• by Wayne Friedman , Staff Writer, April 2, 2010

Media piracy is a bad problem in Spain for U.S.-based movie studios. Under Spanish law, piracy is only illegal if done for profit. Thus, many Spanish consumers feel taking free movies from illegal Web sites isn't that bad -- more like borrowing a book from a friend.  

There are other isolated areas around the globe that have similar piracy issues, such as South Korea. But the bigger concern is that more powerful economies in Europe will head in the same direction as Spain.

Spain is trying to stop digital theft with new legislation -- but it may be too late. The situation is so bad Sony Pictures Entertainment believes it might soon pull out of the DVD retail business there, leaving its after-market of movies to become a media free-for all.  No advertising support, no user's fees - all free.

To make matters worse, this development comes on top of global DVD revenue down-trending for the last several years.

The end game might mean studios need to cut their costs -- fees to legal bricks and mortar retailers for the most part, as well as marketing costs.

And Sony and other studios also have a big theatrical distribution business to consider, bringing more extensive marketing costs to get those films off the ground. (Interestingly, theatrical revenues are up in Spain versus a year ago).

The problem is, those theatrical marketing efforts have been key in driving the DVD business. With brand awareness already high for theatrical features, there is less need for a marketing push when DVDs release  -- unless of course they're direct-to-DVD movies. All this has meant big profit margins -- virtually all gravy for movie studios.

 Now, in a weird way, those marketing efforts are helping to promote the piracy of videos.

 Movies studios' home entertainment business in markets like Spain seem to be close to walking the plank, unraveling to such as degree it's becoming like the music industry: in desperate need of reinventing itself.