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

By on April 5, 2011, 10:16 AM
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."




User Comments: 19

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lawfer, TechSpot Paladin, said:

Was this really necessary? I mean, this ain't rocket science. But I guess that a formal, published research will help media companies understand the market and consumer position... who knows, we might even see a change in a few years.

gwailo247, TechSpot Chancellor, said:

What they're not mentioning is availability. When things were not available, people copied them. Then when they became available, at a huge price, they, gosh, still copied them.

And when you take Russia into account, you couldn't get anything western legally across the Iron Curtain during the good old days of the CCCP, so why be surprised that they continue the practice when they are able.

TorturedChaos, TechSpot Chancellor, said:

This isn't really surprising news, in fact it didn't even cross my mind that people thought pirating media was some large crime ring....

But as lawfer said maybe an official study will carry more weight than "a bunch of geeks opinions." I'm sure most of the copy right groups assume we are all pirates any ways, just haven't been caught yet :P - so our opinions hold crap for weight with them.

Darkshadoe Darkshadoe said:

What is really a crime is the money wasted on a study that people knew the results of years ago.

z01 said:

While it may seem obvious to any one with even a basic concept of economics, the media industry just doesn't seem to get it. The fact that piracy continues to expand to new users should send a signal but it hasn't. The real truth that can be exposed here is that media companies don't want to be governed by market forces. Companies keep prices high to make money when market is showing them something different. They are trying to cheat their way around basic supply and demand.

When you look at most media, the prices are all the same and stay the same year after year within the same class of media or they go up. If you compare media to hardware the trends are opposite. While you can't download a laptop, you can usually find some decent discounts through various sources of dubious quality which then you way against getting the product new. For hardware the products keep getting better and the prices keep going lower or at least staying constant which results in people not wanting to take the risk.

The media industry now is almost to the point of collusion. They come together to wage legal battles against pirates, almost all the prices of media are similar for what they are and a lot of the same people work for different interests to keep prices high. Lots of people might say that because its subjective art that price competition is a fallacy, but if you want to go that way then you can't claim free market protections which means regulation etc. The public have put too much power into the hands of media companies and now that some people are trying to take some back, the companies are lashing out albeit ineffectively.

Cota Cota said:

lawfer said:

Was this really necessary? I mean, this ain't rocket science. But I guess that a formal, published research will help media companies understand the market and consumer position... who knows, we might even see a change in a few years.

If a guy won a Nobel for explaining scientifically why the curtains move when you are taking a hot shower they can waste money in this research :P

[link]

hitech0101 said:

People can't compete with free, well that's the truth even if you sell at lowest rates possible it might reduce piracy but won't stop it.

Guest said:

"Relative to local incomes in Brazil, Russia, or South Africa"

you mean three of the biggest **** hole countries this world has

treetops treetops said:

Theres no money in giving copy pasting, what propaganda machine produced the idea it had to do with terrorism or organized crime. That outright lie makes me feel even better about pirating. Aye!

TeamworkGuy2 said:

Personally, I agree with the article, not because I pirate, in fact, if you choose to believe me, I don't pirate anything (gasp).

Right now I am considering purchases Starcraft 2, total cost of about $50 with shipping feels kinda heavy just for one game...

:publisher hint: same feeling goes for most modern games :/

Saintnsinner said:

Wow, for all you dumb liberal socialists out there, here is a little piece of free market driven economics for you. If these governments just stepped in and taxed these people for pirated matterial I bet it would slow pirating down.

Lokalaskurar Lokalaskurar said:

Are there any legal links to this study? (Is it published freely?) Wouldn't want to support the irony of downloading it as a torrent. No seriously, I wouldn't

It might give me something interesting to read for a change - to go with the morning cup o' tea for the coming 2 years probably, but I certainly don't mind

Darkshadoe Darkshadoe said:

Saintnsinner said:

Wow, for all you dumb liberal socialists out there, here is a little piece of free market driven economics for you. If these governments just stepped in and taxed these people for pirated matterial I bet it would slow pirating down.

