t looks like a drug deal. A stranger o dubious background accosts you rom nowhere and whispers a question ery discreetly. \ou nod and whisper back. 1he man leads you to an alley away rom the crowd. \ou enter a shop that sells cheap clothes. An accomplice is inside packing the stu. le opens a secret closet and you behold stacks upon stacks o the illegal material. It does look like a drug deal. But it`s not illegal drugs. It`s pirated DVDs.
It`s an open secret that malls like the one where the aboe scenario is played out eery single day are lairs or pirates. Stalls, lea markets, and street endors hae been selling pirated CDs, CD-ROMs, VCDs, and DVDs or years. lrom Shoppesille and Starmall to Quiapo and Makati, optical media piracy has been rampant. It`s hardly a local problem. Other countries, especially in Asia and Lastern Lurope, hae earned notoriety in digital piracy. Pirated sotware and games in CD- ROM ormat, music CDs, and moies in VCD ormat hae long been problem areas. But pirated DVDs are on the rise. And it`s a problem that could get out o hand.
1he numbers may shock you.
In Asia, the number o pirated DVDs seized skyrocketed to 6.1 million in 2002 rom zero in 1998. 1hat represents 8 percent o the worldwide seizures, which numbered million pirated DVD discs.
1he Philippines contribute >30 million, about 5 percent o >642 million, the total losses in ideo piracy in Asia Paciic. Not bad, you think. But we hae one o highest piracy rates in the region at 80 percent, at par with China ,91 percent,, Indonesia ,90 percent,, Malaysia ,5 percent,, Pakistan ,95 percent,, 1hailand ,0 percent,, and Vietnam ,100 percent,. \e`re already in the Priority \atch List o the International Intellectual Property Alliance ,IIPA,, since 2001 ,prior to that, we were perennially in the \atch List,, along with India, Indonesia, and 1aiwan. China remains on top, howeer. Combined with piracy in music, sotware, and books, >116 million hae been reportedly lost in the Philippines.
Michael Lllis, Vice President and Regional Director or the Motion Picture Association ,MPA, Asia Paciic Anti- Piracy Operations, notes in a recent launch o its DVD Rewards Program in Manila, DVD piracy is a recent problem that has grown out o the increased popularity o the DVD ormat. It includes the replication, mastering, and distribution o pirate DVDs. Alarmingly, 8 percent o the world`s pirate DVDs in the cases we were inoled in were seized here in Asia Paciic. Clearly, this is Piracy Central. 1his is where replication is taking part.`
Richard O`Neill, Director o the Regional Optical Disc Oice, warns, 1he Philippines is in danger o becoming an Asian dumping ground. 1hat sounds like a harsh term. loweer, as pressure is applied in certain countries, we know that the lines migrate to other countries. 1hey`re starting to come here. I you look at the VRB statistics, this is a homegrown problem. 1he perception was this was a airly sae place to undertake these actiities. I think that the VRB under Mr. Reilla are proing them wrong. 1he I Philippines has the capacity now to become a manuacturing base, which is why a tool like this is necessary, why we think it will eectiely stop the problem at its inancy.`
Jack Valenti, the long-time Chairman and CLO o the MPA, has exclaimed in a testimony beore the US Senate that the US moie industry suers reenue losses o more than >3 billion annually through thet,` adding that digital thieery can disigure and shred the uture o American ilms.`
Lllis points out that eerybody suers rom DVD piracy, rom the legitimate street reseller all the way to the theatrical employees. Nobody wins when DVD piracy takes hold. Plus it has a negatie impact on the Philippine economy. 1he goernment loses by way o lost taxes and jobs are going down the tubes as well.`
Says O`Neill, Piracy aects us all. lor us, that means lost sales. lor your own domestic industry, it means lost jobs. 1hat`s people`s lielihoods. 1hat means those crews, the support personnel, the suppliers all hae lost reenues. It`s a shared problem. 1he impact o piracy is greater in the host country than it is on those who publish lost igures. In act, you`re losing your industry, we`re losing sales. \e think publishing our lost igures alone does not tell the whole story, the losers are the host countries. \ou may get as a consumer what you eel is a bargain but what you`re doing is oting or the demise o your own local industry.`
According to a press release rom the MPA, about 1 million workers are directly and indirectly dependent on the local ilm and entertainment industry, with 200 thousand already lost their jobs due to the piracy problem.
O`Neill, in his presentation, noted that the local theater industry suered a 30 percent loss, or around P2 billion, in 2001 due to piracy. lrom 1,200 local theaters, there are now only around 80. Moie production has gone down by 80 percent, and most local ilms released are the sex ilms that still sell. lrom 200 moies produced eery year, now only around 80 are produced and released. In terms o lost taxes, it`s equialent to P1. billion a year. 110 thousand direct workers and 550 thousand o their dependents hae been aected.
On the other hand, the numbers may not disturb you at all. Ater all, there`s nothing new about piracy. Our consumer culture has long been accustomed to knockos and imitations, rom Gucci bags and Lei`s jeans to Lacoste shirts and Rolex watches. 1hose brands are still in business. Len ilm piracy is nothing new. \hen the Betamax and VlS ormats dominated in the eighties and early nineties, ideo shops made illegal copies or rent. 1he studios are still in business.
