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Tue 16 Dec 2008 04:00 AM

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Raising the stakes

Middle East broadcasters see their investments in content undermined by piracy in its many guises. The Arabian Anti-piracy Alliance (AAA) is charged with tackling piracy on all fronts. Digital Broadcast spoke with CEO Scott Butler about the organisation’s latest weapons and emerging threats.

Middle East broadcasters see their investments in content undermined by piracy in its many guises. The Arabian Anti-piracy Alliance (AAA) is charged with tackling piracy on all fronts. Digital Broadcast spoke with CEO Scott Butler about the organisation’s latest weapons and emerging threats.

The AAA has seized more than 30 million pirated discs since it began operations. Led by a one-time Major in the US Special Forces, the AAA, which was originally a branch of the Motion Picture Association's (MPA) anti-piracy unit, now deals with optical disc, internet, software and pay TV piracy.

"We launched operations in 1996 with a focus on optical disc piracy. We managed to drive pirated material off the shelves and into the backstreet warehouses," says Scott Butler, AAA CEO. "Home entertainment sales immediately responded positively."

We work with the authorities and the stakeholders to ensure criminal raids are conducted. At the end of the day, they have all the responsibility and the power. - Scott Butler, CEO, Arabian Anti-piracy Alliance.

Legally, the AAA has no power to carry out raids or to prosecute - its role is to lobby governments and provide the relevant authorities with the knowledge they need to enforce intellectual property rights (IPR) law.

"We work with the authorities and the stakeholders to ensure criminal raids are conducted. At the end of the day, they have all the responsibility and the power," explains Butler.

Pay TV piracy is proving a more complex challenge than that presented by counterfeit DVDs, whose distribution the AAA has successfully nullified.

"Pay TV is not a tangible product like fake Nike shoes. You can't just go into a warehouse and seize it and there are so many ways culprits can steal the signal. We have to train the authorities to combat all the methods that consumers can use to acquire these services illegally."

Butler says that education is a large part of the AAA's operations in the UAE, with the Ministry of Economy (MoE), customs officials and the police all working with the Alliance to successfully combat copyright violators.

Pay TV signal violations can take many forms from hacked Smartcards, illegal redistribution of signals (collectively termed cable piracy) and grey market services from neighbouring regions such as Africa's Multichoice and India's Dish TV. There is also a new, more complex mode of pay TV piracy to be combated.

"The internet is throwing up a number of major challenges as broadband penetration levels increase across the region," says Butler.

"There was a dedicated download pirate site for the UAE called DVD4UAE.com offering free movies from a library of 600. The pirate had received 12,000 downloads, that is 12,000 movies that the studios received nothing for.

"The other half of the site offered pay TV streaming for $10 a month with services from ART, Orbit, Showtime and Pehla and others."

The AAA has a two-fold strategy for internet based piracy with the UAE Telecommunication's Regulatory Authority (TRA) blocking 410 sites offering unlicensed access to pay TV as well as movies and video games. However, Butler says that they are increasingly finding internet pirates operating within the region.

"Anyone that thinks this activity is only happening in Europe and the US is wrong - there are internet pirates based in the GCC. Dubai Police recently established a cyber crimes unit and to date they've had two great successes, one of which was DVD4UAE.com.

The police and the MoE tracked the culprit down, arrested him in Al Ain and raided a property in Ajman where his operation was based. They seized both servers and he was sentenced to three months in prison. In another case, authorities seized five servers and 15 satellites dishes from the roof and arrested five individuals.

"We have had a lot of positive results in all areas. Ten years ago the UAE became the first country in the region to imprison a copyright violator. Now Bahrain and Qatar are imprisoning pirates too. In these three countries, chances are those who are caught will go to prison. A first-time offender was sentenced to eight months in prison when they were caught with 850 DVDs. Another pirate who was caught with just one hacked pay TV smartcard was sentenced to a year in prison."

Timeline

1996- Motion Picture Association (MPA) establishes a Middle East anti-piracy office in Dubai.

1998- The unit hires two retired officers from UAE Internal Security to run the domestic operations. First imprisonment for copyright violation is enforced in the UAE.

2001- The MPA regional branch morphs into the Arabian Anti-piracy Alliance. Operations are expanded with three branches established in KSA followed by a Kuwait office.

2008- AAA brings its total illegal optical disc haul over the 30 million mark. Pay TV piracy is tackled by blocking IP addresses. KSA dramatically improves its enforcement transparency. Despite these efforts piracy is prevalent in the Kingdom.

2009- The first deterrent prison sentence for copyright violation in KSA?

