I welcome Senator Kitt who is deputising for Senator Leyden. On behalf of members, I welcome the delegation from the piracy steering group: Mr. Jerry Flynn, chief executive officer of Sony Ireland; Mr. Martin Higgins, chief executive officer of Xtra-Vision International and vice-president of Blockbuster International; Mr. Tony Farrell, chief executive officer, Warner Ireland; Mr. Brian Finnegan, secretary general of the Irish National Federation Against Copyright Theft; Mr. Gerry Nagle, chief executive officer of Corporate Connections Limited; and Mr. Eamon Brady, director of Corporate Connections Limited. Before asking Mr. Nagle to commence his opening statement——
Copyright Theft: Presentation.
Mr. Gerry Nagle
Chairman, Mr. Flynn will make the opening statement.
I understand Mr. Flynn will make the opening statement.
Mr. Nagle
Mr. Flynn is chairman of our group.
That means he will make the submission.
Mr. Nagle
That is correct, Chairman.
Before asking Mr. Flynn to make the opening statement, I draw to the attention of the members of the delegation the fact that while members of this committee have absolute privilege, the same privilege does not extend to their good selves. Members are also reminded of the long-standing parliamentary practice to the effect that members should not comment on or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. I ask Mr. Flynn to begin. The opening submission normally takes about ten to 12 minutes, following which members ask questions of various members of the delegation.
Mr. Jerry Flynn
On a point of clarification, Chairman, I have been promoted somewhat. I am managing director of Sony Pictures Ireland.
I hope the money increased also.
Many people here think they have been promoted also. Mr. Flynn should not worry about that.
Mr. Flynn
This is the briefing document of the piracy steering group, home entertainment industry, to the Joint Oireachtas Committee on Enterprise and Small Business.
Do you have copies for the committee? Are they being circulated?
Mr. Flynn
Yes. Sixty-four per cent of the legitimate DVD business in Ireland is lost to piracy each year to the value of €115.2 million. That is a staggering figure when compared with the genuine market which is valued at €180 million. If this growth continues unabated, by the end of 2005 the industry will be dominated by pirates.
The fastest growing form of piracy in Ireland involves the distribution of optical discs, primarily DVD-Rs. It is estimated that over 90% of all pirate discs on the market are DVD-Rs. Pirates prefer this format because of the reduced risk of home burning compared with importing pressed discs. The films are downloaded from the Internet and burned onto DVD-Rs for sale via the Internet and in street and car boot markets.
Currently, INFACT is investigating 631 cases of Internet-based piracy in Ireland. Most titles are pre-theatrical releases and are on the market well in advance of their Irish premieres. The decline of the VHS market has afforded the pirates an opportunity to return to a more lucrative business as the public demands the latest technology in the entertainment market. This is evidence that DVDs are used as masses for DVD-Rs. While street and car boot markets are predominantly used for the distribution of pirated merchandise, an increasing amount of product is sold door to door and through advertisements in newspapers and other print media.
The scale of the counterfeiting crisis can be measured by the seizures made by the Garda in recent years. In 2001, it totalled €1.7 million; in 2002, €3.5 million; and in 2003, €8.3 million. Losses to the home entertainment sector amounted to €114.9 million. That does not include the cinema sector. Losses to the Exchequer in unpaid VAT amounted to €24.1 million and losses in unpaid income tax amounted to €16.1 million.
In addition to the losses to the Exchequer, many pirates are known to be in receipt of State aid. It is not uncommon that their vehicles are unregistered and untaxed and it is suspected that many engage in the counterfeiting of road tax and insurance discs. Based on intelligence and seizures, pirate earnings are estimated at approximately €49.9 million in 2004. This volume of illicit earnings is of great concern as it provides immense financial resources to reinvest in further criminal activities.
Of major concern to the industry is the amount of counterfeit goods reaching Ireland through the postal service. Approximately 90% of all counterfeit goods seized by Customs and Excise are intercepted in the post. The majority of such goods originate from China, Asia, the Far East and Turkey. Recent customs detections have intercepted large shipments of counterfeit goods en route through Ireland to the UK. These shipments were dispatched by and destined for known triad gangs between Asia and the UK.