One thing, though, has changed. 1hat thing is called digital. lrom analog sources such as tape, digital ormats such as VCD and DVD hae made it easier, aster, and cheaper to reproduce copies. Compression technology has made them easier to store in computers and distribute through optical media and oer the Internet. And unlike analog where each copy cycle degrades quality, the 1000 th
copy o a digitized moie or instance is as pure as the original.
1he DVD player happens to be the most successul product in consumer electronics history. lirst enisioned in 1992 and patented by 1oshiba and \arner lome Video in 1993, it supplanted laser disc players in 199 and reached sales o >1 million in the US in 1998. It took DVD players only 5 years to sell 30 million units, less than hal the time it took VCRs to reach critical mass with US consumers, which is 13 years. In comparison, the CD player took 8 years, the PC 10 years, the cell phone 12 years, and color 1V 1 years to sell 30 million units. DVD sales already surpass VlS tape sales in 2002. 1otal DVD sales and rentals are also expected to oertake VlS sales and rentals.
1he irst major DVD titles were released in Japan in 1996 and the United States in 199. \ith 500 lines o horizontal resolution, image quality is ar superior compared to VlS and VCD, which is largely a Southeast Asia phenomenon. 1hat plus the widescreen iewing, reeze rame control, scene selection, language options, subtitle unction, 5.1 channel Dolby Digital surround sound, and bonus eatures such as director commentary, behind-the-scenes interiews, moie trailers, production notes, cast proiles, short ilms, and \eb site links make DVD the preerred ormat or ilm bus and collectors.
DVD piracy makes it accessible to millions o people who otherwise can`t aord the price o a DVD title. It has also made possible a radical shit in consumer behaior - rom mere renters o ideo to buyers and een collectors. 1hat has neer happened to VlS on a mass scale.
1he reason is obious: price. 1here is a latent demand or moies on ideo, particularly the DVD ormat. lollywood is a global orce and the moie-going public just can`t get enough o Julia Roberts and 1om Cruise. Intellectual properties, such as music, books, sotware, and ilms, are price sensitie and highly elastic. I you just bring down the price o moies on ideo, people will buy them.
But that`s not how lollywood intended things to work. 1o make the most o each moie produced, it has to go to a systematic progression o so-called windows o exhibition`. A ilm will be shown in theaters rom 2 weeks to 12 months, depending on its popularity. \ithin a ew days to 6 months, it`s released internationally. 1hen, it`s released on ideo, which has a protected window o around 6 weeks, meaning it can`t be bought and rented in any other way. Ater that, it`s oered on pay-per-iew cable and satellite systems, with its own exclusie 2-6 weeks window. 1hen, it can be shown on premium cable channels such as lBO and Star Moies, which lasts or approximately 18 months. Ater which it goes to network 1V or one or two runs, an interal that lasts 12-18 months. linally, it goes into syndication on network teleision or cable network or 5 years. In each window, lollywood takes a cut. According to 2000 research study by inestment bank ABN Amro, 26 percent o reenues come rom box oice sales, 28 percent rom 1V, and 46 percent rom ideo and DVD.
DVD piracy messed it all up. Instead o watching moies in theaters or renting them, the general public is going straight to purchasing titles on ideo. At a price ranging between P60 and P100, it becomes cheaper to buy a pirated DVD than go to the moie theater. \hile it may still be cheaper to rent at P15 to P35, the discrepancy has become so nominal that buying a title outright makes more economical sense. \ith a per capita income o only Just as important, there`s no need to wait or moies to be shown in theaters. Days or een weeks beore they`re released in theaters, illegal DVD copies o the latest moies are already aailable.
O`Neill says, In another country, just two days ago, I picked up a new DVD o a title that`s still in the theaters called Dare Deil. It was banned in the country where the pirate was distributing that same uncensored ersion. \e can`t distribute that title, he can. \hat we ask local agencies, leel the playing ield a little bit. 1he economic losses, you can quantiy them a dozen dierent ways. It`s his gain, it`s our loss, it`s your loss.` Valenti, in his testimony, exclaims, 1he cost o making and marketing moies, or example, has risen to nere-shattering heights. In 2000, the total cost to the major studios or making and marketing their ilms was, on the aerage, an astounding >82 million! Only two in ten ilms eer retriee their total inestment rom US theatrical exhibition. 1hose ilms must journey through arious marketplace sequences: airlines, home ideo, satellite deliery, premium and basic cable, oer the air 1V stations and internationally. 1hey must make that journey to try to break-een or eer make a proit.` 1oday as that moie traels its distribution compass course, it is exposed to great peril, especially in the digital enironment. I that moie is ambushed early on in its traels, and then with a click o a mouse, and without authorization, sent hurtling at the speed o light to eery nook and cranny o this planet, its alue will be seriously demeaned. \ho on earth would continue to inest huge sums o priate risk capital when the chances o redeeming that inestment become remote, i not impossible` But anyone hardly cares. People oer all sorts o excuses or buying pirated VCDs and DVDs. It`s only or hard-to-ind or unaailable titles. 1he moie industry is already making tons o money, so what`s a ew millions 1he cost o reproducing a DVD is only a ew pesos, so why should they sell it or P500 to P1,000 Julia Roberts gets paid >20 million per moie, or around P1 billion, she doesn`t get my sympathy. lollywood has been hoodwinking the public or years, this is payback time. Studios and celebrities can earn in other ways, such as merchandising and product endorsements. 1here`s no real lost sales or them since I won`t buy anyway, i piracy doesn`t exist and only original copies are aailable. 1echnology kills industries and people hae learned to cope, deal with it. Piracy helps spread technology adoption. It gies access to cheap entertainment to the masses. 1he list goes on.
