Unstoppable theft of digital content threatens markets. (Commentary).

FLIPPING through a menu at a run-of-the-mill restaurant in Beijing, patrons are greeted with a more colorful offer: "You want DVDs?"

It's a common question here in the Chinese capital. Almost anywhere you go, you're bombarded with opportunities to buy pirated DVDs, CDs and computer video games. One doesn't have to look for them -- the goods come to you. Whether you're walking through Tiananmen Square, museums or the blocks surrounding the U.S. Embassy, the question "You want DVDs?" is posed endlessly.

Titles like "A Beautiful Mind" and "Harry Potter" and "Lord of the Rings" can be had for 7 yuan, or less than $1; And we're not talking low-grade copies filmed in theaters with pocket video cameras, but bootlegs of actual DVDs. Or if it's music you want, pirated copies of the latest CDs from Britney Spears, Alanis Morissette or Henry Rollins are just 5 yuan.

The scene in China and, increasingly, elsewhere in Asia, makes you wonder about the U.S. entertainment industry's future. All the big smiles and backslapping we saw at the 74th Academy Awards seem to ignore the forces steadily gnawing away at Hollywood's livelihood.

High stakes 

"Infringement still runs rampant in the country" even with legislation cracking down on the practice, says Li Mingde, who works with the Intellectual Property Center at the Chinese Academy of Social Science.

Entertainment industry big guns like AOL Time Warner Inc., News Corp.'s 20th Century Fox, and Vivendi Universal SA have been trying to outwit the world's video pirates and are pressuring governments to shut them down. Movie studios and computer-software producers say piracy costs them tens of millions of dollars in lost sales.

The stakes are much greater here in China, where bootlegging of movies, music, software and books is rampant. Beijing has been trying to tighten copyright laws as it enters the World Trade Organization and stamp out the sprawling underground industry. And it's made some progress; customs officials are cracking down on bootleggers.

Yet it doesn't take much investigation to see that piracy remains omnipresent in Beijing and Shanghai. That's a huge problem for Hollywood, which has looked at the growing affluence of China's 1.3 billion people as its next frontier. The 1998 film "Titanic" raked in $36 million here and Hollywood executives have been banking on the Chinese market ever since.

In China, "first edition" bootlegs -- those copied in theatres with video cameras -- turn up within 24 hours of a film's release. Higher-quality versions dubbed from actual DVDs entrusted to movie-industry insiders and reviewers can be on the market within days. Costing a fraction of the movie-ticket price, DVDs are often a more appealing expenditure for Chinese consumers.

Worse for Hollywood is the globalization of the piracy business. As authorities crack down on this illegal industry, producers of fake DVDs and CDs are becoming more sophisticated. Malaysia's government, for example, has been cracking down on unlicensed video-disk factories that chum out as many as 360 million disks a year, exporting to Switzerland, China and South America. Hong Kong also has been raiding stores selling illegal videos and software, and tightening local laws.

Lucrative market

All that means, however, is that pirates are spreading around their operations. These days, smugglers acquire their source material in one country, copy in another, produce in a third and then sell in a fourth nation. Business Software Alliance, a watchdog group, claims that 94 percent of the software sold in China is pirated - 97 percent in Vietuam.

One challenge movie studios are coming up against is a global consumer backlash. When you ask locals and foreigners here in Beijing if they feel guilty buying pirated entertainment goods, you'll hear some variation of: "Not when you consider how much money actors and rock stars get paid."

Whatever the driving force, piracy is an industry that's here to stay. "We have every movie' Beijing street seller Ren Yudong told Bloomberg reporter Alice Yuan. "Any title you've read about in a magazine or seen on television, we have them. Fresh off the press."

William Pesek Jr. is a columnist with Bloomberg News.