Movie Industry Battles File Swappers

The tremendous popularity of movies on DVDs has been a double-edged sword for Hollywood. On the one hand, the convenience and low production costs for DVD discs have helped to fuel the growth of movie DVD rental services and purchases. This profitability has provided a huge financial incentive for the movie industry to create more titles, many of which go straight to rental store shelves and are never even shown in theaters (for good reason).

On the other hand, distributing movies in digital format — thus storable on a computer's hard drive — has made it possible for Internet users to freely share copies of those movies with one another, without paying Hollywood for the privilege, in the form of theater tickets and movie rentals.

For many years, countless Internet users have downloaded an equally countless number of movies using various peer-to-peer (P2P) networks, none of which provide revenue back to the movie studios. While Kazaa has long been a favorite P2P network among music and movie file swappers, eDonkey and Gnutella have also seen their share of copyright material. In effect, movie swappers have enjoyed blockbuster hits without paying Blockbuster prices. But then came a plot twist.

In November of last year, the U.S. movie industry, in the form of the Motion Picture Association of America (MPAA), announced that it would begin taking legal action against individuals downloading movies off the Internet. The MPAA, an industry group which represents seven major movie studios, chose to follow the same strategy employed by the Recording Industry Association of America (RIAA), which, since December 2003, has sued over 7000 music file swappers.

On 16 November 2004, on cue, the major movie studios demonstrated that they were following their script, and began filing lawsuits against individuals identified as having shared movie files on P2P networks. Yet unlike the RIAA, the MPAA did not disclose how many lawsuits were filed, nor in what jurisdictions.

An MPAA executive defended the decision not to reveal how many suits were filed or where. John Malcolm, a senior vice president and the MPAA's director of worldwide anti-piracy operations, argued that such details are not important to the overall purpose of the legal action. "It doesn't matter if it's 10 lawsuits or 500 lawsuits. The idea here is that there is no safe harbor." He also indicated that as long as the illegal movie swapping continued, so would the legal spanking.

Follow the Movie Money

Practitioners of movie sharing might argue that it is no different from a large group of people at home watching a single movie rented from the local video store, or sharing a copy of a movie on videotape, never sold for commercial profit. They might claim that no one is being hurt, and that they should be free to share the movies that they have rented or purchased, as long as Hollywood has enough money to keep up the phenomenally wealthy lifestyles documented in the tabloids.

But the movie industry is not buying that story. They claim that one out of four people online has illegally downloaded a feature film, and the practice is cutting into their DVD and box office sales, when people elect to watch a downloaded movie rather than paying for it. The organization estimates that the average cost of making, marketing, and distributing a movie is about $143 million, and that every day the average number of movies illegally downloaded in the U.S. alone every day is over 115,000.

The MPAA points to a survey conducted by online researcher OTX, of 3,600 Internet users in eight countries, that showed that half of them had downloaded copyrighted content during the previous 12 months. Of those who had downloaded movies, 17 percent stated that they were going to the movies less frequently, and 26 percent stated that they were buying fewer DVDs.

The MPAA apparently did not have box-office sales figures for 2004 at the time of the report, but they did point to the fact that global movie admissions had fallen from 1.64 billion in 2002 to 1.57 billion in 2003, a decline of about four percent.

Critics of the MPAA's actions might well argue that box office and rental revenues could paint a different picture, as ticket costs increase at almost the same rate as the production costs and salaries in Hollywood. Furthermore, movie admissions have increased by 330 million (27 percent) from 1993 to 2004, while DVD rentals and sales have increased by 50 percent from 2002 to 2003. Also, DVD rental services were conveniently ignored.

Yet the industry could easily counter that the higher ticket prices are required for compensating for the reduction in paid movie viewing, and are no excuse for copyright violation anyway. Moreover, the MPAA contends that the problem will only get worse as more Internet users switch from dial-up to broadband, which provides the needed bandwidth for downloading the huge files.

How It's Done in the Movies

But how exactly would the movie moguls know whom to target for their lawsuits? After all, there is a common belief among P2P users that they can be anonymous on the Internet, simply by not providing any real information when creating accounts on any of the P2P networks. But to download a file, a computer must have an address on the network — namely, the machine's IP (Internet Protocol) address, which can be used to identify the Internet service provider (ISP) and in turn the individual ISP user.

Like the RIAA, the MPAA member's are filing their lawsuits against "John Doe", because at the time of the filing they do not know the names of the people illegally swapping movies. The industry claims that they will later learn the defendants' identities, perhaps when that information has been subpoenaed from the ISPs.

During the past couple of years, traffic on the major P2P networks has declined significantly. The movie and music industry representatives frequently point to this as an example that the lawsuits are working. Opponents argue that it is more likely the result the P2P networks being seeded with unusable files that are disguised to appear as working copies of the movies and songs sought by file swappers.

Regardless of the true causes of the reduction in P2P activity, it may be of little benefit to the industries, since so many movie and music enthusiasts have switched over to alternate networks (such as BitTorrent), alternate Internet sources (such as newsgroups), and the old but reliable method of simply burning and swapping DVDs and CDs. With hard drive capacities set to skyrocket during the next few years, some folks may end up sharing hard drives filled with movies and MP3 files — probably not the happy ending that the movie industry is hoping for.