Report: Film piracy costs the economy $1.37bn annually

17 February, 2011 by Charlotte Willis

A media conference held on the set of Stephan Elliot’s new comedy A Few Best Men at Fox Studios today has revealed shocking figures surrounding the economic impact of movie piracy within Australia.

A joint study undertaken by IPSOS and Oxford Economics on behalf of the Australian Federation Against Copyright Theft (AFACT) has published the findings of the large-scale damage to the Australian economy.

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After interviewing 3500 adults aged 18 and over, a third of the Australian adult population is thought to participate in movie theft of some form – downloading, streaming, buying counterfeit, borrowing and burning unauthorized material.

A total of $1.37 billion loss in revenue, not only to the film community, but to the entire Australian economy is lost, as well as a staggering 6100 jobs over a 12-month period alone.

AFACT executive director Neil Gane said that the report highlights the urgency of action that needs to be taken.

”The report provides the Australian public with the knowledge of the destructive impact of movie theft and allows those involved in online piracy to ‘think before they click’," he said.

An overwhelming 53 per cent of Australians admitted to being involved in some sort of movie piracy which, in turn means that direct consumer spending losses to the movie industry – including cinema owners, local distributors, producers and retailers – amounted to $575 million.

Actor Roy Billing, who spoke at the press conference, compared this final figure to “the equivalent of more than three times the combined revenues of AFL clubs Collingwood, Hawthorn, Carlton and Geelong.

Billing supported the need for immediacy in educating the public about the financial impact of movie theft.

“In terms of organised crime, movie piracy is a bigger earner than the illegal drug trade – The King's Speech is currently in the top ten pirated films of all time with BitTorrent.

“These are staggering figures and it suggests that we need to act urgently to stem the tide of movie theft.

“The livelihood of artists, technicians, laborers and service people, as well as the ability for Australia to compete as a leader in innovation and creativity is at stake.”

Antonia Barnard, a producer on A Few Best Men, spoke briefly about the danger of producing a film.

“It is a risky enough business without having to deal with the notion that all of the hard work and creative input will be worth nothing if your film is stolen.”

Barnard voiced her hopes for the release of A Few Best Men saying “we hope that people will choose to see it as it is intended to be seen – on the big screen – or that the DVD is bought or rented legally.”

When asked the next step, Gane stated that they would “continue at the same pace utilising the same strategy – data in the form of a report – as it clearly shows the economic damage across its entirety.”

“We need a multi-faceted approach; through awareness, education and enforcement, as well as a closer working relationship with internet providers.

“Seven out of ten household members or account holders who receive a warning will change their behaviour when notified by their service provider – it’s a gradual process of education,” Gane concluded.

 

 

 

 

 

 

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  • M. de Fina

    Why doesn’t AFACT employ hackers to take out the BitTorrent and other pirate sites?
    Simple and effective use of skilled IT nerds.

  • Chris

    Blaming the audience is not going to solve the problem.

    It is false to claim that “forgone revenue” can be equated with a direct “cost” to the industry. For an actual “cost” to be calculated, this research would need to ascertain the percentage of audience members who would still actually go on to pay to see a legitimate version of the content if they did not have access to a pirated version. It must be assumed there are large numbers of people who would simply choose not to view a piece of content if the only way to watch it was by paying for it and it is misleading to count this as a loss.

    Gaining an appreciation of this point is essential if our movie industry is to flourish in the new world order. Content providers need to work to undercut the black market by making it easier for audiences to buy the legitimate version when they want it in the format they want it. And, if we can improve the quality of the legitimate experience so that there’s an added positive incentive for the audience to buy, then we may even find a way to grow our audience despite the ever increasing proliferation of pirated content.

