NYT: In Shanghai, Bootleg Goods Move to Secret Rooms

http://www.nytimes.com/2010/04/28/business/global/28piracy.html

By DAVID BARBOZA

SHANGHAI — The latest mystery in Shanghai, complete with sliding bookshelves, secret passageways and contraband goods, is this: Why are all the popular DVDs and CDs missing from this city’s shops?

But it’s a mystery easily solved. In China, embarrassments are usually hidden from sight when the world comes visiting, and that is what has happened to a large supply of bootleg DVDs and CDs as Shanghai prepares for the World Expo, which is expected to attract 70 million visitors.

A few weeks ago, government inspectors fanned out across the city and ordered shops selling pirated music and movies to stash away their illegal goods during the expo, a six-month extravaganza that opens May 1.

But shop owners found a novel way to comply — they simply chopped their stores in half.

In a remarkable display of uniformity, nearly every DVD shop in central Shanghai has built a partition that divides the store into two sections: one that sells legal DVDs (often films no one is interested in buying), and a hidden one that sells the illegal titles that everyone wants — Hollywood blockbusters like “Avatar” (for a dollar), Tim Burton’s “Alice in Wonderland” and even Lady Gaga’s latest CD “The Fame.”

Customers entering these shops are now routinely directed toward a slide-away bookshelf that reveals a secret corridor. And to chants of “movie inside, movie inside,” a young sales clerk will lead them past a series of empty spaces before entering a room stocked with thousands of bootleg copies of popular films, music and television programs.

“This is where everything is now,” said a clerk at Movie World. “We have to do it this way because of the expo.”

The situation is even more bizarre at Oscars Club, a centrally located DVD shop where city officials recently tacked up a large poster showing the expo mascot — a blue Gumby-like character named Haibao — stomping on an illegal DVD. The poster’s slogan reads: “Fight Against Piracy!”

But store clerks don’t hesitate to steer customers into the back room to find illegal copies of “Sherlock Holmes,” “Up in the Air” and HBO’s new series “The Pacific” in Blu-ray disc format.

Intellectual property rights experts say they are outraged by what looks to be a sham crackdown. And the Motion Picture Association of America, which represents some of Hollywood’s biggest studios, calls the situation troubling.

“Although various senior Chinese officials have made numerous statements in support of intellectual property protection and the fight against piracy, their talk has not been followed by sufficient action,” Mike Ellis, president of the Asia Pacific division, said in a statement last week in response to a reporter’s question.

City officials, however, insist that the recent crackdown has been effective. Since March, more than 3,000 shops have been closed for selling pirated music and movies, they say.

They also strongly deny encouraging stores to build secret rooms.

“That is impossible,” says Zhou Weimin, director of the city’s cultural market administrative enforcement team. “No inspector dares to say that to the store operator. Hinting like that is definitely illegal.”

Mr. Zhou acknowledged that “some stores have adopted a more covert way to run their business,” but he said that this was not a new phenomenon and that they would not get away with it.

As for DVD shop workers, they seem as divided as their stores.

When asked last week what was going on, clerks at Even Better Than Movie World (across the street from its rival Movie World) readily acknowledged to a visitor that they had been told to hide the illegal goods, and that inspectors would pretend not to notice the clandestine backroom operation.

After a few months, they say, the wall will come down and the store will go back to selling illegal DVDs out in the open.

But later, when the same visitor returned, identified himself as a journalist and asked the same question, the clerks pretended there were no secret rooms.

“I don’t know about the existence of that small room,” a clerk at Movie World said last week. Pressed, she said: “I’m not the boss.”

Douglas Clark, a lawyer at Lovells and a specialist in intellectual property rights law in its Shanghai office, says counterfeiting here is rampant. He says the sophistication of the system and the public nature of it are mind-boggling.

“These are not fly-by-night operations,” Mr. Clark said by telephone. “The only way these guys can get away with this is if they’re protected.”

The stores, which are even frequented by American and European customers, are brightly lighted with rows of neatly stocked shelves. And they often brag of a selection that is superior to that found at Blockbuster or on Netflix.

The growing sophistication of the stores — and the speed with which they release new titles (you can already get last year’s complete TV series of “Lost,” “CSI: New York” and “Grey’s Anatomy”) — suggests the pirates have enormous financial influence.

The Chinese government appeared to acknowledge the piracy problem late last week when its National Copyright Administration issued a statement saying many licensed video and audio companies, which include state companies, were making or selling bootleg goods in China. Still, few here believe there will be a serious crackdown anytime soon.

But there is one development that may at least cut down on the sale of bootleg DVDs. Many young people say the search for pirated music and movies has moved online to countless Web sites that offer free downloads.

“I don’t even buy DVDs anymore,” said Qi Wen, a 24-year-old travel agent. “I usually watch the movies online or download them to my computer; it’s fast and simple.”