Video Pirates: The Bane of Hollywood

Where do you think organized crime is making its money these days? With drugs, gambling, and prostitution? Yes, but also - and this may surprise you - the movies.

Mobsters have moved into the movie piracy business and it is bleeding Hollywood to the tune of billions of dollars a year.

Movie pirates used to be small-time operators, selling VHS copies of films on the sidewalk for $5 or less.

But now, with the Internet and DVDs, the movie piracy business has exploded, and police departments across the country are struggling to keep up.

Every month, a special unit of the Los Angeles Police Department mounts two or three raids looking for pirates. Just last Thursday at a raid on a warehouse in downtown Los Angeles, they arrested two men who they say have been filling orders for counterfeit DVDs for years.

Detective Rick Ishitani found one of their order books. "These are movies titles that just came out. 'Angels and Demons,' they ordered 100 movies. And 'Terminator,'" the detective explained.

Police say the suspects were wholesalers who acted like mobsters. They would pick up customers in a van and drive them around blindfolded, before bringing them to the warehouse to fill their large orders.

In the last four years, the LAPD has confiscated nearly a million counterfeit DVDs.

The DVDs are made by pirates who often sit in the back row of theaters and record movies with tiny cameras.

Illinois police say Gerardo Arellano did just that. He was arrested at a multiplex outside Chicago and showed up at court with his family. They were also with him when he was recording in the theater, according to investigator Gary Kissinger.

"He was actually observed with the camera sitting on his right leg, along with his wife and small child," Kissinger told 60 Minutes correspondent Lesley Stahl.

"He brought a child with him to do this?" Stahl asked.

"Yes," Kissinger said. "We're finding that to be more commonplace because not only their child, but other family members or friends, because they act as lookouts and also they're less conspicuous. They blend in with the rest of the audience."

Kissinger works for the MPAA, the Motion Picture Association of America.

Stahl interviewed him at the AMC multiplex where Arellano was arrested.

"I actually heard once that one of these people brought a camera in in a baby carriage," Stahl remarked.

"Sometimes even in the diaper bag," Kissinger said. "Actually, we've seen it where they cut out the cup holder and they'll set the, cut out the bottom of the cup holder and actually set the camera in here."

"And then they control the camera with a remote control device and monitor it," he added.

Police say Arellano worked out of his home, where they found more than 13,000 DVDs he had made from his recordings, along with the computers he used to upload the movies onto the Internet.

"Rarely do you see an individual that's involved in all three major components of the piracy activities: in other words, camcording, Internet piracy activities and also selling the movies on the street as well," Kissinger said.

John Malcolm, a former Justice Department official specializing in intellectual property, says pirates like Arellano are linked to organized crime rings that are making a barrel of money selling DVDs.

In Mexico, the drug cartels are brazenly stamping their DVDs with their logos.

"Here, for instance, are pirated DVDs by the Zetas," Malcolm said, showing Stahl a DVD stamped with a gang logo.

"Here's a Leonardo DiCaprio film with the drug cartel. And they're advertising. It's just breathtaking," Stahl remarked. "Are they getting out of drugs and into movies?"

"No. They want to diversify," Malcolm explained. "They might be doing gambling on Monday, human trafficking on Tuesday, child prostitution on Wednesday, drug dealing on Thursday, and counterfeiting on Friday."

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[nycabrahamthomas]

I think the real pirates are the movie-theater owners who overcharge on water, popcorn, etc. I don't mind the cost of the theater ticket, especially when it is a 2 to 3 hour hit, but the movie-theater owners are CLEARLY robbing the consumer. Piracy should be stopped...but so should the movie-theater owners.

[Treckenridge]

This show is for all the old and what I would call the UNCOMPUTERED.

They will never raise them self up from the ignorant state that they are in because they are either to poor or to lazy to learn how to use a computer.

[Gimpeh]

Wow. What a joke. They blame piracy on the loss of so much money, I blame the crappy flicks coming out left and right. CBS in my book has lost any shred of credibility it had left. Your bias is propaganda to America.

[markatx]

This news piece was a complete rehash of 60 Minutes's 1978 piece on the VCR and how video piracy would destroy the movie industry. How can I trust the reporting on this show with such a one-sided account of a story?

[trutherCBS]

""He was actually observed with the camera sitting on his right leg, along with his wife and small child," Kissinger told 60 Minutes correspondent Lesley Stahl.

"He brought a child with him to do this?" Stahl asked.

"Yes," Kissinger said. "We're finding that to be more commonplace because not only their child, but other family members or friends, because they act as lookouts and also they're less conspicuous. They blend in with the rest of the audience." "

THINK OF THE CHILDREN. Are you guys serious?

