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Piracy Derailed Biz Growth, Report Says

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BRUSSELS The ready availability of pirated material is largely to blame for a slowdown in the film, television and music industries after years of uninterrupted growth, according to the Organization for Economic Co-operation and Development.

In a 400-page report on counterfeiting and piracy published Monday, the Paris-based OECD—which represents the world's 30 richest nations—notes declining royalties, a drop in the number of performers kept under contract and job losses in the entertainment industry's production, manufacturing and retailing arms.

"The market for counterfeited goods has grown very quickly, even when consumers are aware that they are not buying the original items—having clearly made a judgment that the fake items are acceptable at the prices offered," the report said. "Given this situation, the piracy problems faced by the music and film industries seem considerably worse than other sectors, because ... in the age of digital recording technology, the product is generally authentic and the quality of the pirated copies can be very good."

The report said the situation is likely to worsen, as online transfers eliminate the need to transport the pirated goods long distances or across customs borders, which is when such goods are most at risk of being apprehended.

The report also analyzed the structure of piracy operations, noting that sales of counterfeit DVDs, CDs and software in the U.S., European Union and other OECD territories is dominated by organized crime—a general term that includes both criminal gangs and terrorist groups.

It said that large-scale pressing facilities remain comparatively expensive, and only well-funded and organized groups—with extensive distribution networks able to manage the complex piracy chain—would make the necessary investment. This meant that the London pirate market was mainly run by Asian triads (DVDs) and the Russia mafia (CDs), while Italian and Eastern European gangs imported pirated CDs into Italy.

However, the report predicts that organized crime will see its role diminish for a number of reasons, including cheap and powerful computing power that now enables easier copying of music and films and the move from DVDs and CDs to files that can be moved directly from computer to computer.

But if more effective protection technology becomes available for hard media, this could allow organized crime to re-enter the market as they are likely to be the only groups able to extort or buy versions of songs or films that can be copied, the report said.