When Los Angeles-based independent film sales agent Barbara Mudge was in Russia recently trying to sell a film, she ran into a barrier that was starkly different from the usual distributors' objections about weak plots, lack of stars or price.
'The man said: 'I can't buy your movie because it hasn't been pirated yet',' explains Mudge, president of Worldwide Film Entertainment. 'I said: 'Excuse me'' and he said: 'Well, if it's pirated, that means the market wants it. So until it's pirated I'm not going to license it legitimately.''
Piracy is a problem that many in the industry believe could be catastrophic for the independent film sector. Piracy of films produced by the major studios attracts plenty of headlines, and its effects are loudly trumpeted by the claims that sales of pirated DVDs or internet downloads cut into box-office takings or licensed DVD sales.
In the independent sector, the impact is less direct. While studio films are largely rolled out by the same organisation, the release of independent films is generally handled by different companies in different territories at different times.
In the last couple of years, entire territories have disappeared as potential markets for independent films because of piracy. Jean Prewitt, president and chief executive officer of the Independent Film & Television Alliance (Ifta), the global trade association for the independent film and TV industry, says that although independent films are less likely to be the direct targets of piracy than studio productions, their position in the distribution system makes them much more vulnerable.
Free on the web
'The big issue for the independents is that if internet piracy is really prevalent in a territory, it damages the revenue potential for all of the distributors in that territory, even if it's not an independent title that was pirated,' Prewitt says. 'We see our members coming in and identifying a given territory and saying: 'We just can't make sales in that territory any more.''
Among the worst territories for piracy are Russia, the Middle East, Portugal, Spain, Germany, China and Brazil. Some operators also report that the UK is getting more difficult, as are some other Asian and Latin American territories.
Phil Rymer, director of legal and business affairs at the UK's Icon Film Distribution, says the pirates are getting better all the time. 'The piracy is getting very sophisticated. We've received copies of our films where even the artwork is really sophisticated, with credit blocks, publicity photos, good titles. It's a genuine mini-economy.'
Michael Barker, co-president of US distributor Sony Pictures Classics (SPC), says his company has in the past enjoyed success with Iranian films playing in cinemas that serve Iranian audiences in Los Angeles and Chicago. But when SPC opened Jafar Panahi's Offside last year, 'the Iranian audience just did not appear in these same theatres', Barker reports.
'I've been told by people who are close to the public from Iran in America that it's because of piracy - that the film was available to that audience through piracy,' Barker explains. 'I don't think it necessarily came from Iran; it could have come from Europe or other places.'
A lag - allowing pirates to make and export copies - between the release of an Asian or Iranian film in its home country and its availability for release in the US could now be a factor in acquisition decisions, Barker confirms.
Nicolas Chartier, sales chief at US sales and financing outfit Voltage Pictures, believes he has lost 20% of sales over the last six months. 'You cannot sell a video title any more in Spain, for example. Movies that you were selling for maybe $100,000 a year ago you're selling for $5,000 or $10,000 now.
'One of my Brazilian buyers e-mailed all of the sales companies saying: 'I'm releasing this movie on Friday, but it's already on the internet in Portuguese on 20 websites in Brazil. Why would I pay for it when people can get it for free on the internet''
These trends are bound to have an impact on production. 'Distributors would normally have taken a chance with our more specialty product,' says Mudge. 'Those opportunities don't exist any more. And lots of producers aren't going to get their first films made.'
Additional reporting by John Hazelton
ON THE STREETS OF BEIJING
The range of pirated DVDs available in Beijing is astounding - from French New Wave to the latest indie hits.
Most pirated DVDs are sold through specialist stores and the widest collections are to be found in middle-class neighbourhoods or areas such as Chaoyang and Haidian, where ex-pats and foreign students live. Most of the titles are US studio films but there is also a wide range of US indie and foreign-language titles, mostly from Europe and the rest of Asia. Also popular are the box sets of the latest US, UK and Korean television shows.
A brief scan of a store in September revealed sub-titled versions of Edie Sedgwick biopic Factory Girl, Guillermo del Toro's Spanish-language Pan's Labyrinth, Deepa Mehta's Hindi-language Water and Shane Meadows' This Is England. Due to their niche appeal and what the Chinese government would consider spiritually unsound content, titles such as Factory Girl and This Is England stand little chance of a theatrical release in China.
