Foxtel Left Red Faced Over The Impact of Illegal Downloads

Written by David Richards     16/07/2014 | 08:26 | Category: DOWNLOADS

Foxtel executives who are currently lobbying the Australian Federal Government over what they claim are "illegal downloads" impacting their business have been left red faced after a lengthy investigation of data collected from BitTorrent, web sites and the Hollywood Stock Exchange reveal that there is "very little" impact on movie studio's or organisations like Foxtel.

Foxtel Left Red Faced Over The Impact of Illegal Downloads
Recently the CEO of Foxtel Richard Freudenstein labelled downloads over Bit Torrent networks as the work of thieves and urged the Government to enact legislation that will make it difficult to illegally download popular programs, video games and music. He said that illegal downloads was having a "major impact" on studio's ad subscription TV services. 

Choice's Erin Turner told ABC that Foxtel "has an outdated business model" and can only blame itself.

Now a US Economist Kolem Strumpf of the University Of Kansas School Of Business in the USA has confirmed that what Foxtel executives are telling the Federal Government has little substance.

Strumpf compared BitTorrent download data and the financial reports of Hollywood studios lodged with the Hollywood Stock Exchange (HSX), he looked at the top 150 films each year from 2003 to 2009.

He found that there's little if any revenue displacement caused by the illegal films.

After making a poor business decision which involved paying $10m dollars for the rights to the HBO series Game of Thrones Foxtel went on the attack after millions of Australians failed to buy the Foxtel subscription package.

Choice says Foxtel has only itself to blame for record piracy figures after hit HBO series Game of Thrones was downloaded illegally nearly 2 million times after the Game of Thrones finale.

Choice spokesperson Erin Turner said Foxtel's exclusive rights deal with HBO to air Game of Thrones two hours after the U.S. on Showcase had effectively forced consumers unwilling to pay for the cable company's monthly packages to seek alternative means of accessing premium content.

Game of Thrones' season four finale saw 1.5 million hits on the web piracy hub TorrentFreak in the first 12 hours after the show went to air in Australia earlier this year.

The Strumpf investigation of 1,057 films could not find a direct link between lost revenues and the early leak of a film on the Internet. In the findings Strumpf looked extensively at factors that could influence the HSX value of a film including movie trailers and the press surrounding it. 

Strumpf concluded that the loss to Hollywood studios isn't significant when looking at the highest grossing films of each year, which make up around 95 percent of the revenues. 

In fact, Strumpf tells TorrentFreak that a "best guess estimate" saw a reduction of $200 million during the time period for first month box office revenues. Strumpf add that the loss is only three tenths of a percent of what the movies earned.

"There is no evidence in my empirical results of file-sharing having a significant impact on theatrical revenue," said Strumpf.

One of the larger profile leaks, X-Men Origins: Wolverine, which was shot in Australia was singled out in the study due to the potential impact that illegal downloads could have had on the movie.

 The film hit the Internet nearly a month before the film reached theatres, reaching 4.5 million downloads before it was officially released. The HSX value of the film shot up after the illegal copy surfaced. 

Strumpf said that an early release of a film had no significant negative effect on revenues. Seeing an early pirated copy surface before a film release often had a consistent positive effect on revenue, even though it was only considered modest.