Pirates attempt to convey the image of a Robin Hood while inflicting a serious blow to Irish industry, jobs and our economy. It is generally accepted, based on intelligence and information from multiple sources, that the major pirates have links to organised crime and the scope, expertise and money available to counterfeiters indicate an international crime affiliation.
The criminal elements who operate pirating and sales networks do so without suffering any apparent loss or penalty when apprehended. A recent survey of criminal cases visibly demonstrates that the penalty does not fit the crime. For example, in the Criminal Court in Dublin an offender convicted of having goods to the value of €418,000 received an 18-month suspended sentence. In the Circuit Criminal Court an offender convicted of having goods estimated in an impact statement to be to the value of €25,000 per week received a 12-month suspended sentence. It is evident that a major deterrent to the crisis that exists in the entertainment industry lies in the imposition of realistic penalties.
Section 140(3) of the Copyright and Related Acts 2000 states:
A person who—
(a) makes,
(b) sells, rents or lends, or offers or exposes for sale, rental or loan,
(c) imports into the State, or
(d) has in his or her possession, custody or control,
an article specifically designed or adapted for making copies of a work, knowing or having reason to believe that it has been or is to be used to make infringing copies, shall be guilty of an offence.
Section 140(7) states:
A person guilty of an offence under subsection ... (3) ... shall be liable—
(a) on summary conviction, to a fine not exceeding [€1,900 ] in respect of each infringing copy, article or device, or to imprisonment for a term not exceeding 12 months, or both, or
(b) on conviction on indictment, to a fine not exceeding [€127,000], or to [a term of] imprisonment ... not exceeding 5 years, or both.
It is evident from the above cases that section 140 of the Copyright and Related Rights Act 2000 is not being applied. Due to this non-application, the pirates and their criminal associates are operating with virtual impunity.
To ensure the viability of the home entertainment industry, the piracy steering group is seeking the enforcement of the existing legislation and the imposition of realistic penalties to combat a growing and lucrative cancer being perpetrated on the Irish people. The piracy steering group is grateful to this committee for granting it the opportunity to undertake this initial briefing.
The delegation has given us considerable food for thought. I note Deputy Hogan and Senator Hanafin are offering, but before I call them I wish to pose a number of questions. As someone who has been involved in this industry for 40 years, the most obvious question concerns the free CDs and DVDs given in the Sunday newspapers, a practice which is damaging family music shops throughout Ireland. How does the organisation view that practice? I will put my questions and then call on the delegation to reply to them.
I assume that the data the group supplied to the committee has been carefully researched by a reputable organisation. In the example Mr. Flynn gave concerning the Circuit Criminal Court involving goods to the value of €25,000 per week for which the offender received a 12-month suspended sentence, from his experience, does that sentence reflect a one-off ruling or the general rule of thumb?
Mr. Flynn
In terms of the DVDs given free with the newspapers, our company position is that we do not supply to newspapers. That practice is burgeoning. Obviously, there is an element to that practice which per se devalues a DVD if it is given for free. Such DVDs tend to be trailers or very old films. In many cases the copyright to them has been bought by independent individuals who may not have used them and they bring the products out of the archives when they see an opportunity to earn additional revenue from them. However, this is not a standard for industry, distributors or studios. If a CD or DVD is available for free, there is a perception that such availability reduces the value of the product. However, the general public can differentiate between a product that is very old or a compilation of trailers as opposed to new releases such as “Spider-Man”, “Shrek” or the Harry Potter series. The cost of making a movie averages approximately €108 million. In this context, secondary revenues are vital because 60% of films do not recoup the cost of making them at the box office. Therefore, the secondary revenue of home entertainment and television, terrestrial and satellite stations are vital revenue streams.
If an operator brings out a free Christmas compilation of well known Christmas songs such as Bing Crosby's "White Christmas" and Dolly Parton's Christmas song, that damages operators in the marketplace in that people probably buy one or two or even three CDs at Christmas. They will probably buy whatever is the popular Christmas CD to play in their cars or at home during the two weeks around Christmas, but they will not buy a second CD if they get one for free. Is Mr. Flynn's organisation concerned that this practice is leading to a considerable loss of revenue, particularly for shops that are long established, whose proprietors have not got into any difficulties with their shareholder in regard to trading and who have always paid their taxes? Does Mr. Flynn represent those people?
