Crime Inc. Inc., The Business Of Hyping The Piracy Threat

from the a-missed-opportunity dept

Growing up in Chicago in the 1970s and 1980s, I have fond memories of watching Bill Kurtis on Channel 2 news. He was sort of a local Walter Cronkite–the personification of the news. At our house, he was on every night.

So I felt some nostalgia when I got a call from a staffer on Kurtis’ current show, Crime Inc., about an episode they wanted to do on media piracy. And also some apprehension, since we’ve been pretty adamant in our work that criminality–and especially organized crime–is the wrong way to look at piracy. But since I’m a regular complainer about press coverage of these issues and an optimist that the debate can be changed, I agreed to help.

The Crime Inc. people sent over an outline that leaned heavily on content industry talking points: job losses attributable to piracy; financial losses to Hollywood, artists, and the economy; downloading as theft; and the role of organized crime.

But they had also found our Media Piracy in Emerging Economies report and wanted to understand our perspective. I explained that we have problems with the way the major industry groups frame these issues. We don’t think piracy is primarily a crime story, but rather about prices, lack of availability, the changing cultural role of media, and the irreversible spread of very cheap copying technologies. They said they understood. It’s a complicated topic.

I said I’d help as long as this didn’t end up as an MPAA propaganda piece. 60 Minutes had done one of those a couple years ago and it was a major public disservice. They said they’d do their best.

Over the next few months I spent four or five hours talking to and corresponding with staff at Crime Inc. I walked them through the difficulties with measuring the impact of piracy, the problems with opaque industry research, the general irrelevance of organized crime, the market structure and price issues that have made piracy an inevitability in the developing world, the wider forms of disruption in the music industry and so on, and so on. I gave them a list of people to talk to, including Internet hero and MPEE support group gold member Mike Masnick. And they did interview Mike for several hours.

The episode aired a few weeks ago. Unfortunately, it is an almost pure propaganda piece for the film and music industry groups, reproducing the tunnel vision, debunked stats, and scare stories that have framed US IP policies for years. Nothing I told them registered. Mike did not appear. The only concession was two minutes at the end for an alternative business model segment focused, strangely, on the Humble Bundle software package.

By the end, I no longer thought this was an MPAA covert op. Rather it looked like a Rick Cotton overt op. Cotton is VP and General Counsel at NBC-Universal, an enforcement hardliner and piracy fabulist to rival Jack Valenti, and one of Crime Inc.’s corporate bosses at NBC-Universal. He got plenty of airtime to talk about the existential crisis of piracy and the need for stronger enforcement. I have no idea if word came down from him to produce this story (it was the early days of the SOPA fight) or if Crime Inc. was just following the well-worn script on these issues. One doesn’t exclude the other. But it is clear that the show rented itself out to Cotton’s larger enterprise: Crime Inc. Inc., the business of hyping the piracy threat.

So what do we learn from Crime Inc. Inc? Here’s a short summary. I’ll also reproduce some of my end of my correspondence with them below, which goes into more detail.

First–and bizarrely–that there is a massive problem of organized criminal DVD and CD street piracy in the US. And that this is part of a much wider array of linked criminal activities; and that DVD piracy is more lucrative than the drug trade.

I imagine they led with this because it’s more filmable, but it has little to do with present day piracy. I tried to tell them that. Our work does go into this and finds what everyone knows–that DVD piracy has been displaced by sharing and downloading of digital files in the US in the past decade, and that the street trade has been almost completely marginalized. Even at its peak, CD/DVD piracy does not appear to have been a big market. Our 2011 ‘Copy Culture’ survey found that only 7% of American adults had ever bought a pirated DVD. The drug trade claim–ugh. It’s incredible that this bit of nonsense can be endorsed by journalists with some investment in understanding crime.

Second–we get a recitation of impossible-to-kill zombie stats: that media piracy costs the global economy $57 billion/year; that it costs the movie business $6.2 billion/year; that 2 million people work in film/TV production in the US and that piracy has destroyed 373,000 jobs. The problems with these numbers will be familiar to readers of this site, but see below for more detail.

