CHAPTER 2

ISSUES AND CHALLENGES

FACED BY THE FILM AND
MUSIC INDUSTRIES AND
FACTORS INFLUENCING
ONLINE PIRACY
CHAPTER 2. ISSUES AND CHALLENGES FACED BY THE FILM
AND MUSIC INDUSTRIES AND FACTORS INFLUENCING
ONLINE PIRACY

2.1 Introduction
This chapter gives insights as to how online piracy happens, what are the factors
influencing online piracy, the sources of online piracy, the problems and
challenges faced by the Indian Film Industry and the Indian Music Industry and
how is the magnitude of the problem so far as India is concerned. With the
technological advancement and digital boom in today’s era various new set of
problems have emerged. It talks about the statistics of online piracy and the
effects that piracy has on various stakeholders, the Government and the
economy. This Chapter further focuses on the meaning and the type of cyber
crimes that have arisen.

2.2 Meaning of intellectual property

Intellectual property (IP) refers to creations of the mind, such as inventions;
literary and artistic works, designs, and symbols, names and images used in
commerce. Human intellect and creativity are adorable and admirable.
Intellectual endeavours and creative pursuits often result in ingenuity and
innovation. Intellectual property is all about human creativity, ingenuity and
innovation. It is the result of application of mind in the execution of creative and
innovative thoughts. Intellectual Property rights are considered as a reward for
creative and skilful work in execution of ideas. In fact, it is the knowledge and
information which forms the core content of intellectual property. In the
knowledge driven society, the rights associated with such useful knowledge are
highly regarded. Intellectual property rights are rewards provided as recognition
to the creative work. These rights are an incentive for creators and inventors for
executing and expressing innovative thoughts and ideas. Broadly speaking
intellectual property rights constitute legal means to protect results and outcomes
of intellectual activity such as inventions, literary and artistic works as well as

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innovative symbols, names, expressions, indications and designs used in trade.
The impact of intellectual property rights has spread over every aspect of human
life.44

IP is protected in law, for example, patents, copyright and trademarks, which

enable people to earn recognition or financial benefit from what they invent or
create. By striking the right balance between the interests of innovators and the
wider public interest, the IP system aims to foster an environment in which
creativity and innovation can flourish.45

2.3 Importance of intellectual property

The subject called intellectual property being multidisciplinary has been drawing
the attention of everyone irrespective of the field or discipline they belong to. It
has got something in store for everyone ranging from professionals, labourers,
industrialists, philosophers, ethicists, scientists, politicians, artists, law makers,
entertainers, business entrepreneurs, economists, academician, students and
common man. In the modern-day protection and management of intellectual
property rights is a core issue. In recent past the importance of intellectual
property have been universally felt and recognized. In the business world the one
possessing the intellectual property rights will have definite advantage over other
competitors. In the era of globalization when the entire world is considered as a
single (global) market there is noticed stiffer competition from all corners of the
world in any given field. At this juncture possession of intellectual property
rights would facilitate the owner a better and advantageous edge in the
business.46

44
SREENIVASULU N S, LAW RELATING TO INTELLECTUAL PROPERTY, 3 (2nd Ed. Universal
Law Publishing, 2018).
45
What is Intellectual Property? WIPO, available at https://www.wipo.int/about-ip/en (Last accessed on
20 November 2018).
46
Supra note 44.
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2.4 Various types of intellectual property
There are many types of intellectual property rights. The most well-known
types are copyrights, patents, trademarks, and designs. Each one of them is
briefly discussed below.

Copyright

Copyright grants exclusive rights granted to the owner, devoid of others to do or

authorize others to do some acts in respect of literary, dramatic, musical, artistic
works including cinematograph film and sound recordings. It is a negative right
which prevents copying of its subject matter.

Copyright law protects expressions of ideas rather than the ideas themselves.
Copyright protection is conferred on literary works, dramatic works, musical
works, artistic works, cinematograph films and sound recording. For example,
books, computer programs are protected under the Act as literary works.47

Copyright refers to a bundle of exclusive rights vested in the owner of

copyright.48These rights can be exercised only by the owner of copyright or by
any other person who is duly licensed in this regard by the owner of copyright.
These rights include the right of adaptation, right of reproduction, right of
publication, right to make translations, communication to public etc.49 Works
covered by copyright range from books, music, paintings, sculpture and films, to
computer programs, databases, advertisements, maps and technical drawings.

Patents

A patent is an exclusive right granted for an invention. A patent provides the

patent owner with the right to decide how or whether the invention can be used
by others. In exchange for this right, the patent owner makes technical
information about the invention publicly available in the published patent
document.

47
Section 13 of the Indian Copyright Act, 1957.
48
Section 14, Ibid.
49
Ibid.
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It is a reward for contributing to the development in a given field. It is an
incentive to the innovators to come out with new and novel innovations that
could benefit the society at large. Patents grant an exclusive right to the inventor
for limited period over his invention in exclusion of others, for making, using,
selling, and importing the patented product or process producing that product for
those purposes. The purpose of this system is to encourage inventions by
promoting their protection and utilization so as to contribute to the development
of industries, which in turn contributes to the promotion of technological
innovation and to the transfer and dissemination of technology. Patents ensure
property rights (legal title) for the invention for which exclusive right has been
granted, which may be valuable to an individual or a company.50

Trademarks

A trademark is a sign capable of distinguishing the goods or services of one

enterprise from those of other enterprises. Trademarks dates back to ancient
times when artisans used to put their signature or ‘mark’ on their products. It
could be in the form of word, phrase, design, sound, smell, colours, product
configuration, numbers, combination of those, a device, or a label applied to
articles of commerce, which is capable of distinguishing the goods and services
of one person from those of others. In the case of Sumat Prasad v. Sheojan
Prasad51 it was viewed that trademark is a mark used in relation to goods for the
purpose of indicating or so as to indicate a connection in the course trade between
the goods and some person having the right as a proprietor to use that mark. It is
an indication with reference to the origin or the owner of the goods. It could also
indicate a specific quality and reputation on continuous use down the years.52

Industrial Designs

An industrial design constitutes the ornamental or aesthetic aspect of an article.

A design may consist of three-dimensional features, such as the shape or surface

50
Supra note 44 at 154.
51
Sumat Prasad vs. Sheojan Prasad, AIR 1972 SC 2488 (India).
52
Supra note 44 at 17.
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of an article, or of two-dimensional features, such as patterns, lines or colour.
According to ICSID53 “Design is a creative activity whose aim is to establish the
multifaceted qualities of object, processes, service or their system in the whole
life cycles. Therefore, design is the central factor of innovative humanization of
technological and the crucial factor of cultural and economic exchange.”

The significance of an Industrial Design could be felt in the appeal of the

industrial product. It is nothing but what catches the eye at the first sight which
would have long standing and ever lasting impression in the minds of consumers
which could influence their franchise and choice. 54

Geographical indications

Geographical indications and appellations of origin are signs used on goods that
have a specific geographical origin and possess qualities, a reputation or
characteristics that are essentially attributable to that place of origin. Most
commonly, a geographical indication includes the name of the place of origin of
the goods.55 The question regarding what a geographical indication is can be
understood in two ways. One is to understand geographical indication as an
indication representing a particular set of goods originated from a specific
geographic locality. The other is to understand geographical indication as a
product originated from a particular geographic region which is known for
certain quality represented through an indication. In Imperial Tobacco vs.
Registrar56, it was viewed that geographical indications have been defined to
mean “indications which identify a good as originating in the territory of a
particular nation, or a region or locality in that territory, where a given quality,
reputation or other characteristics of the good is essentially attributable to its
geographical origin.”

53
Industrial Council of Societies of Industrial Design.
54
Supra note 44 at 441.
55
Ibid.
56
Imperial Tobacco vs. Registrar, AIR 1977 Cal 413 (India).
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2.5 Cybercrime: meaning and types
A cybercrime is any crime committed using a computer. There is no statutory
definition of cybercrime under Indian laws including under the IT Act. A
cybercrime can be defined as “Any illegal act fostered or facilitated by a
computer, whether the computer is an object of a crime, an instrument used to
commit a crime, or a repository of evidence related to a crime.”

