The Motion Picture Association asked L.E.K., an international strategy consulting firm, to conduct a study on the financial losses incurred by the film industry due to piracy. The MPA (the international version of the MPAA) is comprised of seven major Hollywood studios - Buena Vista Pictures Distribution, Metro-Goldwyn Mayer Studios Inc., Paramount Pictures, Sony Pictures Entertainment Inc., Twentieth Century Fox Film Corp., Universal Studios LLP, and Warner Bros. Entertainment Inc.

The overall major statement expressed in the report is that 'piracy is the biggest threat to the US motion picture industry.' I disagree - I believe that lack of innovation is the biggest threat. The results of this report will provide the framework for my own thesis, which is to argue against the idea that piracy will take down the motion picture industry.  The lack of consumer choices and convenience leads to piracy.  This report appears to be pointing fingers in the wrong direction.  Throughout history, Hollywood has been very slow to adopt new technologies - whether they were beneficial to consumers or not. With as much risk as Hollywood deals with daily, any slight change can severely hamper the bottom line. One one hand I can understand their hesitancy, but not their focus solely on fighting piracy. The results of this study will form the backbone for my own research.

In 2004, the MPA appointed L.E.K. to spearhead the study not only to determine financial losses on a global scale, but also to pinpoint the demographics of the typical pirate.

Three major areas that the report focuses on:

-losses due to both 'internet and hard goods piracy'.

-analysis of the cost of piracy as it affects not only the domestic industry, but worldwide as well

-typical pirate profile

Internet piracy is defined in the report as movie goods downloaded from the internet or obtained from a personal source who had downloaded from the internet. Hard goods piracy, meanwhile, takes place in real space - a consumer either purchases a bootleg copy via a commerical source or obtains a copy from a personal source.

An $18.2 billion worldwide loss to piracy was reported. This figure indicates losses to the studios, foreign and domestic producers, distributors, theaters, video stores, and pay-per-view handlers. The MPA studios alone lost $6.1 billion. 80 percent of these losses are a result of overseas piracy. 62 percent represent hard goods losses, while only 38 percent are from the internet. Only seven percent of all digital piracy occurs in the US.

China, Russia, and Thailand represent the top three countries engaging in the most digital piracy (90% China, 79% in both Russia and Thailand). According to the report, piracy rates are determined from 'MPA member company legitimate revenue plus estimated revenue lost to piracy in each market. They are a static snapshot of the percentage of the potential market that is lost due to piracy' (page 6). In other words, the preparers of this report did not take into account any possible market growth if piracy did not exist.

The report also states that the typical snapshot of a digital pirate is male, aged 16-24, and resides in an urban environment.

The countries where the most potential revenue lost is highest are Mexico, the UK, and France. These mature markets ensure higher amounts of revenue compared to still-developing markets like China and Russia. In China's case, the country only allows the theatrical release of 20 non-Chinese films per year, therefore the amount that US studios make there is small compared to the free markets of Mexico, the UK, and France.