All the DVDs were being sold in tidy packaging, although not wrapped in plastic, and store owners allow their punters to return goods if they are not happy with the quality. Prices start at $1.33 (yuan10) and are slightly higher for DVD-9 disks.
The DVDs on Beijing's streets tend to be the latest blockbusters, sometimes available only a day after their US release, and have been filmed directly from the screen.
Attempts to buy legitimate DVDs in Beijing reveal that the pirates are filling a gap in the market. China does have legitimate local video distributors, such as Zoke Culture, that are fighting to carve a niche, and the US studios are persevering through joint venture video labels with innovative pricing and release schedule strategies.
As result, legitimate products are on sale at retail and video outlets such as Wal-Mart, Xinhua Bookstore, Carrefour and FAB, but due to censorship and import restrictions they do not have anywhere near the range of the pirate DVD stores.
ON THE STREETS OF PARIS
Finding pirated DVDs on the streets of Paris is much harder than in other European territories.
'We are very distanced from what happens in England or Spain,' says Frederic de la Croix, delegate general of France's anti-piracy association Alpa. 'We don't have massive physical piracy, but it does exist.'
The main culprits are the weekend flea markets in Paris and the provinces. DVDs sell for around $10-14 (EUR7-12) depending on how recent they are and de la Croix says nationality counts less than how successful the film has been.To minimise the threat, Alpa makes spot checks and works with local police. If convicted, culprits can face up to three years in prison and a fine of $427,000 (EUR300,000) but penalties are rarely that harsh.
Independent distributor Jean Labadie says that he has never really come across piracy of independent films in France, and that the sector is relatively unharmed. 'The risk is much greater for a Rush Hour 3 than the type of films I distribute.'
ON THE STREETS OF TOKYO
Though it was once considered Asia's 'good' territory, piracy in Japan has risen sharply in recent years, to an estimated $742m in 2005.
Although only half of that was accounted for by the piracy of Hollywood films, both pirates and buyers in Japan generally deal in big movie and music titles rather than arthouse or indie fare.
The government and local law enforcement are challenging this upsurge. On October 13, a piracy ring in Kanagawa Prefecture was busted selling mail order copies of Night At The Museum, Rocky Balboa and Pirates Of The Caribbean: At World's End. Other recent arrests include an internet auctioneer in Sapporo selling copies of Studio Ghibli titles such as Howl's Moving Castle and street vendors in Osaka with duplicating equipment and over 20,000 bootleg DVDs, including Die Hard 4.0 and Transformers.
A law banning the use of camcorders in cinemas came into effect on August 30, with violators facing jail sentences of up to 10 years and fines of up to $85,400 (Yen10m). On the bootleg DVD and P2P file-sharing front, police could previously get involved only when original copyright holders made complaints, but this has now changed.
ON THE STREETS OF SAO PAULO
The DVD black market has become a normal part of everyday life on the streets of Sao Paulo in Brazil. In the city centre, recent Hollywood releases are sold everywhere from plastic sheets on the floor. According to the Latin American division of the Motion Picture Association (MPA), it takes just five days after the US release of some blockbusters for illegal copies to reach the Sao Paulo streets. Last year the industry in Brazil estimates it lost around $102m because of piracy.
'Illegal copies of (Sandra Bullock vehicle) Premonition were available way before its opening in theatres in Brazil,' says Marcio Fraccaroli, CEO of Paris Filmes, an independent distributor. Another company, Flashstar Filmes, now faces the same problem with thriller Mr Brooks. 'Since the film is simultaneously at the theatres and on the streets we will certainly rent and sell much less on DVD,' says Marcio Maita, director of Flashstar.
Recently, Jose Padilha's Elite Squad, the much-hyped Brazilian film about Rio's special police unit, became a piracy phenomenon in the country. It has been estimated that more than 1.5 million pirated DVDs were sold before its opening in theatres on October 5. The demand was so huge that the vendors quickly made up 'sequels' to the film. They sell the documentary News From A Personal War, by Joao Salles (brother of Walter Salles), that also deals with drug wars in Rio favelas, as Elite Squad 2.
ON THE STREETS OF MOSCOW
The streets of Moscow are an unscrupulous cineaste's paradise, with pirated copies of both major Hollywood films and hard-to-find arthouse and independent films sharing shelf space. On a recent visit to a walk-in kiosk next to a supermarket in the south of the city, for example, a pirated copy of Snakes On A Plane was for sale next to a counterfeit copy of Peter Greenaway's 1993 film The Baby Of Macon.
