If 'Piracy' Is Killing Filmmaking, Why Do Nigeria, China And India Have Thriving Movie Businesses?

from the business-models-change dept

We keep hearing from Hollywood folks that "piracy" is killing the movie business, yet there seems to be little evidence of that. The number of films being made each year continues to grow, and the box office keeps setting attendance and revenue records. But what if unauthorized copies were even more rampant? Kevin Kelly noticed that three countries that are normally considered "hotbeds" of unauthorized copies all seemed to house the largest movie industries:

The three largest film industries in the world are India, Nigeria and China. Nigeria cranks out some 2,000 films a year (Nollywood), India produces about 1,000 a year (Bollywood) and China less than 500. Together they produce four times as many films per year as Hollywood. Yet each of these countries is a haven, even a synonym, for rampant piracy. How do post-copyright economics work? How do you keep producing more movies than Hollywood with no copyright protection for your efforts?

This question was pertinent because the rampant piracy in the movie cultures of India, China and Nigeria seemed to signal a future for Hollywood. Here in the West we seem to be headed to YouTubeland were all movies are free. In other words we are speeding towards the copyright-free zones represented by China, India and Nigeria today. If so, do those movie industries operating smack in the middle of the cheap, ubiquitous copies flooding these countries have any lessons to teach Hollywood on how to survive?

Not everything he finds will be considered a "good" thing -- since part of the answers involve things like underground markets and organized crime laundering money -- but that shouldn't take away from some of the key points. In all three countries, he found that (of course) the "pirated" versions (usually sold as video CDs) really acted as promotion for going to see the film in a theater -- one of the few places in those countries where air conditioning is available. Some might point out that this isn't an issue in the US (any more), but if you take a step back there is a larger point: if you provide a valuable experience, people will go. In Nigeria and India, it may be air conditioning, but in the US it could be lots of other things: high quality food, comfy seating, better sound, etc. Second, he found that the industries in all three countries made money by licensing their movies to TV stations who were desperate for content -- suggesting that there are almost always other channels where revenue can be obtained.

Another point that he found was that the movie makers recognized they needed to "compete" with unauthorized copies, and priced things accordingly -- so that the price wasn't all that different than the unauthorized VCDs. Now, that did mean that some of the movies produced in these countries were quite low budget -- but, again, if you combine a higher quality movie with a real reason to buy (see in the theater/additional benefits for buying) there's no reason why big Hollywood movies can't take advantage of the same economics. Of course, some will also point out that when the unauthorized copies are downloaded, rather than available on VCD, the "cost" of the competition then goes to zero -- which is true -- but none of that precludes offering additional scarce value for buyers. In these countries it may just be air conditioning, but there are plenty of scarcities that can be sold in the US as well.

Finally, filmmakers in those countries all seem to recognize that obscurity is a bigger issue than "piracy," -- in part because they have to deal with government censors. So they realize that getting the films seen is the biggest issue, and they can monetize on the backend by offering other types of scarce value.

Now, obviously, the situation in all three countries is not ideal. And, no, I'm not saying that the answer to Hollywood's fears is to follow down these paths directly (though, I have no doubt that someone will accuse me of saying exactly that). But the larger point stands: even if there is rampant piracy (much worse than is found here), the movie industry does not die, and can thrive. And it does so by finding alternative streams of revenue, combined with focusing on the scarce value that can be provided, combined with embracing the promotional nature of the unauthorized films. And, of course, part of the strategy involves actually acknowledging that unauthorized copies are part of the competition, rather than just thinking of them as something illegal that must be stopped.

No, the industries in these three countries are certainly not what Hollywood should be modeling itself on, but they do clearly show that the dire warnings from Hollywood are totally off-base.