Rush..is that you? LOL

By the way, thought you conservatives were against taxation. Kinda makes your post a little hypocritical.

Richy2k9 said:

hello ...

i agree that is is a market fail, when i take my part of the world as an example. Before the Internet was widespread we had no alternative but to buy either from very high price an original article (not only to media, any article here) or really cheap counterfeit one.

For the media industry it was different, we had music houses, video shops that had originals & copied selling side by side with no difference in quality & price, the concept of original didn't even exist, piracy meant stealing the authors as much as stealing the customers.

With the advent of Internet, online purchases, digital copies & distributions, micro businesses started with better prices for everything, it was a revolution. We heard about piracy & found out we were all pirates for we've been buying tailor made expensive tapes, we've been hiring copied VHS or VCDs, we've bought re-printed books & we didn't even know that it wasn't good.

The legal system had nothing to do with it, there were no legislation for this. But the authors, failed by not themselves trying to sell their products, they neglected a small country & it became a major platform for pirated & counterfeit product transitions.

It's only recently (maybe around 5 years) that the government came with copyright laws, campaigns & with higher speed Internet + more people aware of this that we have seen a big drop in all forms of piracy, it still exist at still a high level but is not like before & the island is no more a platform...

we have limited or no more access to p2p networks, a lot do buy songs now that we can buy single tracks instead of full albums on legal sites. since a price drop & good campaign, local artists are less being pirated, no more video clubs (well there are still a few exceptions) ...

i'm against piracy, i'm an ex-pirate, was unaware of this & now i'm proud to state so. it's not easy, but if authors / publishers / artists would follow a certain path, they will sell, i.e. we find more people buying CDs or digital tracks of an artist that did at least once visit a zone or who expressed good feelings about a particular area, make yourself accessible & caring.

publishers / authors, try to go as low price as possible but with a good marketing, support some good causes

software / game developers - make sure you can give proper support to all zones, it will make a big difference.

sorry for the long post ... :P

cheers!

Guest said:

Quite true.

Full version of M$ Office is three times minimum wage in some African countries.

People don't realize piracy is theft. This should come as no surprise with world morals going down the drain.

Why sell your soul for some 3rd rate Hollywood film ?

Guest said:

"If a guy won a Nobel for explaining scientifically why the curtains move when you are taking a hot shower they can waste money in this research :P"

I think you meant the Ig Nobel Prize. Slightly different things.

Archean Archean, TechSpot Paladin, said:

darkshadoe said:

Saintnsinner said:

Wow, for all you dumb liberal socialists out there, here is a little piece of free market driven economics for you. If these governments just stepped in and taxed these people for pirated matterial I bet it would slow pirating down.

Rush..is that you? LOL

By the way, thought you conservatives were against taxation. Kinda makes your post a little hypocritical.

Conservatives are against 'any form of Government' reason being they are heavily pro-business (read corporatocracy) which results in middle-classes and poor getting poorer and rich are getting richer; without any proper check and balance system. Unfortunately, not many try to understand the undercurrents of current thinking / policies of the elite/ruling classes. This is breeding corruption at massively unparallel level, and paralizing the governments in general.

T77 T77 said:

" Legal media markets are correspondingly tiny and underdeveloped."

"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."

I completely agree with the above statements.I live in India and I know that there is no proper framework or infrastructure for legal media markets.I think piracy is a result of market failure as well as legal failure

Guest said:

ummm, you mean that as enforcement of the law, WHICH HAS NOT WORKED???? Ok, so let the government knock on everyone's with access to a PC door and rummage through their computers in hope to find material to be 'taxed'. Not to mention invasion of privacy and inefficiency, people will start to encode the files with the software that will surely be provided by some geeks and may even choose to hide their hardware, making it even more difficult to prove anything. And the cost of training up IT savvy professionals in this very narrow niche just to stop piracy that accounts for about 1% of GDP? You're out of your mind.

And here are some economics for you, that I am studying at GCSE- one of the main features of a good tax is: COLLECTION.

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