, and by extension that illegal filesharing displaces digital movie sales.