  • Woody

    This realy highlights how poorly the big end of town is delivering content to us…

    Look at the states .. With services like Hulu and NetFlix the industry is booming! but here we have the big TV networks holding the distribution rights to a lot of content thus.. Creating a Void in the online market place…

  • jason

    Anyone who does the right research will know that this is a losing battle. Save your money and your stress and change your production values with the wants of the people. It’s like the war on drugs. It is an ever losing battle, it will create disharmony between producers and consumers, it will not work unless you police the internet and the internet will not let that happen without a major battle.
    This track is so obviously a no win for the industry IMHO. Producers have to learn to adapt to the changing landscape. In fact this gives a lot of opportunity for local production when looked at from a different angle. Please, stop thinking in traditional outdated modes of thinking. It will be an uphill battle of monumental headache. Go with the flow.
    With the advent of digital production and the cameras and low cost production methods we are seeing evolve, we have an amazing opportunity to break ourselves from the limited studio system and give true power to local artists and spread the wealth between workers and smaller groups.
    This research is obviously aimed at trying to keep the cosy situation and massive amounts of money brought in by distributors and studios, a majority who are not Australian anyway. Sure they hire some people but why don’t we see the research on the % of Australian $’s staying in Australia and benefiting Australians?

    Please stop following and start leading, specifically those of you who are in positions of power. Your duty is to the Australian people. Start employing people who have insight and get rid of these pencil pushers who are just taking advantage of our tax dollars. That is all.

  • Andrew Irwin

    If we expect the public to enjoy movies, games, software and other commonly pirated material then we must make the legal purchase of it good value for the public.

    I’ve been out of the country for over a year and just saw my first film [The Fighter] at George Street Event Cinemas. I nearly choked when the sales clerk told me “$18” – EIGHTEEN DOLLARS for a movie ticket? No wonder the public is pirating movies, at eighteen dollars a ticket I thought ‘Well, there’s no chance in hell I’m paying for a movie ticket unless I KNOW it’s a damn good movie.’

    Thus, we are screwing ourselves here. I lived in Korea for over a year and movie tickets are around $8-$9 each. At this price, I watched dozens of movies throughout the year, happily risking paying for a dud because the price was right.

    Cinemas have a responsibility to bring costs down so that the audience returns to the cinema, otherwise we can only expect piracy to rise.

  • Lucy

    Make movies we want to see, not depressing artsie features that the wider audience is not interested in.

  • dominic case

    Not sure how much of this “lost” revenue would in fact be “found” if there were no illegal/unpaid outlets (would as many people pay to see something as would have downloaded free?)- or indeed how much of that revenue is lost to Australia anyway, and how much would find its way out of the country to international distributors.
    Nevertheless, the plight of the producer is very real: seeing your investment suddenly turn to mush when your film turns up on the internet would be staggeringly bad. But the size of this leakage shows that the system really doesn’t work any more. You can’t make and sell a movie or a song the same way you can make and sell a car or a shirt.
    No, I don’t know the answer – but I do know that the question can’t be about plugging leaks in a sieve.

  • Jessica

    There are many interesting points here, but none of you opinionated people seem to have any ideas about how to progressively tackle this issue. How does the film industry make money?

  • Brendon

    Maybe a better headline would be:

    ‘Report: Depressing, working class, kitchen sink dramas are costing the economy $1.37bn annually’

    or

    ‘Report: Funding bodies are costing the economy $1.37bn annually by investing in films that have ABSOLUTELY no commercial potential’*

    *Although I think they are getting slightly better (touch wood)

  • luci

    Major problem with this research is it claims “cost” based on lost revenue as if someone who downloads or copies would have actually been a sale if they hadn’t access to the copy.

    That’s like claiming that comp copies/tickets are costing film and music industry millions of dollars – reviewers, critics, media, talk show hosts, test screenings, preview screenings, promo tickets… They watch without paying – is that lost revenue, when they just might not bother watching it if they were asked to pay, and there are marketing benefits to allowing them to view for free.

    Some indie filmmakers, such as the team behind Ink, found their sales revenues increased after their film was pirated – because word of mouth spread thanks to the online “pirate” community and a proportion of those who watched it for free then converted to purchase of a high quality version, merchandise, or contributed via an online tip jar. If it hadn’t been pirated, no one would have heard of this little indie that had no marketing budget to speak of.

