"Asia's Entertainment Industries Fight to Cope With VCD Piracy"

By Connie Ling 

from THE WALL STREET JOURNAL INTERACTIVE EDITION (March 29, 1999)

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Video compact disks have launched an entertainment revolution throughout Asia -- one that has the industry up in arms.

Ron Chan can tell you all about it.

The 34-year-old Hong Kong salesman watched the animated film "The Prince of Egypt" long before the movie's release in Hong 
Kong last December. And that's true for most movies he views.

"I just don't go to the theater anymore," he says, showing off his collection of dozens of VCDs -- all pirated. "VCDs are 
cheaper and easier."

Mr. Chan considers himself a law-abiding citizen. He doesn't buy any other counterfeits -- no fake Prada bags or Gucci ties. 
But VCDs are a different story. "Everyone else is buying [them]," he says.

Almost overnight, counterfeit VCDs have become the darling of pirates and consumers alike. It's far easier and less expensive
to manufacture pirated VCDs than a digital videodisk or a traditional videotape. So in the past couple of years, millions of 
cheap, pirated VCDs -- everything from Hollywood blockbusters to Cantonese sex flicks -- have flooded public markets and 
cut-rate shopping malls in Hong Kong, Singapore, Malaysia, Thailand, Indonesia and elsewhere. Indeed, pirated VCDs often hit
the streets months before the movies debut on local screens -- and long before shops start stocking legal versions of the 
VCDs.

In Hong Kong, the situation is so out of control that it prompted the usually good-natured Jackie Chan, the city's most 
famous action hero, to take to the streets in protest earlier this month, along with some 1,600 actors, singers and other 
entertainment-industry figures.

In China, brisk street sales of "Titanic" overshadowed Twentieth Century Fox Film Corp.'s grand launch of the legitimate VCD
last month in Shanghai. An estimated 20 million pirated VCD copies of "Titanic" were sold before the event.

VCD piracy is an important enough part of the Indonesian economy that to avoid large-scale unemployment, local officials 
recently pleaded for leniency for the smaller illegal-VCD merchants who fill the Glodok electronics business center in 
Jakarta.

And in Singapore, as well as in Hong Kong, theater chains slashed their ticket prices by as much as half for Tuesday showings
in an attempt to compete with the prices of pirated VCDs.

"Citizens in Hong Kong simply don't think it's immoral [to buy pirated goods]," complains Sam Ho, Hong Kong and Macau country
manager for the Motion Picture Association, which represents most major Hollywood studios. "[The fact that] you can easily 
find pirated VCDs in shopping arcades sends a bad message to the people that it's OK to buy them."

VCDs first appeared in Asia in the early 1990s but they became popular in the past few years as more families purchased VCD 
players and titles became more plentiful in the digital format. The technology is based on the same storage format developed 
by Sony Corp. and Philips Electronics NV in the early 1980s for music compact disks.

The piracy problem worsened with Asia's economic turmoil as cash-strapped consumers turned more readily to the cheap 
counterfeits, notes Peter Tam, director of Golden Harvest Entertainment (Holdings) Ltd., one of the biggest film distributors
and studios in Asia. Movie tickets in some parts of the region can cost as much as US$8 and a legitimate VCD can cost US$20. In contrast, a pirated VCD movie can easily run less that US$3.

Bootleg VCDs start with videos of movies filmed surreptitiously in theaters or with a copy of a legitimate tape from another 
market. (Sometimes a movie is available on video in the U.S. before it is released in theaters in Asia.) Then they're 
mass-produced in illicit factories that spring up as quickly as others are shut down by authorities.

To combat the problem, film distributors in Asia are shortening the time between the U.S. and Asian release dates. The key, 
says Linfield Ng of Warner Bros. Singapore Pte. Ltd., is to get the movie to the theaters before the pirated VCD arrives in 
town.

Yet despite frequent raids, the authorities are confiscating more bootleg VCDs than ever. In 1998, the Hong Kong government 
seized 35.5 million illegal VCDs, compared with 3.2 million in 1997.

Losses due to piracy are impossible to quantify, but there's no doubt that they're steep. In Hong Kong, Chinese-language 
filmmakers seem to suffer the brunt of the problem. Hong Kong's Customs and Excise Department says more than 90% of the VCDs 
confiscated last year were local Chinese titles, produced in places such as China, Macau and Malaysia.

Major Hollywood studios are feeling the pinch as well. A U.S.-based copyright watchdog, the International Intellectual 
Property Alliance, estimates that the U.S. motion-picture industry lost around US$534 million in 1998 in Asia due to piracy.

Barbara Zigli, a U.S. Consulate spokeswoman in Hong Kong, says the U.S. government remains very concerned about the level of 
retail piracy, despite its recent decision to remove Hong Kong from its trade-retaliation watch list. "Significant new steps 
must be taken in the near future to effectively address the problem," says Ms. Zigli.

In Hong Kong, the lost profits have also further weakened an already-struggling film industry, once the second-largest movie 
exporter in the world. Today, fewer investors are interested in film production because of the low revenue potential, notes 
Woody Tsung, chief executive of Hong Kong's Motion Picture Industry Association, which represents more than 200 film studios
and distributors. The cutback in investment translates directly into lower-budget and poorer-quality films, further turning 
off audiences, he adds.

Industry leaders expect that VCDs will soon be phased out as digital videodisks, or DVDs, become mainstream, with their 
higher capacity and better sound and picture quality.

But a more sophisticated format such as DVD may not bring an end to piracy. While DVD production costs remain high, they will
inevitably come down as the format becomes more popular. "If the consumers want it [DVD], the pirates will do it" even if it 
means higher costs, notes Mr. Tsung.

"They can spend HK$10 million on the equipment and get the money back within 12 to 18 months," he says with a sigh. "The rest
will be pure profit. It's the best business in the world."

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orginally found at http://www.wsj.com/public/current/articles/SB922676073560755886.htm

now held at http://www.hkfilm.net/vcd.txt