Third–the now traditional guided tour of Mexican street markets, to look for evidence of cartel manufacture of CDs and DVDs. See here and below for more on how this has become a media ritual. In short: are cartels involved? Almost certainly yes, in parts of Mexico where the cartels control most of the informal (and some of the formal) economy. Is this typical of developing countries or the US? No. Will it survive the spread of bandwidth and cheap computers in Mexico? No.

Fourth–that downloading is theft and everyone knows it. End of story. Pity the hipster they found to stage this point. We document more complicated attitudes toward copying and sharing in the US, marked by generally strong concern with the ethics of uploading or ‘making available’ of materials; widespread but weak and largely non-operative concerns with downloading; and virtually no concerns about sharing with friends and family.

Fifth–that piracy is why sympathetic characters like a Hollywood stuntwoman have to worry about not having steady jobs or insurance. This is an odd claim in an era of record profits for the major studios, massive corporate welfare for film production, and continued outsourcing of production to non-union, low-wage countries, but hey–it’s a show about piracy.

Sixth–that the SOPA debate was about… I kid you not… “Hollywood vs. high-tech thievery.” Censorship or innovation concerns? No. (Skip to the very end for this somewhat garbled line. I imagine some embarrassed producer telling host Carl Quintanilla to just mumble through it and get it over with.)

That’s not a full list, but life is short and Crime Inc. has already absorbed too much of mine. I’ll add that watching this on Hulu in several sittings was a maddening experience in itself since Hulu resets with every viewing, force feeding the same 90 second Buick LaCrosse commercial each time. [How has this viewer annoyance system survived? And how is this targeted advertising for someone living in Manhattan?]

Uncharacteristically, there appear to be no pirated versions of the episode available online. Which leads me to think that Crime Inc. may have stumbled onto the most powerful anti-piracy strategy of all: make TV that’s only designed to please the corporate boss.

Additional thoughts from Mike: Just to add to Joe’s excellent breakdown of the what happened. I had two roughly hour-long phone calls with Crime Inc. staffers, sent one detailed email to them and also spent an entire afternoon being interviewed on camera by them in San Francisco. In all of that, I corrected various misconceptions, and repeatedly pointed out that these issues were complex and nuanced, and it would be inaccurate to classify things as simply “theft” or to not recognize the wider implications of what was happening. Throughout it all, they insisted that the show would be a balanced exploration of the topic, and they even promised me a DVD of the final program (which has yet to arrive). I should have suspected that the whole thing was going south when we spent an inordinate period of time with the producer coaching me to make fun of Kim Dotcom during the videotaped interview. She literally would take some of my words and suggest alternatives as ways to make fun of Dotcom. I pushed back on a few points and she seemed annoyed that she couldn’t get me on tape saying it exactly the way she wanted. This, apparently, is how the TV sausage gets made. My reward for all of that was apparently to be cut out of the program entirely.

Given how much of my interview was about opportunities, alternative business models, and the recognition that the issues were really business model problems, rather than legal problems having to do with copyright law, I now wonder if my inclusion was solely to try to get me to mock Dotcom on camera, with the rest just being a setup to make me comfortable to say such things. Failing that, my segment got cut out entirely.

I’m sure NBC and Rick Cotton got what they wanted out of the broadcast. But what could have been a valuable and nuanced discussion about the complex problems being dealt with here turned into a simplistic, stereotyped and factually bogus report that reflects poorly on Bill Kurtis, NBC and Crime Inc.

---- ---- ---- ----

From: Joe Karaganis
To: Crime Inc.
Friday, August 19, 2011
Re: CNBC- Crime Inc.: Media Piracy

I've left some comments inline and have made some additional suggestions. I have to say I'm pretty skeptical about some of these points. We think the organized crime angle is exaggerated, and that the main story, over the past decade, is the collapse in prices associated with copying goods as digital tech has gotten a lot cheaper--which among other things has crushed margins on commercial piracy. Even the crooks now compete with free. How much of this represents a loss to industry is also unclear. The MPAA releases numbers, as I'm sure you know, but not the underlying research. Same is true of the BSA and RIAA. Zero transparency. The British government just released a report that characterized it all as 'lobbynomics,' which is generally our view.