But there`s one good excuse why people buy illegal copies o ilms: it`s there. Increasingly, the piracy problem is becoming like the drug problem. 1here`s a huge demand and a huge supply. Cut the supply and you suppress demand. But the supply is oerlowing.
Supply side ow, we look at the supply side that dries piracy. Right now, there are around 9 optical disc plants with 23 production lines operating in the country. 1he total estimated production capacity is 80.5 million, according to the International Intellectual Property Alliance ,IIPA,.
Richard O`Neill, Director o the Regional Optical Disc Oice, in a orum hosted by the Motion Pictures Association ,MPA,, the international counterpart o the Motion Pictures Association o America ,MPAA,, warns, 1he Philippines is in danger o becoming an Asian dumping ground. 1hat sounds like a harsh term. loweer, as pressure is applied in certain countries, we know that the lines migrate to other countries. 1hey`re starting to N come here. 1he perception was this was a airly sae place to undertake these actiities. 1he Philippines has the capacity now to become a manuacturing base.`
Atty. Lualhati Buenae o the Video Regulatory Board ,VRB,, notes, \e hae coniscated 1 replicating machines already or VCDs. I asked Mr. O`Neill i the Philippines has the capacity to produce pirated DVDs and he said he has no inormation yet. So I assume pirated DVDs are those coming rom outside.`
O`Neill replies that there are indications o upgraded machines that are moing into the direction o the Philippines. Maybe there are here already. At the time it is conirmed, we`ll pass on that inormation to your authorities.` Atty. Carlo Omingo, also rom the VRB, howeer, conirms, \e already hae one replicating DVD machine that has been coniscated last year.`
1he Philippines is indeed a haen or pirate syndicates rom Malaysia, long Kong, and 1aiwan as their own countries are becoming less hospitable to their ilk. 1he underground plants in the country are mostly operated by oreigners. A plant raided in Bulacan contained stampers supplied by a long Kong-based syndicate. 1wo plants in Metro Manila employed illegal immigrants rom mainland China. Another was set up by Malaysians. Len some o the 431 local legitimate actories manuacturing optical media, including those inside the Special Lconomic Zones, are reported to engage in pirate operations at night.
1here is also a growing problem o illegal CD-R burning` commercial operations. In January this year, 165 CD-R burners` were seized. lrom small, retail shops, it has become a mass production problem. Still, the bulk o the supply comes rom large-scale imports. 1he trail, traced by Newsbreak magazine, starts in long Kong, a so-called one copy` country, where a trader buys an original or master copy called a molder` rom an insider in one o the legitimate lollywood distributors. 1he molder then is sent to Malaysia or China or mass production. lrom there, the pirated copies, which come in stacks o 50 to 60 discs per batch, are smuggled into the Philippines, in either Metro Manila or Zamboanga. 1he stickers and cases are purchased rom China. 1hese are then packaged together, oten within the stalls that sell them. Mostly lilipino-Chinese distributors, or organizers`, supply mostly lilipino- Muslims in Quiapo, who then sell to indiidual retailers in malls, bazaars, lea markets, and small shops. Loose Laws s to why pirates can operate with such impunity, we oer ie reasons. lirst is that our existing laws, particularly the Intellectual Property Code o the Philippines ,Republic Act 8293,, do not hae sti penalties. lor instance, or the irst oense, imprisonment is rom one to three years and the ine ranges rom only P50,000 to P150,000. Len the maximum penalty is only P1.5 million, peanuts or pirates.
And o course, there is a need to update the law. IIPA members, including the MPA, wants the Philippines to pass an optical disc law, which controls licensing, production, and trade o production equipment and optical discs.
1he Optical Media bill ,louse Bill No. 5225,, sponsored by Rep. Imee Marcos ,and earlier iled by Rep. larry Angping,, includes proisions or centralized licensing o manuacturing o optical discs A and production parts, centralized licensing o export and import o optical discs, license record keeping requirements, registration requirement or commercial optical disc duplication, and seize and seizure authority.
It also requires that all optical media carry a source identiication ,SID, code that has to be secured rom the goernment. 1he idea is to regulate the container, not the content, so that a disc not bearing the code can be assumed to contain something illegal. 1he Optical Media bill also proposes the reorganization o the current Video Regulatory Board into an Optical Media Board with wider-ranging scope. And it imposes tougher penalties on iolators, including imprisonment o one to nine years and a ine ranging rom P100,000 to P3 million.
Piracy is a crime, and so is thet,` says O`Neill. It`s the same thing. And that`s how it should be addressed. And that`s how it`s being addressed.`
1he original bill, more than a year since it was iled, is still hanging in the Senate. It has already passed the third and inal reading in plenary at the louse o Representaties, albeit the approed ersion excludes sotware as a concession to the Senate, which elt that the regulation o sotware piracy is anti- poor` and elitist`, since that will cut the people`s access to inormation technology. Senate science and technology committee chair Sen. Ramon Magsaysay Jr. admitted that it`s unlikely the bill will be tackled as economic reorm bills are being prioritized. louse o Representaties committee on trade and industry chairman Rep. larry Angping expressed pessimism anything will done, gien that the 2004 national elections are at hand.
