An Illicit Paradise for the Motion Picture Buff

Standing at his stall on a Shanghai thoroughfare, the salesman's eyes sparkle when his customer pauses at a copy of Federico Fellini's Roma. "A top movie," he winks. "You'll like that one."

No movie buff, the salesman adopts the same sly pitch with Fritz Lang's classic M, Bogart's Casablanca, films by Japanese director Akira Kurosawa, and the latest Hollywood blockbusters.

The salesman, who earns a margin of about 10 cents a DVD, had come to Shanghai from his poor inland village to eke out a living after his former employer, a state-owned factory, closed its doors.

His hustling pitch makes him the indispensable final link in the highly integrated business of bringing pirated DVDs to Chinese consumers.

The sophisticated trade involves multiple copyright frauds, rapid-response manufacturing, couriers taking discs across borders, corrupt officials and shadowy financiers. And, of course, it depends on a large dose of official tolerance.

At the end of the line are the movie-hungry consumers, denied easy access to films in China by trade barriers, movie import quotas, the high price of legal discs and censorship.

In the UK, Shekhar Kapur, the Oscar-nominated director, was reported late last year to have been furious at the discovery that pirated DVDs of his film The Four Feathers were on sale in London before its British release. He would doubtless be even angrier if he came to China, where Hollywood movies are sometimes available on the streets before their global premieres in the US.

In Shanghai recently to make a film, actor Dennis Hopper recounted how he had stopped at a stall to look at DVDs, and discovered a movie, as yet unreleased, for which he had recorded a voice-track in Los Angeles just weeks earlier. The pirated disc had got to China before him.

Pirated movies, which in China means almost exclusively DVDs, are not the occasional outrage they are in western markets. Apart from a few legitimate outlets, they constitute the entire market. Shops stock only pirated goods. In a country of 1.3bn people, that is a lot of DVDs and a large amount of money. Local movies are also instantly copied.

Leaving aside the risk of getting caught, the barriers to entry are low at every stage of the piracy business, from manufacturing to retail. The first step, getting a copy of the movie, is easy.

The best quality comes from discs copied directly from the cinema print, or from the commercially issued DVD itself.

The savvy pirate DVD consumers know they have a good disc the moment the movie opens with a stern warning about the penalties for pirating.

The manufacturing is done with "stampers", which stamp the physical imprint into melted optical-grade polycarbonate on discs, says Nick Redfern of Rouse and Co., the intellectual property consultancy, in Jakarta. Each stamper has a capacity of about 30,000 discs, but pirates will often use them to make many more - one reason why about one in five pirated discs does not work.

The ability to do short production runs is also why so many art-house films and cinema classics are copied, and what makes China's streets a movie collector's paradise.

Couriers carrying up to 10,000 discs at a time travel around south-east Asia, preferably by air for speedy delivery, but also by road and boat. They return with instant feedback from customers. "They might say to the manufacturer: 'Give me 20 more copies of Star Wars, because we sold everything last week,' " says Mr Redfern.

The couriers may also carry stampers, which look like large metal CDs, to different factories in the region owned by transnational criminal syndicates wanting to increase production of particular films.

In China, the government has closed more than 20 production lines every year since 1996 and had seized 65m discs until September 30 2001. As a result of the crackdown, most Chinese pirates have been forced out of the export market, and now supply only local consumers.

"We can say there has been a tougher approach," said Mike Ellis, the regional head of anti-piracy for the Motion Picture Association, the US body that licenses film content.

But not that tough. The association estimates that the industry loses more than $90m (£58m) in copyright fees a year in China alone. The real bill may be much higher, as the association is only one of four international bodies chasing money from DVD movies, which struggle to co-ordinate their efforts.

There may be one, barely glimmering, shaft of light in this trade for the big studios and their stars. In China's parallel universe, Hollywood stars are as well known as they are elsewhere. So while Hollywood's hands have been tied, the pirates have done the studios' marketing and distribution job for them. When Hollywood does get its films legally into China, at least it will not be starting with a blank screen.