'Everything is stolen,' says Alexander Semeonov, publisher of Russian Film Business Today. 'Even arthouse and indie films.'
Product ranges from unlabeled Dvd-rs to packages with professionally printed cover art. Sales points for pirated product include tables on the street, kiosks and pre-fab retail space at electronics markets.
Independent and arthouse distributors are becoming more careful about what they buy and how much they pay for it. Sellers have to allow for earlier release dates in Russia because of the piracy threat.
'(Russia has) been the first in the world to release some films theatrically and on DVD such as Tsai Ming-liang's The Wayward Cloud and Mohsen Makhmalbaf's films,' says Anton Mazurov, vice-president and creative director of distributor Cinema Without Frontiers. 'Pirates can't find a disc to copy before the film has been released theatrically.'
The Russian Anti-Piracy Organisation (Rapo) was set up with the help of the US studios and is mostly focused on Hollywood films. It raids manufacturers and sellers of pirated product.
'Even though companies such as Cinema Without Frontiers and Carmen Video are not members of Rapo, copies of their products crop up in the many raids Rapo conducts on a monthly basis, removing them from circulation,' says Rapo head Konstantin Zemchenko.
ON THE STREETS OF LOS ANGELES
Santee Alley, a bustling street market in downtown Los Angeles' shabby 'Fashion District', was once described by the Motion Picture Association of America (Mpaa) as 'one of the biggest pirate havens on the West Coast'. So, several years ago, the Mpaa donated $186,000-worth of surveillance cameras for Los Angeles police to install around the district.
The cameras may have slowed piracy activity down, but they certainly have not stopped it. On a recent Saturday afternoon at least half-a-dozen hawkers were out on the streets around Santee Alley, cautiously displaying their stocks of slickly packaged but clearly pirated DVDs.
On offer - for $5 each or five for $20 - were copies of current studio releases including The Game Plan, Resident Evil: Extinction and Ratatouille. The pirates were also touting mainstream independent movies such as Lionsgate's 3:10 To Yuma, Korean thriller Dragon Wars: D-War (distributed in the US by Freestyle Releasing) and New Line's Shoot 'Em Up.
Cineaste shoppers had to choose from a handful of titles, among them The Weinstein Company's The Hunting Party, Paramount Vantage's A Mighty Heart, Warner Independent's In the Valley of Elah and Focus Features' Eastern Promises.
Foreign-language offerings were scant and, in keeping with the fact the market's clientele is largely Latino, almost all were in Spanish. They included Lionsgate's US-made action adventure Ladron Que Roba A Ladron; Mexican comedy 7 Dias (released in the US by Freestyle); To The Other Side, Mexico's submission for the 2006 foreign language Oscar; and Mexico's 2007 Oscar nominee Pan's Labyrinth (distributed in the US by Picturehouse).
There is some evidence, however, that pirate DVDs of independent and foreign-language films are becoming more easily available in the US, either in ethnic sections of major US cities or online.
ON THE STREETS OF MEXICO CITY
The piracy problem is endemic in Mexico, with counterfeit DVDs for sale in every metro station and on every street corner. Most can be traced back to markets that specialise in bulk sales of pirated goods to street vendors.
Tepito Market, in downtown Mexico City, is one of the territory's largest. A hotbed of piracy, the market covers a 22-block area and thousands of sellers hawk anything from pirate DVDs and CDs, to stolen goods and drugs. Street vendors buy in bulk from Tepito and sell all over the city. There is a very wide selection of product, from recent Hollywood blockbusters such as The Bourne Ultimatum - available even before it opened theatrically in Mexico - to independent Mexican productions such as Jorge Hernandez Aldana's The Night Buffalo, starring Diego Luna. Pirated titles can be old or new, local or foreign, fiction or documentary. And if the pirates do not have a particular title they can be ordered.
A pirate DVD in Tepito costs $1, and prices then rise to between $1.50 and $5 depending on where the DVD is then sold.
'The piracy market in Mexico is around 85%, so you can imagine how big the impact is,' says Alejandro Lebrija, director of Gussi ArteCinema, one of the leading indie distributors in Mexico. 'The films we buy, especially big productions, crop up on the streets long before release if we don't open at the same time as the US.'
Francisco Guerra, head of the MPA's anti-piracy programme in Mexico, estimates the Mexican film industry may lose up to $1.1bn per year to piracy, and it is the independent sector that suffers most.