Shutting Down of File-Share Sites Big News for Netflix and Hulu

One day after the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA) were protested and subsequently retracted, the Department of Justice shut down the popular file-sharing site Megaupload.com, effectively locking out its 150 million users.

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The shutdown seems to be having a ripple effect with other file-sharing sites. One in particular, FileServe.com, announced on its website that it “can only be used to download and retrieve files that you have uploaded personally.” In essence, the government’s message has been sent – copyright infringement will not be tolerated.

This move by the DOJ should have a significant impact on public media conglomerates such as Disney (NYSE:DIS) and Time Warner (NYSE:TWX). These companies’ subsidiaries such as New Line Cinema, HBO and ABC — popular targets of copyright infringement — have long been losing revenue because of websites like Megaupload, which allow viewers to watch television programs and movies for free and without commercials.

The Megaupload shutdown will undoubtedly benefit its competitors, Hulu (NYSE:DIS)(NASDAQ:NWSA) and Netflix (NYSE:NFLX), which seem to be close to securing an oligopoly in online television and movies. However, there are still many file-sharing websites available to the American public. It will be interesting to see whether they follow FileServe’s lead and shutdown their content to U.S. residents, essentially conceding their largest market to Netflix and Hulu, or remain stout in providing free content of popular television shows and movies.

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