MESSAGE
| DATE | 2005-08-29 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [NYLXS - HANGOUT] DRM is Theft King Kong Style
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August 28, 2005
King Kong vs. the Pirates of the Multiplex
By TIMOTHY L. O'BRIEN
SHORTLY before Christmas, Universal Pictures plans to unveil its $150
million remake of "King Kong," the 1933 sci-fi classic featuring an
overgrown beast with a soft spot for blondes, a craggy, fog-shrouded
island inhabited by dinosaurs and a squadron of biplanes buzzing the
Empire State Building.
The new version, aimed squarely at the hearts, minds and wallets of the
teenage-to-mid-30's set that Hollywood prizes, has blockbuster written
all over it. Peter Jackson, the maestro behind the "Lord of the Rings"
trilogy, is directing; Naomi Watts is stepping into Fay Wray's shoes as
the imperiled, scantily clad heroine; and the film is rumored to be
embroidered with mind-blowing special effects.
But even the mighty Kong may not be safe from the clutches of a
nebulous, tech-savvy network of film pirates who specialize in stealing
copies of first-run movies and distributing them globally on the
Internet or on bootleg DVD's. While Hollywood has battled various forms
of film looting for decades, this time seems different. Piracy in the
digital era is more lucrative, sophisticated and elusive than ever - and
poses a far bigger financial threat.
"Piracy has the very real potential of tipping movies into becoming an
unprofitable industry, especially big-event films. If that happens, they
will stop being made," said Mr. Jackson in an e-mail message from New
Zealand, where he is putting the final touches on his version of "King
Kong." "No studio is going to finance a film if the point is reached
where their possible profit margin goes straight into criminals'
pockets."
Film piracy is taking place against a larger backdrop of technological
and demographic shifts that are also shaking Hollywood. Elaborate home
theater components - like DVD players, advanced sound systems and
flat-screen TV's - are helping to shrink theatrical attendance, as more
and more film fans choose to watch while stretched out on their couches.
And with the advent of high-speed Internet connections that can deliver
large film files to personal computers, the movie business is confronted
with the same thorny challenges that the music industry encountered
several years ago with the emergence of file-sharing programs like
Napster.
Hollywood reported global revenue of $84 billion in 2004, according to
PricewaterhouseCoopers, the accounting firm. With most theatrical
releases amounting to little more than an unprofitable, expensive form
of marketing, DVD's have become Hollywood's lifeblood: together with
videos, they kick in $55.6 billion, or about two-thirds of the
industry's annual haul, with box-office receipts making up most of the
rest.
The Motion Picture Association of America estimates that piracy
involving bootleg DVD's deprived the film industry of more than $3
billion in sales last year. That figure does not include lost sales from
pirated works peddled online, for which industry insiders say they have
no reliable estimate but which they assume to be substantial.
"It's hard to say exactly what amount of money is involved, but it's
huge," said Bob Wright, chairman and chief executive of NBC Universal,
the parent company of Universal Pictures and a division of General
Electric. "There is a very dark, black cloud in this game. It's not in
the hands of kids who live next door to you; it's organized groups and
organized crime."
Online, piracy essentially has no boundaries. But the packaging and
distribution of bootleg DVD's take place in a number of far-flung
locales; among the hot spots are the United States, China, Russia,
Britain, Indonesia, Malaysia, India and the Philippines.
At the heart of this network, according to federal investigators and
analysts, are cybergeeks who fashion themselves as digital Robin Hoods,
stealing from rich studios and giving film fans a free ride. Operating
alongside them are cold-blooded hard-core criminals who have the money
and connections to efficiently hijack and distribute films within hours
of - and sometimes even before - a theatrical premiere.
Court documents related to recent prosecutions show that bootleggers put
a stolen copy of the latest "Star Wars" movie on a private Web site just
hours after its May 18 opening. They put "Batman Begins" on the Internet
on June 15, the same day as its release, and had "Bewitched" available
for downloading two days after the movie's debut on June 24.
Universal, aiming to protect filmdom's mightiest gorilla, is
watermarking and encrypting copies of "King Kong." It is also
supervising access to the film during all phases of its production,
monitoring online any machinations involving the movie and planning to
guard advance screenings. Other Hollywood studios, including Warner
Brothers, whose fourth installment of the "Harry Potter" film series is
due this fall, are taking similar steps to combat piracy. For the time
being, however, the bootleggers remain a moving target.
"This is not just about the film industry: whether you're talking about
the pharmaceutical industry, the information technology industry or
filmed entertainment, the protection of intellectual property is
crucial," said Darcy Antonellis, who helps oversee antipiracy efforts
for Warner Brothers, a unit of Time Warner. "If we can't build
businesses around ideas, and feel comfortable that we have the right to
those ideas, then our entire business is threatened."
SITTING comfortably in the darkness of a theater, a team of four
"cammers" goes to work. One sits apart from the group and acts as a
lookout, while another unfolds a small digital video camera hidden
inside his clothing and records whatever movie is rolling across the
screen. The two other members of the team are planted in front of the
person doing the recording, trying to keep the path clear of those
bothersome black silhouettes that pop up in the frames of many bootleg
films.