---- ---- ---- ----

From: Joe Karaganis To: Crime Inc.
Friday, August 19, 2011
Re: Possible story elements

Re a possible segment on the effects of piracy on an average Hollywood union worker and how media piracy affects his income/day-to-day life:

The MPAA doesn't release any data that would allow a credible estimate of this. The '$6.2 billion in losses' number that circulates in these contexts comes from a study in 2005 that MPAA wouldn't make public. We asked for it, the US Government Acountability Office asked, the OECD asked. They wouldn?t release it. This is not a sign of confidence. The $20 billion in economic losses number comes from an erroneous extrapolation of the 6.2 number by Stephen Siwek. As it happens, I think there are 'losses' to Hollywood at the margin, given its dominance of global film markets. I doubt $6 billion is a reasonable figure. But even if it is, we're talking about a roughly $70 billion business. Not a mortal danger. For the union worker, the bigger impact is almost certainly the outsourcing of production to low-wage/non-union countries.

One suggestion: when you hear about losses, ask to see the research--not just the powerpoint or summary.

Re a possible segment on tracing the life of a pirated DVD from overseas manufacture to US consumers:

There's virtually no organized DVD piracy left in the US. You can find itinerant vendors in NY and other big cities selling recent, low-quality camcordered copies but, in high-income countries piracy is almost entirely online now. The commodity chain you describe had its heyday in the early 2000s and disappeared very quickly--first with the rise of cheap disk burners, then with broadband. The vendor on the NY subway is most likely selling disks burned in some Chinatown apartment. Small scale stuff. Still, an interview with such a person or people could be interesting.

The DVD trade is still big in developing countries, and in places like Mexico organized crime is said to play a role. We have a Mexico chapter that documents the growth of a massive cottage industry in Mexico City--'organized' to be sure but not in the form of criminal gangs. But in places where the drug cartels dominate the economy, they will also dominate the pirate DVD business. My take on this is here:

There are basically 2 pirates in the US: (1) the guy running a bittorrent tracker or indexing site, who is probably making enough money on web ads to cover his server costs. By most accounts other than those of the studios, this is very marginal commercial activity; (2) the kid who uploads in the course of downloading.

There are some more lucrative/better capitalized businesses overseas--such as cyberlocker sites like MegaUpload or Hotfile, which clearly facilitate a lot of infringement. MegaUpload gets a lot of attention because it's owned by a flamboyant con man/embezzler named Kim Schmitz. But basically Megaupload is just selling storage. They've made some money by being a couple years ahead of Google/Amazon/Apple/MS, but cloud storage is becoming a bulk commodity business. Free or nearly free when bundled with other services. There are also a bunch of streaming video sites--some free, some requiring subscriptions. Basically, they all have to compete with free too. It's not clear how much money comes through those channels. Paramount estimated MegaUpload revenues at a couple hundred million. But that's guesswork and some (substantial?) portion will be legit.

Re a segment on [Russell] Sprague [film pirate: ].

The dilemma for the studios is that they need a wide, complex distribution system to ensure that movies get seen, rated, reviewed, etc. And this system is, by definition, very porous. It takes one person to upload a movie file. So Sprague gets jail time and at best they've slightly delayed the release of a high-quality pirated version. Studios have done a lot to clamp down on the distribution chain, including real time satellite feeds and surveillance within theaters, but it's basically an impossible task. Then you get stories like this:

If they show the movies, they will be copied.

Many films are available prior to theatrical release. These come from screeners or copies made from film within the distribution chain.

Post release, people will camcord the films. Better and better versions will emerge. Eventually, someone will make a high-quality copy of the soundtrack and these will get merged.

DVD/Blu-ray releases will be copied immediately and circulated online.

