posted 09-19-2003 03:16 PM                    

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Hollywood Faces Online Piracy, but It Looks Like an Inside Job

By JOHN SCHWARTZ

When "Hulk" hit the small screen early, Hollywood hit the roof. Two weeks before this summer's film adaptation of the angry green giant opened in theaters in June, copies started showing up on file-sharing networks around the world. The film cost Universal $150 million to make and distribute, but anyone with a fast Internet connection, a big hard drive and plenty of time could see it free.

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Hollywood is desperately worried that it will soon face the widespread illegal copying that has bedeviled the music industry — and that prompted record companies to file lawsuits last week against 261 people accused of illegally distributing copyrighted music online. Piracy of works in digital format, like DVD's or high- definition television is, in theory, so simple that whole movies could be zapped around the globe with a click of a mouse — a prospect that Jack Valenti, chief executive of the Motion Picture Association of America, has told lawmakers "gives movie producers multiple Maalox moments."

But the early debut of "Hulk" was not the work of the armies of KaZaA-loving college students or cinephile hackers. The copy that made its way to the Internet was an almost- complete working version of the film that had been circulated to an advertising agency as part of the run-up to theatrical release. And "Hulk" is not alone.

According to a new study published by AT&T Labs, the prime source of unauthorized copies of new movies on file-sharing networks appears to be movie industry insiders, not consumers. The study is "the first publicly available assessment of the source of leaks of popular movies," according to its authors.

Nearly 80 percent of some 300 copies of popular movies found by the researchers on online file sharing networks "appeared to have been leaked by industry insiders," and nearly all showed up online before their official consumer DVD release date, suggesting that consumer DVD copying represents a relatively minor factor compared with insider leaks.

"Our conclusion is that the distributors really need to take a hard look at their own internal processes and look at how they can stop the insider leaks of their movies" before taking measures that might hamstring consumers' technologies and rights, said Lorrie Cranor, a researcher at AT&T Labs and lead author of the study.

The production and distribution process provide a better choke point, Ms. Cranor said, than antipiracy measures that could hamstring consumer electronics devices and computer networks. "If you're not going to worry about the insiders, it's kind of pointless to worry about the outsiders," she said.

The insiders might be workers in production or promotion, or even Academy Awards screeners, to whom the studios send thousands of advance copies of DVD's each year. "The movie industry ought to treat everybody within its influence equally, from studio executives and investors, down through movie editors, truck drivers and out to the critics," concluded Ms. Cranor and her coauthors, AT&T Labs researchers Patrick McDaniel, Simon Byers and Dave Kormann, and Eric Cronin of the University of Pennsylvania.

Ken Jacobsen, senior vice president and director of worldwide piracy issues for the motion picture association, said he had not yet seen the report, but added that its conclusions seemed off.

"The industry experience is the awards screeners are a source for piracy," he said, but primarily during the Oscar-judging season. "The industry experience also is, on a rare occasion, a copy gets out of a postproduction house and enters the pirate marketplace. And the industry experience is that a majority of movies enter the pirate marketplace as a result of illegal camcording" in theaters. Digital piracy, he said, is "a serious problem for us now."

Still, large-scale swapping of high quality, full-length films and HDTV programs is out of the reach of all but the most wired consumer because the files are gargantuan, said Raffi Krikorian, a graduate student in the Media Lab at the Massachusetts Institute of Technology, who has researched the difficulty of digital copying.

However, Josh Bernoff, a principal analyst at Forrester Research, cautions that when the technology does grow robust enough for movie trading, consumers will almost certainly do it. In a recent survey of 12- to 20-year-olds published by the company, 20 percent said that they had downloaded a feature film. "I'd have to say when one out of five young people has downloaded a full length movie from a file sharing site, you do have a problem here," Mr. Bernoff said.

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But the downloads were probably of low quality, he said, and the economic effect is "basically nil — there's no evidence whatsoever that people are not going to the theater or not buying DVD's or not renting videotapes because of this activity." Solid figures are hard to come by, but estimates in recent studies put the daily movie downloads between 350,000 and 400,000.

Like many experts in the field, Mr. Krikorian said that consumers were still several years away from being able to zip large digital video files to each other. Hollywood, he said, "shouldn't worry about Internet piracy now, because that's not feasible," he said. Instead, he suggested that the industry learn from the mistakes of the music industry and focus on building business models that will allow the companies to give customers what they want, "so they don't have to look like the bad guys, suing 12-year-old kids."

Much of that planning is already going on, Mr. Bernoff of Forrester said. Studio leaders "are absolutely determined that they will not allow to happen to them what has happened to the music industry," he said. They see video-on-demand through online distribution — if made easy to use and priced right — as being far more attractive than the hassle-filled process of video file swapping, he said. Studios might have to be willing to release movies to the Internet earlier than they would like to compete with pirates, he said, but a good industry strategy will "shut down the illegal distribution" by making it irrelevant.

While Hollywood is supporting new laws to toughen penalties to fight online piracy, it is also imposing better control over internal security. The case of the premature "Hulk" turned out to be a success story because federal investigators traced the online copy back through identifying numbers. The person who put the movie online, Kerry Gonzalez, had received an early copy from a friend at an advertising agency. He pleaded guilty to copyright infringement in June.

Ms. Cranor and her colleagues acknowledge that the industry has taken some steps, but concluded that substantially more could be done.

To Mr. Bernoff, those moves are crucial to any industry strategy for fighting digital piracy. "They have to mind their own store," he said.

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posted 09-20-2003 01:33 PM                 

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Rather than give CAP code a bad name, we should come up with a separate name for this mutation -- I propose we start calling it "CRAP Code" until we get the real name of the process.

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posted 09-21-2003 02:36 PM                       

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John Hawkinson wrote:
I'm sure they're pursuing all possible angles.

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John Hawkinson also wrote:
The MPAA (studios, etc.) clearly acknowledge there are multiple sources for piracy, including both taping in theatres as well as leaks within the studios and screener tapes.

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