The cost of piracy to New Zealand
Paul Campion bet his house on the success of his debut feature film. It didn't seem an unreasonable gamble - he had two acclaimed short films under his belt and years of industry experience. But what he didn't bet on was pirated versions of his movie turning up on more than 2000 illegal download sites before it had even hit cinemas in New Zealand.
Despite critical plaudits and coverage on horror-genre sites worldwide, The Devil's Rock made a loss, recouping about 85 per cent of its budget.
It was enough to keep the house Campion had re-mortgaged to fund the movie, after he gave up his high-paying job at Weta Digital in 2008, to try his luck as a film-maker. But it wasn't enough to fuel his dream.
Because his film made a loss, the Wellington film-maker has been unable to secure further film funding. Two years after The Devil's Rock's 2011 release, he's jobless, picking up occasional freelance work to make ends meet. And there's no question in his mind as to how he got here.
"If you're making a product that people aren't paying for it's impossible to earn a living from it. As a direct result of this, I'm now unemployed and not working in the film industry any more. I'm trying to find work elsewhere, because right now it is absolutely impossible for me to earn a living as a film-maker."
Campion estimates that if every illegal downloader had paid just $1 to watch the film it would have easily made a profit.
In an already tough film-making market, sources say internet piracy is the single biggest issue facing New Zealand's billion-dollar film industry. A Your Weekend investigation has discovered illegal copies of Kiwi movies on YouTube, cyberlockers and on BitTorrent file- sharing sites.
The most sophisticated include synopses, DVD cover scans, and links to film information and critical reviews. If only legitimate distributors were so efficient, one producer moaned.
In the most blatant case uncovered by Your Weekend, a copy of new release Mt Zion posted on YouTube had been watched 17,988 times in four months, with 8800 views in the last month alone. Not only was it being offered for free, the pirated film was earning money through advertising.
And it's not just recent titles that are affected. Your Weekend also found 21 purported versions of Whale Rider on filesharing site Kickass Torrents, including copies in French and Spanish.
A copy of Sir Peter Jackson's 1992 cult hit Braindead has clocked up 24,648 views on YouTube since it was put up in October last year, and a copy of Kiwi classic Goodbye Pork Pie has been watched by 16,312 people.
Asked for his reaction when he found out (via Your Weekend) that almost 18,000 people had watched his movie for free on YouTube, Mt Zion producer Quinton Hita sighs.
"It's great that it's so popular. But it's obviously disappointing that people still don't realise how difficult it is for film-makers in New Zealand to make money."
There was worse news to come. As soon as Hita had staked a copyright claim with YouTube and had the pirated version removed, a second copy appeared in the rankings, which had been watched 10,684 times.
That's 28,672 potential sales lost. And that's just from YouTube copies. There are likely to be countless more versions on file-sharing sites and encrypted cyberlockers, which are more difficult to track.
But piracy only makes fat cats thinner, right? Mt Zion was the highest grossing New Zealand film this year and took $1.6 million at the box office in Australia and New Zealand. So they must be rolling in the dosh. Right?
Not yet, Hita says. They've made money on paper. But not a lot of money.
"There are a lot of people in line before you, before you start to see any money. I think nine out of 10 films, the producers don't see any money back for films made in New Zealand. Which is why there are very few film-makers who can make a living solely through making films."
The tight margins also mean piracy can have a disproportionate impact on Kiwi movies.
In 2010, the Screen Association (previously the Federation Against Copyright Theft) estimated piracy cost the New Zealand film industry $70 million. However, that appears to be an extrapolation from a 2005 Motion Picture Association study.
The difficulty is not so much quantifying piracy - Kiwis were illegally watching 50,000 movies a month at the last count, according to Screen Association tracking; what's tricky is putting a value on it. And that's also one of the biggest barriers to stopping it. Illegal downloaders often argue that film-makers or musicians don't lose money from piracy, because they wouldn't otherwise pay to watch their movie or listen to their song.
It's an argument that causes film-makers to visibly bristle.
