Assignment
Closing Case: WHY IS DISNEY
FUNDING CHINESE PIRATES?
Disney's funding arm, Steamboat Ventures, invested $10 million in a popular Chinese video- and file-sharing site called 56.com. The site had 33 million registered members in 2009. Note that the words for "56" in Chinese sound similar to "I'm Happy."
The Problem
In May 2008, The Walt Disney Company released its animated film WALL-E; the film was released on DVD in November 2008. However, immediately after the movie release in May, the robot love story was available for free on the Chinese video site 56.com. In other words, Disney is funding a Chinese site that bootlegs it own work.
The problem is that pirated movies are difficult to detect because they appear under different names. Although 56.com managed to remove some of the full-length bootlegged copies, many others remain. The 56.com site is often referred to as a Chinese version of YouTube. But unlike YouTube, 56.com and similar sites like Tudou and Youku don't impose 10-minute limits on uploaded videos. And that makes them a haven for illegally uploaded videos, including full-length movies and TV episodes.
If 56.com were in any country but China, we'd expect the Recording Industry Association of America (RIAA) and similar organizations to put pressure on the company to remove copyrighted materials. But China doesn't have a very strong record of enforcing Western copyright laws.
The Solution
One reason that Disney invested in 56.com was that it hoped that Steamboat Ventures, as a major investor, would influence 56.com to take action against copyright violators. In other words, Steamboat Ventures is trying to help 56.com curb pirated videos.
In the United States, you can take legal action against companies such as 56.com. For example, media giant Viacom is suing YouTube for $1 billion. However, that is not an option (yet) in China. At best, the Chinese government will provide a warning to violators.
The Results
Although 56.com is still facilitating free movies, video games, and the like, Disney seems not to be too concerned with these actions. Its investment provides the company a channel of distribution for its products that may provide a strategic advantage to Disney in China. In March 2009, Disney allowed YouTube to run short videos as well as full episodes of its ABC (a television station) and ESPN (Internet and television sports channel) networks under an ad-revenue sharing arrangement.
Questions
1. Why is it difficult to stop pirated copyrighted material from showing up on the Internet?
2. Why aren't copyright laws useful in this situation?
3. Why has Disney invested in 56.com?
4. Why isn't Disney fighting with 56.com?
5. Identify the legal issues in this case.
Sources: Compiled from McBride and Chao (2008).
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