Weak Lnforcement hen, there is the problem with enorcement. \hile the number o raids and searches against ilm piracy are signiicant, 1,534 in 2002, with around 5 million pirated discs and ideocassettes impounded, post-raid enorcement has been ineectual. It`s a well-known act that ater a raid, the next day or een the ery same day, the retailers selling pirated VCDs and DVDs are back with a engeance. 1here are other problems that beset enorcement. Oten, planned raids are leaked in adance. Ater coniscation, the pirated goods are sold by the authorities to the public or returned to the pirates. 1he IIPA, in its 2003 Special 301 country report, also complained about delays in obtaining search warrants, the poor coordination between the VRB and the National Bureau o Inestigation ,NBI,, and the unreasonable personal knowledge` requirements ,that the enorcement oicer has to hae personal knowledge that a crime is committed, rather than basing the issuance o a search warrant on the inormant`s aidait alone,.
Slow Wheels of Justice those successul raids, an alarmingly low number o administratie cases were iled, just 31 percent or 480 cases out o the 1,534 raids and searches conducted in 2002. But surprisingly, each o those cases resulted into a coniction, with >10,000 leied as ines ,although only >,63 recoered,.
But those were administratie cases. O the 259 raids in 2002 conducted in pursuit o criminal coniction o motion pictures pirates, only 3 cases were iled and remain pending in court.
O`Neill stresses that the MPA has a policy o pursuing criminal cases to the end, not 1 O out-o-court settlements. 1he MPA does not receie a single penny. Around the region, we had ,000 criminal prosecutions last year. 90 percent o those cases resulted in successul prosecution.`
Sadly, in the Philippines, the record has so ar been 0 percent. Not a single optical plant disc owner has eer been conicted. And there has been passing the blame. 1he IPO blames IP owners or compromising with settlements beore coniction, allowing pirates to go back to their illegal operations ater paying a sum o money. IP owners, on the other, blame the courts or the slow proceedings. Since litigation can drag or ie years or more, they understandably end up settling out o court.
Sazon explains, 1here are two ways o looking at the protection o copyright holders. 1he irst one is goernmental. In this role, there is a ast tracking o prosecution. I someone or example carries an illegitimate DVD, then you just report this to the VRB and they can immediately carry on. Now, Republic Act 8293, which is the copyright law, is a more tedious way o running ater the pirates. But the penalties are stier. It is a more expensie way o prosecution. Sometimes what happens here is a compromise settlement between the person that iolates and the person that owns the rights. I you ask i justice has been done, to a certain point there is. \ith the compromise settlement, the iolator agrees not to iolate once again, he pays a certain penalty or the inringement.` But then again, in reality, the big-time operators just resume rom where they let o.
1rue, the criminal justice system in the Philippines leaes much to be desired. As noted in the IIPA report: Deendants can delay prosecutions and keep straightorward piracy cases out o the courts by employing means by which eidence can be examined and re- examined, including an appeal process all the way to the oice o the Secretary o Justice.`
Another problem is the lack o specialized IP prosecutors, which was introduced beore but disbanded in 2000 due to the enormous general case workload and limited number o prosecutors. And while the Supreme Court designated 48 courts nationwide to hear IPR cases, and expanded them to 24 municipal courts, in reality, those courts hear other non-IPR cases as well, urther clogging their backlogged dockets. So now, IPR-related cases are brought to regional prosecutors who are not as experienced in copyright cases. Inestigations take months to be completer and decisions to prosecute can still be eleated to the Department o Justice ,DOJ, or appeal, whose inal decision can take months, i not years.
Porous Ports he problem with a country with more than ,000 islands is the obious diiculty in guarding its ports o entry. Smuggling is a major problem in the Philippines, and this has made it easier or pirates to import and export pirate goods and equipment. 1he Bureau o Customs ,BOC, has diiculty in detecting illegal shipments partly because pirates practice both outright smuggling and technical smuggling, that is, misdeclaring goods replication machines as plastic extrusion machines`. 1he BOC has already created an Intellectual Property Unit to strengthen border control oer pirated goods.
Industry Response he MPA has been ery aggressie in combating piracy worldwide in behal o its members, namely the 1 1 \alt Disney Company, Sony Pictures Lntertainment, Inc., Metro-Goldwyn- Mayer Inc., Paramount Pictures Corporation, 1wentieth Century lox lilm Corp., Uniersal Studios, Inc., and \arner Bros.
Its international anti-piracy program consists o educational outreach and publicity eorts as well as rewards programs or inormants, such as the recently launched DVD Rewards Program. Michael Lllis, Vice President and Regional Director or the Motion Picture Association ,MPA, Asia Paciic Anti-Piracy Operations, describes the purpose o the program, 1he MPA`s DVD Rewards Program will support the Philippines in any way it can. 1he program oers signiicant rewards to indiiduals who proide aluable inormation that leads to a successul raid at a pirate production acility.`
But it`s more actie behind the scenes, pressuring goernments to implement or strengthen copyright laws, assisting enorcement agencies in inestigating pirates, and initiating litigation against iolators. 1he local ilm industry is certainly riding on the coattails o the MPA, doing its part in lobbying Congress or stronger legislation.