"I would like an Audi R8, but I can't afford it," Campion says. "I might think they're overpriced, but does that mean I'm going to steal one? You're stealing a product that costs money to make. If people keep stealing them, there will be fewer and fewer films."
New Zealand Film Commission acting CEO Mladen Ivancic says New Zealand films have been less profitable in the past five years. However, it's hard to pin that to an increase in piracy, as it coincided with the global financial crisis and a general downturn in DVD sales.
Nonetheless, he doesn't believe that illegal downloads have had no financial impact. While some freeloaders would not otherwise pay to watch the movie, potential paying customers also take advantage of free copies.
That contention is supported by research that found digital movie sales increased 6-10 per cent at two major film studios, after the 2012 shutdown of Kim Dotcom's cyberlocker Megaupload.
But piracy doesn't seem to have slashed New Zealand box office sales, which have remained steady at $162 million over the past two years.
Another Wellington film-maker, Costa Botes, has just been called evil and likened to a Nazi, after demanding that a website owner remove from the site an illegal copy of his documentary The Last Dogs of Winter. That's the level of anger and emotion piracy debates provoke.
While he can't put a number on what piracy costs him, Botes's experience shows that it does do measurable damage.
Having kept a tight rein on all copies of Last Dogs, Botes managed to navigate the film's cinema release without pirated versions turning up online. It wasn't until a shorter version screened on television in Australia that an illegal copy turned up on YouTube.
The only reason Botes found it was because a cinema owner in Winnipeg, Canada - where the film is set - sent him an email backing out of an arranged screening.
"I said 'Why?' and he said 'Because your film is up on YouTube'."
Botes argues that piracy has transformed into a nightmare the promised digital utopia of increased demand and easy access to world markets. The 1980s, when he sold a 30-minute documentary to TVNZ for about $10,000, now seem like a golden age. Today, if he can sell it at all, he might get $2000-$3000 for an entire feature film on a niche channel such as Rialto. So every lost rights sale, or lost opportunity to publicise the movie through an overseas screening, is significant.
Botes successfully applied to YouTube to get the movie taken down, and the Canadian screening went ahead. But what he found more galling than anything was the fact that the pirate was making money out of his work.
"I was upset that there was advertising on there, and I was really upset, because it was New Zealand advertising."
It's bad enough, he reasons, that YouTube allows people to post videos without making any effort to verify their copyright. To then allow them to make money out of other people's work is, he argues, unforgivable.
So he challenged the advertisers, which included Z Energy and New World. One called back within minutes, the others all responded within a day. All were appalled.
Video advertising for major New Zealand brands also appeared on the Mt Zion pirate copy discovered by Your Weekend. Southern Cross Travel Insurance and AMP were both unhappy that their ads appeared on pirated content, and both promised to follow it up with their advertising agency and Google, which owns YouTube. Telecom, whose ad appeared on an illegal copy of What Becomes of the Broken Hearted, failed to respond.
Catherine Fitzgerald, producer of Oscar-nominated 2011 film The Orator, also had a bitter experience with YouTube after the film appeared on the video-sharing site the moment it was released on DVD in New Zealand.
When she applied for the third time to YouTube to have it removed, they demanded she send a writ to the pirate to prove she owned the rights.
"I'm thinking 'Why don't you watch the credits on the film - my name is there'. They don't take responsibility, they put it all back on the maker. They just collect the ad revenue. It was a bit of a shock to me."
When the distributor, which is linked to Paramount Pictures, stepped in, the pirated film disappeared immediately.
Google argues it would be logistically impossible to establish copyright for the 100 hours of video uploaded to YouTube every minute. Instead, it discharges its responsibility by saying users have to own the copyright of everything they post, and taking down offending videos when they're pointed out.
However, Google fails to explain why YouTube cannot check copyright when someone applies to make money by adding advertising to their videos.
A Google spokesman points out that YouTube proactively checks new videos against a database of content flagged by copyright holders, under a new system called Content ID. That allows the rights holder of a song playing in the background of a video to make money from that video by adding advertising to it. The Content ID service, they say, is free to anyone with a body of work.
