This week's news that the final chapter of 'Star Wars: Episode 3- Revenge of the Sith' has been leaked over the Internet is a strong sign that the entertainment industry is yet to establish a successful means of combating piracy in the industry.

Ed Shedd, media partner at Deloitte comments: "Historically the film industry has been relatively safe from soft copy piracy because of download time. However the uptake of broadband, advances in compression technology (whereby files sizes are made much smaller) and the rise of peer-to-peer networks have all led to a dramatic increase in download speed times for films, and as a consequence increased film piracy around the world.

"DVDs and videos are where film companies now generate their biggest profits, with 46% of global revenue comes from DVD/ video rental and sales. Piracy cuts into this and has a direct impact on the bottom line. Deloitte estimates that costs as a result of soft copy piracy could be as much as $3-4bn  per year. This represents the cost to the industry of films being downloaded for free had they been bought legitimately. However it is worth noting that many users who download pirated material from the internet do so because it is free and may not necessarily buy the films otherwise.

"Interestingly, George Lucas pre-empted the huge segment of piracy eroding his profits by deciding to launch the film almost simultaneously around the world, and by gaining additional sales through cross-promotional deals.

"In the leak of the latest Star Wars film, the movie was time stamped  - suggesting it may have come from the industry rather than from someone who videotaped an advance screening. Apparently it is through the BitTorrent file-sharing network that most downloads of film have taken place - which is expected to already be in the tens of if not hundreds of thousands. The entertainment industry can be expected to fight back with legal action, as it already has done in a number of high profile cases.

"Software solutions have already been used to combat piracy, and include content scramble systems (which prevents copying of DVDs); encryption technology and watermarking (which allows owners to trace pirated copies to their original source).

To date, none of these have been completely successful, and film companies need to work together with technology companies to establish a secure standard for distributing digital content."

Digital piracy is moving higher up the Boardroom agenda and becoming more central to the strategy of film companies.

Specifically, the industry needs to continue to:

• Push for litigation where appropriate, and to lobby governments for stronger intellectual property rights in digital media
• Rethink pricing strategies, release schedules and distribution in light of developments and changing customer attitudes
• Improve physical security of master copies
• Introduce and support collaboration between studios to take effective action against piracy; between governments and industry bodies to strengthen cooperation
• Collaborate with technology companies to create new distribution channels and to improve security
• Communicate with consumers to understand the reasons behind piracy and to provide legal alternatives
• Campaign to address the mindset that downloading pirated content is OK.

The industry can avoid suffering some of the same misfortunes as the music industry, but the clock is ticking.

Ends

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.