Re economic losses: If I download a Hollywood movie instead of buying the DVD, that money does not disappear. I spend it on something else--groceries, rent, health care, etc. That expenditure generates tax dollars, jobs, business investment, etc. Very probably, it contributes more to economic productivity than additional marginal expenditure on leisure goods. In other words, the piracy of US movies/TV within the US affects those industries, but not really the larger economy.

If some Brazilian kid downloads a Hollywood movie, there may be a loss to Hollywood if there was some reasonable chance that he would have paid to see it (or bought the DVD). With DVD prices at $15-20 in Brazil, that likelihood is very low. But at the margin, there is a loss, and it's a real loss to the US economy. (By the same token, it's a net gain to the Brazilian economy. This is marginal for movies, but very important for software.)

All the countries you mentioned would have been very big exporters 8-9 years ago. You could have added Russia, Bulgaria, and the Ukraine to that list. Now, not nearly as much. There is still some international trade in discs but most of the remaining production is now local and the most of the distribution is online.

Here's how I'd frame this--independent for now of questions of filmability.

Everyone knows that there's a lot of piracy of movies, music, and software. Industry claims billions in losses, etc. and is pressuring gov at all levels to ramp up enforcement. This includes the COICA bill [SOPA's antecedent], which will create a process for censoring sites and search results (and probably achieve nothing and possibly break the Internet); the recent '6-strikes' deal between MPAA/RIAA and the big ISPs, which threatens to cut off your internet service on the basis of industry accusations of infringement; and proposals to turn the Internet into a massive surveillance tool for copyrighted content--from monitoring software on your computer to monitoring by ISPs and cloud services of your activity. The current law is also pretty strict! The receipt of even small numbers of infringing digital goods is a criminal offense under the US NET Act, punishable by up to 250K per infringement and 3-5 years in prison. It goes almost completely unenforced because it would apply to tens of millions of people.

So this is shaping up to be our new war on drugs--but it will make that war look like great public policy in comparison. The Dems support it because there?s Hollywood money at stake; the Republicans support it because there are big business interests at stake. Everyone also likes a law and order issue, and will hype the side of it that has any connections to 'serious' crime of the types people care about. So in come child porn and terrorism. But everyone also knows that this is a business model issue, linked to the dependence of the studios and major labels on obsolete media--the DVD and CD. The profit margins associated with those goods are shrinking quickly, but there's some money to be made in the interim by getting the government to pay for enforcement.

Re your proposed Mexico segment, I can endorse a variation on that....

The way to do this is to start with piracy rather than organized crime--maybe framed by recent US efforts to control it internationally. Then look at the economic drivers of piracy: low incomes, high prices, very cheap tech. Then you look at the informal markets in Tepito and the struggle between vendors and the municipality and state, grounded in periodic efforts to suppress and/or control the informal economy (40% of Mexico, roughly). Then you say: in some parts of Mexico--especially poor, low-bandwidth parts--the cartels control much of the economy, and consequently the pirated disc business. Then you observe that all of this physical media piracy is becoming obsolete as Mexican broadband access and digital infrastructure grows. So whatever else happens, both the cartels and the Tepito-style vendors will be out of this business soon. Then you look at the MPAA and its efforts to get the Mexican gov to crackdown--and observe the schizophrenic split between the US-educated trade negotiators, who sign Mexico up for anything, and other parts of the government, which won't because piracy is tremendously popular and generally viewed as sticking it to the gringos. It's an interesting story!

If you lead with the Mexican cartels' role in piracy, you'll slide into the MPAA talking points.



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Comments on “Crime Inc. Inc., The Business Of Hyping The Piracy Threat”

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Anonymous Coward says:

” I should have suspected that the whole thing was going south when we spent an inordinate period of time with the producer coaching me to make fun of Kim Dotcom during the videotaped interview. She literally would take some of my words and suggest alternatives as ways to make fun of Dotcom. I pushed back on a few points and she seemed annoyed that she couldn’t get me on tape saying it exactly the way she wanted. “


I gotta laugh here. You are a strong person, but you let them put words in your mouth? Wow.

sniperdoc (profile) says:

Re: Re: Re:2 Absolutely!