Botes asked to join Content ID. His application was declined.
While Fitzgerald was obviously keen to remove the pirated copies of The Orator from YouTube, she understands that part of the reason they were there was because of the mismatch between traditional film distribution models and the "must see it now" mentality of the digital generation.
Because of the film's Oscar nomination, American audiences were itching to see it, but it still wasn't available there because of the traditional territory-by-territory release model. And that gave oxygen to piracy.
That's another common justification for piracy - that more people would watch movies legitimately if studios devised better ways of getting the film out to everyone, everywhere, at the same time and at a cheaper price.
Fitzgerald argues that a lot of the energy devoted in the past decade to trying to stop piracy might have been better spent trying to open up legitimate channels. And there is some truth to the argument that piracy can give content wider exposure. Breaking Bad creator Vince Gilligan said last month that pirated versions helped grow awareness of the television show.
Filmmakers need to find a different approach, which might mean releasing movies on DVD and digital download at the same time as their cinema release, Fitzgerald says.
Another option is websites that offer movies free to the viewer, but pay film-makers through advertising. She recently put The Orator on United States free movie site Hulu, and its subscription sibling Hulu Plus, but has yet to work out if the return will be worthwhile.
The Film Commission, which has a financial interest in the success of the films it funds, is also looking at different ways to get its movies out there. It has already put a handful of old titles on iTunes, and plans to make the rest of its back catalogue available on video-on- demand sites, and via a VOD player on its own website, for a small fee.
But for some, even a small fee is too much. Andrew Cornwell, general manager of Mt Zion distributor Sony Pictures, calls piracy "the movie industry's single biggest problem".
But it won't necessarily be solved by cheaper movies. Cornwell remembers a Palmerston North cinema's experiment slashing ticket prices - an initial surge in sales quickly tailed off.
Australian horror movie The Tunnel was held up as an example of a creative funding model, after the film-makers pledged to give free access to the movie once each of its 135,000 frames was sold for $1 each. But they only managed to sell 36,000 frames. The film is now on YouTube for free and has been watched 6,472,528 times.
South Pacific Pictures chairman John Barnett was the producer of Sione's Wedding, which was bootlegged when it came out in 2005, costing an estimated $500,000 in lost ticket sales. The problem has increased exponentially since it became easy to share large digital files, he says.
Using Auckland company Parrot Analytics, he tracked television series The Almighty Johnsons, which he also produces. It appeared in Russia and Italy - where the rights had yet to be sold, including an Italian translation appearing within a day of screening here.
He argues that simultaneous worldwide release would kill New Zealand movies and television programmes, because no-one would know they were there. International rights sales feed off a movie's New Zealand success.
Botes also doubts a different selling strategy is the answer. "I'm sick of being lectured by people who say, 'your problem is that you're not willing to look at new business models'. I challenge anyone to come up with a business model that can compete with free. There's begging, I suppose: 'Please pay for my film, because you feel sorry for me'."
The other option is to try to reduce demand. New Zealand's three-strikes Skynet law, passed in 2011, was supposed to reduce piracy by targeting people illegally downloading movies on peer-to-peer filesharing sites.
The Screen Association says the number of times top-200 movies were viewed illegally plummeted from 110,000 to about 50,000 the month the law was introduced, but failed to drop further. The film industry has not issued any infringement notices under the new law, saying the $25 cost to do so is too high.
Monash University research published in September contended that there was little evidence that such "graduated response" laws work. And a Waikato University study found that, after the Skynet law's introduction, traffic seemed to have simply moved from peer-to-peer sites to encrypted sites.
It's clear that piracy does hurt Kiwi film-makers, even if the impact is difficult to measure. And even more clear is the fact there's no silver bullet solution.
Barnett is both blunt and optimistic. If people don't get paid for what they do, they won't do it again. Which will mean fewer movies, and fewer Kiwi movies. But he's optimistic that the industry will adapt and survive, as it has weathered the threats of the talkies, then television then DVDs.
He has just one message for film pirates. "It's selfish, it's illegal, it's theft. That's it."
The Dominion Post