Studios retool anti-piracy tactics

New plans aim to hit pirates' pocketbooks

BEIJING — Pirates ahoy! Illegal DVDs and counterfeit CDs blight the continent of Asia, an issue that vexes Hollywood studios and local governments alike. But the copyright protectors and defenders of intellectual property rights are fighting back.

Pressuring local governments, nimbly altering release windows, smart marketing and public education are some of the tools being used to thwart pirates.

It’s a tough battle. Pirates can get DVDs on the streets of the cities of Beijing and Bangalore within hours of a pic’s release and months before a legitimate DVD is available. They sell for as little as 68¢ in China, for example.

Last year, the Motion Picture Assn.’s operations in the Asia-Pacific region probed more than 30,000 cases of piracy and assisted law enforcement officials in conducting nearly 12,400 raids. These activities resulted in the seizure of more than 35 million illegal optical discs, 50 factory optical disc production lines and 4,482 optical disc burners, as well as the initiation of more than 11,000 legal actions.

“It’s a difficult task to stamp out piracy overnight, as the problem needs to be addressed on many levels — from educating consumers about the problem and how it impacts them to enforcing tougher penalties that make pirating activities less attractive,” says Mike Ellis, senior veep and regional director for the MPA in the Asia-Pacific.

“As long as piracy pays, then it will continue. The rewards and risks are heavily weighted in the pirates’ favor, and the returns are very high. Currently in Asia, the cost of violating intellectual property rights is low, and penalties are considered the cost of doing business. Many criminals are right back in business within hours and days of being caught — that has to change if we are to ever fully address the piracy problem,” he adds.

Worldwide, the studios lost $6.1 billion to piracy in 2005, about $1.2 billion of that from piracy in the Asia-Pacific region, which is just slightly less than the figure in the U.S. of $1.3 billion.

China is the center of the piracy industry; some 3 billion discs were sold here last year, and the market is worth some $2.5 billion, but only a tiny fraction of that was spent on legitimate DVDs.

The MPA estimates that more than 90% of DVDs in China are pirated, costing Hollywood studios $244 million and Chinese studios $2.4 billion in lost potential B.O. in 2005.

In November, Warner Bros., Paramount and DreamWorks announced that they were teaming up to battle piracy in China, the world’s largest market for illegal DVDs, by selling new international titles on DVD for $2.95 through the joint venture CAV Warner Home Entertainment, in some cases with a window of as little as two months after a movie’s U.S. theatrical release, and other studios may soon join Warner’s distribution network.

Warner launched the CAV Warner sales network in 2005 to fight piracy by selling bargain-priced DVDs and now has 20,000 outlets in 50 cities.

Beijing has increased penalties for product piracy and has stepped up enforcement under foreign pressure. The U.S. government has complained about China’s record on intellectual property rights to the World Trade Organization.

But despite some progress, studios are forced to come up with creative ways to beat the pirates.

For example, many people want to buy legitimate children’s DVDs to avoid tears when the disc doesn’t work or doesn’t include all the extra features. Specially packaged gift sets and box sets are also popular, says Tony Vaughan, the Shanghai-based managing director of CAV Warner.

Studios have also learned to be quick on their feet. When a low-quality pirate version of “Happy Feet” hit the market, Warner Bros. brought out a legitimate version quickly to meet an obvious need.

One of the highest-profile sting operations across the region was Operation Tripod earlier this year, a dragnet that yielded a bumper crop of IPR malfeasance.

Not surprisingly, China led in the number of pirated optical discs seized at 1.187 million, with high numbers of discs seized and raids in the Philippines, Thailand, Malaysia and India. There were also a large number of arrests in relation to the illegal camcording of movies in cinemas.

The studio’s efforts at controlling piracy in Asia are beginning to take hold in terms of traditional methods of distribution, but the Internet is presenting new challenges.

And it’s not just pirate DVDs. Pay TV piracy cost the Asian biz $1.5 billion in the past 12 months, and there are few hopeful signs that revenue leakage will decline significantly in the near future, according to a survey by the Cable & Satellite Broadcasting Assn. of Asia (Casbaa) and Standard Chartered Bank.

The survey showed that a conservative estimate of losses stood at $1.54 billion, up from $1.13 billion in 2006 — and the survey did not include China, which remains “uncharted territory for the annual estimates,” Casbaa said in a statement.

Central to the public image of the war on piracy in Asia are Flo and Lucky, two black Labradors who are the world’s first dogs trained to sniff out the chemicals used to make CDs.

They’re being used in Malaysia in the battle against music and film piracy.

Ultimately, the studios might just win, by a nose.

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