Finally someone that has some reading comprehension. All those others about “why didn’t you get up and leave…” Seriously? Do you people know how to read and comprehend what you’ve just read…? The fact that there was nothing usable for the final presentation by Crime, inc. whatever (don’t watch any news media anymore… pointless) is proof enough of Mike’s balls and sticking to the truth.

Chuck Norris' Enemy (deceased) (profile) says:

True Crime

I would suggest that the studios, labels, and industry lobbyist organizations are very organized and it is criminal what they have accomplished and that they continue to pursue the expansion of copyright to the detriment of the public and pass crony capitalist legislation that will entirely remove our individual freedom.

Anonymous Coward says:

Re: True Crime

The truth is always told by the winning part. A crime is something committed by someone who doesn’t understand the laws and how to bend them. That is exactly what the lobbies are not doing. They are trying to subdue others opinions, which is perfectly legal. Detriment to the public is just another word of saying “to my[1] advantage”. The problem is that they have the possibility of doing so, but that is a far worse issue which nobody has found a satisfactory solution to yet… Money corrupts and the more they influence politics, the more wrong solutions will be chosen by the politician.

[1]: Me being publisher of audio and visual content or any industry ‘relying on’ copyright.

Anonymous Coward says:

“…the main story, over the past decade, is the collapse in prices associated with copying goods as digital tech has gotten a lot cheaper–which among other things has crushed margins on commercial piracy. Even the crooks now compete with free”

Hum…I never actually thought about this.

So, a way to crush commercial exploitation of counterfeit media is to actually provide people with fast and cheap Internet access?

That won’t eliminate piracy, of course, but it will certainly destroy any profit that could be made from it (a large part of it, at least).

Anonymous Coward says:

and you actually thought it was going to be anything but this charade? the biggest problem is that there will never be a true report done and televised because those that would be hurt the most by the truth being broadcast are the same people that own the tv stations etc and who will go to any lengths to ensure that nothing but lies and bull shit is aired so as to preserve their version of how things are, even though there isn’t a grain of truth in it!

Manfred Manfriend says:

Re: Re:

Actually, the movie and music industries cost the US about $5 trillion a year in waste disposal, business disruption, traffic problems, etc.

They steal other people’s work.

And they kick puppies.

What? They’re the only ones who get to lie?

I’m looking, but I’m simply not detecting the lie. Which one was the falsehood exactly?

Ninja (profile) says:

Mike, Joe.. I don’t know why you were surprised. The thing was biased from the start. I mean they are doing a CRIME documentary or something on piracy. Then you come and tell them it’s not a crime and it’s a business model problem.

No really, I know you had hopes but that was kind of naive (and I forgive you for that).

The MAFIAA will not adapt, evolve or let go of their bogus stats. They’ll be dragged kicking and screaming into the future. That is, if they survive.

NoahVail (profile) says:

Re: Contact Info for Crime Inc Production team?

So who at Kurtis Prod. decided a balanced view of copyright was intolerable?

Maybe the folks who put this thing together would be honest about it.
They are an investigative show after all. I would think they know the difference between a candid answer and an evasive one.

I came across some contact info for the show.
IMDB page for the episode.

Editor: Ryan Koscielniak

Supervising Producer: Carmen Jones

Executive Producer:

They can be also contacted by facebook and linkedin pages.

Did Daniel Freed work on this as well?

Ophelia Millais says:

Stop waiting for real journalists; seek them out

I don’t see how anyone can watch any of CNBC’s “investigative” programming without realizing the last thing they would ever do is air a piece which frames an issue like this in a way that makes major corporations look bad, or even in a way that says “it’s complicated”. You might as well be looking for peer-reviewed critiques in in PR Newswire, or watching [i]Cops[/i] for footage of police corruption and incompetence.