Cybercrime has a widespread adverse impact, especially in view of the

indispensability of the internet in everyday life. The targets of the cybercrime
include any device which can access the internet, like a computer, smart phone,
or laptop, and any activity that is conducted using IT. Cyber criminals no longer
require an advanced knowledge of computers or a specialized skill set, which
means that anyone and everyone can commit a cyber-crime. Apart from isolated
individuals committing cybercrime, the realm of cyber criminals has expanded
to include organized and professional hackers and crackers, the cyber mafia, and
the conduct of cyber war, cyber terrorism and cyber espionage by governments
against each other.57

Following are some of the types of cybercrimes where in the computer is a tool
for an unlawful act:

• Financial crimes- This would include cheating, credit card frauds, money
laundering etc.
• Cyber Pornography- This would include pornographic websites,
pornographic magazines produced using computer and the internet.
Basically, Cyber pornography includes downloading and transmitting
pornographic pictures, photos, writings etc.
• Sale of illegal articles- Many a time’s illegal articles are sold online by
posting information about such articles on websites, bulletin boards or
simply by using email communications.

57
DR S.R. MYNENI, LAW OF INTELLECTUAL PROPERTY, 26 (6th Ed. Asia Law House, 2016)
45 | P a g e
• Online gambling - There are many websites which are all hosted on
servers abroad that offer online gambling. They are fronts for money
laundering.
• Intellectual Property Crimes- These includes Copyright infringement,
trademark violations, patent violations, online piracy, domain name
registration, software piracy etc.
• E-mail spoofing or E-mail forging - Spoofing occurs where one computer
on a network pretends to have the identity of another computer on the
network. A spoofed email is one that appears to originate from one source
but actually has been sent from another source.
• Forgery – Counterfeit currency notes, postage and revenue stamps, mark
sheets etc. can be forged using sophisticated computers, printers and
scanners.
• Cyber defamation – This occurs when defamation takes place with the
help of computers and or the internet e.g., someone published defamatory
matter about someone on a website or sends e-mail containing defamatory
matter about someone on a website or send emails containing defamatory
information to all of that person’s friends.
• Cyber Stalking – Cyber Stalking involves following a person’s
movements across the internet by posting messages on the bulletin boards
frequented by the victim, entering the chat rooms frequented by the
victim.
• Hacking or unauthorised access to computer system or network – Hacking
means unauthorised attempts to bypass the security mechanisms of an
information system or network.
• Theft of information contained in electronic form – This includes
information stored in computer hard disk, removable storage media etc.
• Email bombing – This refers to sending large amount of emails to the
victim resulting in the victim’s email account or mail servers.

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• Data diddling – This kind of attack involves altering the raw data just
before it is processed by a computer and then changing it back after the
processing is completed.
• Salami attacks – Those attacks are used for the commission of financial
crimes. The key here is to make the alteration so insignificant that in a
single case it would go completely unnoticed. E.g a bank employee inserts
a program into bank’s servers that deducts a small amount from the
account of every customer.
• Denial of Service – This involves flooding customer resources with more
requests than it can handle. This causes the resources to crash thereby
denying authorised users the service offered by the resources.
• Virus – They are the programmes that attach themselves to a computer or
a file and then circulate themselves to other files and to other computers
on a network. They usually affect the data on a computer, either by
altering or deleting it.
• Trojan Horse – This is an unauthorised program which functions from
inside what seems to be an authorised programme, thereby concealing
what it is actually doing.
• Internet time theft – This connotes the usage by unauthorised persons of
the internet hours paid for by another person.
• Bot and Bot Nets – Bots are programs installed covertly on a user’s
system which allows the attacker to remotely control the targeted
computer through a communication channel, such as Internet Relay Chat
(IRC), Peer to Peer (P2P) or HTTP. These communication channels allow
the attacker to control a large number of compromised computers in a
single channel in a ‘botnet’ (an abbreviation for robot network)
• Key Loggers – Key logger is a software program, or a device designed to
secretly monitor and log all keystrokes. The key logger software scans
computers, their processes, and data, the moment a person strikes a key

47 | P a g e
 on the keyboard. This information is immediately carried over to an
external controller.
• Website Defacement – This is usually carried out by the substitution of
the home page of a site by a system cracker that breaks into a web server
and alters the hosted website creating one of its own. The hacker usually
replaces the site matters with his own message or completely destroys the
site’s content.
• Distributed denial of Service (DDOS) attacks – A denial of service is an
attempt to prevent users from accessing a specific computer resource such
as a website. A DDOS involves overwhelming the targeted computer with
requests so that it is no longer able to communicate with the intended
users.
• Phishing – This is criminally fraudulent process of masquerading a
trustworthy entity in an electronic communication in order to trick people
into disclosing sensitive information such as user name, password and
credit card details.
• Vishing – This is a criminal practice of using voice over phone systems
to gain access to details about account numbers, PIN, date of birth and
expiry date of credit card holders and using it for fraudulent activities.
• Pharming – This occurs where a cybercriminal redirects a user from a
legitimate site to a fraudulent and malicious site where their machines are
injected with malware.
• Identity theft – This involves pretending to be someone else in order to
steal money or get other benefits. The identity of another individual is
impersonated in order to commit credit card fraud, create false profiles at
networking sites and operate false email identities.
• Phreaking – This refers to people who tamper with systems of
telecommunications such as public telephone networks and various phone
system audio frequencies. This term has been recently broadened to

48 | P a g e
 include people involved in computer hacking and is referred to H/P
culture hacking and phreaking culture.
• Rootkits – These are programs designed to capture the ‘root access or take
control of the system while avoiding detection from anti-virus scams. In
other words, a root kit is a virus which seeks to hide the fact that computer
is compromised from the operating system and therefore from the user. A
root kit does so by using software that hides processes, files, registry data
and network connections and prevents them from being displayed.
• Mobile malware – This spread through mobile phones even without use
of blue tooth, emails, or infected Multimedia Messages to control its
spying tools are also being installed on mobile handsets. They are
installed on the handset in order to keep a long of all the activities of the
user.58

2.6 Copyright internet and digital content

The birth of internet has brought into existent digital copyrights in the spear of
copyright law which could be considered for protection on the proof of
originality. Protection and management of digital copyright is a major concern
today. The advent of information technology has made it difficult to apply the
traditional rules of copyright law to various cyber space players, entities and
organizations. The cyberspace players who would be responsible for digital
copyright content can be grouped under following headings:

1. Internet Service Providers (ISPs)

2. Bulletin Board Service Operators (BBSO)
3. Commercial Web page owner/operators and
4. Private Users.59

Online world leaves in a variety range of pieces of information and knowledge

in different formats through different players. It is very pertinent to know what

58
Supra note 57 at 30.
59
Supra note 44 at 386.
49 | P a g e
the actual content of digital copyright is, what is exactly protected when we say
there is copyright over the content in the internet or digital world. Let us examine
what are the actual contents of digital copyright. The websites are heavily loaded
with information, much of it with varying degrees of copyright protection. In
fact, the reality is that almost everything on the Web is protected by Copyright
law. Typically, a website would consist of the following elements:

• The content generally is in the form of text, graphics, audio or video files,
which are protectable as literary, artistic and cinematograph works
respectively under the Indian Copyright Act, 1957. This means that the
creator of the content can prevent anyone from reproducing or distributing
content without his consent.
• The underlying source code or computer programme is protectable as
literary work.
• The layout of the web page or rather or rather the ‘look or feel’ of the
website if distinctive, is amenable to protection as a trade dress.60

2.7 Meaning of copyright infringement

Digital technology allows perfect copies and easy distribution of some works
that makes it easier for people to make and get copies of songs, movies or
videogames, and more difficult for copyright holders (record companies, etc.) to
control the works once they are released to the public.This new technology has
changed the way content distributors relate with their customers and law and
business models are trying to catch up. Piracy is the unauthorized distribution,
theft, reproduction, copying, performance, storage, sale or other use of
intellectual property (IP) protected under copyright law.61

Piracy as a term is used to denote copyright infringement. Modern day ‘pirates’

makes copies, sometimes perfect digital copies of the work of another. Today

60
Supra note 57 at 29.
61
Piracy by Technopedia, Technopedia, available at https:/www.techopedia.com/definition/545/piracy
(Last accessed on November 18, 2018).
50 | P a g e
copyright holders are concerned with infringement because they believe that if
someone can buy a copy of their work for less or obtain it for free or through a
trade, his or her profits will be lost. Regardless of whether the copied materials
are offered for sale, distributed free or given to relatives, the copyright holder
may claim infringement. There are three fundamental forms of Online Piracy:
music piracy, software piracy, and movie piracy. Although other forms of online
piracy exist, these three remain the most common and the most fundamental
avenues for which online piracy is present. 62

Some common examples of copyright infringement

A long series of court rulings has made it very clear that uploading and
downloading copyrighted music without permission on P2P networks constitutes
infringement and could be a crime.

