By refusing to adapt to technological developments, the film industry is depriving itself of revenues from legal sale of videos, rental and merchandising.

THE ENTERTAINMENT industry in India is finding it difficult to keep pace with rapidly evolving digital technologies that challenge existing laws on intellectual property rights and business models.

Globally, technology continues to evolve making it possible for individual users to record, duplicate and transmit films or music in digital form with ease and without loss of quality. The piracy of creative works by organised groups spawned by such advances is a universal concern. It has pitted producers of films, music and broadcast programming against consumers and rights advocates who fear that industry lobbying is leading to unfair copyright protection loaded in the producer's favour. Consumers fear that they may be forced to give up their freedom to use the music, films, and software that they have paid for, in a fair manner.

There is a consensus on the need for reasonable protection of copyright, but differences have sharpened over the level of safeguards. While these debates go on, file-sharing using the peer-to-peer (P2P) model on the Internet has opened up a new area of confrontation between music lovers and film buffs, and the respective industries. Using a particular P2P service enables unfettered sharing among members.

Internationally, the problem of illegal sharing of copyrighted content has prompted producers to look for technological solutions. In Western countries that have strong copyright laws and are affected by piracy over broadband Internet, new business models for music sales have emerged. One of these was pioneered by Apple Computer's iTunes for a la carte music downloads and this was quickly followed by similar services from other big names in the business. This stands in contrast to the virtual refusal by many copyright owners in India to acknowledge the emergence of digital innovation that makes it possible to compress a large number of songs for download or sale on compact discs, incorporating software to secure the content. Digital television represents the next wave and copyright concerns have led to demands led by U.S. broadcasters, for addition of data code to television programmes and video recording hardware to prevent unauthorised recording and duplication.

India's piracy problems are real but the entertainment industry, particularly in the South, has not made a serious effort to solve them with a market-oriented approach. An estimate by the U.K. Trade and Industry Department two years ago found that piracy represented 60 per cent cannibalisation of India's film industry revenues. Some States such as Tamil Nadu are trying to tackle copyright infringement by taking recourse to tough laws that empower police to detain alleged pirates without trial, while the film industry has been advocating that State Governments must also help get audiences back into the theatres through tax sops.

Whatever the impact of these measures, it is clear that the film and music industry, one of the largest in the world, is caught in a time warp. Unlike the more developed markets, the entertainment sector in the country is affected not so much by the use of the Internet by P2P services but by organised groups that have used technology to rake in big profits through illegal duplication and sale of compact discs.

The industry cannot afford to ignore for long all the revenue streams that it has not exploited so far. To start with, even the bread-and-butter cinema hall audiences may not have got the best deal so far. A report prepared by the U.K. Film Council on the prospects of the Indian film industry says the ratio of the number of film theatre screens for every million population stood at 13 in 2002, the lowest in the world. Even if a thousand multiplexes came up in the next couple of years as projected, that figure could not have risen in any significant measure to make theatres the preferred option for viewing films. Theatres are also becoming expensive, due to high entertainment tax rates in many States. If a quality theatre experience is difficult to find even in many urban centres, the rapid advances in home entertainment technology and its affordability have created a critical mass of viewers in the "home theatre" segment who have integrated with the globally popular Digital Versatile Disc (DVD) format.

A major market that the film industry has failed to grow is the rental library circuit. Licensed rental outlets could meet the demand for home videos, as they have been doing in developed markets, but Governments and the industry have not acted to get a legal framework in place for libraries, leaving the field open to pirates and corrupt enforcement by default. Bootleg `master' discs often made using hand-held video cameras in cinema halls or from discs sold in foreign markets are used to churn out pirated DVD and VCD copies.

While law enforcement related to copyright may stop some leakage of earnings, the policies of the film industry may be hurting its own prospects. By refusing to adapt to technological developments, it is depriving itself of revenues from legal sale of videos, rental and merchandising.

The technological changes in television and radio brought about by digitisation, coupled with wider broadband access, are poised to throw up more challenges: the entertainment industry may have to suffer further erosion of profits. The law alone may not ensure success in the digital future.