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

Abstract

In many markets of the digital economy, some products are more prone to online piracy than some of their substitutes. These situations of asymmetric online piracy distort the competition between products. Using the French antipiracy law known as HADOPI (Haute Autorité pour la diffusion des œuvres et la protection des droits d'auteur sur internet) 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 introduction of the law is associated with a 9% increase in the market share of American movies but that this increase occurs at the expense of other movies. These findings primarily originate from a high initial level of asymmetric piracy between American and other movies. This asymmetry was attenuated by the antipiracy law, resulting in a fiercer competition between movies and, as a side effect, in a decrease in the legal consumption of less-pirated products. These results have important implications for firms whose profits may be affected by legislation fighting piracy as well as for governments for the design of their policy.