A positive stance on IP theft

October 7, 2011
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Universal Pictures International Entertainment VP Paul Chesney told the audience at the Entertainment Content Protection Summit that a TERA Consultants study of the impact of IP theft on creative industries in the EU showed that it could mean the loss of 655,000 jobs by 2012. “Retail sales totalling €32 billion would also be lost – enough to buy each household in the UK a 3D TV,” he said.

 Put simply, one in 10 people employed currently in the €860 billion creative industries could be out of work by this time next year, purely as the result of digital theft. Chesney didn’t take the familiar route and blame consumers, ISPs and governments for the situation – instead, he offered a positive stance on the ways the industry should respond to the threat.

 He told the audience that winning the fight against IP theft constitutes the biggest opportunity for the home entertainment industry. “The revenue from home video entertainment across the five major European markets is still significant and the combined revenues from physical and digital will sustain the industry through 2015. It remains a healthy business that I am proud to be part of,” he said.

 TERA Consulting figures indicate that lost revenue from consumer file-sharing next year, estimated at €22 billion, will be more than three times the size of the legitimate market. Losses from streaming video will approach €32 billion on top of that. By 2015, there will be an €82 billion loss attributable to file sharing and streaming in the combined markets of France, Germany, Italy, Spain and the UK.

 Chesney said, “A study earlier this year suggested that 24% of global internet traffic infringes copyright and there has been a suggestion in some quarters that access to everything for free on the internet is a basic human right. That kind of scares me!” He welcomed the announcement by UK Secretary of State for Culture, Olympics, Media and Sport Jeremy Hunt that the industry should be entitled to make it more difficult to access sites that are dedicated to the infringement of copyright.

 Protection of assets requires training, accreditation programmes and regular audits, he noted, and he highlighted the improved security in the theatrical window that is made possible through technical innovation, including watermarking: “Change is fundamental to sustainability. Success in the fight against piracy means a change to our business models.”

 He reminded the audience that Universal has entered into several collaborative partnerships this year: “The three key areas are the invigoration of the local market, the preservation of quality and choice and the provision of a better focus for our customers, through more efficient distribution.”

 Chesney said that collaboration means one less conversation to be had, one less box to be delivered, one less VMI operation and one less returns activity for customers.

 “The news that Sony DADC and Cinram are working in partnership in the UK after the Enfield fire is great from a studio perspective. Historically, there was an edge for different studios to have different supply partners but in a mature market, there should be a lot more collaboration in the supply chain,” he said.

 “Margins are very tight and we recognise that, so we have to do things more efficiently in order to take costs out of the business. For example, we have to question whether a daily delivery to every single outlet in territory is the right way to do things.”

 According to Chesney, the majority of IP theft occurs prior to the video window: “Awards screeners, camcordings and early-release territories contribute to the problem. We trade with 17 countries and 52 licensee territories in the international business alone, each with different windows and strategies to maximise those markets.”

 Although UPIE had in the past focused on in-territory suppliers, in the future it will be concentrate on suppliers with a multi-territory reach, which will help to tighten security: “The greater the technology choices, the more risk we have – the tablet, the smartphone; everything is more immediate and access is quicker. Digital and physical combine to ensure that we must react faster as well. There must be more prosecution of offenders and more enforcement, since from a government perspective the loss in revenue and taxes is immense.”

 Although he stressed the need for action at government level, he said the industry must do more to protect itself, and action begins with in-house policies and tighter controls: “The in-house content protection policy for UPIE operates throughout the year but we dedicate one week to the theme ‘It’s our content – it’s our responsibility,’ and every day there is something happening – a government minister or talent talking – and the event embraces the whole staff. For the first time this year, it is going to be a world-wide event for NBC Universal, so that everybody buys into it.”

 Chesney said that UPIE asks everybody who works with the company to look after content as though it is their own, because it is their livelihood. There are restrictions on bringing laptops and mobile phones into the UPIE workplace and he headlined an added security measure: “Nothing leaves our offices, pre-street date.”

 He praised the Content Delivery and Storage Association (CDSA) programme, which provides a single international policy for pre-release asset security: “It is an on-going process that suppliers have to adopt and sign up to, along with every member of their staff. It is not a spot survey; it’s part of the DNA of the business. It is also intended to be complementary to FACT and MPA audits because from a suppliers’ perspective they are reluctant to sign up for yet another policy that might eat into their margins.”

 So far, 35 vendors in key territories around the world have enrolled in the programme including compression and authoring houses, and replicators in the UK. “We encouraged the CDSA to make the programme cost-effective. There was no way that I was going to champion this programme unless our suppliers found it comfortable to do so too,” he said, and noted that a London production house grasped the business development potential for its marketing and on-line operations, and saw the programme in a really positive vein.

 He also made the point that there can be no reliance on trust: “At one of our facilities, we noticed that the door was propped open with a fire extinguisher, and just yards away, the barrier leading out onto the road was up. When challenged, the response of the MD was ‘Well we have never lost anything from our facility in the past 15 years!’ As anybody knows, just one Blu-ray or DVD leaving the building prematurely can end up as a digital master.”

 Chesney said, “Content theft is here to stay but that is no reason to let up on the continuing effort on all fronts. Awareness and education of both young and old must continue and we must protect content as if it were our own in order to realise the opportunity that is still there. Take as an example the target audience for the ‘Twilight’ series. They know exactly how to download free content online, yet they choose to buy packaged media. The audience is still there, it has not gone away.”

 Chesney rounded off his presentation with a reminder that he entered the industry in 1983 at the time of rental video on VHS. He declared: “I fully intend to be here in 10 years’ time when it is still a vibrant and healthy business. 

Retirement is a long way off!”