Movie pirates are going after Blu-ray, using a technological twist that makes their illicit copies both cheap to make and tough for consumers to spot.
Pirates are taking advantage of the fact that many viewers can't tell the difference between Hollywood's new high-definition, higher-priced Blu-ray movie format and a bootleg format -- called AVCHD -- that's a grade lower: AVCHD uses 720 horizontal lines of resolution instead of Blu-ray's 1,080, but still offers a sharper picture than an ordinary DVD on high-definition television sets.
The movies are pulled off Blu-ray discs using easily available software. Because of the lower resolution, they can be put on ordinary blank DVDs instead of more costly blank Blu-ray discs. That makes them quite profitable for pirates to make, warns the Motion Picture Association, the industry group that battles piracy on behalf of the studios owned by Walt Disney Co., Viacom Inc., Sony Corp., News Corp., Time Warner Inc., and General Electric Co.
"We are concerned and are assigning priority to this issue," said Mike Ellis, the Asia-Pacific managing director for the MPA.
Some eBay Inc. merchants are warning customers to look out for counterfeit Blu-ray discs, or ordinary DVDs passed off as Blu-rays. One tip-off: Real Blu-ray discs attract fingerprints more easily than the pirated discs.
The industry took notice last month when authorities raided a big stash of the new pirated discs in China, which is often at the leading edge of piracy trends. Authorities in the southern Chinese city of Shenzhen last month unearthed a pirated warehouse collection with 800 of the discs, with titles ranging from "Harry Potter and the Philosopher's Stone" to "Transformers." The pirates had packaged them in Blu-ray's recognizable blue boxes, including holograms to try to make them look like the real thing.
"Pirated DVDs from this region...have been exported all over the world in the last few years. These syndicates are very quick to spot market opportunities," said Mr. Ellis.
The MPA estimates that within the next six months the high-definition discs could account for 10% of $224 million that its member companies lose from piracy in China. While a legitimate Blu-ray discs costs about $30, a pirated Chinese disc goes for as little as $7.
The new piracy threat comes as the industry tries to push Blu-ray to compensate for softening sales of regular DVDs. Entertainment companies hope consumers will upgrade their libraries to the newer discs. In the four weeks ended Oct. 26, Blu-ray discs accounted for 6% of the home-video market, according to Nielsen VideoScan. Retailers and electronics companies recently cut prices on Blu-ray players to spur adoption.
The pirate discs haven't yet appeared outside of Asia. But the industry worries they could find a market in places with lower penetration of broadband Internet access. In those markets, downloading high-definition video files -- legitimate or illegitimate -- can be lengthy and cumbersome.
"When we created the specifications for Blu-ray, we were very serious about trying to stem the tide of pirate discs regardless of where they were in the world," said Andy Parsons, a senior vice president at Pioneer Electronics Inc.'s Home Entertainment Group and the U.S. chairman of the Blu-ray Disc Association Promotions Committee.
The association built two layers of copyright protection into their discs. One layer unique to Blu-ray, called BD+, checks to make sure that the disc isn't being played somewhere it shouldn't be. "To make a pirated Blu-ray disc is pretty difficult," said Mr. Parsons.
Pirates use software to pull high-definition video off Blu-ray discs. One software company, Slysoft Inc., claims to have cracked Blu-ray's protection software last year and sells a program to extract Blu-ray movies called AnyDVD HD for the equivalent of about $100. Slysoft said in a statement in March that it enabled "backup security copies of Blu-ray discs." The U.S. Digital Millennium Copyright Act bans DVD copying, but Slysoft has said its software is legal in Antigua and Barbuda, the Caribbean nation where it is based.
Mr. Parsons said he was aware of Slysoft's claim but declined to comment on it. Slysoft didn't respond to requests for comment.
The technical protections built into Blu-ray can be changed by encoding a software update onto new Blu-ray discs. But those updates, too, will be cracked, said Peer van Heuen, head of SlySoft's high-definition technologies, in an earlier press release. "The worst-case scenario then is our boss locks us up with only bread and water in the company dungeon for three months until we are successful again," he said.
