Cheap, pirated DVDs of American films that are produced in China can be found for sale on the streets of Beijing just a few days after the films are playing in theaters. These bootlegged DVDs are threatening legitimate DVD wholesale sales. Pirated DVD shops exist all over China. For instance, Chinese consumers can buy popular DVD movies for about $1.22 (8 yuan) from stores that exist just down the street from the Apple Store in Beijing. So why would anyone buy legitimate DVDs from the Apple Store?
A major reason for the DVD black market in China is its strict censorship policy and government restrictions on home entertainment products. This makes it nearly impossible for consumers in China to buy legal copies of American films because so few are approved for marketing. China only allows 20 foreign movies into theaters each year, and the government has strict licensing rules for the sale of home entertainment products. The censors must approve all films for legal viewing and they disapprove of movies with explicit sex scenes, as well as movies such as “The Social Network,” which is about Facebook, a site that is blocked by the government in China. Therefore, Chinese movie buffs are driven to illegal Internet downloads or stores and street vendors that sell pirated DVDs.
Bootleg DVDs in China are very slickly produced and packaged. In fact, many have extra features that make them better than those found on legitimate discs. This is a huge business. According to a report issued by the state-run media, the country’s pirate DVD industry totaled approximately $6 billion in 2010. China’s box office receipts, on the other hand, totaled a mere $1.5 billion for last year.
The authorities in China say they are taking strong action to put a stop to copyright infringement of products such as films, music and clothing. They claim this crackdown has resulted in jailing 3,000 people since October 2010. However, the major problem is that China’s censorship policies make it almost impossible for consumers to buy legal DVDs of American films in China. This is acknowledged by Hollywood studios and Chinese consumers alike.
The Motion Picture Association of America estimates 9 out of 10 DVDs sold in China are bootlegged, and the piracy rates for Internet downloads are at least the same or higher. MPAA, the trade group that represents the six major Hollywood studies is hoping that a pending World Trade Organization dispute will force China to liberalize the theatrical distribution of movies and government policies regarding the import and sale of home entertainment products, including the retailer licensing process. This has been going on since 2009 and hopefully, resolution will happen soon.
Hollywood has started licensing deals with Chinese video portals such as Youku and Tudou, whereby they license films that users can pay 5 yuan to watch. Tudou is also going to start streaming TV programs like “Desperate Housewives” and “Lost” in a licensing agreement with Disney Media Distribution. However, Chinese consumers are so used to bootlegging that they even have pirate brands such as Red Dragon, Monkey King and Pegasus. Some of the more established pirate brands are even putting watermarks on their DVDs to distinguish their products from other bootleggers.
So what can Hollywood do? The MPAA has taken people to court in China and has won these court cases. However, the penalties are not severe enough to discourage people from bootlegging. There are so many bootleg DVD factories and so little enforcement of the law that it’s hard to make a case for legitimate DVD wholesale sales.