Mr. Flynn
No, I do not represent the music industry.
Does he not represent the CD industry?
Mr. Flynn
No, only the film industry.
We will have to bring in representatives from the CD industry to discuss this matter with them. My other point concerned the data to which Mr. Flynn referred.
Mr. Flynn
As regards the data, I will ask Mr. Finnegan, the director general of INFACT who compiles the data for us from the raids, to speak on this matter.
Mr. Brian Finnegan
INFACT is the enforcement arm in this regard. Essentially, those figures are reliable. We computed them based on many years of experience in fighting piracy. The calculations we use are based on seizures as the sampling method. It is not that difficult to extrapolate from them the levels of business in which the pirates are engaged. This data is backed up by qualitative research in the sense that the Garda conduct surveillance and we also conduct surveillance within the remit of the law. We have profiled most of the major pirates in the country at this stage. We know the frequency of their business. Pirates do not carry excess stock because of what they call "raid risk". Essentially, the figures are as accurate as anybody will get them.
Do they relate only to the Twenty-six Counties or all of Ireland?
Mr. Finnegan
They relate to the Twenty-six Counties. We do not have a remit in Northern Ireland.
The Six Counties are not included in those figures.
Mr. Finnegan
No.
Mr. Nagle
There is also an issue in this regard in Northern Ireland, but our remit relates to the Republic of Ireland.
I thank the groups for appearing before the committee. The figure that Mr. Flynn explained is the content of his loss of business through piracy is enormous. The committee is grateful for that information in the context of the considerable debate taking place on the various forms of criminality, of which this is one. It would be helpful if we could be supplied with more detailed backup information on the figure in order that we could justify it to Ministers and Ministers of State. In that way, if we were challenged on it, we would be able to substantiate it to the best of the organisation's ability and our ability to assist in doing something about it.
Mr. Flynn mentioned that INFACT is investigating 631 cases of Internet-based piracy in Ireland. What powers of investigation has his organisation? What does he mean by the word "investigating"? He might clarify what he must go through to do that.
Does a specific section of the Garda Síochána target this market? If so, we would be happy to hear whether additional resources or assistance are required by the Garda in terms of legislative change or additional Garda resources.
Mr. Flynn also mentioned that many pirates are known to be in receipt of State aid. To what type of State aid or grant assistance would they be normally be entitled? I would be interested to hear about that.
I take the point the Chairman made regarding the examples Mr. Flynn gave of suspended sentences that were handed down. In light of the figure mentioned in the first paragraph, why do such sentences continue to obtain in court procedures? Perhaps we may have a role to play in highlighting this matter for the Chief Justice or Ms Justice Denham, who is working on proposals for reform of the criminal justice and courts systems.
It was mentioned that the 2000 Act is not being applied. Why is that the case and what can we do to help bring about a realisation that it needs to be enforced to a greater extent than it is at present?
Mr. Flynn has been given quite a number of questions to answer.
Mr. Flynn
As Mr. Finnegan is our operations man in the field, I will ask him to answer.
Mr. Finnegan
With regard to powers, we are a private, non-profit-making company. We are affiliated to other organisations and are funded entirely by the film industry. Therefore, we have no powers per se as regards investigations. We are empowered under the Act, at the request of the Garda Síochána, to attend searches under a warrant granted by a District Court judge. Essentially, that is to assist gardaí in identifying pirate products from original ones in order that original products are not seized on the day. We do so approximately 155 times a year. We also attend court to give expert evidence at the request of the DPP.
In terms of actual powers, we have none. Such powers are all held by the Garda Síochána, which is the way we want it. We do not pretend to be policemen and do not want to be. We are not trained to be policemen. Essentially, what happens is that people in the trade or consumers contact my office frequently to complain about pirate goods they have bought. Sometimes the Office of the Director of Consumer Affairs contacts me. We then check it out, look at the disc that has been purchased and ask where it was purchased. We amass that information, approach the local Garda Síochána and make a formal complaint on behalf of the copyright holder. The Garda Síochána will then investigate and take action as it sees fit. We are careful not to pass on spurious claims to the Garda Síochána. We try to weed them out as best we can. Our reputation with the Garda Síochána is very good. In 15 years we have been involved in over 3,000 searches. Only on two of these was nothing found. Even the Garda Síochána is envious of that success rate.