Common examples of online copyright infringement:

• You download an app on your smart phone that allows you to ‘strip’ the
audio from any YouTube music video and permanently keep that audio
in your music collection.
• You make an MP3 copy of a song because the CD you bought expressly
permits you to do so. But then you put your MP3 copy on the Internet,
using a file-sharing network, so that millions of other people can
download it.
• Even if you don’t illegally offer recordings to others, you join a file-
sharing network and download unauthorized copies of all the copyrighted
music you want for free from the computers of other network members.
• In order to gain access to copyrighted music on the computers of other
network members, you pay a fee to join a file-sharing network that isn’t
authorized to distribute or make copies of copyrighted music. Then you
download unauthorized copies of all the music you want.

62
All the Facts on Online Piracy, Insurances Laws, available at https://insurance.laws.com/online-piracy
(Last accessed on September 20, 2018).
51 | P a g e
 • You transfer copyrighted music using an instant messaging service.
• You have a computer with a CD burner, which you use to burn copies of
music you have downloaded onto writable CDs for all of your friends.
• Someone you don’t know e-mails you a copy of a copyrighted song,
which you forward to your friends.63

2.8 Justification for copyright protection

The main purpose for copyright laws is to safeguard your literary and artistic
works. Copyright laws were created to protect the expression of ideas. Artistic
works are generally considered to be expression of ideas- books, paintings,
songs, movies and computer programs are examples of it. Moreover, creativity
is the keystone of progress and no civilized society can afford to ignore the basic
requirement of encouraging the same.

As long as copyright laws have existed, there have been discussions as to how to
justify copyright protection. Several different theories of copyright protection
exist, the most common one perhaps being the incentive theory. According to
the incentive theory, copyright protection is necessary to give creators the
incentive to invest time, skill, effort and resources into the creative process. The
time-limited monopoly, which prevents others from free riding on the creative
efforts, also enables the creators to retrieve their investment.

The prospect theory provides justifications for situations in which the creator’s
investment is risky and costly and where economic rewards are uncertain. The
prospect theory offers a fully good explanation of the extension of copyright
protection to new technologies.

The third theory is the natural rights theory and it has two main features. The
first feature builds on Hegel’s property theory, which considers intellectual
creations to be an addition to the creator’s personality. Consequently, the creator

63
About Piracy, RIAA available at https://www.riaa.com/resources-learning/about-piracy (Last
accessed on November 18, 2018).

52 | P a g e
has an inherent right to protect the integrity of her creation, just as she would
have the right to protect her own personality. The second feature builds on
Locke’s theories and treats intellectual property as the creators “fruit of labour”.
According to Locke’s labour theory, “creators have an inherent right to reap the
fruits of their creation and obtain rewards for their contributions to society”.

The concluding theory on copyright justifications is the development theory.

According to this theory, copyright act as a catalyst for economic development
and modernization, and copyright protection is thus a necessity to increase
literary and artistic production, attract foreign as well as domestic investment,
generate tax revenues and create new jobs.64

2.9 Factors affecting online piracy

There is no one answer when it comes to deciding why piracy occurs. There are
various factors which can be responsible for online piracy of music, films and
sound recordings. It is far more complicated a problem than just a person not
wanting to pay for the downloading. Some of these factors are discussed below:

To give perspective on each of these causes, they are discussed below in detail:

1. Obtaining benefits as the item is free - Most individuals who participate

in online piracy do so to obtain the benefits of a particular item for free.
The most dominating example of online piracy is found in the illegal
download market for free media such as music and movies. Opponents of
the online piracy market further point out that the use of such creative
works without paying for them also affects the large support staffs (i.e.
Publishers, designers, engineers, sound technicians etc.) who lends a hand
in the creation of the work.
2. Doing it because it is convenient and quick – One of the major factors
that could be linked to increase in the online piracy level is that as with

64
M DU BOIS, Justificatory Theories for Intellectual Property Viewed through the Constitutional
Prism PER / PELJ 2018(21) – available at http://dx.doi.org/10.17159/1727- 3781/2018/v21i0a2004
(Last accessed on November 10, 2018).
53 | P a g e
 the increase in technology it is very easy and convenient to engage in
online piracy. Anyone sitting in the comforts of their own home can
engage in online piracy with the help of a computer and good bandwidth
connection or also merely by having a good smart phone. With the
advancement of technology and the internet speed being fast online piracy
can be done very quickly also. It is no more a time-consuming process.
Hence it is easier to engage in such behaviour.
3. Threat of being discovered is low or negligible - Many times it happens
that the nature of online copyright infringement is such that it is very
difficult to trace the infringer. Moreover, the instances where the infringer
is traced and punished are rare. There is facelessness attached to the crime
of online piracy and hence the infringer keeps on doing repeated
infringement without any fear of being caught. Most people downloading
a song on the internet think they will get away with it and are thus not
deterred from piracy.
4. Probability of being punished is low – There is no deterrence in the area
of copyright infringement. People are sure that they will not be caught or
punished and hence the flout the law very easily and without any fear.
Moreover, the judicial court system in India is such that people are losing
faith in the judicial system. Also, in the area of copyright infringement
cases it is difficult to locate the infringer as the boundaries of this crime
are not just restricted to India. Hence the probability to catch and punish
a criminal is extremely low and thus is a major factor which motivates
such kind of behaviour without any fear.
5. Illusion that the content available online is free – Many a times people
have that illusion that because they are paying for the internet connection
they can download and copy anything and everything available on the
internet. Sometimes they are unaware that the material on the internet is
copyrighted and he/she could be punished for the same.

54 | P a g e
6. Perception that Copyright owner is a wealthy corporation that the
Industry makes a lot of money – People have a perception that by their
copying also the copyright owner will not be affected because he (i.e.
Corporation or individual) is perceived to be a wealthy person. We time
and again keep reading in the newspapers that this particular film made
this much crores of profit and most of the times we hear the hefty
payments that the celebrities receive or charge for doing certain projects.
Hence in the minds of common individuals there is a very glamorous and
luxurious picture that comes up when we talk about films. Considering
this perception many people think that as the music Industry and the film
industry makes a lot of money and as actors are highly paid by doing
online piracy it is not hurting anybody or pinching their pockets. And as
they make a lot of profit and the industry is blooming, their act they
consider is very trivial and does not affect anyone.
7. Inadequate supply conditions - It happens that the legitimate copyrighted
materials are not available. It is also possible that the products available
online legally are very pricy. Hence as a result what happens is that there
is demand but supply being inadequate people start searching for
alternative means for obtaining products and in the process piracy
happens.
8. Original products being unaffordable- Most of the producers do not
release movies or shows at the same time at all places. Sometimes the
hindi movies are released much later in the foreign countries. At the same
time, English movies also take time to hit Indian theatres. In such cases,
the original copies not being available, people search and use alternative
ways like piracy to get the content to the public.
9. Peer pressure- Among the teenagers and the college going public, there
is always a pressure to be friendly and important person among the peers.
Hence it is suspected that this age group merely engage in piracy
behaviour just to become popular among friends and to seek importance.