That, in a nutshell, is how cammers work, federal investigators say.
They may be at the bottom of piracy's food chain, but once they have
their hands on a movie, they quickly feed it upstream to others in their
network, racing to see who can post the first clean version of a popular
film on the Internet.
According to law enforcement authorities and court documents, the Web
sites where the films are posted are invitation-only affairs that
bootleggers call "topsites." Most of them operate in secluded online
zones known as the "darknet."
Piracy teams are typically known as "warez" groups, a street derivation
of the word "software" that is pronounced "wares." Members all have
nicknames, or "nics," and their true identities usually remain hidden,
even from one another. Investigators and others familiar with piracy say
that aspiring bootleggers secure admission to a warez group by either
running a computer server where the movies can be stored or by sharing
copies of stolen films.
Proud of their handiwork, warez members like to "tag" a stolen film,
attaching notations to online files that list the nics of everyone
involved in the heist. The usually obscure computer groups engaged in
piracy have even spawned a cult film - available only online, of course
- called "The Scene," with leading characters named Teflon, Trooper and
Slipknot.
"It's almost like a game, with various people playing king of the hill,"
said Darrell Smith, a software developer in Scottsdale, Ariz., who
helped create an early file-sharing program for music called Morpheus
and who is familiar with the inner workings of warez groups. "These
groups are structured very hierarchically, and each of them have certain
reputations they like to maintain. It's very similar to inner-city gang
members, minus the violence."
NEEDLESS to say, warez pirates also have a willing and enthusiastic
online audience. Like music lovers who pounced on Napster's offerings
without questioning whether they were trading in stolen goods, film
buffs have been flocking to public peer-to-peer computer networks that
traffic in movies. Average Joes and Janes who download movies also have
a designation in the piracy world: "leeches."
According to BigChampagne, a company in Beverly Hills, Calif., that
tracks online media use and creates weekly charts showing the most
actively downloaded films available on the Internet, there are hundreds
of thousands of leeches. For the week through Aug. 9, BigChampagne said,
an average of 102,895 people a day downloaded the new "War of the
Worlds," using a popular file-sharing program called BitTorrent. During
the same period, "Wedding Crashers" had an average of 100,134
downloaders a day, and "Charlie and the Chocolate Factory" had 97,611.
Law enforcement authorities say warez groups communicate with one
another as soon as investigators take down one of their sites, making it
difficult to mount large-scale raids. And pirates view new topsite
servers coming online in the United States suspiciously, assuming that
the servers may be part of a sting operation. Nonetheless, last month
federal prosecutors and their counterparts in 11 other countries mounted
one of the largest international efforts against film piracy to date, a
result of a two-year investigation called Operation Site Down.
A criminal indictment filed in July in federal court in San Jose,
Calif., against four people accused of participating in warez groups
that were investigated in Operation Site Down said that 750 movies had
been uploaded to two topsites; they, as well as other servers affiliated
with them, housed stolen movies, games and software amounting to about
27 terabytes of data. That is the equivalent, said one person involved
in the investigation, to the contents of several large university
libraries.
A search warrant recently unsealed in federal court in St. Louis as part
of Operation Site Down said that an employee of a theater there was
involved in the warez groups being investigated and that he had plotted
to mount a camera behind one of theater's screens in order to make a
bootleg copy of a film. Court papers say that although the employee was
tracked down because another one of the films he pirated bore a
watermark linking it to the theater where he worked, he also had the
ability to delete watermarks from other films. He has since been
arrested and charged as a defendant in the Operation Site Down case.
Authorities said they were able to get inside the warez groups involved
in Operation Site Down only by deploying an undercover agent who
developed relationships with members of the ring. "The main reason an
undercover was necessary was that it's very difficult to penetrate this
online world unless you're undercover," said Mark L. Krotoski, an
assistant United States attorney in San Jose who is a senior prosecutor
in the Operation Site Down investigation. "It is a very sophisticated
conspiracy that runs almost like a business."
Law enforcement officials say two groups are involved in online film
piracy: a nonprofit arm that is in it just for the kicks and a much
smaller arm that is in it for the money. Those in the first group are
happy to accept free downloads of other films in exchange for
successfully uploading a copy of their pirated film, investigators said.
Mr. Smith, the software developer, said that someone in the pay-for-play
crowd can put in about a week of hard work and then usually earn enough
cash to pay for a year of private college tuition.
"We continue to focus so many resources on this form of online piracy
because we have hard evidence that the top-level warez groups are
releasing a product that is not only being distributed freely over the
Internet, but is also being supplied to the for-profit, hard-goods
market involved in copyright infringement," said Michael M. DuBose,
deputy chief of the Justice Department's computer crime and intellectual
property unit.
Most of the big money in the piracy game, analysts say, swirls through
the hands of bootleggers involved in the real world, not online. "As of
yet, it's not at a point where you can point to titles being distributed
online and say it accounts for the slump at the box office," said Joe
Fleischer, co-founder of BigChampagne. "But physical-goods piracy is a
real problem."