    But it’s not just unheard of indie’s who are starting to think this way. If allowing people to see your movie for free is such a threat to revenue, then how come even some major players are using it as part of the marketing mix – such as the free online preview screening of Tim Burton’s Alice in Wonderland?

    The real out take here is : if this so called “piracy” is so entrenched in our society that over half the population are doing it, there must be a reason why, and does it make sense for it to be considered illegal? Do we really want to label half our country ‘criminals’? Or rather should there be a thoughtful consideration into why this is occurring?

    There are many complaints made about traditional distribution, release dates, pricing, and rights – and “piracy” is clearly a huge market response telling us loud and clear that change needs to occur.

    In the business world, you either meet your consumers needs, or lose them. The film industry needs to listen to what those needs are before it throws stones.

    In terms of ‘how is a filmmaker to make money’ : many an indie filmmaker would argue that the traditional revenue split doesn’t serve them either. eg. Video rentals of a film can be extremely strong, yet the filmmaker will only get a few dollars from the DVD sale to the shop. I’d call that lost revenue for the filmmaker. The problem of how an indie filmmaker can get a fair share of ticket sales, tv sales, etc when distributors and sales agents all take a chunk, is a discussion that has been going round and round for years.

    In my opinion, the digital age opens opportunities for indie filmmakers, who can now sell their films direct to their audience if they want. And yes, some people won’t pay, they’ll get hold of it for free – however there are many successful businesses in other sectors that use this as part of their business model – ‘freemium’ – give something away for free but charge for the premium content. E.g. AVG anti-virus software.

    In film terms – the free online version is lower quality, and we know already that a proportion of the audience will pay premium for BluRay/HD quality & want to watch in cinema or on their expensive home cinema.

    We also know that the core fan base pays several times over for content they like – they pay to see it in cinema, then purchase a copy, they may also watch it on TV, or buy a Special Edition with extra features, or purchase related merchandise. There’s no reason they’ll stop doing this just because they have access to a low quality online version for free.

    Filmmakers can make better use of their websites as a portal to everything their film related – making sales directly with the audience (bigger cut!), collating a database and relationship with their audience that they can retap into with each future film, making bigger impact with less marketing dollars.

    Some fans are happy to “tip” or crowdfund, which won’t raise the full amount of a feature film, but Iron Sky for example has raised several hundred thousand dollars towards their film via fan funding. More importantly, this interaction proves they have a committed audience base.

    Filmmakers can learn a lot from other industries that have embraced the notion of freemium – there are many business models that can contribute to income stream without expecting every single viewer to pay.

    In fact, if you think about it, we allow TV viewers to watch without paying (networks pay a license, and are in turn paid by advertisers), so why does the filmmaking industry keep asking the viewers to pay completely when we could align with third parties to foot the bill on viewers behalf.

    With new technology there are both challenges and opportunities – if history has taught us anything, it is that the ones who view the challenge as an opportunity are the most likely to succeed. Those who get stuck on the ‘challenge’ go the way of the dinosaurs.

  • World War Ted

    The argument is wrong. The real issue is that the market has moved on from the revenue streams that their structure is based upon – as much as why people went to the cinema less when TV started up. The industry must change it’s revenue stream, anything else, including legislation and litigation, is just desparately clawing to hold off the inevitable.

    For the industry to survive, they need to find their niche (3D movies, the social experience, etc) or lessen costs by letting go of the current distribution stream. How about a studio website where you can download the next batman movie with unobtrusive region-targeted ads appearing on the sides of the screen? How about paid product placement (without being obnoxious – looking at you I, Robot)? How about making cheaper, better movies and reducing costs through production? How about reducing the costs to cinemas to screen the films so they can pass on the savings in ticket prices? How about breaking down the major cinema chains, and their exclusive distribution deals, to allow for greater competition? How about removing the copyright restrictions on where a film can be shown (oil-rigs, schools, etc) and running a revenue stream out of the sale of the DVDs instead?

