A critical analysis of the effect of copyright infringement on the UK film and cinema industries Stephen R Perrin Submitted in partial fulfilment for the degree LLM by Research School of Law University of Sheffield September 2017 ABSTRACT Film studios and major cinema operators strongly contend that copyright infringement, commonly known as piracy, is costing the worldwide industry many billions of dollars in lost revenue. A number of senior industry figures, as well as other commentators, foresee the industry’s slow death due to illegal consumption. Consequently, for the past two decades the industry has lobbied governments and legislators to provide legislation that restricts illegal online access to their product. During this period, however, the industry has witnessed significant growth in worldwide box office returns, admissions, film production investment and in the number and quality of cinema available for the exhibition of films. These two observations appear to be at odds. Arguing that film, and especially cinemas, provide socio-cultural as well as economic benefits, this thesis critically examines the industry and academic evidence pointing to the quantum of revenue loss, as well as academic evidence examining the effectiveness of the legal measures that the industry has been successful in establishing. The thesis reaches two conclusions. First, the equivocal nature of research findings regarding revenue losses suggests that estimates of infringement revenue effects appear to have been overstated. Second, the effectiveness of legal measures appears to be in doubt, with any positive effects being short-lived. However, it is argued that the equivocality of the evidence does not permit the counterfactual conclusion that the industry is totally unaffected by copyright infringement, or that legal measures are totally ineffective. Alternative perspectives and their implications are discussed. i Acknowledgments Despite the writer’s 37 years’ experience in the film and cinema industries, the writing of this thesis could not have been possible without the co-operation of other actors in the provision of relevance, data and guidance. Enormous gratitude is therefore extended to industry colleagues who willingly gave their time and shared their expertise and knowledge, without which this thesis would have immeasurably weaker. Special thanks are due to Phil Clapp of the UK Cinema Association who not only gave time and advice, but maintained a high level of interest and encouragement throughout the process. Thanks are also due to David Hancock of IFS and to Sean Perkins of the BFI for their willing provision of data and for their signposting to other data sources. Finally, huge thanks are expressed to my supervisors, Professor Robert Burrell and Dr Mark Brown, who assiduously ensured that I did not stray from the straight and narrow and approached my research as a scholar, rather than as an industry insider. ii List of Abbreviations Abbreviation Description BFI British Film Institute. The Government’s lead body for film policy in the UK. CAS Copyright Alert System (USA) CCI Center for Copyright Information (USA). CCUK Creative Content UK. A collaboration between Government, music and film trade bodies and major ISPs created to carry out the activities foreseen in sections 2-18 of the DEA. CF CreativeFuture. A USA collaboration of creative industries formed to lobby Government and to promote legal consumption of creative content. CJEU European Court of Justice. CMU Carnegie Mellon University CPDA Copyright, Designs and Patents Act (1988), amended 2003. DCMA Digital Millennium Copyright Act (USA) 1998. DEA Digital Economy Act (2010). ECHR European Convention on Human Rights. FACT Federation Against Copyright Theft. A not-for-profit organisation established to protect its members’ Intellectual Property. Works on behalf and is funded by the film, music and television industries. FDA Film Distributors’ Association. The trade body representing film distributors in the UK. iii IPI Institute for Policy Innovation, USA. IPO Intellectual Property Office (UK). ISP Internet Service Provider. E.g. BT, Sky, EE, TalkTalk, Virgin. MPAA Motion Picture Association of America. The trade organisation that represents the economic, cultural and political interests of the six major studios in the USA. Internationally, it represents its members’ interests as the Motion Picture Association (MPA). NATO National Association of Theater Owners. The trade organisation that represents the interest of cinema owners in the USA. PIPA Protect IP Act (USA). PIPCU Police Intellectual Property Unit. A division of the City of London Police that investigates intellectual property theft and the counterfeiting of hard goods, especially in the digital world. RIAA Recording Industry Association of America. SOPA Stop Online