Anti-piracy action is co-ordinated by the National Bureau of Criminal Investigation in Harcourt Square. That bureau will take on the more serious and expensive investigations. By and large, any other investigations are down to local gardaí showing their own initiative or acting on foot of complaints from the industry, local shops, consumers or ourselves. We have to fall in with that and are under strict control. We are polite on searches. We do not carry out the searches ourselves, we merely tell the Garda Síochána which product is wrong or genuine. It is as simple as that.
We frequently encounter defendants in court — I am not exaggerating here — who may be driving a 2004 registered €75,000 jeep, yet they apply for, and obtain, free legal aid.
We have been operating in this country for 25 years. Many years ago we gave up using civil suits because none of these people has assets that could be detected.
Would they be on social welfare?
Mr. Finnegan
Anecdotal evidence appears to suggest this. I have no access to social welfare records but on occasions when we have worked with the Revenue, that certainly came out. Evidence of this nature also comes out in court.
As regards suspended sentences, we cannot discuss individual cases in detail. However, even the suspended sentence in the case referred to earlier is being appealed. It is the modus operandi of these people — as is their right and I would not take it away from them — that even where fines are as low as €150 or €250, they tend to appeal the severity of the decision and quite often have it overturned.
In some cases of which I am aware, nearly one year's work has been undertaken on behalf of the MBCI and ourselves. Absolute fortunes were spent on surveillance, detection, searches and the preparation of books of evidence. Staggering sums of money have been involved. Some of the cases have been complicated and it is, at least, disheartening to see that. It does jaundice certain policemen who tend to ask why they should bother spending weeks investigating cases and spending a further six or seven weeks at a later date being involved in the appeal process when a fine of only €100 or 150 will be handed down. I assure the committee that it can be demoralising.
The Copyright Act is fantastic legislation and all credit is due to the Oireachtas and the officials concerned. It is hawked around Europe as the way to go in dealing with intellectual property. As regards the application of penalties contained in the legislation, there is a perception that we are dealing with Hollywood which, at the end of the day, has loads of money. Therefore, it does not really matter. Just to correct that, in terms of all media revenues, Ireland renders to Hollywood just over 1% of Hollywood's revenues. If the industry collapsed here, Hollywood would continue and would hardly feel it. It is, however, 100% of our business.
As regards sentences, it is really difficult to comment. Judges have different views. Some judges, even within piracy cases, are — I must be charitable here — inconsistent.
That is not unique to piracy.
Mr. Finnegan
One judge in the Central Criminal Court informed me that I had to appreciate that he had sentenced a rapist earlier that week and murderer the week before. He noted the section in the legislation and informed me that it is obviously one of the largest Acts ever passed by the Oireachtas. He also stated that our legislators take this issue extremely seriously but in the end he imposed a suspended sentence. I have no explanation for it.
Our guests' evidence to the committee this morning is that the law is not being enforced as rigidly as they would like it to be.
Mr. Nagle
That is correct. One must take into account the point of view of the gangs involved in this business. If they are caught with a slab of cocaine they could be sent down for years. That is rigidly enforced by the Judiciary but a 40 ft. container of DVDs is far more valuable, yet they are going into court and getting off with suspended sentences.
It is far less devastating socially.
Mr. Nagle
Correct. I agree.
Surely Mr. Nagle is not equating one with the other.