55 | P a g e
 Hence people of this age group also believe that it is the ‘in thing’ to pirate
and engage in such behaviour because their friends are pirating. They also
distribute such content among their friends.
10. Cheap Mobile Data rates – According to a report65 India has emerged as
the country that provides mobile data at the lowest rate in the world.
Indians pay on an average Rs. 18 for 1 GB of data against global average
of Rs. 600. India has over 430 million smart phone users in India and
India is the second largest smart phone market in the world after China.
This report also stated that 1 GB of data costs $ 6.66 in the UK and $
12.37 in the US. This could also be one of the aggravating factors for the
increase in piracy as people do not have to think about the cost that mobile
data will entail.

2.10 Sources of online piracy

There are various sources by which online piracy happens. For a better
understanding on the issue of how and by which source the online piracy
happens, few sources are discussed below:

1. Peer to Peer P2P Services - A P2P allows computers to connect with each
other on the Internet. Once connected, a computer can access the hard
drives of all other computers also on the network. P2P is also commonly
known as a networking protocol and it is often intended for people who
want to share the digital content.
2. Cyber Lockers - Cyber Lockers are also a means by which the audio-
visual work can be stealed. They are essentially online storage sites where
you can upload a file up to 200MB (movie-size) and let other people
download copies whenever they want. One such site, rapidshare, makes
money by charging downloaders for a quicker, enhanced downloading
capability. According to V.i.Labs, a digital anti-piracy technology firm,

65
Mobile Data Rates Cheapest in India, Costliest in Zimbabwe: Study, Gadget 360 by NDTV, available
athttps://gadgets.ndtv.com/telecom/news/mobile-data-rates-cheapest-in-india-costliest-in-zimbabwe-
study-2003327 (Last accessed on November 2, 2018).
56 | P a g e
 rapidshare claimed last year to have 160 million files on tap. While cyber
lockers can serve a legitimate purpose, like streaming sites they are
typically offshore hosts serving as facilitators to access pirated content. 66
3. Streaming site - Illegal streaming allows you to view unauthorized
copyrighted content on demand without downloading the illegal file.
Websites may stream directly or provide links to content hosted on other
websites. Both hosting unauthorized content and providing links to
unauthorized content is illegal. These sites are often user friendly, with
content divided into categories such as genre, year or language.67
4. Linking sites - Linking websites collate thousands of links to pirated
content often stored on external cyber lockers. These sites are prolific in
copyright infringement as cyber lockers are not searchable.68
5. Torrent sites - A torrent is a file sent via the Bit Torrent protocol. Bit
Torrent is an illegal, digital file-sharing program that is operated from a
centralized location, which grants access to its users that allows them to
participate in the transfer, import, and export of intellectual property. Bit
Torrent, which is classified as a Peer-to-Peer (p2p) digital file-sharing
program is considered to be more efficient than its predecessors, which
include Napster, Kazaa, and Limewire. In contrast to traditional fire-
sharing programs in which full files are circulated through digital
transmission, Bit Torrent sharing allows for the segmented transmission
of digital media through its servers as a result, users are inundated with
much smaller files, which allow for a more comprehensive and seamless
transmission however, this design does not detract from the illegality
innate in all file-sharing programs. Typically, a Bit Torrent website will
contain a series of servers that houses the intellectual property through

66
Internet Theft: How It Happens and Why It Matters, Directorate Guild of America, available at
https://www.dga.org/Craft/DGAQ/All-Articles/0903-Fall-2009/Piracy-Internet-Theft.aspx
(Last accessed on October 15, 2018).
67
The online piracy landscape, FACT, available at https://www.fact-uk.org.uk/the-problem/digital-
online-crime/online-piracy/ (Last accessed on October 20, 2018).
68
Ibid.
57 | P a g e
 which is being circulated throughout the Bit Torrent website membership
to Bit Torrent websites ranging from those offered without a charge to
those that require membership fees are able to download and upload
digital media belonging to the members of that particular Bit Torrent
website.69

2.11 Effects of online piracy on the stakeholders

Online Piracy affects copyright owners, government and the economy. It
dampens the economy in multidimensional ways. Below the effects of
online piracy are discussed:

1. Deters content creators from investing in new content - Online Piracy

deters the content creative people who lose interest in the creation and
investment of new content. “The negative impact that piracy has on the
content creation industry extends much further than the lost revenue,”
says Lawrence Low, Vice President of business development and sales
at Irdeto. Piracy deters content creators from investing in new content,
impacting the creative process and providing consumers with less choice.
It is becoming increasingly important for operators and movie studios to
educate consumers on the tactics employed by pirates and to further
promote innovative offerings that allow consumers to legally acquire
content.70
2. Lost tax revenues from these sales would have gone to benefit local
governments and communities- Except in the case where pirated items
are sold through retail channels and taxed, tax revenue is not generated
from pirated items. For example, when music is downloaded with no tax
charged when it is supposed to be, as dictated by tax laws, that revenue

69
Supra note 67.
70
Many consumers don’t care about the impact of piracy, Beta News, available at
https://betanews.com/2017/01/18/consumer-impact-piracy (Last accessed on June 24, 2019).
58 | P a g e
 is lost as well. Lost tax revenue reduces funds available by the taxing
government to spend.71
3. Loss of Production time- Pirated software is not as well supported as
legitimately acquired software. Any organization using this kind of
software is vulnerable to malfunction and that could lead to lost
production time. Creative people who depend on this money to make a
living could suffer economically due to piracy.
4. Employment losses due to piracy - According to a recently published
report by Organisation for Economic Co-operation and Development
(OECD) and European Union Intellectual Property Office (EUIPO), the
total employment losses globally due to piracy and counterfeiting is
expected to rise to 4.2 to 5.4 million jobs in 2022 which stood at 2 to 2.6
million jobs in 2013 witnessing a staggering increase of 110%. Besides,
the total economic and social costs are expected to rise to $1.54 to $1.87
trillion by 2022 which was $737 to $898 billion in 2013 due to
counterfeiting. At MASCRADE (Movement Against Smuggling and
Counterfeit Trade) 2017, a FICCI-KPMG report namely Illicit Trade:
Fuelling Terror Financing and Organised Crime, which is a product of a
FICCI initiative was launched to help improve the understanding the
relationship between illicit trade, organised crime and terror financing.72
5. Affects Legal Streaming Service- Streaming media is video or audio
content sent in compressed form over the Internet and played
immediately, rather than being saved to the hard drive. With streaming
media, a user does not have to wait to download a file to play it. Because
the media is sent in a continuous stream of data it can play as it arrives.
Users can pause, rewind or fast-forward, just as they could with a

71
What Is the Effect of Piracy on a Business? available at https://smallbusiness.chron.com/effect-
piracy-business-24541.html. (Last accessed on April 20, 2019).
72
A Worldwide Loss of Around 5M jobs Due to Counterfeiting, Piracy, Holostik, available at
https://holostik.com/newsroom/worldwide-loss-around-5m-jobs-due-to-counterfeiting-piracy.(Last
accessed on September 2, 2018).
59 | P a g e
 downloaded file, unless the content is being streamed live. 73 Netflix,
Amazon Prime, Hulu, hbonow are some of the examples of legal
streaming services. Most people know that online piracy takes a heavy
toll on content creators. For example, streaming services, which includes
services such as Netflix and Amazon, are projected to lose around $52
billion in lost subscription and ad revenue to piracy between 2016 and
2022, the  revenue that streaming services cannot pay content creators in
royalties.74 Hence we can say that Piracy affects legal streaming services.
6. Possess threat to Cyber Security – In today’s digital era, cyber security
is very important. Cyber security basically refers to set of technologies
that protect network from digital attacks. A new report by Digital
Citizens Alliance (DCA), an organization focused on internet safety, has
found that many of those involved in illegal content piracy have been
embedding malware in the piracy apps used with streaming media boxes.
Streaming media boxes such as Amazon Fire TV Stick, Apple TV, and
Roku allow consumers to stream movies, TV, and music. Many of these
devices are legal and use licensed content. However, some criminal
groups resell these legitimate devices or their own custom devices
running the open-source Kodi software, preloaded with piracy apps for
$75 to $100 on both the so-called “Dark Web”, hidden sites of the
Internet used to conduct illicit activity and legitimate venues such as
Craigslist, ebay, and Facebook Marketplace. Once consumers
unwittingly purchase a pre-loaded streaming media box, malicious actors
use the malware to facilitate a range of unwanted actions, from cyber-
attacks to unauthorized crypto currency mining to theft of user data. For
example, DCA found evidence of malware in a piracy app forwarding a

73
Streaming Media, What is Tech Target, available at
https://whatis.techtarget.com/definition/streaming-media (Last accessed on September 2, 2018).
74
Both Consumers and Content Creators Lose with Piracy Apps, Innovation Files, available at
https://medium.com/@ITIF/both-consumers-and-content-creators-lose-with-piracy-apps-b8ad6a0dcfca.
(Last accessed on November 1, 2018).

