Mixed Anti-Piracy Results Send the Wrong Message

This week has provided a much-needed win for Hollywood in the war against piracy. It has also provided the video game industry with another black eye against any and all measures that have been taken to curb the problem.

First, the good news: researchers at Wellesley College and Carnegie Mellon University found that two unnamed film studios experienced an online revenue increase of six to ten percent after Megaupload and Megavideo were shut down.

Now the bad news: Electronic Arts (NASDAQ: EA ) is getting assaulted in the press by angry consumers, bloggers, reporters and professional athletes who can't log in and play the new SimCity.

Piracy is at the center of both issues. Hollywood studios thought of Megaupload as a threat to their business because it allowed users to download and upload pirated films. Fearing a similar problem, Electronic Arts implemented an unpopular form of DRM (digital rights management) that prevents software from running without a persistent Internet connection.

Movie studios have yet to publicly respond to the Wellesley College/Carnegie Mellon University study, but it is safe to assume that they are happy with the results. Electronic Arts is also remaining silent, though it did publish a defensive blog update to explain the issues that players have incurred.

The problem with both of these scenarios is that neither industry has a definitive answer in the war against piracy. By shutting down Megaupload, Hollywood may have encouraged some people to actually pay for the entertainment they consume. That does not mean that every file-sharing site should be banished, nor does it mean that every file-sharing consumer is bad. It simply means that this one particular site might have been bad for movie studios.

Even if that's true, there is at least one hole that can be poked in the study's results, which did not consider the quality and popularity of the films released when the research was conducted.

The study focused on the 18 weeks after Megaupload was shut down in January 2012. During that time, Twilight: Breaking Dawn Part 1 was released on DVD and digital distribution. Alvin and the Chipmunks: Chipwrecked and Mission: Impossible - Ghost Protocol were also released during the period. Isn't it possible that they had a positive impact on revenue?

That is precisely the problem with the research -- it didn't make room for outside factors that may have also impacted sales.

On the flipside, Electronic Arts is sending the message that all anti-piracy measures are bad for the game industry. In reality, this particular strategy is the problem. Consumers cannot be expected to stay online at all times. Other game companies have learned this the hard way . Now Electronic Arts will have to do the same.

This does not mean that game publishers cannot actively fight piracy. They can -- and should -- continue to do so. Movie studios should do the same.

However, neither industry should be led to believe that it is an all-or-nothing proposition. The battle against piracy is arguably the most challenging that the game and entertainment industries will ever face. It cannot be won by shutting down one website -- nor will it be lost because another game company screwed up.

Follow me @LouisBedigianBZ

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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