These results are encouraging for the industry and Butler says that this deterrent sentencing is key to successful enforcement. Unfortunately, not all countries in the region are taking such an aggressive approach to pursuing pirates.

"Saudi Arabia has been the worst regime in the region in terms of IPR enforcement. It has been highly ineffective, piracy has flourished and it still has a long way to go until there is effective enforcement," says Butler.

"Fortunately, over the course of the last year we have started to witness a number of improvements. The Minister for Culture and Information has brought in fresh leadership in the form of His Excellency Abdul Rahman Al Hazzaa. He has done a fantastic job in institutionalising transparency, which was our biggest problem in Saudi."

Butler explains that while the AAA and Saudi law enforcement officials have previously worked together on successful raids - bringing in optical discs as many as two million at a time - there was no change in the market dynamics as there was no deterrent sentencing for the culprits.

"Cases would go to court in a closed room and would be deliberated without the stakeholders being given the opportunity to take part in the process," he says.

"In other countries we would have legal representation, would make our case and explain how that pirate was affecting the business. In KSA, the stakeholders were completely separated from this process. What was worse is that the court would make a decision and we wouldn't be told what it was. The reality is that we don't think that many cases even made it to court. The challenge was to bring some transparency to this process."

Things have dramatically improved since the appointment of His Excellency Hazzaa with a website launched detailing each case number, date and location of raid, what was seized, the dates and times of the hearing and - crucially - the verdict.

"They have pledged to maintain transparency and to do all this in English as well. We applaud them for this step but now we need to see deterrent sentencing," says Butler.

To assess how concerned pirates in KSA are about enforcement the AAA carried out what it terms a "fear factor" survey.

Eighty five percent of non-national pirates in Saudi Arabia said if they were caught they we would not be deported, 90 percent said the owner of the shop would not be sent to prison and 70 percent did not think that the shop would even be closed. A fine of around 10,000 Riyals ($2600) was the most likely penalty, according to 54 percent of those surveyed.

"This level of fine is considered by many pirates simply a commercial operating cost. To date, not one conviction has resulted in an imprisonment," says Butler.

"This means the biggest single market in the GCC is afflicted by piracy rates of more than 90 percent because there is no fear, the pirates can do what they like and never face the possibility of prison. It is a question of political will and that is now there and I am hopeful 2009 will see our first KSA conviction result in a prison term."

So why is Saudi Arabia now looking to break the stalemate that has existed for so long?

"The authorities are fast appreciating the importance of copyright protection. Foreign investment is directly affected by enforcement. The UAE has the best enforcement regime in the region and Saudi is seeing what is happening there as a result of this. Warner Brothers signed a billion dollar deal with ADMC, Dubai has agreements with Dreamworks, Universal and Paramount amongst others, and there is a booming home entertainment retail market in the UAE," says Butler.

"You can gauge piracy using the ratio of software to hardware. For example, the ratio of how many legitimate video games retailers expect to sell in a year per console sold. In the US and Europe it ranges from between five and 12 games per console. In the UAE it is around three and in KSA it is 0.1 to one, which means they sell one legitimate game for every ten consoles sold. It is the same for movies. The unit sales of blockbuster movies in Qatar - which has a population less than one million - are higher than Saudi Arabia with its 28 million residents. This is because rampant piracy destroys the core development of the retail chain."

To highlight the scale of the effects of piracy, Butler points out that 12 percent of the US GDP is based on copyright courtesy of Microsoft, Google, Warner Brothers and all the other studios, publishers and copyright-protected manufacturers.

"When you have higher rates of piracy, the consumer always loses out. It removes part of the market demand, so the creative output falls. We have seen this with the Egyptian film industry. How many video games are there specifically for the Arab market? None, because there is no legitimate market for them. The UAE will benefit the most when Saudi piracy is controlled because the creative business is going to be locked in at Dubai Studio City and twofour54 in Abu Dhabi. Saudi Arabia will benefit to a degree, but the creative companies associated with these new markets will already be established in the UAE, and they will profit more as  Saudi consumers enter the market and demand for Arab content swells," says Butler.

Dodgy DVD dealers raking it in

The profits of piracy

One AAA raid on a cable redistribution network in Dubai found that the chief culprit was making $41,000 a month redistributing pay TV channels to 5000 homes. A similar Bahraini operation was using 5km of cable. Over 95 percent of homes in Lebanon receive their pay TV this way with some of the black market operators now offering movies on a pay-per-view basis.

A counterfeit DVD distributor also in Dubai was earning $25,000 a month. Vendors can reportedly sell up to 10,000 units a day, with each disc costing less than three cents to produce and selling for $3.00-4.00.

According to the AAA, these vast illegal operations are typically the domain of Asian-based crime syndicates.

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