1he MPA also has resorted to pushing or technological ixes to the ery same technologies that endanger its existence. lor instance, it took years beore lollywood embraced the DVD ormat, out o ear that being digital makes it a lot easier, cheaper, and aster to copy, which is true. And so, the consumer electronics industry incorporated the Content Scrambling System or CSS. CSS encryption was designed to be unbreakable, until a teenager rom Norway cracked it. Apparently, the copyright industries neer learn: anything can be hacked and cracked.
Lately, the MPA is pushing or two new technological ixes in the US. One is a broadcast lag`, a digital marker that preents broadcast programs shown on 1V rom being redistributed on the Internet. 1wo is to plug the analog hole` with a watermark detector. Since teleision sets and stereos nowadays can conert analog signals to digital that can be stored in a computer, songs or moies can be recorded easily and redistributed illegally.
It`s these lobbying eorts that bear closer scrutiny. 1he MPA and its umbrella organization, the IIPA ,which also includes as members the Association o American Publishers, American lilm Marketing Association, Business Sotware Alliance, Interactie Digital Sotware Association, and Recording Industry Association o America,, hae earned a notoriety or their alarmist warnings on the death o the entertainment industry, their exaggerated statistics, their bully tactics in getting goernments to crack down on piracy, and their anti-consumer stance.
1he Sky is Ialling ack Valenti, the MPAA`s long-standing and powerul President and CLO ,since 1966,, has been criticized by the media or being a chronic alarmist. In a March 2003 Congressional hearing, he linked international pirates to terrorists and organized crime. In a lebruary 2002 report entitled I \ou Cannot Protect \hat \ou Own, \ou Don`t Own Anything!`, he warned that the uture o moies is in danger o being shrunk and squandered by an increasing thieery on the Internet.` In April 2001, he testiied beore the Senate Judiciary Committee, \ith all the passion I can summon I tell J this Committee that i copyright is allowed to decay, then this nation will begin the slow undoing o an immense economic asset, which will squander our creatie uture.` In January 2001, in a speech to 1he International 1rademark Association, he emphasized that the ictims o using ree that which belongs to others are the US economy - the creatie community - and the country`s citizens who want entertainment at a air and reasonable cost.` 1his rom the same man who, in 1982 when the moie industry ell threatened by the emergence o the ideocassette recorder, amously said that the VCR is to the American ilm producer and the American public as the Boston strangler is to a woman home alone.` 1oday, o course, ideo sales and rentals account or 46 percent o studio reenues, almost double the 24 percent earned at the box oice.
lollywood, he claims, loses >3 billion annually in potential worldwide reenue due to piracy, not counting losses due to Internet piracy. \et, lollywood is reporting record reenues. US box oice reenues in 2002 reached >9.5 billion, a 13 percent increase rom the preious year, the highest in 20 years, and it`s a long- term uptrend. 1he number o ilms produced and released goes up and down through the years. One can`t say there are less ilms created because o piracy. 1he number o people employed in the ilm industry has not drastically changed through the years. Sales and rental o VlS cassettes declined by 24 percent in 2002 but DVD sales and rentals more than compensated ,and sere as explanation, or the loss, with a total o 02 million units, a hety 84 percent increase.
Len international box oice reenues hit record leels in 2002. Reenues grew 20 percent to >9.64 billion. Asia Paciic contributes 40 percent o that, around >3.8 billion. In the Philippines, in 2001, \arner Bros. generated P342 million in reenues, a 40.6 percent increase, and net income o P. million, a 185 percent jump. Columbia Pictures made P298 million in sales and P36 million in proits. United International Pictures` reenues increased by 3 percent to P228 million and net income increased by 85 percent to P2 million.
low could an industry that`s posting record highs be in danger o demise Len the music industry, which decried that MP3s being reely distributed on the Internet, is ar rom dying. lorrester Research estimates music sales declined by only 15 percent in the past two years, and not exactly due to Internet piracy. Stan Liebowitz, a proessor at the Uniersity o 1exas at Dallas School o Management, published a comprehensie estimate o a worst-case scenario that sales will drop by 20 percent. In the country, Sony Music Lntertainment lost P39 million on sales o P220 million in 2001, albeit the decrease in reenues is only 13.5 percent. Not exactly the end o the industry.
1he Philippines, the IIPA reported, contributed 1 percent, or >30 million in losses due to piracy. Lduardo Sazon, executie director o the Association o Video Distributors o the Philippines ,AidPhil,, conducted a study which alleged that out o P10 billion in reenues generated by the theatrical, ideo, cable, and music sectors, almost hal or P4.4 billion was lost to piracy in 2001. lor the theater industry, the loss amounted to P2 billion, or a 30 percent loss. In 2000, the legitimate ideo industry earned P1.05 billion as opposed to P2.45 billion earned by ideo pirates. 1he goernment loses P1. billion in unpaid taxes eery year due to piracy. And close to a million workers and their dependents are aected, with close to 200 thousand haing already lost their jobs.
