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Piracy in China Cost Industry $2.7 Bil. in 2005

Piracy in China cost film makers $2.7 billion last year, with domestic firms shouldering more than half those losses, according to a study commissioned by a trade group representing the major Hollywood studios.

China's film industry lost about $1.5 billion in revenue to piracy last year, while the major U.S. studios lost $565 million, according to data released on Monday by the Motion Picture Association (MPA), whose members include the studio units of Time Warner, Walt Disney Co. and Viacom Inc..

The study was the first for China done by a third party, LEK Consulting, for the MPA, which previously did a similar annual study itself.

The 2005 losses to U.S. studios were well above the MPA's own previous estimate of $178 million lost to piracy in 2003.

Some 93 percent of all movie sales in China were of pirated versions of films, according to the latest study.

"In terms of who's losing the most here in China, it's not the MPAs member companies. It's the local industry," said Mike Ellis, who heads the MPA's Asia Pacific division.

The study also found that the Internet is becoming a growing source of piracy in China, though pirated discs still accounted for the majority of lost sales last year.

According to the report, illegally downloaded films cost the industry $1.04 billion in China last year, while pirated video discs accounted for $1.63 billion in lost revenue.

The MPA released its latest report along with another first-ever study on the impact of movie piracy on China's economy, which was also commissioned by the MPA and done by the Chinese Academy of Social Sciences.

That study said that growth in China's box office slowed by nearly half to 30 percent last year, when the industry generated $247 million in receipts, from 58 percent in 2004.

Piracy is a rampant problem in China, where bootleg versions of major films often appear on the street just days after their theatrical release.

The MPA and its members also complain of highly restricted access to the market, with only 20 foreign films allowed into China each year on a revenue-sharing basis. Even when they are allowed in, films are often restricted in their runs.

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