Pulling the Plug on Pirate Videos : Movies: Taiwanese teens once thronged to tiny Movie TV centers to see the latest on celluloid from the U.S. But American filmmakers, who lost millions in royalties, complained, and now it’s curtains for an illegal “MTV.”

In the pastel-colored lounge of Taipei’s biggest video entertainment center, Shinn Jwu-chern made no bones about why he trafficked in the pirated videocassettes that have cost American filmmakers millions of dollars in lost royalties.

“The consumer demand was so high,” Shinn said. He sipped his coffee and shrugged. “They wanted to see them. We had to have them for business.”

One year ago, if Shinn didn’t have them, 1,200 competing outlets would. That’s how fast and furious the competition became in a distinctly Taiwanese business phenomenon called MTV.

That’s not Music Television, as in America. It’s Movie TV, Taiwan-style. Marked by flashy neon signs and U.S. pop music, MTV centers provide private rooms where small groups of friends can rent and watch videos--usually American, often thrillers like “Lethal Weapon.” For Taiwanese teens, the centers offer an oasis of privacy away from cramped homes and nosy parents, filling the role that drive-in theaters played for American adolescents in the 1950s.

And, until recently, MTV had been one of the hottest businesses in Taiwan. Two years ago, when MTV hit like a hurricane, lines for MTV rooms snaked out to the street and entrepreneurs could recoup their investment in just four months, said Paul Huang, formerly a government regulator who now represents U.S. film interests through the Foundation for the Protection of Film & Video Works in Taipei.

“It grew haphazardly, like wildfire, without any regulation at all,” said William Nix, senior vice president of the Motion Picture Assn. of America, who directs the industry’s worldwide anti-piracy efforts. “It was very harmful to the image of the film industry, the royalties and the distribution strategies.”

But that was then. This is now. MTV is fading fast.

The U.S. movie industry vociferously complained, led by MPAA members Columbia Pictures Entertainment, MGM/UA Communications, Orion Pictures, Paramount Pictures, 20th Century Fox Film, Universal City Studios, Walt Disney (Buena Vista Pictures Distribution) and Warner Bros. Their films made up at least 60% of MTV inventories, Huang said.

At the fad’s peak, the industry figured it was losing as much as $50 million in royalties a year. And MTV was cutting into the industry’s movie-theater business, because pirated videotapes sometimes would surface in the MTV centers before the film was even released in Taiwan.

“Some people would go abroad and (videotape the film) in the theaters and movie houses, and bring it back,” Shinn confessed. His Solarsystem Audio & Video Library Co. projects a distinctly American ambience with posters of Kevin Costner, American rock videos playing on a big screen and even Marlboro cigarette butts crushed out in Marlboro ashtrays. Shinn said the center stocks 13,000 videotapes and 10,000 laser discs for 1,500 customers cramming 70 rooms a day.

Pushed by Hollywood, the Office of the U.S. Trade Representative grabbed the issue and hammered Taiwan with it. As part of broader negotiations over Taiwan’s problems in protecting U.S. intellectual property rights, trade officials singled out MTV as “one of the most glaring aspects,” said Raymond Sander, director of trade and commercial negotiations for the American Institute in Taiwan in Arlington, Va.

(The institute, with offices in Arlington and Taipei, serves as the unofficial diplomatic link with Taiwan in the absence of formal relations.)

And Taiwan’s Government Information Office took the problem to heart. Officials had little choice: The Americans were threatening to press unfair trade charges, which would clear the way for retaliation. Nervous officials thus began swooping down on MTV operators with a vengeance.

Last year, officials raided MTV centers 13,800 times and confiscated 290,300 illegal videotapes. They had so much illegal booty in the early days of the crackdown that they had to haul it out in trucks, said Liao Cheng-hao, deputy director-general of the Government Information Office.

Officials busted two underground factories that made pirated videotapes and shut them down. They also drove many operators out of business by enforcing local laws on zoning, health and safety, which many centers routinely violate. The safety hazards were pummeled home when fires broke out in a few centers last year, killing several people.

As a result of the actions, the number of MTV centers has tumbled to about 270, Huang said. In addition, the percentage of MTV operators using pirated videotapes is now less than 10%, according to the government, compared to 95% in 1982, when the business first surfaced.

Government officials have also pushed forward a revised copyright law that should give bulletproof legal protections to U.S. filmmakers. A new law is critical, because many of the remaining MTV operators have switched from outright pirated copies to videotapes licensed only for home use. In their minds, they are now using legal tapes.

The Americans, however, argue that their use is still illegal in MTV centers because they constitute a “public performance” similar to showing movies in a theater and thus require royalty payments.

That “public performance” concept does not exist in Taiwan law, however. The proposed revision to the copyright law would firmly establish it.

“We are not only doing this for foreigners. We are doing this for ourselves, because our people’s work also has to be protected. Only then can we upgrade our cultural environment,” Liao said.

Taiwan’s vigilance has been roundly hailed. The crackdown has helped reduce the film industry’s losses by two-thirds, to a present figure of about $10 million to $20 million, Nix said.

“MTV knocked the bottom out of our market in Taiwan and seeing it turned around is a dramatic and positive improvement,” he said.

U.S. officials are also pleased. In November, they removed Taiwan from the list of countries to watch for unfair trade practices because of its rapid progress on the copyright law revisions. The revisions are expected to become law this year.

“They’ve really done an excellent job over the last eight months,” Sander said.

But challenges remain. The Taiwan government must clean up the remaining MTV outlets that are still in violation of zoning or safety laws. They must ferret out the remaining illegal tapes, and there may still be many. Kimball Liang, representative for Warner Bros. in Taipei, estimated that as many as 10,000 pirated copies of “Batman” were circulating on the island.

Nix and the film industry must figure out a way to license the legal operators and set up new channels of distribution that will coordinate the release of the videos with the films so that one doesn’t cannibalize the sales of the other.

As for Shinn and his friends in the MTV business, not to worry. The heat on MTV has forced them to find other businesses. And they have.

Someone noticed that the Japanese sing-a-long bars, called karaoke, were becoming popular in Taiwan. That first entrepreneur decided to convert an MTV center into a sing-a-long lounge. A microphone was installed in each private room. Libraries of lyrics to be projected on screens replaced the videocassettes. Instead of watching movies, friends sat before a screen and, to the flash of lyrics on it, belted the songs out.

Thus was born KTV, for karaoke TV. Shinn is jumping into the business. So, it seems, is half the city. KTV centers now dot practically all of Taipei’s main streets.

American songwriters need not worry, however. Most of the songs are Chinese.