60 | P a g e
 user’s Wi-Fi network name and password to a foreign server. Bad actors
have also used malware in piracy apps to launch distributed denial-of-
service attacks (DDOS), which are cyber-attacks that use groups of
computers to overwhelm an online service with Internet traffic. For
example, the developer of the popular Kodi add-on Exodus, which
provides users, pirated content, inserted malicious code into the software
that allowed the developer to use infected devices to perform DDOS
attacks against groups that threatened to expose his identity. Similarly,
some bad actors have inserted code to use consumers’ devices to mine
crypto currency, which requires large amounts of computing power.
Infected devices run slower and use more electricity, while the developer
gets paid for the unauthorized crypto currency mining.75
7. Social impact due to piracy–It has been observed that the societal
impacts because of piracy are very high and it is leading to erosion of
morality in the country. It is affecting children and teenagers to a great
extent. When the youth are not engaged in productive activities, they tend
towards certain illegal activities which results in increasing transnational
crime, corruption and eventually increase in terrorism. Since pre-teen and
teenagers are in constant search for entertainment, they often source
content from pirate sites and are exposed to malware, remote access
trojans, pornography, gambling and adult dating. This group of pre-teen
and teenagers is most vulnerable to hackers that gain access to
compromising information and, in turn, blackmail their targets.
Regarding pornography, industry experts and bodies, such as the
Australian Digital Alliance, believe that pirate sites provide pre-teens and
teens with their first window to pornographic content. Pre-teen and teen
online porn addiction are a topic that has been garnering much academic
and government concern across Europe and the Asia Pacific region.
According to a survey by NSPCC childline in the UK, one in ten

75
Supra note 73.
61 | P a g e
 teenagers aged 12-13 years old were worried that they had become
addicted to online porn. This issue is gaining traction and several research
papers have been instituted to study the impact further. It further stated
that 782 high risk advertisements were found on 835 pirated sites, which
include advertisements involving malware, pornography, adult dating,
gambling, multi-level marketing and unregulated products. 50% of the
HRAs were detected on ‘Video streaming sites’ followed by 32% on
‘Linking sites. The total number of page views of these sites was
approximately 115 million per day.76
8. Reduction in CSR money– Online Piracy eventually results in a
reduction of CSR money. It is observed that much of the online piracy
operates in an unorganised sector. Also, such piracy is a huge loss on the
economy. It eats into what would be CSR money. Many of these CSR
projects focus on improving the quality of life which in turns promotes a
healthier workforce.
9. Destabilises the legal industry - In any country online piracy and
increase of such crimes will undermine the rule of law and the legitimate
market economy, creating greater insecurity and instability around the
world. It is very important for the development of science, culture and
arts in the society that a secure environment is created. The rights of the
creative people in the society should be protected and a conducive
creative environment should be created. Hence the legal environment in
country should be stable and should effectively protect the interests of
the right holders.
10. Companies forced to lay off– Increase in piracy will result in loss of
profits and as a result of which less income into the people involved in
making of films and music. There is a general perception that piracy does

76
Badvertising: When ADS GO Rogue, FICCI, SIPI & VERI-SITE, Building Respect for Intellectual
Property Database (2017).
62 | P a g e
 not erode any one’s income, but the truth is that it adversely affects the
content production companies which could be forced to lay off its staff.
11. Entertainment Industry — Movie making is a task which involves a lot
of money. If the investors do not earn profits and are unable to recover
the cost because of more and more piracy the movie making will be
affected tremendously. It will become a very risky venture and as a result
of it fewer movies will be made if piracy continues to rob those who
invest in making movies.
12. Economic Impact — The movie industry is an economic engine that
creates and provides jobs and contributes to the economies of countries
that produce movies. Piracy hurts economies everywhere movies are
sold, displayed or broadcast. Some countries have already experienced
the complete slowdown of their own movie industry due to piracy.
Camcorder piracy can drive out legitimate jobs of theatre owners, video
stores, and their employees. Profits from this illicit activity often end up
in the hands of members of organized criminal networks, gangs, and
worse.
13. Consumers— In order that the consumers continue to experience a large
variety of high-quality movies, piracy must be controlled. The
entertainment industry recognizes the potential of technology to deliver
content in new and exciting ways. However, the looming threat of piracy
can thwart technological innovation. If fewer movies are created as a
result of piracy, the consumers will be badly affected. For a country like
India, movies and music are a major source of entertainment for the
people. Hence piracy will have detrimental effect on the consumers.

2.12 Entertainment industry in India

2.12.1 The Indian Film Industry: Introduction

The Indian Films are a major source of entertainment in India. The Indian
film industry, famously known as Bollywood, is the largest in the world, and

63 | P a g e
 has major film studios in Mumbai, Calcutta, Chennai, Bangalore
and Hyderabad. For nearly 50 years, the Indian cinema has been the central
form of entertainment in India.77

The Indian film industry is the largest in the world in terms of number of
films produced with around 1,500 to 2,000 films produced every year in more
than 20 languages. It is dominated by Bollywood, the Hindi film industry,
contributing 43% of the revenue while regional and international films
contribute the remaining 50% and 7% respectively. Within the regional film
industry, Tamil and Telugu are the largest segments comprising
approximately 36% of net box office revenues followed by Bengali,
Kannada, and Malayalam films.

Currently, international films are a small, but growing segment, driven by

rising numbers of English and other foreign language speakers, as well as
rising numbers of international movies witnessing dubbed releases across the
country. Despite the large number of films and theatre admissions, the
industry continues to remain small with respect to other global industries in
terms of revenue. In India, the film industries gross realization stands at $2.1
billion versus gross realization of $11 billion in the US and Canada which
produces significantly lower number of films (approximately 700 films). This
is mainly due to low ticket realizations and occupancy levels, lack of quality
content, and rampant piracy.78

2.12.2 Prospects and growth rate of the Indian Film Industry

The Indian film segment grew 27% in 2017 due to a combination of high
growth in overseas theatrical releases (particularly in China), growth in
satellite rights values and domestic box office collections. All sub-segments,
with the exception of home video grew and the film segment reached Rs 156

77
Indian Cinema, Cultural India, available at https://www.culturalindia.net/indian-cinema. (Last
accessed on November 15, 2018).
78
Indian film industry grew at 27% in 2017: FICCI, MoneyControl, available at
https://www.moneycontrol.com/news/trends/entertainment/indian-film-industry-grew-at-27-in-2017-
ficci-2520513.html (Last accessed on November 20, 2018).
64 | P a g e
 billion in 2017.At present, the film industry grosses a total revenue of Rs
13,800 crore ($2.1 billion), and it has grown at a CAGR of over 10% in the
last couple of years.