Mr. Nagle
However, it is also devastating economically. As a nation, Ireland is the biggest exporter of software in the world. If that virus starts to spread into our basic manufacturing base——
You cannot possibly——
Remarks should be addressed through the Chair. I must inform Mr. Nagle that is why Governments of all political parties spent so much time on the Copyright Act. Intellectual property is so precious to people in Ireland because, as he has said, this country is the number one manufacturer of software. The Copyright Act is viewed internationally as the definitive piece of legislation which many other EU members states and America have tried to emulate. It is of enormous importance to us as a nation. The committee wants to do everything it can to see that penalties are imposed to protect the copyright or intellectual property of the creator or owners, which you and the various international companies and organisations are representing. As the conduit from the industry to the Department and the Minister concerned, the evidence coming before us this morning is alarming. Deputy Martin Brady made the request to the committee, although he has not, as yet, been able to attend this. Before we go any further I would like members to note the contents of a letter dated 11 March 2005 from Mr. Séan Murtagh, head of anti-piracy operations at IRMA. The committee will later make a decision on how it will move forward from here on in.
I am glad to see the sentences "In addition to the losses to the Exchequer, many pirates are known to be in reciept of State aid" and "It is not uncommon that their vehicles are unregistered" have been clarified. That clarification was vital given that there is no grant aid available from FÁS, the Leader programme or enterprise boards.
We are trying to stop a flood tide. Is there not an onus on the industry to look again at its business and to release the DVDs into the public domain when the public want them which is often the time at which they are released to the cinemas? While that may result in cinemas not generating as much revenue, it would do away with piracy. Hollywood also has a responsibility in this regard.
My point is similar to that made by Senator Hanafin. We are speaking about a distortion of the industry's market — I agree that as a consumer it is also my market — and the industry's wish to have in place increased regulation. I am unable to read from the name plate for which company Mr. Higgins works. However, I note Mr. Flynn works for Sony Ireland and that Mr. Tony Farrell works for Warner Ireland. The entertainment industry is involved in cutting edge technology, research and development. Surely then it is the industry's responsibility to protect itself.
Many people have taped CDs for personal use such as in their car. I am sure that is not the type of piracy about which we are speaking. Nevertheless, the industry is requesting that a designated group of State agencies, whether it includes the Garda Síochána, Revenue Commissioners, Customs and Excise and so on, police the industry. However, were the industry to invest enough money in research and development, it could solve the problem overnight. It is all about controlling the market. The controls being exercised by the market seek to increase revenue from a particular product. If making movies becomes extremely costly, the industry may have to be a little more discerning about the types of movies it makes.
While I am sure Sony and Warner are not the only companies that engage in this type of technology perhaps it is in this area we should be looking. No one is suggesting we should allow the market to become flooded with pirate DVDs and so on. While the loss of revenue is a major problem, regulation of the industry is not entirely a matter for the State. Perhaps, as suggested by Senator Hanafin, the early release of DVDs would help to address the problem. The cost of DVDs is also a significant issue.
Mr. Flynn
I take the point that this is an issue for the industry. I agree it should be a given that penalties as provided for in legislation are imposed. However, that is not happening. The point relating to the industry's responsibilities is correct. The industry is, in terms of copy protection, in the process of implementing a new system entitled Arcos to take over from the current system, Macrovision. We have spent significant money on that development. In Ireland, we have spent more than €1 million on high speculation holograms, copy protection measures, enforcement by INFACT and lobbying on the encryption. The problem is — this also happens with credit cards — the decryptor is always ahead of us. We spent £6 million on this in the UK and I am not sure how many million worldwide. Money is being spent but, unfortunately, the decryptors are almost always ahead of us. As technology advances in the area of digitalisation, we may be able to put in place better preventative measures. It is not for the want of throwing resources at this problem that it continues to exist. We are genuinely investing significant resources in the area.
The point about windows is also a valid one. It is an issue which evolved around the time videos were introduced. There was a genuine fear within the film industry that video would erode cinemas. Nobody wishes to decimate any particular industry but technology by its nature does. It is correct that there was in place a window system to protect this area. While the introduction of videos was not initially aimed at generating greater revenues, the reality is, as was pointed out, that through various windows the pie has grown. That window system has been reviewed and windows have been drastically reduced during the past two or three years. It is an area which is constantly revisited. Countries such as France and others are prevented by way of legislation from interfering with windows. I agree with the remarks on copy encryption.
I do not accept that DVDs are too costly given they are one of the few commodities which have reduced in price since the introduction of the euro. It is a highly competitive marketplace and one of the most competitive in existence. One can now buy three DVDs for €30 or two for €25. On release, a DVD is set at a particular price and it then reduces.
