U.S. Studios Fight Rampant Movie Piracy in China

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China allows only 20 foreign theatrical releases within its borders each year. Harry Potter and the Goblet of Fire will be one of this year's official releases, but the movie will also be distributed in a more typical Chinese fashion — on pirated DVDs. Rob Schmitz of member station KPCC reports from China on measures taken by American movie studios to combat the illegal copying of American films.

ALEX CHADWICK, host:

California Governor Arnold Schwarzenegger is also in Asia this week, in China, to promote California products, which include movies, TV shows and software. The US entertainment industry, a lot of it based in California, loses billions of dollars each year to China's pirated DVDs. Rob Schmitz of member station KPCC reports from Shanghai.

ROB SCHMITZ reporting:

Darcy Antonellis considers her job to be a tough one. Warner Bros. has enlisted her help in trying to curb illegal copying of its films throughout the world. But Antonellis' job gets even tougher when it comes to China.

Ms. DARCY ANTONELLIS (Warner Bros.): What we have to consider is the reality that every title that is released here in the US is available in the Chinese market without our control.

SCHMITZ: And with that reality as a starting point, at least it can't get much worse. Antonellis hopes that Governor Schwarzenegger's personal experience with movie piracy--he's lost a lot of money himself from it--will give the governor added incentive to push his anti-piracy campaign this week. In fact, much of the trade mission will be devoted to this issue. Schwarzenegger will give a speech at Beijing's prestigious Tsing Hua University about it. He's releasing a TV ad with old friend Jackie Chan, and he'll attend China's premiere of the latest "Harry Potter" film from Warner Bros., an event designed to encourage the Chinese to experience American films through legitimate means. For the time being, though, most Chinese seem content to enjoy American films the old-fashioned way: spending what amounts to less than 1 US dollar on a copied DVD they can take home.

(Soundbite of store activity)

SCHMITZ: At this store in Shanghai, customers flip through thousands of DVDs neatly arranged by genre in plastic containers. Every one of them is pirated. Most cost around a dollar. Just days before the new "Harry Potter" premiere in Shanghai, I asked the storekeeper when she expects to have the DVD version of the film.

Unidentified Translator: (Foreign language spoken)

SCHMITZ: She tells me her store may have it the same day as it's released. That's typical for a big-name film like "Harry Potter." Films like this are usually camcorded inside a theater in the US or Canada, uploaded onto a Web site, and then downloaded by disc manufacturers in China. Warner Bros.' Antonellis says they make millions of copies that are distributed to street vendors within a couple of days.

In recent years, Antonellis and her anti-piracy team have developed a tracking system that embeds a different code on each film print. With the code they can pin down exactly where a film was camcorded. Warner Bros. also tracks who has access to a film during postproduction. But that's all it can do. The rest, says Antonellis, is up to China's government, and she cites one example as proof that the government is able to stop piracy when it wants to.

Ms. ANTONELLIS: So the Ministry of Culture provided what's called protection status for titles.

SCHMITZ: Protected status means the ministry warned the public not to buy or distribute pirate copies of the movies. It's done it with three films, which, not surprisingly, were three of China's largest grossing movies in recent years: "Hero," the "House of Flying Daggers" and "Kung Fu Hustle." Antonellis says protected status worked. Shortly after each film was released, you couldn't find pirated copies on the street.

Ms. ANTONELLIS: And interestingly enough, the box office performance for those titles performed as any other legitimate market. When you compare those titles to titles that weren't given protected status, the box office performance was typically abysmal.

SCHMITZ: Antonellis says the key is to convince the Chinese government that it stands to benefit from the revenues in taxes raised from a legitimate market. This is something that Xu Xiaomeng is now attempting to do. Xu is the general manager of Warner Paradise Cinema, China's highest grossing cineplex located in the heart of Shanghai. Xu frequently meets with government officials to try to persuade them to take more aggressive action against pirated DVD distributors. Xu says the government, though, is proceeding with caution.

Mr. XU XIAOMENG (Warner Paradise Cinema): (Through Translator) It's very difficult. China has too many people, and we're taking action to stop it, but we have a long way to go, and the government can't take action now because they recognize that doing so might lead to an unstable society.

SCHMITZ: In other words, people might get really upset if they weren't able to buy dirt-cheap DVDs. Knowing it can't count on the Chinese government to stop piracy entirely, Warner Bros. has decided that if you can't beat them, compete against them. Warner Bros. has entered into a joint venture with a Chinese company to build cineplexes throughout the country. And just this year, the studio was the first to join a Chinese company to distribute DVDs at competitive prices.

(Soundbite of chimes)

SCHMITZ: At a Shanghai department store, Chinese customers can buy these legitimate DVDs for just over $2 US each, only a dollar more than their illegal counterparts. Warner Bros.' Darcy Antonellis says sales so far from the studio's low-priced DVDs are encouraging. At this point, she says, any dent the studio can make in China's multibillion-dollar industry of pirated DVDs is a step in the right direction. Reporting from Shanghai, I'm Rob Schmitz.

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