The Unintended Consequences of Anti-Piracy Laws on Markets with Asymmetric Piracy: The Case of the French Movie Industry

Abstract

Using the French anti-piracy law known as HADOPI as a natural experiment, we study the asymmetric effects of online piracy on cinema admissions. Applying four estimation strategies at different levels of observation (town, movie, country, and consumer), we find that the introduction of the law is associated with a 9% increase in the market share of American movies. This increase occurs at the expense of other movies. Although we find an increase in overall admissions, this effect is not statistically significant. These findings primarily originate from a high initial level of asymmetric piracy between American and other movies, which was attenuated by the anti-piracy law, resulting in a fiercer competition between movies. The results can also be explained by the behavior of younger consumers, and might be caused by consumers' budget or time constraints. We exclude positive shocks on the relative quality of American movies, the advent of 3D movies, supply side reactions by firms, and word of mouth effects of illegal downloads as explanations for this redistributive effect.