Hollywood Robbery

By Amanda Ripley

Studio executives, no strangers to melodrama, have begun to talk about movie piracy the way FBI agents talk about terrorism: they watch the Web for "chatter," they embed films with hidden "fingerprints," and they speak without irony about "changing hearts and minds." They even use night-vision goggles. It's not going too far to say they are completely paranoid, which doesn't mean they are wrong.

On the night of Nov. 29, Warner Bros. transformed more than 500 American theaters into secure compounds for a sneak preview of The Last Samurai. The $140 million Tom Cruise vehicle, designed to transport the star from the screen to the Oscar podium, was filmed on location in New Zealand and Japan with a cast of 750. All the hype, along with the adolescent story line--samurai fight against the Japanese army!--guaranteed the film to be of interest to pirates. And in the age of faster Internet connections, protecting a movie has become like guarding very expensive air. So to prevent an early bootleg from squashing ticket sales, more than 1,000 security guards hand delivered prints of the film to projection rooms. They searched each facility for recording devices. In lobbies, moviegoers were siphoned through metal detectors. Camera phones were confiscated. As the lights went down and Cruise and his movie-star teeth flickered onto the screen, men and women in dark blazers walked solemnly down the aisles, searching for the pale glow of camcorders through their night-vision goggles. Maybe because this was Los Angeles, the moviegoers didn't seem to notice the paramilitary scene unfolding beside their military fiction.

Last year more than 50 major movies were illegally copied and released even before they came out in theaters, according to the Motion Picture Association of America (M.P.A.A.). But for all the talk about movie piracy, few people understand how it actually works--the stunning velocity at which copies move and how far the studios will now go to hold back this threat. To tell the tale of how films get to black-market stores and shacks across every continent, from Beijing to New York City and to computer hard drives everywhere, TIME tracked the winding journey of The Last Samurai (full disclosure: Warner Bros. and TIME share the same parent company). And the trajectory confirms that movie executives are right to be alarmed. But it also shows that most of their protective acrobatics are, at best, just buying time. The harder it is to get a movie, the more pirates want it. "It's like a piece of gold," says one male American downloader. That's an unsustainable dynamic, says Eric Garland, CEO of BigChampagne, which tracks the most popular entertainment downloads: "You don't get to go to war with your core customer. You have to court him."

Marc Brandon works in a far corner of the Warner Bros. studio in Burbank, Calif., not far from where the old western back lot used to be. His office is plain and neat, and there was a time when his job was too--back when, as director of antipiracy Internet operations, his chief responsibility was reminding online T-shirt companies that the studio owns Bugs Bunny. Today, Brandon, 30, in jeans and an oversize T shirt, says the pirates dictate his daily schedule. In 2002 some 41 million illegal copies of movies were seized by law-enforcement authorities around the world with assistance from the M.P.A.A. Last year the film industry made $52 billion--but would have made $3.5 billion more if not for piracy, according to a Smith Barney estimate released in November. Next year the loss may rise to $5.4 billion. Brandon can't hope to stop bootlegs of Warner Bros. releases from spreading like a virus. It's a Herculean task just to delay the inevitable. "It's not a matter of if," he says, "but when." And when makes a huge difference. If a high-quality copy is made before a film's lucrative first weekend in release, the studio can lose tens of millions of dollars.

For Samurai, evasive maneuvers began before the film was finished being shot. Every work print of the movie was encoded with a hidden marker so that it could be identified if it was leaked. Even the scripts had codes stamped across every page, each corresponding to the owner's name. Before sending Samurai to dubbing houses, Warner Bros. rendered the copies less piratable by going through every scene and editing out characters not relevant to the particular dubbing job--an exercise that took about three days per cassette. The studio did send out "screener" copies to Oscar voters--a high-risk move--but far fewer than normal.

Studio executives feel so threatened by piracy that they do not even like to dignify it with the word. "It's a word that has a swashbuckling, cool kind of feel, and that's not what we're talking about. This isn't Johnny Depp on the front of a boat," says Barry Meyer, chairman of Warner Bros. "It's theft. It's shoplifting. It's grand larceny."

Many Americans who download movies and buy pirate copies insist that doing so has no effect on their legitimate movie-buying or theatergoing habits. But it would be foolish for Hollywood to ignore the grim prophecy of the music industry--where album sales have dropped 16% since 2000. Right now, the movie industry's guardian angel is slow technology. Seasoned downloaders on a broadband connection generally need eight hours or more to download a film. But 18 months from now, it may take only 2 1/2 hours, according to calculations by BigChampagne. Eventually, "if you can download a movie with sophisticated sight and sound in seconds and have it in your library, you're not going to buy that in a DVD store. Anyone with even a paltry understanding of human nature understands that," says Jack Valenti, head of the M.P.A.A.

The weekend of the sneak preview, Brandon got hourly updates from the studio's Internet-monitoring firm, hoping not to hear that Samurai had been scattered across the globe. The off-site security firm (which requested that it not be named) scanned file-trading networks 24 hours a day. It can fire off letters warning Internet service providers about misbehaving users, but its main weapon is the decoy file, which it dispatched by the tens of thousands. Downloaders spent hours pulling down the bait, only to find a mess of ones and zeros. Bored wannabe pirates added to the mass distraction, posting bogus files to get attention and create havoc. The week before the film's release, TIME staffers found online Samurais that turned out to be Scary Movie 3, Santa Clause 2 and a porn flick.

By the Monday after the film's sneak preview, no pirate copies had surfaced. "It was a pretty amazing feat," Brandon says now, as if describing a matter of national security. "The movie very easily could have been compromised."