Although investigators say that the hard-goods traffickers, the most
notorious of whom are based in China and Russia, often get their stolen
products from warez groups, they are equally adept at making knock-offs
of new DVD's as soon as Hollywood studios release them. For this they
rely on techies known as "rippers" or "crackers" who are adept at
unscrambling the security codes that studios have embedded on DVD's to
deter copycats.
"The parts of the world where replication is thriving are where
large-scale operations exist, sometimes controlled by organized-crime
groups who can afford to spend more than $1 million on a replication
machine," said John G. Malcolm, who oversees antipiracy efforts for the
Motion Picture Association of America. "Asia is piracy central, and a
majority of the world's pirated discs are replicated there."
The Asian rings also have strong roots in the United States, law
enforcement officials say. Last fall, federal prosecutors in New York
indicted 51 people linked to the two largest Chinese organized-crime
families in the city. Charges ranged from human smuggling and extortion
to money laundering and murder. Law enforcement officials said people
named in the indictment were also heavily involved in film piracy.
BOOTLEG DVD's are easy for hard-goods pirates to distribute on their own
turf. For example, a weekend stroll around Gorbushka, a sprawling bazaar
in Moscow that is home to Europe's largest open-air display of
black-market goods, typically turns up row after row of pirated DVD's.
Investigators say that when overseas pirates want to ship bootleg DVD's
to markets outside their home countries, they simply hide them by
packing them in nondescript barrels or winding them inside rolls of
carpet.
While the amounts of money involved in piracy can only be estimated,
some successful prosecutions reveal the handsome sums involved. In
April, two Americans working in China, Randolph H. Guthrie III and Abram
C. Thrush, received prison sentences in Shanghai for illegally selling
$840,000 worth of pirated DVD's and for stashing more than 210,000 of
the knock-offs in three warehouses. American and Chinese law enforcement
authorities said the pair sold the DVD's on eBay and through a Russian
Web site to buyers in almost two dozen countries, including the United
States.
Also in April, a joint raid in Manila by American and Philippine law
enforcement officials resulted in the arrests of about 550 people
accused of being involved in piracy rings and the seizure of more than a
million blank discs worth about $2 million.
For all of the recent crackdowns on piracy, and the strides that studios
have made in blocking thefts of review DVD's provided to the news media
and others, many people in Hollywood and in the technology field believe
that the film industry is fighting an uphill battle.
"I don't believe piracy can be easily beaten; fighting fire with fire by
releasing movies on DVD at the same time as cinemas is probably where
the industry is heading in the next few years," said Mr. Jackson, the
director. "Electronic delivery directly into both cinemas and people's
homes will not necessarily beat pirates, but it will mean studios are at
least on a similar playing field."
The Supreme Court recently affirmed legal protections for creative
content distributed online when it overturned a lower court's decision
to dismiss a copyright infringement case that Metro-Goldwyn-Mayer
Studios and other entertainment companies brought against Grokster and
another company that makes file-sharing software. The ruling will make
it easier for Hollywood to litigate more aggressively, should it choose
to do so. Studios say that such protections are merited because it now
costs about $98 million, on average, to produce and market a film
domestically, while 6 of every 10 new films lose money.
But technological innovations, as always, will still move forward under
their own internal logic. And some critics of Hollywood's response to
digital piracy say that the film industry is not addressing the broader
challenge: a rapid and epochal shift in how audiences watch movies.
"The Internet was designed to facilitate file transfer. That's what it's
all about, so whether it's in e-mail, instant messaging, music or films,
it's all going to increase as sure as the sun comes up tomorrow," said
Mr. Fleischer at BigChampagne. "I think the movie business is in the
same place the music business was in 2001 and 2002. They're just sitting
it out and not doing much to put legitimate movie offerings online."
HOLLYWOOD veterans say they are well aware of the momentous changes
afoot. "Our industry is trying very hard to make sure that what happened
to the music industry doesn't happen to our industry," said Barry M.
Meyer, chairman of Warner Brothers, which was one of the first studios
to mount a serious antipiracy campaign. "We don't want this to become
mainstream behavior."
Others watching the wrangling between Hollywood and film pirates say the
online world offers an alternate distribution system - free from the
confines and control of movie studios and television networks - that
will allow independent filmmakers to reach a broader audience. Their
concern is that antipiracy efforts will stymie innovation.
"The physical part of the Internet might get stifled because these
things are being demonized," said Mr. Smith, whose Morpheus software was
in dispute in the Grokster case. "That's what I'm worried about when
people begin to talk about the darknet and the need to protect content."
But it is safe to assume that even independent movie producers who want
to earn a living from their work would share an interest in ensuring
that the integrity of their films - and any copyrights associated with
them - are protected online. To that end, Hollywood thinks that the time
has come to bring down the curtain on film piracy. "I always thought
that piracy connotes something glamorous," Mr. Meyer said. "Let's call
it what it is: theft. I think it's just like shoplifting."
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