Movie
Theft Is A Crime That Hurts Your Business
by John Fithian
NATO President
At NATO events and movie
industry gatherings worldwide, we have discussed movie
theft (“piracy”)
many times. Despite this focus, many cinema operators and
vendors still fail to grasp the direct impact movie theft
has on their own businesses.
After I discussed movie theft at a public
gathering recently, an exhibitor approached me later in the
day with a comment
I have heard too many times before – “Isn’t
movie theft a problem only for the studios and DVD retailers?”
Nothing could be further
from the truth. In this space this month and next, I hope
to serve two purposes:
to ensure that exhibitors and cinema vendors appreciate the
fact that movie theft does grave damage to their business;
and to describe the efforts NATO is taking to combat this
scourge, and thereby to encourage all our readers to lend
a hand to the effort.
As a preliminary matter,
however, I offer a reminder on terminology. The illegal
duplication, distribution, and consumption of
copyrighted movies constitute the crime of “movie theft.” With
Johnny Depp burning up box office records around the world,
we need to stop using the romantic term of “piracy” to
describe this activity.
Movie theft is a crime
that causes serious financial damage to motion picture
exhibitors and the vendors that supply
them. Sophisticated research indicates that movie theft
in 2005 cost $670 million in U.S. theatrical sales, and
$6.1
billion in worldwide box office (see chart for country-by-country
breakdown of lost theatrical sales.)
(Click
Map to See Full Size Version)
LEK Consulting, an international
strategy and consulting firm, conducted an 18-month study,
surveying 20,600 movie
consumers in 22 countries, using focus groups and
telephone, Internet and in-person interviews. Data from
those
countries directly researched (including the United States)
was
extrapolated to 42 additional countries using a regression
model developed
in conjunction with UCLA and based on country-specific
characteristics to complete the worldwide piracy
picture. The study’s
movie-theft loss calculation was based on the number of legitimate
movies – movie tickets, legitimate DVDs, and pay-per-view
sales – consumers would have purchased if pirated
versions were not available. The LEK study concluded
that the worldwide
motion picture industry, including foreign and domestic
producers, distributors, exhibitors, video stores
and pay-per-view operators,
lost $18.2 billion in 2005 as a result of movie theft.
As understood for many
years, movie studios and video retailers have suffered
dramatic losses from movie
theft. Just a
few years back, in contrast, motion picture exhibitors
suffered
only marginal losses, as movie thieves took weeks
after the theatrical break to get their black-market DVDs
to consumers.
Today, however, sophisticated criminal networks make
available illicit DVDs and Internet downloads a few
days after, simultaneously
with, or in some cases even BEFORE the movie’s
theatrical debut. Using cutting-edge technologies
for recording and
replicating purposes, the movie thieves can sell
illegal DVDs and movie downloads at a fraction of
the cost of a movie
ticket, at the very same time our NATO members are
trying to sell tickets at the box office.
Given this unfortunate
technological reality, we now confront the fact that a
full third of the global
losses
to movie
theft come from lost theatrical sales ($6.1 billion
out of $18.2 billion.) In the United States, the
ratios are
only
slightly better. One-fourth of the total domestic
losses come from theatricals ($670 million out
of $2.7 billion.)
If these global and national
industry aggregate numbers seem remote from the ordinary
cinema company’s bottom line,
I invite our domestic exhibitor readers to undertake
the following analysis. Using one of the box office tracking
firms, learn the percentage of the total box
office represented
by your company. Now take that percentage and
multiply it by $670 million. The resulting number will
indicate your
estimated losses to movie theft.
As an example, I will pick
on our largest member. Regal Cinemas represents 21% of
the domestic
box office according
to recent
box office tracking numbers. That means that
movie theft cost Regal nearly $141 million
in 2005.
Given this data, it is
incumbent upon NATO and its members, supported by our industry’s vendors, to do everything
we can to combat movie theft. As your trade association,
we take this threat very seriously. In the second part of
this column next month, I will describe some of the NATO
activities we are undertaking.