    Options aplenty.

  • Galvin

    It never fails to amaze me when I read talkbacks on Piracy that arguments stem from the ‘make it easier or more affordable and we’ll stop stealing’ mentality. Any other industry in the world that you would equate that too would seem ridiculous. You don’t steal a bottle of wine from the restaurant if you can’t afford it – you simply don’t order it. You don’t steal a car from the showroom and say ‘well it should be more affordable to me’. You don’t jump on a plane without a ticket and say ‘it’s my right’. I’d like to turn the tables on each and every person that thinks it’s okay to steal movies purely through laziness, ignorance and arrogance. Think about what you do for a living, to pay your rent, to live your life – and then let us steal what you do as an occupation without paying. Then when you are out of a job – ask us why we thought it was okay? It’s no longer naivety – everyone understands that stealing movies loses jobs, reduces quality and ups the ticket price. It’s simple…. a movie is not a necessity, you won’t die if you don’t see it. So pay for it… or here’s a thought. Don’t watch it.

  • Jessica

    Riding on the back of that last comment, I think that films need to acknowledge that a major component of people (virtually all of Gen Y) get their content from the internet.

    If the film industry wants to compete with piracy, then a legal film download option needs to be available.

    The point of difference would be offering HD footage with high-quality sound, since most torrents and online sites have awful quality.

  • move on

    Seems pretty much everybody is wise to this nonsensical creative accounting argument about ‘lost revenue’. Peddling it further will only perpetuate further cynicism rather than sympathy toward the media companies behind the dubiously named AFACT.

  • Jason

    If nature and evolution have taught us anything, those who survive find solutions to changing conditions, while those who try and stand against the overwhelming tides of change die and become extinct.

  • Richard

    I also believe that an illegal download does not equate to a lost sale. Embrace the new distribution channels. If a person is willing to use their own reseources to download and view a movie, ask for a reasonable fee. A cinema charges $18 per ticket and the producer may get $2.50 of that, so why wouldn’t a canny producer bypass everybody who is not providing a service the average punter wants?
    Don’t use the iTunes model – it’s a rip-off for both the customers and the artists.
    If a person is happy to forego the big screen experience, charge $3.00 – $4.00 for their download and make it legal. In October 2007, Radiohead provided a case study in successfully monetising free downloads by offering their album “In Rainbows” directly to fans at whatever price they felt like paying. Radiohead still achieved good sales of CD copies and expensive vinyl collectors sets on the basis of a better experience for their supporters and fans.
    But then the challenge for producers is not only to realise and deliver a movie people want to watch but know how to PUBLICISE, PROMOTE and MARKET the movie.

  • Stephen

    Part of the issue is the rising cost at the cinema. Also, piracy is also due to international issues. Not having an amazon Australia in my opinion skills the sales. The deals offered by amazon makes them more affordable. If, there is no plan to release the movie in the U.S. or UK cinema’s find a distributor in the U.S and UK to coincide the release of the local release. It may be a gamble for some movies, but for the ones that have done well it is a good idea to try even if on a small scale. I personally would like to see Tomorrow, When the War Began to be released on Amazon.com (U.S.) so I can watch it. On the other hand my personal studies on piracy tend to be positive. No one wants to buy a movie that they can’t preview through some channel. The new renting options for $4 US is amazing. Id rather burn $4 for a bad movie than $30. I agree Itunes is a bad idea release. Amazon will always be your best outlet for films.

  • Lucy Jackson

    Why not just let the film industry die?

    Does it really matter if actors and make-up artists are out of work? Does it matter that somebody makes a bad investment and loses their money? Whose fault is that? Isn’t ‘risk’ up to the investor to assess?

    We need people to be fixing the environment, not striving to validate their vanity on screen and being paid millions to do so.

    I say death to the international film industry and let’s welcome a new workforce of planeteers.