Now, could it be that the decline in the local moie industry, admittedly aected by piracy, has as much to do with declining quality, or to be precise, low standards Our ilm industry stalwarts hae been complaining about the diiculty in competing with lollywood releases and the exorbitant taxes leied on them. 1he latest gripe was, o course, the imposition o the alue-added tax on proessionals, which coer the entertainment industry. \et, they keep churning ormulaic moies and low- budget sex ilms, with the rationale that only these sell to the masses. Shouldn`t the all o the Philippine moie industry be blamed as well on the industry itsel
1he Philippine Motion Picture Producers Association ,PMPPA, and the Moie Producers Distributors Association o the Philippines ,MPDAP, recently identiied the actors that restrict the growth o the industry, which includes the escalating costs o ilm production, onerous and numerous taxes, alling box-oice receipts o domestic ilms that are losing out to bigger-budgeted oreign ilms, ilm censorship, ilm piracy, cable 1V, and the star system`, with superstars charging as much as P3-4 million, aside rom ancillary rights and other ringe beneits, taking up a good chunk o the typical production budget o P15 million.
At the 3rd Cinemanila, ilmmaker and estial organizer Amable "1ikoy" Aguiluz noted that what the local moie industry needs is the introduction o new people with new ideas, the trying out o new themes and new media, the telling o new stories, and the use o new methods in telling them.`
1he MPA, parroted by the local counterparts, hae oten resorted to guilt trips to get consumers eel remorseul oer their buying preerences. Sazon says, \e beliee as legitimate distributors that piracy creates a culture o criminality and deception. Besides being a criminal oense because it is an act o stealing, the problem is this: it`s piracy that`s actually anti-poor. \e pay taxes to the goernment. Goernment proides the necessary the poerty alleiation programs.`
le adds, \e represent 98 percent o the legitimate business. \e serice 800 outlets nationwide. \e carry all the major US titles as well all the local productions. Our business is the irst business that gets aected. Because in our business, we cannot release our ideo titles unless they are irst publicly exhibited. \e hae a window period rom a minimum o 2 months or local productions and 6 months or oreign moies. As you probably know, right ater the US theaters release a moie, 2 days ater, the titles are on DVDs and VCDs.`
Also,` Lllis warns, piracy is undermining Philippine creatiity and threatens its competitie adantage in the Asia Paciic region. 1hereore we need strong laws and eectie enorcement to help restore the country`s reputation and protect the local economy.`
O`Neill says, Now, we call them pirates. Perhaps it`s too noble a term. 1hey`re thiees. lrom whomeer they steal it, whether it`s yours, whether it`s ours, it`s thet. \ou may get as a consumer what you eel is a bargain but what you`re doing is oting or the demise o your own local industry.`
Both the US and local ilm industries hae used the guilt-inducing populist argument that they`re only protecting the interests o the little people - the bit actors, stuntmen, camera crew, production assistants, makeup artists, writers, and what not. ,Not surprisingly, it`s the same argument posed by local actors complaining about the imposition o VA1 on them, who stormed the Senate, albeit wrongully since it should hae been the Department o linance they should hae stormed, which they did ater the Senate patiently pointed this out to them., \et, the moie industry is notorious or the wide and mind-boggling disparities in income between the big shots and the little people. At least, the actors, directors, and producers earn well. In the music industry, the actual creators - the composers, musicians, and recording artists - receie a paltry sum ater the recording studios take their cut.
1he other argument, which resonates more with the public, points out that creatie people will hae little incentie to create their work and business people will also hae little incentie to take risks i piracy only steals what ought to be theirs. 1he aerage production cost o a lollywood eature ilm is >58.8 million in 2002. 1he aerage marketing cost is >30.6 million. 1hat`s a total o >89.4 million. Only two in ten ilms recoup their inestment rom US theatrical exhibition. I consumers opt to buy pirated VCDs and DVDs instead o going to the theaters or waiting or the legitimate ideo release, producers will not take the risk o making new moies.
I guilt doesn`t work, they use ear. 1he standard line is to link pirates with organized crime and terrorist groups. 1here is reason to beliee the ormer, gien that the cost o operating a production plant is enormous. A single replicating line, or instance, already costs P80 million, way aboe the league o a small-time operator. Certainly, it`s not hard to beliee criminal syndicates with links to big business, powerul politicians, and corrupt police oicers are behind these. And who wants the Philippines to become the next Colombia
Statistics Plucked Irom the Sky hese alarming statistics that can shock the most hardened consumer o pirated VCDs and DVDs are actually estimates made by the same industry groups that publish them. low objectie can that be
lor motion pictures, the IIPA estimates losses to piracy or partially deeloped markets like the Philippines in this manner: ,a., 1he number o legitimate ideo product sold or rented in the country each year is subtracted rom the estimated total number o ideos sold or rented in the country annually to estimate the number o pirate ideo product sold or rented annually in the country. ,b., 1he resulting total number o pirate ideo product sold and rented each year in the country is then multiplied by the percent o those pirate ideo products that would hae been sold or rented legitimately and adjusted to relect the US producers` share o the market. ,c., 1he igure resulting rom the oregoing calculations is an estimate o the number o legitimate sales o US motion pictures that are lost each year in the market due to ideo piracy. 1hese estimates are adjusted to relect the wholesale price o legitimate ideo product, to equal losses due to ideo piracy.`
Now, how does one estimate the total number o ideos sold or rented in the country annually,` that include pirated copies And more diicult, how does one come up with the estimate o the number o legitimate sales o US motion pictures that are lost each year in the market due to 1 ideo piracy` Perhaps you bought a pirated copy o Maid in Manhattan` ,or shame,, but does that mean you would hae purchased a legal copy i only that were aailable
No wonder Department o 1rade and Industry ,D1I, Secretary Manuel Roxas II raised doubts about the IIPA`s statistics in the past, questioning its one-on-one ratio and simplistic methodology. Quezon Rep. \igberto 1anada denounced the IIPA`s bully tactics or lobbying the US 1rade Representatie to keep the Philippines in its Priority \atch List.
