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.