Simultaneous Estimation of Legal and Illegal Supply and Demand: The Case of Motion Pictures

Latent Estimation of Piracy Quality and its Effect on Revenues and Distribution: The Case of Motion Pictures

“…Although we focus on the effects of piracy quality, the control variables are consistent with those reported in existing motion picture research. Notably, in the screens equation, anticipated revenues (α1 = 0.490, p < .01), advertising expense (α4 = 0.164, p < .01), and film critics reviews (α5 = -0.371, p < .01) are significant and in the same direction as those found elsewhere (Elberse and Eliashberg 2003;Clement, Wu, and Fischer 2014;Koschmann and Bowman 2017). In the revenues equation, screens (β1 = 1.335, p < .01) and film critics reviews (β5 = 0.441, p < .01) are significant and in the same direction as those prior studies.…”

“…After the launch period, suppliers can adjust supply based on prior weeks' performance; week 2 is estimated with an industry average 30% drop-off in opening week revenues, while weeks 3 and onward use a double exponential smoothing model (i.e., Holt-Winters forecasting method). Since revenue decay is curved rather than linear, one parameter smooths and another accounts for the trend, giving more weight to more recent weeks, as done in prior research (Elberse and Eliashberg 2003;Koschmann and Bowman 2017). Web Appendix A further explains revenue estimation.…”

“…Finally, studies to date have also not touched on how piracy quality affects both legal and illegal supply, core aspects of the piracy market that may induce omitted variable bias if not addressed (Koschmann and Bowman 2017). Table 1 presents key piracy quality studies to date.…”

“…For many products, and especially information goods like motion pictures, the launch period is different from the postlaunch period. The system has four equations: The model uses a multiplicative framework, log-transforming variables in accord with prior movie research (Elberse and Eliashberg 2003;Clement, Wu, and Fischer 2014;Koschmann and Bowman 2017). The system of equations treats legal supply as the starting point: illegal copies enter the market after the legal product has launched.…”

The economics of movies (revisited): A survey of recent literature

“…However, while the question seems relatively straightforward, establishing credible causal relationships has proven challenging given the interplay between lawful and unlawful consumption (Smith et al., 2019; Tyrowicz et al., 2020). Using data related to actual prerelease and/or post‐release piracy, mixed evidence has been reported on the sign and magnitude of sales displacement (Koschmann & Bowman, 2017; Lu et al., 2020; Ma et al., 2014b; McKenzie & Walls, 2016). Given the inherent challenges with revealed‐preference piracy data, some researchers have opted instead to use survey data to explore similar questions (Bai & Waldfogel, 2012; Herz & Kiljański, 2018; Jha & Rajan, 2021; Nishijima et al., 2020), while other survey‐based studies have focused more on identifying the characteristics of individuals who participate in the activity (Cox & Collins, 2014; Ho & Weinberg, 2011).…”