Hollywood Reeling From Illegal Movie, TV Downloads

BRIAN DEAGON
INVESTOR'S BUSINESS DAILY
April 2, 2007
http://investors.com/editorial/IBDArticles.asp?artsec=17&issue=20070402&view=1

If you haven't seen the hit movie "300," you can always catch it for free on the Internet — along with just about any other Hollywood blockbuster.

You can also watch any popular TV show — every episode of each season, even from channels not available on your local cable network. It's all just a few clicks away on your computer.

In the same way the Internet disrupted the music business, a high-speed locomotive is headed right at filmed entertainment, industry analysts say.

Until now, filmed entertainment was relatively safe from Internet piracy because the large size of video files clogged Internet pipes. But improvements in file compression, faster networks and graphics-enhanced computers have broken down those barriers.

"With the proliferation of broadband and better streaming, the tech trends are bad and the problem is likely to grow," said John G. Malcolm, senior vice president and director of worldwide anti-piracy operations for the Motion Picture Association of America.

The motion picture industry estimates that in 2005 alone it lost $2.3 billion to Internet copyright breaches in the U.S. and $7 billion worldwide, including box-office receipts and video sales.

"There's no silver bullet to stop this," said James McQuivey, a media analyst at Forrester Research. "This is a fire you'll never put out."

First Music, Now Movies

Case in point is the illegal swapping of music. The Recording Industry Association of America has filed thousands of lawsuits and spent millions to send a message that illegal file swapping is outright stealing. But more people are swapping music files now than ever before.

The same peer-to-peer networks that allow the illegal swapping of music are increasingly being used for sharing movies and TV shows.

"P2P (peer-to-peer) video only accounts for about 10% of file swapping right now, but it's growing at triple-digit rates," said Eric Garland, founder of Big Champagne, a Web tracking research firm.

"More and more people are getting their entertainment online without paying for it," Garland said. "P2P is more popular than ever before."

More than 9 million people log on to a P2P network worldwide each day, and that grows each year despite intense efforts by the entertainment industry to shut down the ones that operate illegally.

And it's going to get even tougher to stop the flow. In addition to P2P networks, numerous Web sites have surfaced that offer enough video content to fill a movie rental store.

These Web sites essentially are search engines like Google, but focused on video. They don't host the content but provide an Internet link that connects users to wherever the content is located, on a central server or someone's personal computer.

An example is Peekvid.com. The Web site has links to about 500 movies, including current Oscar winners. It also lists about 200 TV series, often including all the seasons and episodes of every show, including the hit series "24," which airs on News Corp.'s (NWS) Fox network. The site, which shows the movies in a pop-up window, is ad-supported.

According to Garland, much of the video content on Peekvid can be traced to a YouTube-like video site called DailyMotion. Just like YouTube, copyrighted content removed by the site often reappears as countless other users upload it again.

P2P In The Spotlight

Peekvid is one of many sites the MPAA has on its radar.

"There are very few sites which we are unaware of, and what they are doing is clearly wrong," said Malcolm. "They're stealing and making money off the work of other people's creative efforts."

The MPAA and other industry groups worldwide have dragged many scofflaws to court and raided many locations that dish up the content. But there's no sign such illegal activity is ebbing.

"It's not going away," said Chris Seline, founder of Searchles.com, a Web search engine. "TV sites are like a dime a dozen. It doesn't take much to put one together, to find where that content is and linking to it."

In January, U.S. Internet users viewed 7.2 billion videos online, according to comScore, a digital media measurement firm. The typical viewer watches two online videos a day, averaging 2.6 minutes each. The comScore research did not include videos viewed on P2P networks.

Overall, a lot of video that's viewed on the Web is legitimate and highly promoted. The media and entertainment industries have been actively moving content onto the Web, much of it free.

Analysts say the entertainment industry will never be able to stop to flow of unauthorized copyrighted content across the Web. Rather than trying to stanch the flow, the entertainment industry should do a better job at cashing in on the trend, they say.

"You can throw a police force at it, but it will still exist," said Stan Rogow, a producer and writer with a string of Hollywood shows and movies to his credit. "What you have to do is find a better way to get your stuff out there and make it better. It's just a new method of distribution."

Hollywood has been moving in that direction, working out deals with P2P players and other popular Web sites to make popular content available, usually supported by advertising.

"There's no choice but to embrace these platforms," said Howard Homonoff, director of the entertainment and media advisory practice of PricewaterhouseCoopers. "They have the ability to create a legitimate revenue-producing business, even though they can't eliminate the illegal practices."

Said Nolan Quan, a consultant to Broadcaster.com, a video sharing site: "I would bet at some point the studios will win this battle."