Going forward, the industry is expected to grow at 11.5% year-on year

reaching total gross realization of INR 238 billion ($3.7 billion) by 2020. The
key growth drivers are expansion of multiplexes in smaller cities,
investments by foreign studios in domestic and regional productions,
growing popularity of niche movies, and the emergence of digital and
ancillary revenue streams.79

The domestic box office contributes to most of the revenue, representing 74%
of the total industry. Cable and satellite rights and online digital aggregation
revenues are the fastest growing segments and are expected to grow at a
CAGR of about 15% over the period FY15 – FY20, driven by rising demand
for movies on TV and increasing smart phone penetration across the country
respectively. On the other hand, home videos have been shrinking due to
increasing piracy and growing popularity of digital platforms. Home video
has lost share to Video on Demand (VOD) through Direct-to-home (DTH)
operators and Over-the-top (OTT) platforms.80

The Federation of Indian Chambers of Commerce and Industry (FICCI)

released a media and entertainment industry report depicting a 9.1 % overall
growth in 2016 despite demonetization bringing a sudden shock at the end of
the year. The report was launched in Mumbai and has holistically captured a
comprehensive picture of India’s media industry growth, challenges, future
projections and the key underlying themes.

79
Indywood, The Indian Film Industry, Deloitte, available at
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/technology-media-
telecommunications/in-tmt-indywood-film-festival-noexp.pdf. (Last accessed on November 15, 2018).
80
Film industry in India to hit $3.7 billion by 2020, The Economic Times, Oct. 9, 2017,
economictimes.indiatimes.com/articleshow/60998458.cms. (Last accessed on November 10, 2018).
65 | P a g e
 The rural markets in the country are expected to contribute in all the key
segments while the changing paradigm of economics in the country and a
steady shift to digital mediums are expected to fuel a faster growth rate of 14
% over the period of 2017-21. As the digital media making its way to the
centre stage rapidly from being just an additional medium, it is compelling
existing players to rethink their business models. To accelerate growth, the
existing organisations must rebuild their strategies to fit and thrive in the
changing, digitally oriented landscape. Nimbleness and flexibility will be at
the core of sustainable businesses.81

Figure 1: Film Industry Revenues (INR billion)

Source: https://www.hlc-cultcritic.com/filmonomics-bollywood/ (Last accessed on October 2, 2018).

Figure 2: Category wise Break-up of revenue

Source: https://www.hlc-cultcritic.com/filmonomics-bollywood/ (Last accessed on October 2, 2018).

81
Sudipto Roy, Growth of the Indian film industry slowing down FICCI report elucidates the challenges
and prospects, Media India Group, https://mediaindia.eu/cinema/growth-of-the-indian-film-industry-
slowing-down. (Last accessed on March 20, 2018).
66 | P a g e
2.12.3 Challenges faced by Indian film industries

The Indian film Industry faces several challenges. Some of the major
challenges that it faces are highlighted below:

1. Low infrastructure penetration - While the Tier 1 cities and metros are
reaching saturation, the Tier 2 and Tier 3 areas lack the required
infrastructure such as malls, access to low-cost power, etc. This lack of
availability of exhibition infrastructure is a key impediment for the
growth of the sector. The addition of screens has not kept up with demand
with increments of only 150-200 new screens per year. Further, India is
severely behind the globe, in screen penetration with 6 per million, versus
23 per million in China and 126 per million in the US. Single screen
theatres have historically had low occupancy, low ticket realizations, and,
hence, low profitability. This has led to shut down of single screen
cinemas especially in small and rural towns which have experienced a
decline from approximately 10,000 screens in 2009 to 6,000 currently.
While multiplexes are being added in the Tier 2 and Tier 3 towns, the
pace of additions is one-third of the pace at which the single screen
theatres are shutting down. Without faster addition of screens, especially
in small towns and rural areas, the growth of the film industry will be
stunted. India needs to have at least 20,000 screens to fully realize the
potential of films produced in the country.82

2. Slow growth in average ticket price (ATP) - In India, the growth in ATP
has been slow rising from INR 150–160 in 2011 to INR 175–200 in 2015,
marking a CAGR of approximately 4%. This growth has been mainly
driven by increase in multiplex screens, priced at more than 100% to
single screens and rising number of 3D movies which continue to be
priced at a premium of 15-20% over regular movies. ATP also varies

82
Supra note 81.
67 | P a g e
 regionally; for example, Tier 1 cities command an ATP of approximately
INR 200 versus INR 160 and INR 100 in Tier 2 and Tier 3 cities.
Meanwhile, the ATP in the US and China are $8.4 (approximately INR
570) and $5.5 (approximately INR 385) respectively. In order to improve
performance of Indian cinemas, keeping in mind the average occupancy
rate of 35%, ATP will have to drive towards global rates.83

3. Complicated tax regime - Several levies, central as well as state, are

charged in the media and entertainment industry. These taxes are
increasingly being disputed with authorities. Complications in taxation in
the film industry have arisen due to interplay of multiple indirect taxes
and frequent changes in taxation law and judicial rulings. Further,
entertainment tax varies across states in India. Recently, some states have
granted exemption from entertainment tax for regional films to promote
the sector.84

4. Rising costs and lack of access to funding- The film sector in India
suffers from lack of access to funding across the value chain due to high
tax rates and complex taxation. Film production is facing severe shortage
of funds while costs are rising with only studios as a source of capital for
most films. The biggest cost inflation factor is employment of talent,
which can charge up to 40% of a film’s budget, the highest globally,
wherein the cost of talent does not exceed 15–20% of the film budget.
Costs must be controlled through lowering of talent costs (hiring of
younger stars and providing share of profits rather than upfront fee) and
efficient marketing strategies (move towards social and digital platforms
of marketing). While the bank support has been extended to films after
the industry status was accorded to the film sector in 2000, the stringent
norms for lending have resulted in difficulty in accessing capital.
Especially affected are the small players and independent filmmakers

83
Supra note 81.
84
Ibid.
68 | P a g e
 which typically do not get access to bank finance. Further, while several
film funds have been founded such as Third Eye, Cinema Capital Venture
Fund, VistaarReligare Film Fund, and Dar Capital, their success has been
intermittent. This is mainly as investments are made in smaller
productions which carry higher risk. With the growing focus on content,
improvement in scale, and corporatization of the industry, film funds to
investing in Indian content may gain prominence going forward. Several
single screens in India are severely dilapidated and in need of
maintenance. However, owing to low revenues and occupancy,
investments on renovation are not feasible. This has been witnessed in the
Bengali film industry which is suffering from lack of profitable and
sustainable exhibition infrastructure resulting in shut down of several
theatres. The conversion of single screen cinemas to multiplexes is
essential not only to increase the number of screens in India but also to
improve the profitability of the sector. This process of conversion has
been stalled by lack of cash flow and access to funds by the single screen
operators. 85

5. Piracy - Piracy has been eating into the revenues since home media was
invented. Started as bootlegged VHS tapes with hissy visuals and static
over the sound, now we can get crystal clear HD quality digital print
online just two days after the release of a movie or sometimes even before
the release of the movie. Though some indie filmmakers have debunked
the theory that piracy creates a big hole in the producer’s pocket, it still
remains one issue against which all the film industries of the world come
together to join forces. 86 Despite the ongoing digitization of the film
industry, piracy continues to be a key issue resulting in industry losses of
INR 190 billion a year. Over 150 sites thrive on piracy where content is

85
Supra note 81.
86
Swapnil Narendra, 8 Problems of Indian Cinema- According to the Author, Flimmakers Fan,
http://filmmakersfans.com/challenges-and-problems-indian-cinema (Last accessed on February 20,
2016).
69 | P a g e
 stolen from Indian movies; quick copies are made and distributed
globally. Nearly half of the 150 are from the US, followed by 11 from
Canada, 9 from Panama and 6 from Pakistan. The top 100 sites make INR
35 billion ($510 million) highlighting the extent of the issue. The problem
is exacerbated for regional films. For example, Baahubali, which had one
of the highest budgets in the film industry, was pirated on the day of its
release. About 1.6 million people downloaded the movie and another 1
million people watched it illegally through 1,500 links. Additionally, the
Telugu film industry lost about INR 3.6 billion in 2015 due to online
piracy through 18 million downloads or web streaming.87

