NEW YORK -- There’s a good reason why DVD piracy has become the domain of organized crime groups: Bootlegging films carries a higher profit margin than selling illegal drugs -- and a far lower risk of getting arrested.
That's why, according to a new report
by the RAND Corporation, a U.S. think tank, film piracy has become a key part of Russian organized crime’s illegal business portfolio, along with drugs, money laundering, extortion, and human smuggling.
Gregory Treverton, a co-author of the report, directs the Center for Global Risk and Security at RAND.
“What we do know is that the profit margin -- not the profit, but the profit margins -- are much greater for film piracy even than for narcotics," Treverton said. "So, another reason to be involved -- and as we said, yet another reason for crime to be involved -- is because the penalties for piracy are relatively light by comparison, say, to drug trafficking. So, you have something with a very high profit margin, fairly low risk of enforcement -- that seems like a pretty good addition to your criminal portfolio.”
Treverton says RAND's objective was to learn more about the relationship between piracy, organized crime, and government officials in producing “protected space” for crime. He says the report’s 14 case studies provide compelling evidence of a broad connection between film piracy and organized crime.
The study sought "to use the cases to understand more about how -- for a combination of reasons, starting with corruption but also going to the stakes of politicians -- this protected space for crime gets created in a number of different countries. That’s what we looked at Russia, Mexico, and Japan,” Treverton said. Bribes And Pay-Offs
The report says Russia’s widespread corruption, particularly in law enforcement, provides numerous opportunities for pirates to take advantage of weak rule of law.
For instance, the officers from the economic crimes squad are known to shut a business down without cause, only to require payment later to restart the business.
And if criminals want to preempt a police raid, the going rate for advance warning on an impending search of a piracy outfit is about $30,000.
In 2005 alone, 4,269 Russian police officers were charged with corruption-related crimes, according to the report.
Mark Esper, the executive vice president of the U.S. Chamber of Commerce’s Global Intellectual Property Center in Washington, told RFE/RL that Russia and China top the list for intellectual property-rights violations, according to another report carried out recently by the U.S. government. At the same time, he says, there is some modest improvement in the situation compared to a decade ago.
Esper notes that a part of Russia's civil code that covers intellectual property rights went into effect on January 1. "So, it’s fair to say there’s been progress in terms of the legal code; but it’s not clear [if] there’s been progress in terms of enforcement," he said. "When you have a system that’s fraught with some degree of corruption at both the official level and law enforcement level, it’s very challenging to crack down and reduce these violations.”
Esper says the weakest point in Russia with regard to intellectual property violations is enforcement. Indeed, the Rand report highlights the close ties of pirates and enforcement officials willing to be paid off.
The most notable Russia-related case analyzed in the report is that of Alexander Tarantsev.
According to Russian experts on organized crime, Tarantsev controlled pirate markets in Moscow and often used bribery to influence corrupt officials. His case, the report says, highlights the links between pirates and authorities, not only through bribery but also through careful cultivation of relationships with senior politicians and officials. It is also noteworthy for highlighting the continuing violence associated with piracy.
Political Will Needed
Treverton of RAND Corporation says that in China, there has been improvement on the part of the authorities to enforce internationally adopted rules for intellectual property. But the problem is that these enforcements are ignored at the local level -- and the same is largely true of Russia.
“Ten years ago, people would say ‘Why should we worry about some rich Hollywood studio?’" Treverton said. "The language has changed a bit, again [it is] unclear at least to me what their real ability to enforce their will on the various regions of Russia would be even if they wanted to. Probably this is still not an issue on which they’re going to spend many political chips.”
Esper of the U.S. Chamber of Commerce says the RAND report underscores the political will of governments as the most important element to weaken or sever the link between film piracy and organized crime. “Without that type of political will, the resolve to address this crime trickles down into law enforcement and into those persons on the ground really dealing with it," he said.
But even political will is dependent on another factor: strong legislation.
"There have been some improvements in Russia’s civil code and some political commitments made with regard to [WTO] treaty obligations and those are positive steps forward," Esper said. "But you have to have strong legislation, enforcement legislation, and other types of measures to protect this industry from crime, from counterfeiters, from pirates.”