Studios Pressuring Credit Card Firms Against Sharing Sites, Paramount Exec Says

STANFORD, Calif. -- Movie studios are pressing credit card companies, PayPal and ad brokers not to do business with websites that offer unauthorized copies of full movies, said Scott Martin, Paramount Pictures’ executive vice president of intellectual property. Paramount and unspecified other studios, individually and through the MPAA, have in effect been saying to the businesses, “please” cut off the sites “or we'll go to Washington,” he told us after he took part in a panel discussion Friday at Stanford Law School. The reference to Washington relates to proposals in Congress to extend liability to companies that enable infringers, Martin said.

Paramount started its effort early this year, and the results have been mixed, Martin said. “We're not seeing the level of cooperation we want to see,” he acknowledged. He said American Express, MasterCard, Visa and ad brokers such as adBrite, in addition to PayPal, had been approached “to cut off these services.” Some have been more cooperative than others, Martin said, without identifying particular responses. Paramount goes to the providers of commercial services only after approaching the distribution sites unsuccessfully, he said. Infringing sites often get around payment cutoffs by finding new merchant banks to work through, but the credit card companies and PayPal can take countermeasures, Martin said.

The studios are taking a page from the porn industry in going up the service chain after enablers of sites accused of infringement, Stanford law Professor Mark Lemley told us. The 9th U.S. Circuit Court of Appeals in San Francisco in the Perfect 10 cases against Visa and CCBill rejected efforts by a producer of sexual content to go after credit card issuers and payment processors to combat infringement, he said. The strategy would call for taking on electric companies that power the financial institutions and on to an “endless stream of people,” Lemley said. It’s “the tail wagging the dog,” he said. Uncertainty on the part of credit card companies and ad brokers about which sites content owners would consider infringers, and the time it would take them to figure it out, would significantly hurt all e-commerce, Lemley said.

"We're not threatening to sue” the financial institutions or ad brokers, Martin said. But Lemley said that would be preferable to changing federal law to make them liable, especially because the studios would lose in court now under the 9th Circuit precedents. “There are other ways that we are looking at pressuring these sites besides going after the sites themselves,” Martin said on the panel without elaborating.

The threat isn’t sharing by college students but slick, commercial operations like the Russian ZML.com, Martin said, calling the site more attractive than the iTunes Store. He estimated the annual profit of MegaUpload at $15 million to $160 million a year and of Rapidshare at $50 million to $370 million. Any confusion among consumers between authorized and unauthorized movie sites is a grave threat to the studios, Martin said.