Music, movie, and software piracy is a market failure, not a legal failure

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The Social Science Research Council (SSRC) launched a new global study on piracy in 2006, titled "Media Piracy in Emerging Economies," and has now declared it disagrees with trademark and copyright holders who frequently characterize piracy as a legal failure. After independent investigation in six emerging economies (Bolivia, Brazil, India, Mexico, Russia, and South Africa), the report concludes that piracy is a product of market failure.

The 426-page report is the most comprehensive analysis of media piracy such as music, movies, and software, to date. Contrary to repeated claims that there are strong links between piracy and organized crime, it finds that no such connection exists. Furthermore, it finds no evidence that anti-piracy education programs have any discernable impact on consumer behavior after identifying over 300 of them around the world. Last but not least, the report also rejects the conventional wisdom that tougher penalties provide a strong deterrent to piracy activities.

Here are the major findings from the report:

  • Prices are too high. High prices for media goods, low incomes, and cheap digital technologies are the main ingredients of global media piracy. Relative to local incomes in Brazil, Russia, or South Africa, the retail price of a CD, DVD, or copy of MS Office is five to ten times higher than in the US or Europe. Legal media markets are correspondingly tiny and underdeveloped.
  • Competition is good. The chief predictor of low prices in legal media markets is the presence of strong domestic companies that compete for local audiences and consumers. In the developing world, where global film, music, and software companies dominate the market, such conditions are largely absent.
  • Antipiracy education has failed. The authors find no significant stigma attached to piracy in any of the countries examined. Rather, piracy is part of the daily media practices of large and growing portions of the population.
  • Changing the law is easy. Changing the practice is hard. Industry lobbies have been very successful at changing laws to criminalize these practices, but largely unsuccessful at getting governments to apply them. There is, the authors argue, no realistic way to reconcile mass enforcement and due process, especially in countries with severely overburdened legal systems.
  • Criminals can't compete with free. The study finds no systematic links between media piracy and organized crime or terrorism in any of the countries examined. Today, commercial pirates and transnational smugglers face the same dilemma as the legal industry: how to compete with free.
  • Enforcement hasn't worked. After a decade of ramped up enforcement, the authors can find no impact on the overall supply of pirated goods.

In many developing countries, there are few meaningful legal distribution channels for media products. As a result, at the low end of the socioeconomic ladder, piracy often is the market. Even where there are legal distribution channels, high prices often result in many products simply being unaffordable for the vast majority of the population. Foreign rights holders prefer to preserve high prices in developed countries, and while this maximizes profits globally, it also creates pirate markets.

"Based on three years of work by some thirty-five researchers, Media Piracy in Emerging Economies tells two overarching stories: one tracing the explosive growth of piracy as digital technologies became cheap and ubiquitous around the world, and another following the growth of industry lobbies that have reshaped laws and law enforcement around copyright protection," reads a statement from the SSRC. "The report argues that these efforts have largely failed, and that the problem of piracy is better conceived as a failure of affordable access to media in legal markets."

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