Movie piracy: threat to the future of films intensifies

Almost 30% of Britons are now watching movies illegally online or buying counterfeit DVDs, costing the industry £500m a year

‘There’s a perception it’s a victimless crime, but it’s not,’ says Mark Batey of the FDA. The movie industry excels in selling dreams. But since the dawn of the digital revolution, there is one narrative they’ve consistently and conspicuously failed to sell: that piracy is theft and consumers who indulge ought to feel guilty about it. Recent research by Ipsos suggests that almost 30% of the UK population is active in some form of piracy, either through streaming content online or buying counterfeit DVDs.

Such theft costs the UK audiovisual industries about £500m a year.

Given such scale, why has that the message failed to sink in? “There’s a perception that it’s a victimless crime,” says Mark Batey, chief executive of trade body the Film Distributors’ Association. “But it’s not. There are just a handful of super successes every year among hundreds of movies that are brought to market. And when a film is copied or made available online, it reduces the value of that film around the world.”

This, says Batey, can be particularly detrimental to the independent film-maker who may have spent years raising money for the film and may have had to remortgage their house.

Former lobbyist and US senior government official Jean Prewitt agrees. “The impact of piracy tends to play out differently and arguably more immediately on the independent sector than it does on the studios,” she says. “The indies are totally dependent on local distributors in all countries to take risk and invest in the making of a film before it is made. This is how these films get financed.”

Prewitt, who now heads the Independent Film and Television Alliance, points to its members who go to markets at festivals such as Cannes, Berlin and the American Film Market in Los Angeles (which is produced by IFTA) to present their project to buyers, who pre-commit to the film and then take it when it is finished, guaranteeing a minimum level of royalties to the film-maker.

These pre-sales are then taken to a bank and used as collateral to finance the film. If the pre-sales aren’t secured, the bank won’t loan the money and the film doesn’t get off the ground.

“Distributors are not able to take the risks they used to. What this means to the consumer is not that some producers don’t get rich, it means the product doesn’t get made.”

Each year, a huge number of these independent films are lauded at the Oscars: Dallas Buyers Club, 12 Years a Slave, American Hustle and The Wolf of Wall Street all went to market to seek independent financing.

This reduction of revenue caused in part by piracy has also resulted in studios and production houses making less adventurous choices when it comes to films – just think of the prequels, sequels and remakes hitting screens this summer. Similarly, streaming television content illegally has a huge effect on the business, says Gareth Neame, executive producer of Downton Abbey.

“Broadcasters will pay us money upfront, but it’s not sufficient to cover the cost of the whole production, so we look at the long-term value of our product and, based on all the ways we can exploit this, we cashflow against anticipated revenues,” he says.

“If it comes to pass that the show doesn’t make those revenues because of illegal downloads, we don’t recoup the money, and we have to be more cautious.

“Long term, movies and TV and other content simply won’t be created in the first place. One may think an individual act of piracy doesn’t matter, but if that becomes a way of life then the value of intellectual property becomes eroded, shows like Downton Abbey won’t get made.”

Phil Clapp, chief executive of trade organisation the Cinema Exhibitors’ Association, says that cinemas are losing about £220m a year at the UK box office due to piracy, representing about two months’ income in an average year.

“We recognise that the vast majority of illegal content starts its life in the cinema, and because we remain the key source we have put a huge amount of effort into making our sites more secure and training staff and giving them the ability to take action,” he says.

Clapp adds that the financial impact is felt most acutely by the long list of people you see on the credits of a film. “Makeup artists, costume designers,, studios and facilities, even box office staff – they are the ones who are greatly affected by this loss of revenue.”

According to a 2010 TERA report, up to a quarter of a million jobs will be at risk if nothing is done about copyright infringement in the UK by 2015.

Alex Hamilton, managing director of eOne Films UK, which has brought films such as the Twilight saga and 12 Years a Slave to British theatres, agrees with that assessment.

“The audiovisual industry supports hundreds of thousands of people’s livelihoods and if the industry has trouble supporting itself, it’s going to put people out of work,” he says. “People aren’t pirating to make themselves better or put food on the table; they are doing it for recreational purposes. An individual has to acknowledge that their actions don’t exist in isolation.”

There are a number of ways to consume content legally, says Hamilton, from cinema to video on demand subscriptions such as Amazon Primeand Netflix, and the cost is relatively low. Another crucial point pirates should understand is that nothing is free.

When a consumer streams illegal content, these sites are making money, either through advertising or subscription costs.

“It’s straightforward plagiarism for profit,” says Prewitt. “Every consumer click is driving legitimate dollars out of the legal industry and into the pockets of these criminals.”

The Federation Against Copyright Theft (Fact) works with law enforcement agencies to prosecute piracy but also works to educate the public on the consequences of copyright infringement.

“One message that is key is that, whether you’re pirating physical copy or streaming, you are putting money into the hands of a criminal,” says Kieron Sharp, director general of Fact.

Many pirates who produce counterfeit DVDs on a large scale can be traced to organised crime rings in the far east, he says, who then reinvest that money in other strands of criminal activity, such as prostitution, drugs and dog-fighting. “Our view is that most of these people [who stream illegally] are film and TV fans and we want them on our side, not on the side of criminals, who will profit from their consumption.”

Fact general counsel Byron Jacobson says the organisation has also been working hard to prevent companies from advertising on infringing websites. There seems to be evidence, he says, of a significant decrease in the number of high-street brands doing so.

And while Fact has proved to be a strong backbone for the entertainment industry when it comes to copyright infringement, support from outside the business has waned.

The UK coalition government has moved slowly in implementing the Digital Economy Act, which addresses policy issues related to digital media, including copyright infringement, and it has been an uphill struggle to get internet service providers to help combat the issue.

However, there is light at the end of the tunnel. In the UK, BT, Sky, Virgin Media and TalkTalk have reached a deal with the Motion Picture Association and the BPI, which represents the British music industry to send “educational” letters to customers who have downloaded illegal content. The process is expected to come into effect in 2015.

“The difficulty is there is no end point,” says one industry insider. “It’s not really going to divert or stop even medium-level or hardcore pirates. Maybe it will quash the nervous teenager, but that’s about it.”

And it’s not just the entertainment industry that will suffer if the value of copyright is not respected, says Neame. “IP businesses and learning-based business industries are hugely increasing in the west,” he says. “The erosion of IP will have an increasingly large impact on the global economies and economies in Europe. It’s important that we try to educate people to behave like responsible citizens and to be honest and understand why copyright matters.”

Diana Lodderhose –, Thursday 17 July 2014

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