Pix peer pressure?

Study examines financial toll of downloads

This article was updated at 4:46 p.m.

NEW YORK — Illegal downloading of films via the Internet may not be the financial catastrophe many fear, at least not for some time.

According to a new report released Monday, online peer-to-peer network piracy will have only a limited impact on the movie business in the medium term. Study, from U.K-based Informa Media, concludes that Hollywood and other film copyright owners have far more to gain through legal streaming, online subscription, e-tailing of discs and other legit downloads than they stand to lose.

According to the researchers, illegal copying off the Web could cost copyright owners $92 million this year. That’s certainly nothing to sneeze at, but it’s still a relatively small fraction of the estimated $1.1 billion market for legitimate sales of hard copies via online retailers. The Informa Media report forecasts legit direct digital sales of films could reach $872 million by 2010 (or $3.5 billion including online hard copy sales), with lost sales value at that time of around $460 million.

The study, “Films on the Internet,” estimates that roughly 144,000 films are downloaded illegally every day by broadband Internet users worldwide. The calculation assumes that around 1% of the 1.5 million users connected to pirate peer-to-peer networks are actively downloading at least one film at a time at an average speed of 2½ hours a title.

Assuming roughly half of those 15,000 illegal downloads could have been potential legit buys worth around $3.50 per film, total film industry losses clock in at a modest $92 million. If P2P network growth expands in line with broadband access, losses could escalate to around $460 million by 2010.

Informa estimates that there are 95 million broadband subscribers worldwide, a figure that should increase to over 300 million by 2010.

According to report publisher Simon Murray, several key factors distinguish the threat of online film piracy from the plight of digital music.

“The time it takes to download a film is still prohibitively long, which inhibits (one’s) ability to steal them easily and pass them around. Also, there tends to be less repeat viewing of a film compared to songs which can be listened to hundreds of times,” he said.

While the report does not directly address illegal burning of multiple digital copies, the authors believe it is the Internet that enables the proliferation of copies to begin with, so its technological limitations should have a knock-on affect for multiple CD-burning.

Authors note that even with the fast growth of downloads, sales of hard copies of DVDs and videos via Internet retailers and videostores will continue to dominate film sales, notching up a projected $2.62 billion in 2010.

While Hollywood is being outwardly aggressive about stemming the tide of pirates before it reaches the epidemic proportions seen in the music sphere, many privately insist that the value of an official DVD release — with all the extras — still exceeds a pirate copy.

Pricing averts piracy

Report author Adam Thomas noted that the studios have clearly been more diligent than their recorded music industry peers in trying to avert widespread piracy technically and strategically through pricing strategy.

But the sector’s main advantage so far is speed and infrastructure (or lack thereof). Online film piracy will only reach the problem level that the music industry is suffering when most homes have super high-speed fiber optic connections, and that’s not likely to be pervasive before 2020.

The Intl. Intellectual Piracy Assn. estimates that the U.S. major distributors lost $1.36 billion from physical video piracy in 2002, while the Motion Picture Assn. of America estimates film industry losses of $3 billion-$3.5 billion per year from hard copy piracy.

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