Piracy Act (USA). UKCA United Kingdom Cinema Association. Trade body representing the interests of cinema owners in the UK. Formerly the Cinema Exhibitors’ Association. UKFC UK Film Council. The previous lead body for film policy in the UK. Established by the Labour Government in 2000 though disbanded by the Coalition Government in 2010. UNIC The International Union of Cinemas (Union Internationale des Cinemas). An international trade association representing the interests of cinema companies across 36 European states. iv Table of contents Chapter 1. Introduction and background Page 1. Introduction 1 1.2 Background 2 1.3 The rise of copyright infringement in the film industry 3 1.4 The rise of legal and non-legal copyright protection measures 4 1.5 The rise of commercial and academic research 6 1.6 Research questions 6 1.7 Interpretive approach 7 1.8 Research methodology 8 1.8.1 Academic research and literature 8 1.8.2 Industry research and literature 9 1.8.3 Industry data 9 1.8.4 An empirical approach with interviews 9 1.9 The geographic and market focus of this thesis 11 1.10 Summary 12 Chapter 2. An examination and discussion of emerging copyright infringement themes 2.1 Introduction 14 2.2 Claimed revenue effects resulting from copyright infringement 15 2.3 Comments on research, interpretation and terminology 15 2.4 The Motion Picture Association (MPA) study 18 2.5 UK industry studies 20 2.6 Academic studies 22 2.7 Industry statistics 28 2.8 Discussion of research into revenue effects 30 2.9 Does copyright infringement affect the creative and cultural output of film and cinema companies? 31 v 2.10 The nature of film and cinema culture 32 2.10.1 Cultural concepts with the film industry 34 2.11 Analysis of industry data 36 2.11.1 Film availability 36 2.11.2 Film diversity and breadth of choice 36 2.11.3 Exhibition 39 2.12 Production 42 2.13 Discussion of industry data findings 45 2.14 Conclusions 46 Chapter 3. Legal, operational and voluntary copyright protection measures adopted by the industry aimed at curbing copyright infringement 3.1 Introduction 47 3.2 Legal measures employed by the industry 47 3.2.1 Website blocking 47 3.3.2 Website blocking activities in other markets 50 3.3 The effectiveness of website blocking 52 3.4 Industry research 53 3.5 Academic studies 54 3.6 Discussion of results 55 3.7 Other issues concerning website blocking 56 3.7.1 ‘Whac-a-mole’ 56 3.7.2 Website blocking and circumvention 57 3.8 Opponents of website blocking as a copyright protection strategy 58 3.8.1 Online freedom campaign organisation A 58 3.8.2 Online freedom campaign organisation B 59 3.8.3 Discussion 61 vi 3.9 Graduated response strategies and consumer alert programmes 62 3.9.1 HADOPI 63 3.9.2 Comments on the graduated response strategy 64 3.9.3 Discussion 65 3.10 Industry generated protection measures 66 3.10.1 Technical and operational security measures 66 3.10.2 Production and post production security 66 3.10.3 Distribution and exhibition 67 3.10.4 Security; screeners and security ‘hacking’ 68 3.11 Release Pattern strategy 69 3.12 Educational initiatives 71 3.13 Voluntary Consumer Awareness Strategy (VCAP) 73 3.14 Conclusions 73 Chapter 4. Copyright protection measures as an example of Fabian Defensive Strategy 4.1 Introduction 76 4.2 Fabian Defensive Strategy (FDS) Described 76 4.3 Similarities between FDS and film industry copyright protection measures 77 4.3.1 Frustration and delaying tactics 77 4.3.2 Non-alienation 79 4.3.3 Protecting one’s own position 81 4.3.4 Formation of alliances 81 4.4 Summary of measures representing Fabian Strategy 83 vii 4.5 Conclusions 83 Chapter 5. Cinemas revisited: windows of opportunities of threats? 5.1 Introduction 85 5.2 Windows; the distributors’ perspective 86 5.3 Windows; the exhibitors’ perspective 87 5.4 Interpretation and discussion 88 5.5 Current windows developments 90 5.6 Conclusions 91 Chapter 6. Summary and conclusions 6.1 Introduction 93 6.2 Main research findings 93 6.2.1 Revenue and output effects 93 6.2.2 Effectiveness of legal and non-legal protection measures 94 6.3 Discussion 95 6.4 Good news for cinemas? 96 6.4.1 New technology 97 6.4.2 Legal implications of new technology 97 6.4.3 Legal consequences 99 6.5 What next? 100 6.5.1 Are new laws required? 100 6.5.2 The role of new technology 101 6.6 Wider relevance 102 6.7 Conclusions 103 viii Appendix 1. Interview rationale and methodology 105 Appendix 11. Ethical issues 117 References 124 Film Industry and other reports 131 Websites and blogs searched during the course of this research 133 ix Away to the cheating world you go, Where pirates are all well-to-do; But I’ll be true to the song I sing, And live and die a Pirate king; For I am a Pirate King, And, it is a glorious thing, To be a Pirate King! From the Pirates of Penzance by Gilbert and Sullivan x Chapter 1 Introduction 1.