I’m glad you’re calling out Crime Inc. on their bias, but they’re not going to be embarrassed by something like this even if it runs in the New York Times.

If you want to get your message and rebuttals to industry talking points out there, you’re going to have to pick a better venue, and you’re going to have to be proactive about it. Sitting back and hoping a neutral journalist is going to come along (from an infotainment network, no less) and help you blow the whistle is na?ve and unproductive.

ECA (profile) says:

This reminds me o something

Lets consider the salvage industry..
All those cars out there and PARTS being sold from person to person.
What would it be like IF’ Edsel was still being paid for parts traded.

But, I think the problem with the industry tends to be that they are BEHIND the 8 ball.

They DIDNT innovate, when they had the chance. and GAVE IT AWAY to others, then are NOW trying to regulate HOW those companies can SELL their products. itunes/hulu/others/ internet radio…are all going to suffer.
Hulu/itunes are starting to really SUCK, as the corps keep trying to change the contracts and PROGRAMMING..and they know NOTHING about programming.

A point to make to Crime Inc. was to look at those prosecuted…They WERE NOT crime boss’s. they were Every day people and PARENTS..

Franklin G Ryzzo (profile) says:


Couldn’t have been… This is the only description of Mike in the article:

I gave them a list of people to talk to, including Internet hero and MPEE support group gold member Mike Masnick.

It’s completely devoid of ad hominem attacks on Mike, nor does he whine about questions not being answered that have been answered dozens of time before. Considering how one dimensional AJ is, I doubt he could have written a coherent article without these telling signs.

techflaws (profile) says:

The drug trade claim–ugh. It’s incredible that this bit of nonsense can be endorsed by journalists with some investment in understanding crime.

You don’t need investment in understanding crime to realize that this claim is utter bullshit. Profit margins in DVD “piracy” can’t ever be as high cause – unlike drugs – the product is legally available.

that piracy is why sympathetic characters like a Hollywood stuntwoman have to worry about not having steady jobs or insurance

Funny they should use a stuntwoman (of all people), who stands to gain the most (health!) from not continuing her dangerous job.

Tim Griffiths (profile) says:


You are legally allowed to make a copy of your content for your own use. Then the industry lobbied for a law that made breaking digital lock illegal even for the purpose of perfectly legal copying. This law makes no sense, you take something the public does a lot of that they have a legal right to and you find a way to criminalise that behaviour with out actually making the outcome illegal. It puts people in a dissonant position where the out come of what they want to and are used to doing is legal but a rather arbitrary road block has been put in place that makes it imposable to do with out breaking the law.

What that lead to is the fact that most people ignore the digital locks rule which for the most part undermine respect for those kind of laws.

So why do it? To catch pirates? well that makes no sense since all you are doing is adding an extra “crime” that no one really is going to bother to pay attention to. I don’t know of a single case where an end user or a pirate has been pulled up purely on breaking of digital locks in places that such laws exist.

What it does do how ever is something very interesting. It allows the people who make content to make any new ways of viewing that content illegal. If some one comes along with a new technology or idea that the industry dose not like all they have to do is change their DRM in such a way that it locks out that use. Which then makes it illegal and that is something that we’ve seen happen.

The industry is lobbying for new laws that let them control innovation because they then can make anything they don’t like illegal instead of having to compete with it.

OldGeezer (profile) says:

It didn’t take long to figure out they were spouting the same ridiculous figures that created the $8 billion iPod. Did you really think that they would point out that the unavailability of so much programing is pushing a lot of people to pirate that would probably be willing to pay a reasonable amount for convenient services that had what they wanted? Pure propaganda.


You should all stop buying stuff.
Just download so called ‘illegal’ copies of music, films, books etc and if you cannot find it online just go without.

Most of what is produced by the film industry is banal, vapid shite, and nearly everything that is lauded is rubbish.

The sheep dogs of Corporations do a good job and the sheep keep buying for fuck’s sake stop, close your farcebook accounts and your twatter accounts get a real life and USE the internet when you need to, don’t live on it.

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