Filed Under: china, india, movies, nigeria, piracy

Careful What You Wish For: Greater IP Enforcement In China Being Used Against Foreign Companies...

from the you-asked-for-it... dept

Supporters of stronger intellectual property laws in other countries ought to be careful what they ask for... they just might get it, and then discover they didn't really want it after all. For example, for many, many years, US companies have been screaming loudly about how the US should pressure China to be more respectful of intellectual property. China, for example, regularly makes the "priority watch list" of the USTR's "Special 301" report, which is effectively a catalog of what countries US companies are complaining most about. However, China has suddenly taken an interest in intellectual property in the last few years, and it doesn't seem to be turning out quite like US companies expected.

First, a few years back, we wrote about a high profile counterfeit DVD bust in China, where the "culprit" was actually a rich American. Then, we noticed in 2008 that China was starting to talk about China cracking down on video game piracy, but only when it concerned others copying China's video games. Finally, late last year, we noted that a French company had lost a patent lawsuit in China.

It turns out that was just the beginning. Joe Mullin points us to a story about how there have been a series of recent patent and trademark rulings in Chinese courts all of which appear to be going against large multinational companies and in favor of Chinese companies.

Of course, this isn't a surprise at all. Various studies have shown that greater copyright, patent and trademark protections tend to follow a period of great innovation, when the companies that did that innovation look to protect their position from upstarts elsewhere. In other words, it acts in the exact opposite manner as it's supposed to. It's not an incentive to innovate, but a tool used to stop competition and innovation from others. The situation in China is playing out exactly according to that formula. The country is growing into a bigger believer in intellectual property laws -- but only for the sake of using it to protect against foreigners -- which, we assume, is not what US companies wanted, but which they should have expected if they ever bothered to look at the actual history of stronger intellectual property laws.

Filed Under: china, copyright, intellectual property, piracy, video games

Commerce Dept. Supports RIAA Bailout Radio Tax

from the well,-of-course-it-does dept

This probably isn't a huge surprise, but the Commerce Department has now come out in favor of the performance rights tax on radio stations, which will force radio stations to pay up to promote music. Basically, as it stands right now, when a radio station plays music, it pays the songwriters/composers, but not the performers. That's because the performers are getting free promotion by getting their songs heard on the radio. As we've pointed out, this is really something of a "bailout" for the RIAA, which will get a new stream of cash for something that makes absolutely no sense in an open market. Historically, record labels have always been known to (often illegally) pay the radio stations to play music. That's because they knew, quite explicitly, that there's value in having their music played.

But, then, when they started pushing for this new tax, suddenly they amusingly started to claim that radio is "a kind of piracy." Seriously. However, they then immediately contradicted themselves by then accusing one radio station of illegally not playing their music.

Basically, the recording industry is willing to make any argument, no matter how contradictory to get this free money, which they claim they're entitled to. They say that they need to get paid for music played on the radio at the same time that they're pushing money the other direction just to get on the air (since they know it's really a promotion). They say that radio is "pirating" from them, but when a radio station stops playing RIAA music (which should make them happy if it's really "piracy,") they accuse them of abusing the airwaves, and demand an FCC investigation.

This has been nothing but a blatant attempt by the recording industry to get free money through legislative fiat, and it's ridiculous that the Commerce Department would support such an effort.

Filed Under: piracy, tax
Companies: riaa

Hollywood Threatens To Stop Selling DVDs In Spain In A Push To Increase Unauthorized File Sharing?

from the confused dept

Robert Ring points us to the news that Hollywood studios are now threatening to stop selling DVDs in Spain, and are blaming "piracy." Specifically, Michael Lynton, of Sony Pictures, the guy who insists that nothing good has come from the internet, is claiming:

"Spain is on the brink of no longer being a viable home-entertainment market for us."

I'm really curious how Lynton keeps his job when his response to a market challenge is to leave the market entirely, shifting the unauthorized rate from whatever it is all the way up to 100% by choice. This is the same guy who claimed that the internet was killing the movie business, in the midst of a year with more movie releases than ever before and the largest box office take ever. He's also in charge of the company that wouldn't even support one of its own movies for the Oscars because it was afraid that the Oscar reviewer copies would end up online, even though the movie was already available for download.

