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HOLLYWOOD ON THE VOLGA
In Hollywood, contraband, police corruption, and contract killings are elements of a hit movie. But to the movie moguls of Moscow, they are part of everyday life.
Russia's professional "pirates," who smuggle in American films to be copied and sold on street corners here for $4 to $5 apiece, are costing American filmmakers millions.
The Motion Picture Association of America (MPAA) estimates its losses to piracy in Russia at $145 million a year, part of a worldwide total of $3 billion in losses to pirating.
Some films, such as "Waterworld" and "The Bridges of Madison County," have had their unofficial - and illegal - world premires in Moscow.
"Before they can send the master copies in to show in theaters, the movie has already been sold on video in the kiosks," complains Felix Rosenthal, the MPAA's Moscow consultant.
Other foreign films do not arrive that fast, but still appear on video in Russia long before they are released on video in the United States.
A tightly organized underground market has flourished amid the social and economic changes that have taken place here in the last five years. Many observers say the trend has almost run its course, however, and that further changes in Russian society are paving the way for legitimate, licensed video distributors to dominate the market.
The pirates have seized the opportunity presented by weak and poorly enforced intellectual-property laws to feed a population starved for imported entertainment. They risk no more than a fine, and their cassettes cannot be confiscated until after the case has been decided in court. That means that even when they are arrested, pirates and their videos are back on the street the next day.
Even existing laws are poorly enforced, according to Yakov Abrukin, the director of Varus Video, one of a handful of legal distributors in Moscow.
"We have no historical experience [with intellectual-property law]," he says. "The people who should know the details - the police and the bureaucrats - are absolutely ignorant."
Mr. Abrukin also says that when it comes to cracking down on piracy, many police officers' hearts - and wallets - just aren't in it. "All these companies pay money to the Moscow police," he says.
But if official Russian law has little effect on piracy, the law of the streets is well-enforced. Local studios must buy the "rights" to a movie from the mafia, and those selling films they haven't paid for risk having their kiosks burned - or worse - according to a source in the Moscow video business.
"A lot of people have died," he says.
None of this would be possible were it not for the cozy relationship between Russian pirates and some US film industry insiders. A pirate will often gain admission to a private screening of a new movie - and bring a hand-held video camera to create his own master copy. And when a movie is released on laser disc, connections at the laser-disc company send copies as soon as they are produced.
"We can't compete," says Abrukin, referring to these practices.
To distribute a fairly recent successful American film, licensed firms like Abrukin's usually pay between $50,000 and $100,000, plus 30 percent import duty. What's more, his tapes are subject to 20 percent value-added tax (VAT) because they are sold in regular shops.
Pirates evade customs by sending their films with flight attendants, who are rarely stopped. The pirates don't pay VAT either, because they sell through an informal network of kiosks.
Licensed studios do enjoy one advantage, however: quality. On pirated cassettes, the picture is often wobbly and the sound in mono. Watching a copy of "Broken Arrow," Moscow viewers hear laughter and applause from the audience at the theater where the pirates recorded it.
Most Russian viewers put up with these flaws because pirated cassettes are the only movies they can afford to watch. Industry observers say that as the Russian middle class grows, the demand for a higher-quality product will increase. "The middle class is ready to pay a higher price for a better-quality product," says Rosenthal.
The pirates themselves seem to be aware of this development. They have begun to sell some of their videos in expensive illustrated packaging that looks just like licensed versions rather than the usual plain boxes with stark black- and-white labels.
Although such improvements on the part of unlicensed distributors complicates law enforcement even further, they may be a sign that by acquiring the necessary technology and expertise the pirates are preparing to legalize their production.
In fact, most of the major distributors already produce a fraction of their videos legally as a cover for their illegal operations. These companies are hedging their bets against any sudden changes in the situation, according to Abrukin. Should the police begin cracking down and licensed distribution become more profitable, "They will close their illegal production and continue the legal," he says.