Businessweek reports that the entertainment studios lose more than $6 billion a year to movie piracy (according to a report by the Institute for Policy Innovation) — and that media piracy has become big business for organized crime. For example, the Los Zetas drug cartel of Mexico earns a reported $1.8 million a month through its “side” business of pirated music and DVDs. Some groups — including Los Zetas — even stamp their products with gang logos before distributing them to public markets.

The article cites an array of international drug smugglers and crime rings based in Russia, Mexico, China and Ireland that have made trafficking counterfeit entertainment media products a highly lucrative enterprise.

In an effort to address these international concerns, the MPAA is employing former law enforcement officers in Russia, Singapore, Britain, and Malaysia, to work with local police. The impact of piracy has been so severe in South Korea that “major studios have closed their regional home-entertainment offices because sales aren’t high enough to support the operations.”

The MPAA explains that some of these criminal elements have found significant success with online efforts, creating rogue websites that look so professional they’ve been bold enough to sell advertising on them. In these cases, pirated movies are streamed from the sites for free while the criminals earn revenue from the advertising. The MPAA is reportedly lobbying for passage of new U.S. legislation to combat such enterprises.

David Pogue of the New York Times writes that we are in a fascinating transitional period from physical media to streaming services, but that accessing streaming movies from our TVs, laptops and phones comes with a price. For example, we are missing some of the DVD features including subtitles, multiple languages and director’s commentary. We are also restricted regarding when we have access to some streaming content and how long our subscription or per-title fee allows us to view a specific title.

In response to these concerns, Pogue mentions a new streaming service named Zediva.com that provides subtitle, language and commentary options in addition to some surprising (and perhaps disturbing, for the content creators and distributors) business model features. Rented movies are available for two weeks instead of 24 hours, current titles are available the same day as DVD releases, and there are no hardware or subscription fees — simply a rental charge of $2 per movie.

The process is simple. Zediva has set up hundreds of DVD players in its California data center; the company purchases dozens of copies of current releases and makes them available to consumers. As Pogue writes: “The DVD is simply sending you the audio and video signals, as if it were connected to your home with a really, really long cable.”

Of course, content creators and distributors may have issue with this approach. In related news, the MPAA has filed a lawsuit against Zediva (since Pogue’s article), claiming that the company is violating copyright law by streaming DVDs. While the company bills itself as a movie-rental service, comparing its service with companies like Netflix that purchase hundreds of copies of popular movies and then mailing them to renters, the MPAA’s lawyers argue the service is a form of “public performance” that would require a license.

Related Wall Street Journal article: “Hollywood Studios Sue Start-Up Zediva” (4/4/11)

Internet law columnist Michael Geist, writing for the Toronto Star, comments on a new global study on piracy backed by Canada’s International Development Research Centre that suggests “piracy is chiefly a product of a market failure, not a legal one.”

The media piracy study — in an effort to analyze infringements regarding music, movies, and software — was launched five years ago by the Social Science Research Council. Institutions in South Africa, Russia, Brazil, Mexico, Bolivia, and India were identified to better understand the international media market and related piracy issues. The resulting 440-page report is the most thorough analysis of media piracy to date.

The report sets the record straight on several popular piracy myths. For example, it states there are no links between piracy and organized crime, there is no evidence indicating that anti-piracy education programs have any impact on consumer behavior, and tougher legal penalties do not necessarily provide a deterrent to piracy.

The report also suggests that piracy is primarily a result of market failure, not legal failure. Geist writes: “In many developing countries, there are few meaningful legal distribution channels for media products. The report notes ‘the pirate market cannot be said to compete with legal sales or generate losses for industry. At the low end of the socioeconomic ladder where such distribution gaps are common, piracy often simply is the market.’”