Film Fund-amentals: Pirates of the Digital Shores

Last time I checked, the only boom profession offering employment is “Somali pirate.” Unfortunately, the work conditions are horrible, the benefits are non-existent, and the Navy SEALS turn out to be pretty good shots. So it isn’t a great career move.

But digital piracy is a major enterprise. Well, kind of. The recent posting from TorrentFreak of the Top Ten Most Pirated Movies of All Time presents some fascinating figures. For example, who would have guessed that Kick-Ass was almost as popular as The Dark Knight (though personally I have no doubt that Hit-Girl could whoop Batman’s butt).

The estimated totals for illegal downloads represent the kind of astronomical figures that have Hollywood shaking. The most pirated movie is Avatar, with an estimated 21 million downloads. If you translate that figure into a basic estimate of lost revenue (using a figure of 12 as an extremely low-ball figure for individual box office and DVD returns), at least $252,000,000 is roughly projected in lost profit. Even with the movie’s $2.8 billion in global returns, this is a pretty hefty chunk of change. James Cameron might even have to brown-bag it every so often.

Even more extreme is an item like The Incredible Hulk. With an estimated download of 14 million, this suggests a lost revenue of something in the area of $168,000,000 (again, a low figure). Since the movie’s global take was $263.5 million (with a production budget of $150 million, which probably means something more like $200+ million), the film has taken a major hit from piracy.

This is why everybody from US Congress to the MPAA to the European Union to the Hollywood craft guilds are all hopping mad and demanding major action. Late last year, US Immigration and Customs Enforcement lowered the boom on five major web sites involved in alleged acts of piracy (actually, ICE took out 82 sites, as noted by TorrentFreak in their more detailed report).

The cost of film piracy has been estimated at anything from $1.3 billion to as much as $6 billion. Obviously, this is a lot of stealin’ going on. But it also rises a question (which isn’t exactly being asked in some circles): what kind of money is actually being made by these digital pirates? Since we can all agree that this is a type of criminal activity, and most crime is committed for some form of profit, just what do these folks make by providing illicit downloads of recent movies?

Basically, they make nothing from the download. Most of these sites offer the movies for free. Sites that do charge are often not the preferred place to go (after all, if you have to pay you might as well get something that’s legal). There’s even a strong rumor concerning a suppressed marketing study that suggests that many digital pirates are some of the film industry’s biggest consumers. In some cases, they’re buying multiple copies of the DVD and then downloading it to the rest of the planet. Some digital pirates are motivated by a form of mad love rather than criminal drive.

So the actual money is for the most part not generated by the illegal material. The loot is derived from advertising. An extremely interesting blog piece by journalist/filmmaker Ellen Seidler details Seidler’s attempt to track down the advertisers who financially propped up the pirate sites that were illegally offering her movie And Then Came Lola. Basically, she discovered that the companies behind the advertising that operated behind the pirates were connected in various ways to Google, Sony, Pixar and Netflix.

In other words, the major Hollywood companies are being ripped off by digital pirates who make their money through adverting provided, directly and indirectly, by the major Hollywood companies. Which also means that at least some of the money that these companies are loosing from the piracy they are actually picking up on the other end of the system. Which is also kind of convenient, since they don’t have to deal on that end with all of those messy royalty payments and stuff. Which also means that the real losers in this situation aren’t the major companies so much as all of the second-tier players from the guilds and stuff who might be dependent on the upfront money made from the movie itself. Well, those folks as well as some indie filmmakers who stand to actually lose real money, which is how Ellen Seidler got involved in tracking down this information.

Personally, I do not in any way condone digital piracy. It really is immoral, unethical and illegal. It may also be fattening, but I haven’t seen the data on that issue. However, it is also a lot more complicated (and devious) than anything admitted to by the MPAA or any of the suits in Hollywood. As often happens, the major players are busy attempting to cover their bases on all ends of the equation. Only the little people (that is, the vast majority of us) actually stand to lose.

This gets even more complicated when the piracy issue is used by the major companies as a reason for increasing government regulation of the Internet. As many open net advocates have argued, much of the proposed legislation is designed to give corporations a greater degree of control over Internet content and access.

In principle, the companies are arguing that this will help control piracy. It all sounds a bit like an insurance company hiring an arsonist to burn down some of the property they insure just so they can jack up the rates on the remaining houses.