That is not competition. There is no competition if every shop is selling three DVDs for €30. The market is only competitive if I can purchase in a particular shop three DVDs for €20 which cost €30 in another shop.
Mr. Flynn
The market is genuinely very competitive.
I have purchased all the Disney movies, of which there has been a flood recently given the re-release of older ones. There is no competition in the market because they are all sold at the same price. The price is often determined by when they are released and for what occasion. The price may be reduced some six months later but as far as I am aware — I may be wrong — there is no competition in this area.
Mr. Flynn
I am afraid the Deputy is wrong. While I cannot speak for specific studios the revenues and price——
If the multiples have reduced the price of the industry's products, will they be reduced by the major players?
Mr. Flynn
I am sorry, I do not understand the Chairman's question.
I am speaking about the Tesco experience in Ireland. Tesco is forcing stores to reduce the price of their products. Will the major players also reduce their prices to allow those selling the products to make a profit?
Mr. Flynn
I cannot speak on behalf of other studios in terms of their pricing policies.
What is Sony's position?
Mr. Flynn
Sony bases its pricing model on its product costs and the return decided by its economic structure. It is not dictated by any multiple or individual store. The price is based on the revenues required to make the cost of making the movie viable.
The level of piracy in operation is astonishing. Is it hard for the Garda Síochána to detect piracy? Is it equipped to determine pirate material? There is always a question mark hanging over video and DVD materials being sold at the Ballinasloe market during the October fair.
I welcome the delegation and apologise for my late attendance which was due to heavy traffic. We are all in agreement that the situation is serious. Piracy undermines new productions and affects jobs.
We are very much in favour of the piracy steering group's campaign. There is no point in people buying cheap copies because the quality is not good. The question that concerns us is how to stamp out the practice. Films should be released on the Irish market at the same time as they are released internationally. Why are films held back and not released here? If they were released here and internationally at the one time, this would prevent the buying of films on the black market earlier which deprives cinemas as well as producers.
There is significant growth in the number of CDs being given away by the newspaper industry. People now buy a newspaper for the free CD rather than for the content of the newspaper. When Ireland on Sunday started this practice it was criticised by everyone but then Independent News and Media decided it was a great idea. Everyone is doing it now and CDs are being thrown at people from all sides, which has downgraded respect for CDs. Has the steering group checked that all these give-away CDs are covered by copyright and that the copyright fees have been paid to the producers, owners, singers, songwriters, etc.? There is so much stuff coming on the market that I wonder whether it is possible to man this area. Some of these CDs are fantastic productions and, like many others, I have some of them in my car. At Christmas, in particular, there seemed to be a new one every day. I wonder whether the Bing Crosby industry has retained its rights. Perhaps our Chairman would know more about that.
I notice the group has pulled back on its television advertising. The advertisement which showed a man buying a copy product in a market and returning with it to be told by the trader that he knew nothing about it was effective and provided people with a contact number. The advertisement is still shown in cinemas but it is no longer on local radio and television. There should be a finders fee for people who come forward with information relating to pirate activity.
I was in the HMV store on Grafton Street looking for Lee Hazlewood and Nancy Sinatra CDs. I know my daughter could find this music on the Internet and download it. I listened to it on the computer but did not download it. However, when I went to HMV they were not available and the store must send away for them. The piracy group should be aware of market demands. For example, much of the music of Thomas Hampson, a well known American baritone, which sells well could be rerecorded and sold. I looked at the available list of his music in HMV and noticed that much of his work is not available. I also noticed that the cost of buying legitimate recordings is prohibitive. I found the costs outrageous. Instead of a €10 level for most recording artists, many of the CDs cost €21 which is somewhat high. The industry is killing the golden goose and should be more competitive with the price of the genuine article. High costs lead to the growth in bootlegging.
I found the amount of bootleg products available in Spain unbelievable. People from every part of the world sell bootleg products there door to door and in cafes, restaurants and bars. I am sure the steering group is aware of this. I do not see this so much here and have not seen these products being sold door to door in my area. However, as my colleague said, they may be on sale at fairs. There should be a clampdown on their sale. Anybody selling them should be raided and prosecuted. This would bring an end to the operation.