This is a CEO who seems to want to blame everyone else for his own failures in giving people a reason to buy. He's blaming the internet when the real issue is his own inability to figure out how to provide scarce value that people want to pay for. I can't imagine how the board meetings go: "Hey, so how are you capitalizing on this massive increase in movie interest?" "Ah, well, we're dropping out of markets because the kids download." How do you manage to lead a company when your response to a boom in interest in your business is to take away one of the reasons to buy and then to blame the people who want your product? It's astounding.

Filed Under: dvds, hollywood, piracy
Companies: sony

James Cameron: Innovation Trumps Any Piracy Threat

from the ain't-nothing-to-worry-about dept

Nearly a year ago, Techdirt reader Parker Mason had submitted a story to us, suggesting that the amazing visuals and 3D + IMAX aspect of Avatar was a perfect example of adding value to movies that would give people a real reason to go to the theater. I actually kept that story open in a tab for months, intending to write it up, and I never got around to it -- and, to be honest, I wasn't entirely convinced that Avatar would really get a huge reception. Don't I look foolish? Yes, Avatar obviously has been a blockbuster of blockbuster proportions -- in part because of exactly those points. People want that greater experience and I was certainly among those who ponied up for the full 3D IMAX version (and not the fake IMAX version either -- thanks to a friend who reminded me of that bit of deception).

It looks like James Cameron recognizes all this as well. Nastybutler77 was the first of a bunch of you to point to Cameron's claim that innovation trumps "piracy," which he made onstage at CTIA:

"In film we have definitely felt threatened by piracy," he said. "We saw the music industry crash and burn in its efforts to stop it. But with G4 (I think he meant 4G wireless) and Moore's Law, you can't fight it...."

"The music industry saw it coming, they tried to stop it, and they got rolled over," he said. "Then they started suing everybody. And now it is what it is."

Instead, Cameron said he has tried to innovate to give movie goers a reason to go to theater. And in creating a rich, "reinvigorated cinema experience," Cameron said he discovered that people are willing to pay money to experience the same content in different ways. Not only are they willing to pay $10 or more to see Avatar on the big screen in 3D, but they also will pay to own the DVD and to take it with them on their phone or portable device.

"People are discriminating about the experience," he said. "They want to own it, have it on a iPhone when they want it, and they want the social experience of going to the cinema. These are really different experiences. And I think they can all co-exist in the same eco-system."

Indeed. It's great that he's recognizing this. The other interesting point he made was that they're going to release the Avatar DVD while the film is still showing in the theaters -- in part because the show is still doing well in the theaters. Of course, many theaters have complained about how they don't want shorter release windows (or, horror of horrors, the idea of releasing a movie in the theater and on DVD at the same time). However, it will be interesting to see whether the DVD release, while the movie is still in some theaters, leads to at least a little bump in box office sales for the movie, as people who watch it on DVD decide they want to see it on the big screen.

Filed Under: avatar, james cameron, piracy

Failed Filmmakers Pretend Piracy Group 'Stole' Film To Try To Get Publicity

from the super-weak dept

We've talked about smart filmmakers learning to embrace file sharing to enlarge their audience and to improve their business model, but it appears that some filmmakers are getting the wrong kind of message. TorrentFreak has the story of how some filmmakers in Denmark, who had a total flop on their hands, pretended that the local Piratgruppen organization literally broke into the studio, stole (used correctly, for once) the film, and were threatening to put it online. Of course, the whole thing was completely made up in a weak attempt to get publicity. Little actually came of it until it was exposed as totally made up -- but it's a pretty serious issue. The studio was blatantly lying and accusing people of out-and-out criminal behavior, knowing that it was false. And this is in Denmark, where the local anti-piracy group has been quite aggressive in going after anyone for copyright infringement. Shameful.

