Broadband, compression technology and peertopeer networks are making downloadable films a reality. The industry needs to act on multiple fronts to protect its revenue streams.

If you thought knock-off DVDs were the only piracy threat to films, think again.

Historically, the film industry has been relatively safe from soft copy piracy (downloading films from the internet). While people can download music files in 30 seconds using broadband, the sheer size of film files has proved a barrier. Even so, 400,000-600,000 films are illegally downloaded every day in the US.

We believe three factors are about to destroy this false sense of security, as download speeds for films dramatically decrease due to:

  • Uptake of broadband (faster connections). The number of consumers with broadband is forecast to rise. In the UK alone, annual growth is projected at 60% per annum between 2002-2005. Broadband technology enables connections up to 40 times faster than traditional narrowband.
  • Advances in compression technology (smaller files). Often called ‘the MP3 of video’, compression technology DivX video codec has over 75 million users worldwide. It offers DVD-quality and enables full-length films to easily fit on a CD or to be delivered over broadband connections. Free versions are available on the internet. There’s also DeCSS, developed by a team of hackers and posted on the internet to allow DVDs to be copied to a hard drive so that they work with Linux. Further developments are inevitable.
  • Rise of peer-to-peer networks (shared computer power). Peer-to-peer networks allow users to access parts of each others’ hard drives, enabling files to be copied from one computer to another. They don’t use a central server so are difficult to track down, disable and/or prosecute. For The Matrix Reloaded, pirates used a file-sharing computer programme called BitTorrent that let digital thieves download films for free in three hours.

For the most part, film executives have identified the threat of digital piracy and appreciate the scale of the problem, but few have a clear view of how best to take preventative action.

Doing nothing is not an option. Most of the major film companies are owned by the major entertainment groups, and have watched their sister music companies go through hell in recent years.

"Once digital films become freely available to all (at a low cost or free), a Pandora’s box will be opened for the film industry in the same way that it has been for the music majors. And once opened, it will be very difficult to close," warns Mark Endemano, a director in the UK’s Media Consulting practice at Deloitte.

Film executives may find the old adage, ‘know your enemy’, appropriate here. They need to update their understanding of new developments and strategies in the piracy arena in order to capitalise on their adversaries’ weaknesses. They also need to address the fact that downloading pirated music and films is not perceived as illegal by many who do it.

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