6. Multiple layers of bureaucracy- There is no single window to provide all

clearances needed to shoot in India. Producers need to approach several
institutions to understand the required permissions. At times filmmakers
need to obtain over 70 permissions and licenses for a shoot in the country
without any pre-defined turnaround time. For example: Shooting of
foreign feature films in India requires the prior approval of the Ministry
of Information and Broadcasting (MIB) whereas in the case of a
documentary, approval of the Ministry of External Affairs (MEA) is
required. The script of the film must be approved by the MIB which is a
time-consuming process; the Ministry may also depute a liaison officer to
facilitate the shooting. Film makers require approvals from authorities in
specific locations prior to shooting. Filmmakers also need to adhere to
certain local laws of the region where shooting is to take place in India.
The regulators may be various Municipalities and Municipal
Corporations, associations of cinematographer, make-up, hairdresser,
etc., and state legislations. Often, foreign producers are faced with unclear
rules and regulations in terms of obtaining permissions making the
process inefficient and expensive. However, the Indian film sector, along

87
Supra note 86.
70 | P a g e
 with the Government of India and various state governments, is
revamping its approvals process as well as looking to incentivize local
film making through the establishment of an India Film Commissions and
the Film Facilitation Office. Both these initiatives have been recently
announced as part of the Make in India campaign in the film sector.88

7. Prevailing strict censorship norms- The censoring of films by the Central

Board of Film Certification (CBFC) prior to public screening in India is
mandatory for filmmakers as per the provisions of the Cinematograph
Act, 1952. In this process, films are viewed before public screening by
CBFC which in turn takes a decision of whether it should be screened
publicly as is, with restricted access, or with certain cuts and alterations.
This has been a major impediment for the Indian film industry not only
due to the extended time to monetization but also due to risk of reduction
of good content. As larger sections of the audience have become more
receptive to films which tackle serious issues, filmmakers have become
more experimental as they seek to make better content and progressive
films. However, constant battles for certification without edits with CBFC
are a dampener to the industry. For example, the CBFC demanded 89
edits in the movie, Udta Punjab, a film on the growing problem of drug
addiction in Punjab. Further, several Hollywood films releasing in India
are subject to edits prior to public screening. This leads to delays in public
viewing and often discourages viewers in watching the movies in a
cinema resulting in challenges to release Hollywood films in India. As a
key growth segment in the Indian film sector, Hollywood films should be
subject to minimal censorship and delays to capture the growing audience
and potential of this segment.89

88
Supra note 86.
89
ManojjitSaha, Indian film industry faces growth hurdles, The Hindu,
https://www.thehindu.com/business/indian-film-industry-faces-growth-hurdles/article19820369.ece.
(Last accessed on November 12, 2018).

71 | P a g e
8. Leakage of movies by Rival Publishing house - In India, where the
Bollywood has often put out the same old story about the evils of piracy,
and where the government recently ramped up criminal penalties for
recording or transmitting films and audio, one newspaper has comments
from within the industry that suggest much of the film piracy in
question is specifically enabled by rival publishing houses. According to
a Tamil cinema DVD seller, who spoke on the condition of anonymity,
piracy is mostly an inside job. The source explains that movie companies
are leaking each other’s films, as a competitive move. People from rival
production companies or those from the creative department secretly
release the movie online or circulate it as DVDs to hit the collection at the
box office.
9. Local Censor Board and distribution houses are Piracy Bandwagons–
According to Times of India reports another industry source have stated
that insiders in the censor board and distribution houses sell the copies for
up to 5 lakhs. Later, these copies are uploaded on private portals that have
dedicated passkeys. None of this specifically excuses downloading a film
illicitly, of course. However, it most certainly does call into question the
industry claims that piracy is by and large harming the wider film
industry. If that were true, then these industry insiders uploading cam-
footage and other films of recent releases would be committing self-
inflicted wounds. Doing so would make little sense, were the larger claims
of the industry true. Amazingly, this goes even further down the chain,
supposedly. These insiders work with theatre owners to get these
recordings, rather than movie-going citizens. When it comes to recording
video and audio at movie theatres, it is believed that some movie industry

72 | P a g e
 insiders work in tandem with theatre owners to leak high profile films. As
a result, some films appear online just hours after their official premiere.90

2.12.4 Understanding the film distribution process

Now a days, the film distribution has also become a task. Vidya Balan, a
popular actress had so rightly said in the movie ‘Dirty Picture’ that it is solely
because of one factor that a movie is declared a hit and that is –
‘Entertainment’. But, even the glitz and glamorous world of Bollywood must
go through a grinding process. Before a film is made, a lot of thought is put
into it, from the script to the actors to the postproduction; everything needs
to be taken care of. The whole process of filmmaking is tedious, but the world
after that is like the sun that makes the day beautiful. Film distribution is one
aspect of filmmaking where a film is made available to the audience. And
after a film is distributed, it finds its fate, which either makes it, a hit or a
flop. Moreover, there are several factors which can be considered from
making of a film to the actual distribution of it. These are elaborated below:

• Content is King-However, there is a formula for guaranteed success,

which lies in the hand of film distribution companies. They are the key
players when it comes to distributing films across various platforms.
There are various platforms where a movie is streamed, in theatres,
through DVDs and nowadays on the digital world. But, the success of a
film depends on content as nothing is bigger than that, not the stars, not
the locations, not even the director because content is king. If your content
is strong and has a wide appeal among the audience, then your film will
sail through smoothly, even when the tides are low.91

90
Timothy Geigner, Report: In Bollywood, Movie Piracy Is Largely Carried Out By Rival Publishing
Houses, TechDirt, https://www.techdirt.com/articles/20190313/10445741793/report-bollywood-movie-
piracy-is-largely-carried-out-rival-publishing-houses.shtml. (Last accessed on October 20, 2018).
91
How the process of film distribution is evolving digitally? Ultra-India, available at
http://www.ultraindia.com/blog/film-distribution-process-evolving-digitally (Last accessed on
November 10, 2018).
73 | P a g e
 • New-age promotion-Promotion of a film also plays a major role in
deciding the destiny of a film. With the emergence of social media, actors
and directors aren’t ashamed or vulnerable to share with the audience
some amazing moments of their shoot. If the social media post of an
actor’s page is more engaging than there are more chances of the movie
drawing a good audience. Therefore, now a day’s every step of an actor
on a social media platform count. At times, it can even get a backlash
from an audience.92
• Transformation in the distribution process due to Digital World-Now a
day, the film distribution has undergone several changes because of the
digital platform. Film distributors are seeing a lot of potential in the digital
world as the viewership is much larger compared to theatres. There are
independent film directors, who are willing to explore the digital world as
they believe the online platform is made to capture the world. The era of
short films is trending nowadays and big stars from the film fraternity are
finding their ways into these films as they believe, the content is unique
and yet experimental. Distributors truly understand that Bollywood too is
going through a transition phase. Big banners too have realized the
importance of the digital world and its impact on consumers as well as
profits. Trailers, songs and best moments are being released online for the
first time. Old traditional methods of distributing a film is being ignored
by distributors and new and innovative methods are being adopted. Film
distribution is therefore a vital ingredient in the art of filmmaking. It is
because of a distributor; a film finds its true audience. Hence, film
distribution is a crucial part in the process of filmmaking.93

92
Supra note 91.
93
Ibid.
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2.12.5 Statistics of internet users
FICCI and EY study in March 2018 estimated that the film industry alone
loses $2.8 billion in revenue to online piracy.94 There are several factors
and statistics that tell us that there are bright chances that this problem
will magnify in the coming years if sufficient measures are not taken to
cub the menace by devising and adopting suitable measures.

As we all know, the number of internet users in rural as well as urban

India is steadily increasing and there are several statistics to substantiate
this fact. More and more internet users mean that the probability of the
crime of online piracy will also be on an increase only.

Below diagram shows the increase in the number of internet users over the
coming years.

Figure No. 3 Number of Internet users in India from 2015 to 2022 (in millions)

Source: https://www.statista.com/statistics/255146/number-of-internet-users-in India/ (Last accessed

on October 2, 2018).