[TXLady101]

I think 60 minutes time is up. There's nothing but a bunch of grand parents on the show. Were they writing this article for 4 yr olds? Calling Bit Torrent "gee whiz technology"...lol thats like saying the internet is a "gee whiz technology". I don't think anyone should decide how much money others should make. However the Capitalist system is set up so that when consumers feel they are being over charged or not getting what they pay for we consumers move on to the better cheaper product! People like to watch movies when and where they choose. With big screen t.v.'s and home theater's with better quality than the movies people would rather stay home. Parent's can't always afford a sitter plus $50 for a movie + concessions. Smokers want to enjoy their smoke without missing the movie in the comfort of their home. Hell, I would like the ability to pause the movie to use the restroom instead of missing the best part! Make live stream available through TV or Cable boxes when the movie is released. Charge $20 for a 24 hour access of the film. They'd make up the "6billion" in loses alone. Cable does it already with on demand for rental releases and Blockbuster is going out of business due to this. Should we penalize the cable industry for thinking of it first...NO. Hey movie industry I dare you to try it for one big movie and see what happens!

[FShoeFitzwearit]

I have no sympathy for overpaid Hollywood stars, directors, producers, et. al. whose video products are overpriced. And 60 Minutes "correspondents" who shill for the industry are also absurdly over-compensated. There are many much more serious problems in need of exposure. But this one is a no-brainer, hence the coverage.

[ladyraestewa]

Here's an idea about how the entertainment industry can stop losing money --- stop all the "let's keep patting ourselves on the back" shows and awards where you do nothing but praise yourselves for all the work you've done! Oh and make something decent and worth watching for a fair price!

[ConcernedViewer001]

60 minutes has provided the kind reporting matched by no other news show. I have never been more suprised to read the story on movie piracy. Check your sources CBS! Rather than performing an actual investigation, you are taking alleged facts from a most dubious source, the movie industry. Do your own investigation. Really find out the facts. There's huge story to be told and it will affect everyone's future. Bring back the reporting we have grown to respect.

[GlennStencell]

Some interesting facts that the public does not know.

I have known several processes to effectively stop movie piracy for many years now. I have a background in electronics, security, accounting, and the movie business (in the movie business as an exhibitor).

In May of 1997 I sent a business proposal to the major movie distributors (Universal, Disney, Warner Bros., etc.) regarding a new type of movie projector that would also have some abilities to stop movie pirates. Yet all of these proposals were sent back, since they do not accept outside proposals.

In May of 2009, I mailed/delivered approx 400 invitations to people in the movie industry. This invitation was to a meeting to inform them how movie piracy could be stoped. These people included distributors, producers, directors, the MPAA, the FBI, the Academy, and the various guilds (producers, directors, screen actors, and writers). Mr. Soderberg was actually sent two copies (one addressed to him at the Director's Guild of America, and one to him at his company "Anonymous Content").

The effect of this invititation was that many did not respond, or in most cases, the invitation was returned, with a generic type of letter to the effect that they do not accept outside proposals.

When I was in L.A. in May of 2009, I personally followed up with phone calls to various places (noteably the major distributors, the MPAA, the Academy, the FBI, and the various Guilds), to make sure that they did receive my invititation, and inform them that I was in the L.A. area in case they wanted to call to meet with me regarding questions about my qualifiations or the invitation in general. However not one of these organisations called me back. While most of the major movie distributors sent back the invitation with the generic letter stating that they don't accept unsolicited proposals, no response of any kind was received from the MPAA, the FBI, or any of the Guilds (including the Directors Guild of America, which Mr. Soderberg represents).

So, while a solution to movie piracy does exist, the industry does not seem to want to hear about it, unless they come up with it themselves - THEY DON'T ACCEPT OUTSIDE UNSOLICITED PROPOSALS. The bottom line is that if someone does not know how to solve something, and they close their mind to even entertaining ideas from outside, how do they ever expect to solve the problem.

In my opinion, Mr. Soderberg is an excellent Director. I have enjoyed many of the movies he has directed. However, his position as a leader in the industy should be questioned. He publicly states that he dosn't believe a solution to piracy exists, and he is closed to outside ideas.

In regards to Mr. Soderberg's proposal to Congress, to obtain the rights to monitor the internet, most people will probably agree that this would be too much power given to any one person or organisation.
Surely, the movie industry should remember McCarthy and the communist witch hunting. This is truely not an appropriate solution.

The solution which I know, would empower them with the knowledge and technology needed to solve their own problem, and return control of their products back to them.

The $6 Billion/year question really is - When are they prepared to listen?

If someone in authority in the movie industry really wants to discuss obtaining a solution to movie piracy, call me at [phone]. Note: identities will be verified.

[ladyraestewa]

I worked for an entertainment lawyer and this makes perfect sense. It is exactly how the recording industry handled this same situation in the early days of Napster -- they were presented with these "future" problems and potential solutations, plus alternative ways to start thinking about how they must do business in the electronic/internet age. But instead of listening, they decided they could do it themselves but failed miserably. Suddenly it's a cronic problem and they have on hand in their pants and the other scratching their foreheads saying, "when did this happen and how are we going to save ourselves."