Bully Pulpit uch is the enormous power o the IIPA. lor years, lollywood has had a cozy relationship with the Democratic party, in much the same way the energy sector has with the Republicans. It`s campaign donations` tit or legislatie support`s tat. In an excellent \ashington Monthly report entitled lollywood and \hine`, author Brendan Koerner noted that nearly 80 percent o the >30 million campaign donations gien by the entertainment industry during the 2002 election cycle went to Democrats. Payback comes in the orm o riendly legislation. 1here`s the lR 5211 bill that will allow media companies to hack into ile-sharing networks like Kazaa and Morpheus. Another inappropriately called the Consumer Broadband and Digital 1eleision Promotion Act criminalizes the sale high-tech deices that don`t hae goernment-approed copy-protection hardware. And another called the Anticountereiting Amendments o 2002 that restricts consumers rom playing their legally purchased CDs on multiple deices by prohibiting copyright holders rom altering or orging digital watermarks, een i only or personal use, such as recording a 1V show or conerting an analog tape to digital ormat.
Intellectual property, ironically, is a relatiely new concept. In the past, creatie output and knowledge were not considered as property that must be protected. Creators and artists were commissioned or their work but their work belongs to the public domain, which can be reely shared. But the Industrial Reolution introduced the concept o patents, mainly on machinery, which later on eoled into the notion o copyrights and intellectual property. But een then, the original intent o copyrights, as articulated in the US Constitution, was to appropriately reward creatiity while ensuring the steady low o new knowledge into the public domain. In other words, rights on intellectual property were limited compared to the rights bestowed on physical property. Originally, the term or protection was 14 years. Since 1960, that term has been extended 11 times. Now, it`s 95 years, applied retroactiely.
\ith great pressure rom Big Media and Lntertainment, punishing iolators o IPR has become more seere. O`Neill notes, Goernments around the world are now realizing that stealing intellectual property should carry the same kind o sentencing as stealing a physical good. lor example, in long Kong, i you are caught selling a hundred pirate DVDs, you can go to prison.`
But intellectual property is not exactly the same as physical property. 1he Constitution guarantees the concept o air use` and that intellectual property should be turned oer to the public domain ater a limited period. lair use means you can quote other writers. It means you can use screen shots o a \eb site i you`re doing a reiew o it. It means you can record an episode o Buy the Vampire Slayer` or personal iewing. lair S use is not something you can apply to physical property.
Now, the concept o intellectual property is under ire because with the adent o digital technologies, it`s easy to replicate and distribute. 1he Internet is bringing up a generation o consumers used to the idea that inormation ought to be ree. 1he open source moement urther reinorces that philosophy. People are getting ed up with the commercialization and monopoly o intellectual property by Big Business. Naturally, the copyright industries are ighting the commoditization o inormation and entertainment.
1he media and entertainment industries hae long betrayed their technophobia, or to be precise, their ear o new technologies that could dismantle their monopoly. In 1908, the music industry took to court companies that made paper piano rolls based on the publishers` sheet music. 1he Supreme Court ruled against it. In 1931, a group o composers did the same to a hotel which played their songs on the hotel radio. 1he court disagreed. In 1968, a book publisher sued a library or photocopying pages rom its journals or research purposes. 1he court again disagreed, citing air use`. In 1969, the 1V networks brought a case against CA1V stations ,precursor o cable 1V,, and lost. In 1984, the moie industry iled a suit against a manuacturer o VCRs, and lost. Recently, it managed to kill Napster and MP3.com and has sued SonicBlue, the maker o Replay1V ,although while the industry dropped the suit, SonicBlue eentually went into bankruptcy,.
What About the Consumer? n the ight against piracy, regular consumers are painted as thiees. And in the search or solutions, the copyright industries hae oten introduced anti-consumer ixes. 1he use o copy- protection technologies that limit the use o media on certain deices, or instance, iolates the Constitution`s guarantee o air use. lollywood`s own Internet oerings, such as MoieLink, hae limited choices and inlexible subscription terms.