94
Draft e-commerce policy wants body to find pirates, cut their revenue, The Economic Times, Feb 25,
2019, https://economictimes.indiatimes.com/industry/services/retail/draft-e-commerce-policy-wants-
body-to-find-pirates-cut-their-revenue/printarticle/68145384.cms. (Last accessed on October 15, 2019).
75 | P a g e
Figure No. 3 provides information on the number of internet users in India from
2015 to 2022. In 2017, India had 331.77 million internet users. This figure is
projected to grow to 511.89 million internet users in 2022.

Despite the untapped potential, India already is the second largest online market
worldwide. Many India’s internet users are mobile phone internet users, who
take advantage of cheap alternatives to expensive landline connections that
require desktop pcs and infrastructure. 95

In India, people that use smart phones is increasing day by day. There are
various statistics which substantiate this fact.

Figure No. 4 - Share of mobile phone users that use a smart phone in India from
2014 to 2019

Source: https://www.statista.com/statistics/330695/number-of- mobile- users with smart phone (Last

accessed on October 2, 2018)

Figure No. 4 provides information regarding the share of mobile phone users
that use a smart phone. The smart phone industry in India is a growing market

95
Sanika Dhiwanji, Number of internet users in India from 2015 to 2023 (in millions), Statista, available
at https://www.statista.com/statistics/255146/number-of-internet-users-in India. (Last accessed on
October 2, 2018).
76 | P a g e
with around 36 percent of all Indian mobile users expected to own a smart
phone by 2018.96

Figure no. 5 – Countries with the highest number of Internet users as of December
2017 (in millions)

Source: https://www.statista.com/statistics/262966/number-of-internet-users-in-selected-countries/
(Last accessed on October 2, 2018).

96
Supra note 95.
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Figure No. 5 shows the country wise bifurcation of the number of worldwide
internet users in selected countries as of December 2017. India ranks second
highest in the above given list of countries.97

2.12.6 Music Industry

Indian Music Industry was established on 28th February 1936 and it is the second
oldest music companies’ associations in the world engaged in defending,
preserving, developing the music and actively promoting by encouraging
advancement of creativity and culture though sound recordings. Indian Music
Industry members include major record companies like Saregama India Ltd.
(HMV) Tips, Venus, Universal Music (India), Cresendo, Virgin Records, Magna
Sound, Milestone, Times music and several other prominent national and
regional labels that represent over 75% of the output in legitimate recordings and
a wide range of musical repertoire.

Indian Music Industry has a rich musical tradition and is capable of generating
revenue for the country in every genre of the music Industry. There are lot of
loopholes in the industry due to unabated growth of piracy. Raids’ spanning the
length and breadth of the country, the Indian Music Industry has lost over Rs.
1800 crores in past 3 years. There are registered offices in Kolkata, Mumbai,
New Delhi, Chennai, Bangalore and several other cities, towns across India
focusing on surveillance, law enforcement and intelligence teams. Indian Music
Industry along with MTV launched the first music awards in India, THE
IMMIES which has been a huge success. The objectives of the award were to
reward music talent.98India is one of the world’s largest music markets. With 1.3

97
J. Clement, Countries with highest number of internet users available at
https://www.statista.com/statistics/262966/number-of-internet-users-in-selected-countries (Last
accessed on October 2, 2018).
98
Indian Music Industry, Indian Mirror, available at https://www.indianmirror.com/indian-
industries/music.html. (Last accessed on October 2, 2018).
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billion music lovers and strong economic growth, the value of music in India is
expected to double by 2020.99

2.12.7 Issues and challenges faced by the Indian Music Industry

When we talk about the issue of online piracy one should bear in mind that
it’s certainly not a straight road to walk and the issue faces numerous
challenges and is a complex phenomenon and requires understanding the
issue from different perspectives.

1. Digital piracy is a relatively new crime– The advancements in technology

have largely been made possible by the increasing sophistication of
hardware and software as well as a decrease in the cost of newer
technologies. Some years ago, creative works had to be delivered via
physical means such as through the use of CDs and cassettes but the cost
of making copies of them was relatively high. The introduction of copying
technology such as CD duplicators and software that could rip music from
the CDs made the process more efficient. It has evolved hugely in the last
three or four years as technology has developed, and the complexity of
these various cases means that they often take years to investigate and
come to court. That means that the issues about online piracy are only the
tip of the iceberg.100
2. Availability of software for converting music to different formats–Now
a day’s several software is available for converting music to different
formats and compressing it as well. The availability of multiple music
formats has led to an increase in piracy and made it harder to monitor
because of the fact that music can be compressed makes it easier to
transmit especially over the internet. The download time of such content
is much faster considering the availability of fast internet connections.

99
India: The sleeping giant of digital music is ready to wake up, Musically, available at
https://musically.com/2017/12/22/india-sleeping-giant-digital-music/ (Last accessed on October 2,
2018).
100
Cracking down on Digital Piracy Report 2017, Intellectual Property Office, Online Copyright
Infringement Tracker, (July 2017).
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 The fact that the files are smaller in size also means that more songs can
be stored in the high capacity storage devices.101
3. Dark Web and the Bitcoin Boom - More and more criminal gangs are
using the dark web that is hidden from the mainstream internet. Such a
platform is used to sell illicit information, such as the illegal software used
to modify streaming devices or the customer data they’ve acquired
through malware. Increasingly the criminal gangs are also using bit coin
to ensure any funds that come to them, for instance via subscriptions to
cyber lockers, which are untraceable.
4. Social media commerce replacing the pub or car boot sale - The
criminals selling illicit streaming devices are moving their business
online. Fewer and fewer are selling these goods through traditional
locations like pubs, markets and car boot sales. Instead, they’re
advertising their wares on social media platforms and e-commerce sites.
This helps them attract a potentially much wider audience and try to
remain anonymous and avoid capture.102
5. Stream Ripping of Music: Stream ripping of music is a major problem
faced by the Music Industry and it has become imperative to take steps to
curb this loss of revenue due to piracy. The Industry experts are optimistic
that music consumers in India will pay for content if they are sufficiently
incentivised, but clearly more needs to be done to facilitate this change.
The threat of digital piracy to a thriving music economy is obvious.
There’s a pressing need for effective anti-piracy policies and measures
with a focus on converting piracy users into legitimate music consumers.
More users in India use piracy to download music than in any other
country in the study. Stream-ripping is the most popular form of music
piracy in the country. The music industry in India has a potential of being
one of the biggest music markets in the world. However, it faces dire

101
Supra note 99.
102
Ibid.
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 issues of stream ripping which is one of the most common methods for
pirating music in India. As per the study, 72% of respondents use stream
ripping to obtain free downloads of music. YouTube is the main source
for stream ripping, typically through websites like Convert2mp3 and
Flvto.biz.103
6. Unwillingness to pay for genuine music: The biggest issue is the general
music consumer’s apparent unwillingness to pay for music. While India-
based streaming services may have amassed over 100m users the overall
conversion rate to paying is reckoned to be just 1%. The problem is with
the younger generation who have got used to the idea that music is free.
There is a massive retail business of pirated MP3s that are sold on SD
cards and side-loaded on to users’ mobile phones. This entire business of
selling pirated music to users is estimated to be a $1billion industry. And
then of course there’s YouTube.104
7. Sharing of content via Peer to peer networks- These P2P networks allow
digital content to be shared over the internet, but these networks are
abused and are a heaven for pirates of music. This piracy of music is hard
to stop because as soon as one illegal sharing service is shut down, another
is created .These networks created by consumers over the internet allow
them to share music at minimal cost leading the circulation of millions of
illegal copies of music around the globe. The process of gaining access to
these networks is also quite simple. All one must do is to download and
install a file sharing software on their computer and this software is
normally free. Once installed, the computer is linked to the peer to peer
networks and the user has access to any MP3 file on any other user’s
computer over the internet. The files on their computer can also be
accesses by all other users on the network.

103
Piracy & value gap – key challenges faced by the Indian music industry, Music Plus, available at
https://www.musicplus.in/piracy-challenges-faced-indian-music-industry (Last accessed on October 10,
2018).
104
Ibid.
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