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LOS ANGELES (Hollywood Reporter) - Organized crime is taking on a larger role in film piracy, according to a new report from the RAND Corp. being released Tuesday.
And though it could point to only a handful of examples where the profits from piracy have been used to support terrorist activities, the report warns that the terrorist connection could increase in the future.
Crime syndicates have become involved in the entire supply chain of illegal films, from their manufacture to their street sales, as piracy takes its place alongside such criminal activities as drug trafficking, money laundering, extortion and human smuggling.
"Given the enormous profit margins, it's no surprise that organized crime has moved into film piracy," said Greg Treverton, the report's lead author and director of RAND's Center for Global Risk and Security. "The profits are high, and penalties for being caught are relatively low."
Raising the prospect that piracy also could become a threat to homeland security, Treverton said, "If you buy pirated DVDs, there is a good chance that at least part of the money will go to organized crime and those proceeds fund more-dangerous criminal activities, possibly terrorism."
The report from the nonprofit research center was supported by a grant from the Motion Picture Association (the international arm of the Motion Picture Association of America), which estimates that the worldwide motion picture industry loses as much as $18.2 billion annually because of piracy.
The RAND researchers documented 14 case studies of film piracy -- throughout North America, Europe, South America, Russia and Asia -- where organized crime was part of the picture.
The report also cites three cases where film piracy helped support terrorist groups:
* In the '90s, the Irish Republican Army used many criminal activities, including film piracy, to support its efforts to drive the British from Northern Ireland. A political agreement in 1998 brought an end to the violence, but at least part of the IRA continues to operate as a criminal enterprise that remains involved in counterfeiting, the study says.
* The D-Company, an organized crime group active for generations in India, has been involved in film piracy since the '80s. The group became a terrorist organization when it carried out the "Black Friday" bombings in Mumbai in 1993 that killed more than 257 people and injured hundreds more.
* In the tri-border area of Brazil, Argentina and Paraguay that is an important financing center for Islamic terrorism, channeling $20 million annually to Hezbollah, at least one transfer of $3.5 million was made by known DVD pirate Assad Ahmad Barakat. Barakat was labeled a "specially designated global terrorist" by the U.S. government in 2004.
The RAND report says that counterfeiting levels are not likely to decline unless governments worldwide commit more resources to fighting counterfeiting and devise tougher laws to protect intellectual property.
The report points to digital technology for making illegal counterfeiting easier and more profitable -- even more profitable than other, riskier criminal enterprises like drug trafficking.
In one example, it cites a pirated DVD made in Malaysia for 70 cents that was marked up more than 1,000 percent and sold on the street in London for about $9. The profit margin was more than three times higher than the markup for Iranian heroin and higher than the profit for Colombian cocaine, according to the report.
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A new study by the RAND corporation has attempted to put the focus on 'movie piracy' squarely on the shoulders of terrorist groups and criminal gangs. The report, which claims to have been 'peer reviewed', seems to show that no matter which gang, thug, or terrorist - they all pirate movies.
On reading the report's summary, there is a strong wave of deja-vu. It hardly seems like 4 years have passed similar claims put out by a UK industry group were debunked. Worse still, the same old tricks are being used again to cloud the issue. The only difference is that instead of just concentrating on the situation in UK and Ireland, they've now gone global.
The MPAA funded report report titled 'Film Piracy, Organized Crime, and Terrorism' claims that terrorist groups use film piracy to finance their activities, while organized gangs see it as a significant revenue stream. Selling pirated goods is a 'low-risk, high-profit enterprise' which attracts criminals of all sorts according to the report. And, as if that is not bad enough, in some areas the influence of these pirating gangs extends into law enforcement and political leaders, who are bought, intimidated, or induced to create "protected spaces" where crime flourishes.
Something that jumped out during the first glance at the report is the blurring of terms. On page 3 of the report, one of the reasons things can, and are, overstated is explained as a footnote.
"The terms "piracy" and "counterfeiting" are used interchangeably in this report, although they can mean different things."
Unfortunately for the study, they do mean VERY different things. 'Piracy' in this context tends to refer mostly to digitally representable items, while counterfeit goods can run the gamut from aircraft parts, to cigarettes. In France, you can't sell certain brands of handbag on eBay easily, because they might be counterfeit. Fake aircraft parts (which don't meet specs) are a major problem for the airline industry (also counterfeiting) and fake cigarettes are a commonly seized item at international borders. If you want another example, just look no further than your spam folder - count the number of Viagra, and other medications you are offered - all counterfeit.
It only goes downhill from there. Early in the report, it moves on to talk about definitions of organized crime, including some that are so loose it's hard to see anything except a lone person's opportunistic crime as being 'organized'. In fact, by the definitions given, the RIAA may be an organised crime gang, or the UMP party in France, making 3-strike Sarkozy, the head of a crime syndicate.
Digression aside, the case studies that underpin these findings also fail to pass scrutiny. The very first one mentions a seizure of 9400 discs in a shipment. Using a standard weight of a DVD (60g, with box), it comes to about half a ton, and assuming each disc can be sold for $10 (a high price) that's only $94,000. A kilo of cocaine has a higher street value (about $160,000 right now, according to Cleveland Police), and is much easier to transport. In addition, drugs don't tend to suffer from the 'do it yourself' aspect that gives sites like the Pirate Bay and Mininova such heavy traffic. No value is ever given for the 'profit' made either, only..
The combined proceeds from CD/DVD piracy and drug sales were estimated, for the purpose of assigning asset forfeiture, at $3 million.
Throughout many of the case studies listed, there is little hard evidence to actually link crimes. One cites packages arriving at a location containing copied DVDs, and when the police arrived, several men with false papers attempted to run. This leads the author to the assumption of using immigrants to work a copying operation, despite the only evidence mentioned being a single person trafficked.
If movies are the easy, safe and profitable way, as the report suggests, then someone's not telling these gangs. A little chart is even produced, which lists gangs worldwide and the work they're involved in. There are no prizes for guessing that they all apparently participate in DVD copying, but more surprisingly, its the only activity they all share.
The true purpose of the report is of course to force authorities worldwide to do something about piracy, or criminal gangs and terrorist groups will take over. We have no doubt that the MPAA will cite this study in nearly every press release they issue from now on, and bring it onto the political agenda. Here are a few recommendations the report gives.
* Piracy should be made a priority offense within anti-gang strategies.
* Laws should be enacted to grant investigators greater authority to sustain investigations, conduct surveillance, and obtain search warrants.
* Key piracy cases should be fought in the organized-crime or money-laundering divisions of prosecutors' offices.
* Governments should share intelligence with industry-led anti-piracy efforts.
It is likely that the MPAA will use these findings to get tougher anti-piracy laws. This wouldn't really be a problem if it would only affect commercial piracy. However, as a side-effect people might have to prove that the music on their iPod is legit when they go through customs, and at home their ISP might be looking into their download behavior.
Unsurprisingly, a large percentage of sources given in footnotes, happen to be the very groups that have funded the story, the MPA(A) and FACT, which should seriously dent the credibility of the report. However, it is to be expected that this report will be given the same credibility as other MPAA-financed studies, despite their dubiousness. As a result, expect more laws to tackle this 'threat', which will only ever be used against everyday citizens, and that's just how the likes of the MPAA like it.