And it has the tendency to resist as long as it can to adjust pricing, perhaps the single most crucial actor in combating piracy. Instead o cutting prices, it has resorted to oering an alibi. O`Neill explains, I you steal something, o course you can sell it cheaper than someone who produce the same thing. It`s common sense. I I go and steal your watch, I can sell it or a raction o the legitimate price.`
Sazon adds, People graitate towards low pricing. \ou can get a pirated DVD or 90 bucks, while our customers will settle or 450 and 50 pesos. \hat`s the dierence \e import our DVDs, we pay custom duties, we pay a certain amount o brokerage ees and excise taxes and so on, we also pay our 10 percent VA1, we pay royalties so that the producer who put in the inestment can recoup his inestment, we proide the necessary sales and promotion campaign to be able to create demand, we also an oerhead expense as well as distribution charges. So in eery country where piracy is supposed to be a problem, the legitimate owners will always say that when it comes to combating piracy, pricing is not a actor to consider.`
But it is. 1he moie and music industries are an anomaly. 1hey are bucking the trend o decreasing prices. Instead o going down, as is the logical progression, prices o CDs and DVDs go up or remain the same. One would expect the price o audio cassettes, or instance, would decrease with the substitution o CDs, but it hasn`t. 1he major cost o intellectual I property industries is incurred during creation, but the subsequent reproduction is nominal. So one would expect that the more they reproduce and sell, the cheaper it gets or them, and thereore the lower the price that ought to be charged. But that doesn`t happen. One would think that the cost o production o a well-run business should decrease to relect increasing eiciencies, but the cost o producing and marketing moies just keep on growing. Something must be wrong with the entertainment industry then. Perhaps they`re paying Julia Roberts a tad too much Maybe their distribution model is ineicient Sure, the high ailure rate o moies and short shel lie o actors are conenient excuses. But that`s their problem. Other industries such as consumer electronics suer rom the same risks o product deelopment and product lie cycle, but their prices are decreasing. 1hey`re not passing on the cost o ailure and obsolescence to consumers.
1here`s also something wrong with their pricing policies. \hy charge the same price to deeloping countries In the global economy, a company has to adjust the price o its products to relect the world aerage o purchasing power, or adopt dierential pricing. A P450 CD or a P50 DVD is a strain on the pockets o ordinary lilipino consumers. \hy should access to entertainment or sotware be restricted rom the masses 1o be sure, sotware and entertainment companies hae responded grudgingly by lowering their prices. Microsot, or example, oers olume discounts and discounted prices or certain sectors. \arner Bros. has lowered the price o VCDs rom the P400 or so a ew years ago to the more aordable P150 today. Len DVDs hae gone down rom P1,000 plus to as low as P45 today. Some CDs, particularly local ones, can be purchased or P100. So it`s obious that prices or these goods are set artiicially high. Piracy is orcing the entertainment industry to set the prices o these goods to their true alue as dictated by the market, not by the industry.
Intellectual property products are highly elastic. Lower the price and you increase the olume. At the right price, people will buy the original. It`s the simple law o supply and demand. Certainly, there will still be many who would opt or the illegal no matter what, since it`s close to impossible or the legitimate industry to match the pirates` prices. But they will be able to get many more consumers to switch to legitimate purchases. Lquilibrium in pricing is possible to attain. Piracy only proes that, right now, equilibrium does not exist.
Big Lntertainment doesn`t want to relinquish their monopoly. It wants to control how consumers should listen to music ,good and bad songs in one CD, only in CD ormat, only using your stereo, and watch moies ,wait months beore you see them on ideo, limited bonus eatures or DVDs depending on which region you lie in, expires ater 24 hours ater you download them,. \ears ago, lollywood didn`t want us to watch their moies on our VCR or on our cable 1V. But it managed to adjust its business models and make tons o money. So it needs to igure out alternatie business models to surie in the digital age, and not get in the way o consumers and new technologies.
1rump Card nortunately, lollywood is acing this challenge dierently. I all the educational, publicity, legislatie, enorcement, and judicial eorts don`t succeed, then it still has its trump card - trade sanctions.
U 1hat`s one thing that will get goernments to crack down on piracy. O`Neill warns, I piracy continues and i it grows, you will hae continued attention rom oreign trading partners. But we hae ull conidence that this will not happen. 1his will stop dead in its tracks and brought down to a manageable leel. And that will happen soon.`
1he trump card is the Generalized System o Preerences ,GSP,, a US trade program that allows duty-ree exports o certain products into the US rom deeloping countries like the Philippines. lor the irst 11 months o 2001, >62.2 million o Philippine goods ,or 6 o the Philippine`s total imports to the US rom January to Noember, entered the US under the duty-ree GSP code. 1o keep on beneiting rom such unilaterally granted trade preerences, the US 1rade Representatie ,US1R, must be coninced the Philippines meets its criteria including whether it proides adequate and eectie protection or intellectual property rights.`
\ith the Philippines in the Priority \atch List, we`re in danger o losing the GSP priilege. \e are at a disadantage because we`re not a major trading powerhouse in the irst place. China, on the other hand, can aord to piss all oer Bill Gates and he will continue to gie away \indows or ree. It can continue to produce pirated DVDs and the US will continue to kiss its ass. So when it boils down to that, our goernment will hae no choice but do lollywood`s bidding.
But will piracy eer go away \e might pass that Optical Media bill into law and increase the number o raids, een conict a ew pirates. \e may een bring down piracy leels to something more manageable, as the Business Sotware Alliance has done. But it`s not going away. And lilipinos couldn`t care less.
1o really get deeloping countries like the Philippines to respect intellectual property, then eeryone should ind better solutions. Certainly, creators and producers should be properly compensated. Criminal syndicates should be squashed. Consumers should be educated and persuaded to buy the original. Goernments should pass and enorce strong laws.
But the copyright industries should do their share, and not just bully goernments and consumers. lere`s good adice: Lower your prices to relect the true alue o your products as dictated by your market. Look or alternatie business models and not persist in milking consumers. Use technology not to thwart us consumers but to make it easier, cheaper, and aster or us to enjoy entertainment. It`s a dierent world. Deal with it.