Chinese Film Piracy: Progress Report
Several recent events reflect that some progress is being made in the effort to stem the overwhelming tide of pirated films in the Chinese market. Most recently, on December 27, the Beijing First Intermediate People’s Court fined Beijing Sohu Internet Information Service Co., a subsidiary of Nasdaq-listed Sohu.com (NASDAQ:SOHU), 1,085,000 yuan (US$138,850) after finding that it illegally posted digital movie files on the Sohu.com website for downloading. Sohu.com, the third largest Internet Portal in China, has approximately 100 million registered users.
In addition to paying the fine, the court is requiring Beijing Sohu to publish an acknowledgment of its infringements and to pledge to refrain from future infringements, according to a statement by the Motion Picture Association (MPA).
Beijing Sohu operated an Internet service that allowed subscribers to download movies without the consent of the copyright owners. MPA-member films available for download on the site included 'Dawn of the Dead', 'The Day After Tomorrow,' 'Harry Potter and the Prisoner Of Azkaban' and more than 100 others titles. Five of the 10 pirated films owned by MPA members had never been released theatrically in China.
Less than two weeks earlier, the MPA announced that another court in China, the Beijing Second Intermediate People’s Court, had ordered the Yu Hao Qing DVD retail outlet located in Beijing’s central business district and its parent, Beijing Century Hai Hong Trading Co. Ltd., to cease sales of pirated movies. The defendants were ordered to pay the five MPA-member plaintiffs 164,000 yuan(US$20,964). In its announcement of this ruling, the MPA estimated that 93% of movies sold in China are pirated.
The Chinese government allows only 20 foreign films a year to be shown in Chinese cinemas. As MPA Vice President and Regional Legal Counsel, Asia-Pacific, Frank Rittman, explained in the MPA announcement of the Yu Hao Qing ruling, the “maintenance of theatrical exhibition quota, combined with the frequent imposition of ‘blackouts’ on the theatrical release of foreign films, and the restrictions on home video distributors compared with pirate retailers, give movie pirates a tremendous market advantage.” Thus, Rittman opined, “[m]arket access, i.e., a more open market is a prerequisite for reducing piracy.”
In an apparent effort to increase market access to genuine copies of US films, MGM and 20th Century Fox announced in late November that China's biggest retailer of legitimate DVDs, Zoke Culture Group, will distribute their home videos. Zoke joins CAV/Warner Home Entertainment as a distributor of legitimate copies of US films in China. Currently, Warner's DVDs compete head to head with counterfeits in stores in China. As pirated DVDs sell for a mere $1 and are frequently available within a week or so after the film’s US theatrical release, Warner’s strategy has been to release a high quality DVD at a low price within two weeks of the film’s theatrical release. For example, Warner released the film Crazy Stone last summer with minimal special features and cheap cardboard packaging. The price, 12-15 yuan (US$1.50-$1.90), and cheap packaging rendered Warner’s legitimate DVDs almost indistinguishable from pirated versions. According to Asia Times, even though most customers didn't know the difference, several store clerks around Beijing said Crazy Stone was never pirated.