Mr. Flynn
Mr. Finnegan will deal with the Garda issue. Senator Leyden raised the music issue. However, I cannot comment on that because we do not represent the music industry, just the film industry.
Am I correct in stating that we should invite Mr. Sheehan to come before us to discuss that matter?
Mr. Flynn
The Chairman is correct. Before passing to Mr. Finnegan, the Senator also mentioned the markets. The Sunday markets are an issue of concern. Door to door selling happens here and selling within companies is also a concern. Pirated material and available lists of DVDs are passed around within companies.
The music from those films is reproduced and sold on CDs. Sony Ireland owns the rights to numerous songs and scores.
Mr. Flynn
It does but that is not my area. I am the managing director of Sony Pictures Home Entertainment, Ireland.
Does Mr. Flynn not worry about that side of it?
Mr. Flynn
I do but I cannot speak on its behalf. I take the Senator's point.
I assure the Senator there is a distinct difference.
Mr. Finnegan
Please excuse my voice, but I have the flu. I just want to reply to the question on the training of gardaí. Gardaí are trained in basic copyright law. We spoke to them many years ago in Templemore and copyright and piracy form part of their training. The issue is also dealt with when gardaí are promoted and must complete detective courses, retraining, etc.
Somebody asked what we are doing about piracy. I do not know of any other industry that has done more to defeat it and we have spent billions trying to defeat it. Encryption has been suggested but if the pirates can crack the Blowfish code — two years ago if people even knew about it, the FBI would arrest them — they can crack anything.
We are producing information booklets on piracy. We are getting into bed with other industries with a view to running seminars and education programmes, not only for gardaí but also for customs and for the Revenue Commissioners if we can attract their interest. We intend to roll out this education programme into schools and colleges in order to educate the next generation.
I asked about the advertising campaign.
Mr. Flynn
The Senator is correct that we have cinema advertising. We are about to roll out another public awareness campaign. It is important to provide funds for that and get it rolling again as quickly as possible.
It should be updated.
Mr. Flynn
Yes, that is our intention.
What about the earlier release of films on the Irish market? Why is there a delay?
Mr. Flynn
I dealt with that issue earlier. This goes back to when cinema and video first emerged. In recent years, windows have been shortened significantly. This decision is being examined globally by all studios and is being addressed.
Mr. Martin Higgins
I will just speak on behalf of the retailers and Xtra-Vision. Anecdotally, I can describe what is happening in the real world. The market is competitive on pricing. For example, "The Incredibles" will be released this week on DVD. I am sorry Deputy Lynch has left but if she compared pricing on this across the country, she would see a competitive set of dynamics. People in the industry understand it is competitive on prices.
With regard to what is happening on the ground, Xtra-Vision is owned by an American multinational blockbuster which, for six to seven years, has invested in its territory here through repositioning real estate and growing the category of entertainment within our stores. The company is very concerned at the level of piracy and the apparent inaction in terms of penalties. It is not so much that there is a lack of willingness on the part of State agencies to tackle the problem and bring people to court but that there is, despite the legislation, a lack of serious deterrent. What comes under review with regard to the company is the level of investment that comes into the territory consequently to continue to open and reinvest in the business.
We are also significant investors in the Irish film industry and invest at script stage in many Irish produced movies. We, therefore, give quite a lot back and bring forward much Irish film which is often uneconomic and risky. The point was made earlier that this is an art form business. Studios and people who invest in movies do not start out intending to invest their money to make bad movies. Money is made on some movies and lost on others. That is what drives the economics.
We have 200 stores throughout the country, North and South, and approximately 1,650 employees. I could give the committee anecdotal evidence relating to pirates setting up outside individual stores. I refer, for example, to our stores in the Market Square in Ennis and in Waterford city. The people to whom I refer set up outside and advise the customers coming into the stores that they can supply the product at €5 and question why our customer should pay us €12.50 or €15. These people pay no rents, PRSI, rates or VAT in their price make-up. It is, therefore, not a level playing field and that is a core issue which is damaging the industry. Xtra-Vision is happy to compete on a level playing pitch with anybody but this is not a level playing pitch.