Filed Under: copyright infringement, denmark, film, piracy, stealing

Apparently The Word 'Piracy' No Longer Sufficiently Derogatory For Entertainment Industry

from the what's-next? dept

We already wrote about the release this week of a highly misleading report about how many jobs "piracy" was going to "cost" Europe. However, a bunch of folks have been sending in the Reuters coverage of the announcement of the report, which included some fascinating comments from Agnete Haaland, the president of the International Actors' Federation, who argues that there needs to be an even stronger word for infringement than "piracy," claiming that the "pirate" connotation is too glamorous:

"We should change the word piracy," she told reporters at the unveiling of the report on Wednesday.

"To me, piracy is something adventurous, it makes you think about Johnny Depp. We all want to be a bit like Johnny Depp. But we're talking about a criminal act. We're talking about making it impossible to make a living from what you do," she said.

Ok. Pick your jaw up off the floor. First, this is stunning in that it's been the entertainment industry itself that pushed and popularized the term "piracy" for copyright infringement. They did so very deliberately in an attempt to demonize the act of infringement, presenting it as something much worse. That some have since taken that term and embraced it hardly changes that initial fact. Second, she's wrong about the fact that they're "talking about a criminal act." Yes, in some cases copyright infringement may be a criminal act, but in most cases the use of "piracy" these days refers to civil issues between two parties and not criminal acts at all.

Then again, given that this was a statement made in favor of a blatantly misleading report, perhaps it's not surprising that the speakers were blatantly misleading as well.

In the meantime, does anyone have any suggestions for Ms. Haaland on what we should call the act of copyright infringement?

Filed Under: agnete haaland, piracy, words

As Expected, Ridiculous, Wrong, Exaggerating And Misleading Report Claims That 'Piracy' Is Killing Jobs

from the oh-come-on dept

As was leaked earlier this week, a study paid for by the International Chamber of Commerce has come out with ridiculously misleading and misguided report about how "piracy" is killing jobs all through Europe. The tagline is that it's "costing" 1.2 million jobs and about $330 million. And, of course, that sort of report is the kind that the press loves, and so we get a series of headlines:

• Net piracy puts 1.2m EU jobs in peril, study shows
• Internet piracy taking big toll on jobs
• Illegal-file sharing could 'cost billions' by 2015
• Piracy threatens Europe's creative industries
• EU must take 'urgent' action on piracy, report warns

And on and on and on and on. Of course, it's not even close to true. The real story is that for certain companies who refuse to adapt and refuse to embrace what consumers want and what technology allows, modern technology will cause them to fail. However, at the same time, it has already opened up new opportunities and created new jobs while making it easier and more efficient to create, promote, distribute and consume content. Somehow, however, none of that seems to show up in these studies.

Honestly, the claims by this research firm, TERA, read like "automobiles costing buggy makers jobs and money, something must be done!" It's based on a fundamental misunderstanding of basic economics and the nature of dynamic markets (and, frankly, calls into question anything put out by this particular firm). The only thing "costing" companies money are their own actions. If they are failing to adapt to a changing market, that's their fault. Don't try to pin the blame on new technologies and consumers getting better access to content.

Even worse, when you start to dig into the report you find all sorts of highly questionable or downright incorrect assumptions. TorrentFreak put together a starter list of problems (feel free to add more in the comments):

