BOOTLEGGERS PILLAGE STUDIOS' PROFITS ILLEGAL DISTRIBUTION ACCOUNTED FOR $6.1 BILLION LOSS IN '05.

Byline: Greg Hernandez Staff Writer

The major movie studios lost an estimated $6.1 billion in 2005 because of Internet piracy, bootlegging and illegal copying of their films, according to a study released Wednesday by the Motion Picture Association of America.

The losses are far bigger than any previous annual estimates and showed that Internet piracy, which accounted for $2.3 billion of the losses, is now nearly matching the losses for street sales of bootlegged copies, which totaled $2.4 billion. The remaining $1.4 billion was lost to the illegal copying of films.

MPAA chairman and CEO Dan Glickman said the study, prepared by LEK Consulting LLC. over 18 months in 22 countries, will help to better analyze and focus the industry's efforts in fighting movie theft.

``Movies are a valuable product, and intellectual property must be respected,'' Glickman said.

Previous figures quoted by the MPAA were annual estimated losses reaching $3.5 billion from street sales of pirated movies alone. The MPAA had also previously referred to a study by Informa Media Group which estimated that online file sharing was costing the movie industry $858 million more annually.

The losses were calculated by consumer demand for titles, while previous estimates were calculated by losses based on DVD seizures.

The study showed that the bulk of the losses were from international piracy, which accounted for $4.8 billion. About half of that total was from European countries. The remaining $1.3 billion in losses occurred in the U.S., which is higher than any individual country.

Of the countries included in the study, piracy in foreign countries is especially prevalent in Russia, Mexico, China and Spain in terms of Motion Picture Association member company losses.

But the report states that the country where piracy is most prevalent in terms of potential percentage loss to the marketplace is China at 93 percent, followed by Russia at 81 percent, Hungary at 73 percent, Thailand and Mexico at 62 percent, and Taiwan at 51 percent.

Various markets were surveyed differently, since some countries such as Mexico can be assessed for losses to legitimate markets while others, including China, can only be assessed by lost opportunity.

``The film industry is a thriving economic engine that generates jobs and exports in countries all over the world,'' Glickman said. ``We are calling on governments internationally to continue to work with us in limiting the impact of piracy on local economies and the film industry.''

The MPAA has provided the international data from the study to the Office of the U.S. Trade Representative for use in preparing its annual report on worldwide intellectual property rights.

The study also provided a profile of the typical international copyright thief, who is a male between the ages of 16 and 24 living in an urban area.

In the U.S., the 16-24 age group represents 71 percent of the illegal downloaders, while college students were at the root of most of the piracy losses.

``As an industry, we have to continue to educate people about copyright law and the consequence of breaking those laws,'' Glickman said. ``At the same time, we have to provide legitimate, hassle-free ways for consumers to obtain movies at a reasonable cost.''

Just last week, the MPAA and the Recording Industry Association of America sent letters to 40 university presidents in 25 states asking for their cooperation in cracking down on students who are engaging in Internet theft, typically through a school's Local Area Network because they are perceived as more secure and private than peer-to-peer file-sharing systems.

``Clearly there is a certain segment that is never going to change their habits because it's ingrained in their personalities,'' said Richard Dorfman, managing director of Richard Alan Inc., a financial and investment advisory company with interests in media and entertainment.

``But overall, I think the majority of the people engaging in this activity could be persuaded to abandon it provided that the mechanism for (legal) downloading was there.''

[e-mail]

[phone]