In fact, it wasn't until Dec. 6 that Brandon finally got the dreaded call. Around 2 p.m., he learned that Samurai was online, just one day after its release in theaters. In this day and age, that is a victory--which reflects how badly the studios are losing the war. That first pirate of Samurai was from a camcorder copy made in a U.S. theater on the day the movie premiered. Warner Bros. has identified the theater using tracking codes hidden in the film but declined to reveal the information, citing ongoing legal investigations. After years of resisting the hard line taken by the music industry, the studio recently decided to take off the gloves and pursue civil litigation against pirates. The M.P.A.A., meanwhile, is investigating 23 American theaters where camcording has occurred. (The first person to be federally charged for camcording, Johnny Ray Gasca, jumped bail two weeks ago in California.)

The Samurai copy was posted online under the pirate logo MPT--one of the so-called release groups that upload films and have their own hierarchy. Currently, MPT also claims to have online bootlegs of Paycheck, Big Fish and Lord of the Rings: The Return of the King. Beyond the desire to get something for nothing, serious downloaders relish the technology of pirating for technology's sake. "I'm a geek," says one Indian student living in France. "There's a thrill of it. The first movie I downloaded, it was quite a kick--it was My Big Fat Greek Wedding." The day Samurai appeared online, a dozen downloaders posted reviews--of the pirate copy. "Video is a little grainy, nothing too bad, color is dead on," wrote someone calling himself Freeder. "Watched this at the theater last night ... glad I can watch it again without paying $20," added another.

Once a movie leaks, duplicating plants begin churning out discs by the thousand. Two and a half years ago, hard copies would hit the street about a week after theatrical releases. Today they're usually out in 48 hours. On Dec. 13, a TIME reporter bought Samurai from a stall along Taweewong Road in Phuket, Thailand. "We've had Last Samurai for three days already," said vendor Nook (not his real name). At his booth, just 50 yards from an official Warner Bros. store, Samurai was available with Thai, Chinese or Bahasa Indonesia subtitles. Business has improved, Nook says, since police stopped shaking him down for a monthly $60 payoff. Now he pays just $150 a year for an official ID card. Piracy has become so normalized that it has its own bureaucracy. Two days later, a reporter bought Samurai in Shanghai. The shopkeeper, who introduced himself as Mr. Wang, displayed thousands of pirated DVDs--from Hitchcock to Schwarzenegger. The DVD cost $1. It arrived the day before, via pedicab. "If you want to wait a few months, you can come back for a better version," said Mr. Wang.

Piracy is so rampant in parts of Asia that even the pirates have problems with piracy. In Taipei, a copy of Samurai purchased over the phone for $1.76 features the logo "HLW production team/Production: KC" in the upper right-hand corner of the image. The group attached its pirate mark so it can police its own product, speculates Michael Ellis, vice president of Asia-Pacific antipiracy operations for the M.P.A.A. "From a criminal point of view, if someone is taking away your market share, that's a problem." (The Chinese-character subtitles were not always of professional quality. When Tom Cruise says "I would happily kill you for free," it is translated as "At any time, I can back off.") Copies bought in Moscow and New Delhi even list addresses for the pirate "copyright holders." They are likely fake, added to help slip bootlegs past customs agents, Ellis says.

On Christmas Eve, another copy of Samurai appeared online and was traced back to a screener that had been sent to Oscar voters. Since Warner Bros. gave out only VHS copies, the bootleg was not of great quality. But its existence is an embarrassment after a year of high-profile debate over the risks of screeners--a beloved industry perk. Valenti of the M.P.A.A. had pushed hard to fight piracy by banning all screeners outright. But independent studios complained the ban would penalize small movies trying to get award nominations. In December the U.S. district court overturned the ban. Last week Sony traced a pirated copy of Something's Gotta Give to a screener intended for use by veteran character actor Carmine Caridi, a member of the Academy of Motion Picture Arts and Sciences. The Last Samurai and other pirated screeners have also been traced back to Caridi, according to a source close to the investigation, though it is not yet clear if Caridi had anything to do with leaking the film.

Studios have been loath to acknowledge their own holes in the security net. A 2003 study led by a group of AT&T researchers found that 77% of online pirated films came from weak links within the movie business itself--from Academy members to critics to cinema projectionists. The report was criticized by studio execs, who found its definition of movie insiders overly broad. Nevertheless, this past year, some studios have started quietly inserting hidden markers in screeners that identify the owners. Under a new pledge, which 80% of Academy members have signed, anyone found to have leaked a screener can be kicked out of the Academy.

So far, Warner Bros. has traced thousands of online Samurai copies and 25 bootlegs from 12 countries to one screener and two camcorder copies. That is not a lot of leaks. But it takes only one. As downloading speeds increase and camcorder technology continues to improve, studios will be forced to put down the night-vision goggles and invent a new business model for a new world. "Nobody believes you're going to dissuade people from downloading," says Garland of BigChampagne. "It's all about co-opting that content and building businesses around it."

Fittingly, The Last Samurai is a movie about men fighting to protect their archaic way of life. Their customs stand no chance of surviving. But the samurai fight on anyway, barreling into battle with their swords drawn against the cannons and artillery guns that boom into the future. At press time, Samurai had earned $98 million in theaters; and according to BigChampagne, about 49,000 copies are bouncing around on the Internet, for free. With reporting by Desa Philadelphia/Los Angeles, Matthew Forney/Shanghai, Robert Horn/Bangkok, Joyce Huang/Taipei, Paul Quinn-Judge/Moscow, Sara Rajan/New Delhi and Grant Rosenberg/Paris

With reporting by Desa Philadelphia/Los Angeles, Matthew Forney/Shanghai, Robert Horn/Bangkok, Joyce Huang/Taipei, Paul Quinn-Judge/Moscow, Sara Rajan/New Delhi and Grant Rosenberg/Paris