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A new type of piracy is scaring Hollywood and the White House is ready to help

As high speed internet continues to become more widespread, Hollywood continues to grow more fearful of internet piracy. Unlike the RIAA (music industry), Hollywood hasn't yet started suing individual downloaders (though some independent studios have), but they have targeted websites and services that showcase illegally obtained videos. Now, according to the THR, Hollywood is targeting cyberlockering--an old foe with a new face.

The ways people illegally download

P2P (Peer to Peer) filesharing: Most of these systems have been shut down. Napster, Kazaa, Bearshare, Limewire, and eDonkey are a few older examples. Instead of simply downloading a file from a website, P2P works by allowing any one person to download a file from anyone else logged into the network.

Bittorrent: Bittorrent is a bit different from P2P. While you use a program like uTorrent or Azureus to download files, the files themselves are usually much larger (think whole albums instead of a single song) and found on websites like The Pirate Bay, etc. Hollywood is vigorously trying to shut these websites down.

The other key difference is that instead of P2P where 1 person downloads 1 file from another person, when you download a torrent you're downloading hundreds of pieces of files from hundreds of other people. At the same time, you're also sharing bits of that file with other people downloading the same file. It's like a flood--everybody gets to swim, but everybody gets wet too. Unlike P2P,  you can't download without sharing. Confused? Wikipedia may help.

So what's Hollywood worried about now? 

Well, they're worried about their oldest enemy: hosted files. Only now they call them "cyberlockers." These are sometimes offshore blog sites, private forum communities, private email lists, or simple FTP sites where copyrighted material is put up for download. Another new difference--many of these communities now charge members a subscription fee to join. 

Foreign, often mob-run, businesses aggregate illegally obtained movies into "cyberlockers" similar to Internet storage sites used by individual consumers to squirrel away pirated video. But the for-profit version of this phenom has spawned an array of sophisticated and seemingly reputable sites selling unlimited digital movie files for as little as $5 a month.

"Cyberlockers now represent the preferred method by which consumers are enjoying pirated content," Paramount COO Fred Huntsberry said Monday...

Commonly, Hollywood movies are made available via illegal for-profit sites within days of theatrical release, while the advent of global releasing now allows the proliferation of individual titles into an array of language dubs within the first month of a theatrical debut, he noted. When movies are released on DVD and Blu-ray Disc, the sites upgrade the quality of video offered from camcorded images to pristine digital copies. - The Hollywood Reporter

As noted in the article, these sites often do look better than legitimate downloading sites, and they also offer files in flexible, non-DRM formats like .avi. Many offer a better product than Hollywood is willing to offer. The music industry is finally allowing sites like to sell unrestricted .mp3 files, which work on any device and will always work, even if Amazon shuts down. DRM files are often tied to a subscription service and will not work if they can't access a server for approval.

Here's an example. Say you'd like to watch The Lord of the Rings in High Definition (HD). You could buy the Blu-ray, which has an extra disc that lets you make a digital copy, but that digital copy will expire in 2011. That's right, it will stop working. So that 30 dollar copy of Lord of the Rings you bought, well it's only good as long as you're playing it on that fragile Blu-ray disc. If you want to watch LOTR without a Blu-ray player, you'll have to buy it all over again. How many times will a LOTR fan have to re-purchase the movie throughout their life as new formats come and go? This is as much a problem of Hollywood greed as it is illegal downloading.

The White House joins in

The MPAA and RIAA aren't alone in their fight. The White House recently announced plans to fight internet piracy, or as they call it, Intellectual Property Enforcement. Heading up the attack is Victoria Espinel, who was appointed in September as the first Intellectual Property Enforcement Coordinator.

Espinel was required under a law passed in October 2008 to prepare a report on enforcement of intellectual property laws, which was released Tuesday. It includes efforts to boost enforcement by the FBI, the State Department, the Library of Congress and many others.

According to the report, motion picture and video piracy cost the U.S. economy $20.5 billion annually in lost output, $5.5 billion annual in lost earnings for U.S. workers and 141,030 jobs that would otherwise have been created. As a result, governments at all levels are deprived of $837 million annually in lost tax revenue.

Just this year, the Justice Department has opened about 150 new piracy investigations and plans to coordinate with 35 countries to clamp down on the problem. My question: are they going to hold Hollywood accountable for overpricing their products? Probably not.

The real cost of piracy

But does piracy actually cost the U.S. economy $20.5 billion? We don't actually know. Hollywood and the RIAA want everyone to believe it's huge, but it's actually almost impossible to  to calculate the "cost." Hollywood likes to treat every movie download as a lost sale and lost revenue, and most of their calculations are based on this line of thought, which has obvious holes. Most notably, there is no data I've seen that suggests a majority of people who downloads movies would buy them otherwise. Even the Gov't Accountability Office of Congress has had difficulty understanding the MPAA's numbers.

According to a 2006 report, college students were responsible for almost half of the film industry's losses. How much money do they assume college students have? They download movies because they cannot afford to buy them. Fuzzy math! 

What do you think? Should the Obama Administration help Hollywood fight cyberlockers and other forms of piracy? Will this actually help the economy and create jobs? I'm not so sure.

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