To return to the point about windows, they are using products to which we, as retailers, do not have access. Not only are they not paying their due fees, they are bringing products to the market two or three months before we can make them available to the consumer. This is a structural industry issue. From a retail perspective, these are the factors affecting jobs and investment in the category.
Why do our guests not ring the Garda Síochána?
Mr. Higgins
In many cases, the Garda is more than willing to become involved. The point was made by my colleague, Mr. Finnegan, that in many instances the Garda authorities are disheartened by the amount of resources required to put these people before the courts, particularly as the courts let them off with summary convictions. The Garda is busy dealing with serious crime.
The Chairman asked the reason for the failure to enforce the Act. In my view, it is because piracy is, to a large extent, regarded as a victimless crime in which nobody is perceived to be injured. It is not a case of somebody being murdered, nor is it drug-related crime as mentioned by another member. There is a significant lack of awareness among members of the Judiciary regarding the damage being caused——
Has the delegation any examples from Europe?
Mr. Higgins
In what terms?
I understand piracy is a serious offence in Scotland. The delegation could call on the committee to emulate the Scottish example.
Mr. Flynn
I will defer to Mr. Finnegan on this point.
Mr. Finnegan
There is an integrated approach in Holland. All the agencies in that country have been brought together and they pursue piracy.
Will the delegation make a copy available to the committee of the information from their counterparts in Holland? I thank Mr. Higgins for giving the committee an overview. I invite Mr. Farrell to make his contribution.
Mr. Tony Farrell
We may not have concluded one point under discussion, namely, how to distinguish between real and pirated products. The industry in this country is licensed. We have 1,400 retailers who pay annually to renew a licence to enable them rent or sell DVD and VHS filmed products. In the case of somebody at an enclosed or open air market, my understanding is that they are equally legally obliged to display a current licence at all times to alert the consumer to the fact that they are an authentic business. From a local perspective, it is easy to alert those frequenting the markets to which I refer that if there is no licence on display, they should not purchase anything. I am not saying that all marketplaces do not have licences——
I suggest that could be put into the advertising campaign, that people should only buy from licensed operators.
Mr. Farrell
We checked this morning and established for accuracy that there are 1,400 licensed retailers. This is a vast number for the size of the country. This includes some wholesalers, which is a point well worth making.
I will make one further point about thewindow system. We all know that the business in Hollywood tends to release in the US first and then scale out to the territories. There has been an implementation in recent times of what is called the rental right directive on the part of all studios which has taken the system from cinema to rental to retail and changed instead straight from cinema to retail. There used to be a six-month window between cinema and rental, followed by six months before the product could be purchased. We have now combined the rental and retail date to effectively halve the window from theatrical or cinema release into purchase at home video level. In the case of Warner, certain products — the most recent example being the Harry Potter franchise, obviously because of its British nature — were recently released in the UK and Ireland on or before of the US dates. This is Warner's practice, where applicable.
Mr. Nagle
I thank the Chairman and members of the committee for giving us a hearing on the subject of this serious issue for the industry. We will supply the additional data requested.
On behalf of the committee, I thank the delegation for attending and providing an informative briefing on the industry.
I will be proposing to the committee that the Minister for Justice, Equality and Law Reform be invited to appear before it at a suitable date within the next month or two. The committee will then highlight the issues the delegation has raised. The committee will also consider the serious situation whereby the law does not seem to be applied in the spirit in which it was drafted by the legislators. The committee would be pleased to study the regulations pertaining in Holland if the delegation forwards them to it.
I look forward to working with the delegation over the remaining lifetime of this Government — two to two and a half years — in an effort to address the problems highlighted this morning. I fully understand those problems as I have a vested interest, having been in this industry for many years. It is an important industry which generates a great deal of employment. Ireland is regarded as being a safe pair of hands in respect of copyright legislation and the protection of intellectual property rights. The committee will convey the examples cited by the delegation to the office of the Minister for Justice, Equality and Law Reform.
The joint committee adjourned at 12.38 p.m. sine die.