Russia Leads MPA’s ’98 Piracy-Loss List

The peace process unfolding in Northern Ireland may have the unintended consequence of stoking video piracy, according to the Motion Picture Assn.

In its annual report to the U.S. trade representative on trade barriers, the U.S. trade group MPA notes that unauthorized prerecorded videocassettes have for years emanated from illicit duplicating plants in paramilitary “strongholds” in Northern Ireland, the British province, and across the border in Ireland.

With the historic peace agreement concluded last year, the MPA cites local Irish anti-piracy organization Infact as forecasting “a slowdown in enforcement” targeting paramilitaries.

The 1999 edition of MPA’s 447-page report, “Trade Barriers to Exports of U.S. Filmed Entertainment,” catalogs piracy travails and foreign regulations cutting into sales of major studio films. The Northern Ireland piracy, although an intriguing example of trade colliding with politics, is a minor problem compared with the magnitude of misappropriation of Hollywood movies in other countries.

The MPA estimates its members’ piracy losses in Ireland for 1998 at just $15 million, far less than Russia ($320 million in estimated piracy losses), Italy ($200 million), Japan ($149 million), Brazil ($125 million) and China ($120 million).

A theme of the MPA report is that improved movie distribution technologies and growing popularity of Hollywood films are stoking piracy. The unauthorized duplication of video compact discs, or VCDs, a format popular in Asia, is particularly threatening.

VCDs are easy to manufacture, and because the VCD is a digital medium, pirates can make perfect copies. The VHS videocassette recorder, by contrast, is an analog process, and so pirated copies of a videocassette are likely to be of poorer quality. “The scale of optical media piracy [VCDs and DVDs, for example] is unlike anything that the MPA has ever faced,” MPA President Jack Valenti says in the report preface. In the first nine months of 1998, the MPA was involved in Asian piracy raids in which 34 million pirated VCD discs were seized. That compares with fewer than 2 million VCR tapes worldwide that were seized in raids over the same period. Valenti is also chief of MPA’s better-known sister organization, the Motion Picture Assn. of America.

The MPA warns of two adverse trends in the 15-nation European Union. First, some elections have installed leftist governments, which have a protectionist bent in the name of promoting European “culture.” Also, emerging Central European countries such as Hungary and the Czech Republic “are under pressure” from the EU to adopt EU-style quotas favoring European programming on TV channels, if those countries want to gain entry to the EU, the MPA notes.

There are bright spots. China, once a hotbed of piracy, is cleaning up its act, but illicit trade is shifting to affiliated territories such as Hong Kong (piracy rate grew to 20% of all products sold in 1998, up from just 5%) and Macau, according to the report.

Pirated items produced for domestic consumption are troubling enough, but the MPA is even more concerned with operations that ship their pirated wares to other countries. The report notes that Hong Kong in particular is shipping bootleg VCDs to other countries. As for mainland China, the MPA notes that “there is now little evidence of pirate product being exported to other countries,” though piracy for consumption in that country resulted in $120 million in losses for Hollywood studios in 1998, the MPA estimates. Another problem in China is a government-sanctioned monopoly on theatrical film importation, which eliminates competition in bidding. In addition, that country’s one importer only licenses 10 foreign films annually for which the revenue will be shared with the foreign distributor. China also has an unofficial quota limiting foreign programming to 25% of TV air time.

Russia tops MPA’s list of problem territories because its once-improving anti-piracy enforcement is on the wane with the country’s economic meltdown. The MPA notes when adding unauthorized TV telecasts of films--a problem in many countries--studio losses are “significantly” larger than the $320 million estimated loss from just video piracy. Economic travails also threaten anti-piracy gains in South Korea, Latin America and elsewhere, the MPA notes.

Piracy is most common in Third World countries, with the MPA estimating the prerecorded video movie market being 100% illicit in 11 countries, ranging from Bolivia (estimated 1998 piracy losses of $2 million) to Vietnam ($5 million in losses). In Nigeria, where illicit videos are the only kind sold, the seven major studios of the MPA do no business whatsoever. In fact, the report notes, U.S. studios are waiting for the government to follow through on a recent promise to compensate them for assets seized in 1981 when Nigeria’s film industry was nationalized.

The MPA estimates the industry suffers its biggest dollar losses in industrialized countries where the piracy percentage rate is far lower. For example, Japan’s piracy rate is just 8%, but ranks third in dollar losses ($149 million) because its film industry is so vast. Indeed, the MPA notes most Japanese consumers would not knowingly buy a bootleg video, but pirates manufacture slick-looking products that appear legitimate.