• The report suggests that there's a direct correlation between Internet traffic growth and lost jobs. That is, the more traffic that is generated on the Internet, the more money will be lost. This correlation is 1 according to the report, which assumes that all growth in Internet traffic will increase piracy at the same rate.
• The report makes another bogus assumption by stating that more traffic will mean more piracy and thus more lost revenue. It does not account for the fact that people might consume higher quality files which are greater in file-size. All projections are based on bandwidth and not the number of pirated goods.
• The report cites some academic literature which suggests that piracy leads to a decrease in sales. Studies that reported the opposite or a null-effect were carefully left out. This bias defines the entire outcome of the report. If they used studies that found a positive effect they would have found that piracy would create hundreds of thousands of jobs in the years to come.
• The report uses fixed substitution rates. They assume that 10 downloaded albums results in one lost sale and this figure is not adjusted for the projected increase in piracy. One would think that the public's budget for entertainment is limited and that the substitution rate would go down as piracy goes up.
• Related to the previous point, if the industry did indeed lose over €240 billion in revenue by 2015, consumers would have a lot of extra cash to spend. Depending on where this money was spent it might create more jobs than the entertainment industry claims it is losing. As a report commissioned by the Dutch Government showed last year, the overall effect of piracy on the economy might actually be positive.
• It gets even more ridiculous when we take a closer look at the claims. In the UK consumers spent €6.3 on audiovisual products. If the projected trends continued, the 'lost' revenue because of piracy would exceed the actual revenue, meaning that the music and movie industries would end up having to pay people for pirating their products.
• Lastly, the researchers seem to have trouble putting a decent report together as they messed up the legend of one of the critical figures. In this figure the bars for "file-sharing" and "global Internet traffic" are switched around. This makes us skeptical about the other statistics that are published in the report.

In other words, it looks like a typical study where the folks who created the study had the answer before they did the study, and then just needed to fill in the blanks carefully to make sure they got the results they wanted. It's basically a blatant lie. The unwillingness to look at studies that suggest job increases or that look at the positive impacts from greater and easier distribution and promotion is clearly a joke.

Filed Under: europe, file sharing, jobs, piracy

Peeling The Layers Off 'Piracy'

from the but-wait... dept

We often see critics or industry folks make absolute statements like, "copyright infringement is stealing and it's bad." Of course, this is wrong for any number of reasons, but rather than jumping all the way to why such statements are obviously wrong and misleading, why not peel back that onion one layer at a time. Ross Pruden points us to an interesting blog post by Luci Temple, where she begins the process of questioning the assumptions around "piracy is bad." It starts out with that premise (it's bad!) and then starts asking questions:

Purchaser: This person has already paid for a legal copy of the film. Now, the Purchaser might want to do a number of things that are technically in breach of copyright:

a) Burn a copy of the dvd for personal use, so that their original copy won't get scratched.
b) Create a digital copy for use on a portable MP4 player, media gate, or computer.
c) Lend the burned dvd to a friend for their personal use (their friend being a Previewer).
d) Lend the digital copy to a friend for personal use (which actually involves making another digital copy).

All these things are technically acts of "piracy," however, are they all morally "wrong"? Is copyright law applicable to the mores of the digital age, or does it need to be updated?

She goes on to discuss "lending" to a friend, noting how it's fine to lend a physical copy, but why not a digital copy? The thing is, the more you play this game, the more you'll realize how many situations that are automatically lumped in with what's considered "bad," almost certainly aren't "bad" in anyway at all.

Filed Under: ethics, file sharing, morality, piracy

Reminder: You Don't Compete With Piracy By Being Lame, The DVD Edition

from the fbi-warning dept

It's a point we've tried to make over and over again: you don't compete with "piracy" by offering a product that's a lot worse. And yet, so many people do. A bunch of you have sent over the following image that highlights this in the DVD world (tragically, no one seems to know who made this image -- but if anyone knows, please tell us in the comments and we'll add it to the post). It shows how an unauthorized downloaded copy of The Matrix lets you start watching it immediately. But if you purchase the legitimate DVD, it forces you to sit through multiple FBI warnings and multiple trailers for other movies, with no ability to skip past them. It's humorous, but the point it makes is really important. When your product is less valuable (and yes, that includes being more annoying) than the unauthorized alternatives, you're going to be hard pressed to get people to agree to pay you for your product.
Click for larger version.

Filed Under: consumer experience, dvds, piracy