Piracy Part1: A Global Market

Very few parts of the entertainment industry are actively trying to serve consumer needs, instead they are almost universally holding on to business models that no longer make sense in the internet age.

Fundamentally, consumers want their entertainment on demand. They want to get their entertainment cheaply and easily. The majority of tech savvy consumers have experienced downloaded entertainment and they like it.

iTunes is great. The browsing experience is good, buying is easy and delivery is instant. Now that DRM is slowly being phased out, buying music through iTunes is increasingly a decent alternative to piracy.

Just to be clear, I don't condone, nor participate in piracy, but that's because as someone who has worked in the entertainment industry, I can't bring myself to download other people's work without paying for it. Not if there is even the slightest hope that the actual creators of the works get to see some benefit from my enjoyment. That doesn't stop me feeling slightly miffed that a horde of consumers do pirate entertainment and would consider anyone who did pay for it to be a mug.

The following total revenue breakdown for 2003 shows where the Western music industry get most of their money. (taken from Wikipedia)

The paying consumers are essentially subsidizing those who don't. In an ideal world, prices would be low enough and access to legal downloaded entertainment (whether music, films or games) would be ubiquitous enough that everyone would rather do the honest thing and support the artists they like.

But how is that possible?

There is a digital class system that powerfully promotes piracy. Residents in the US have access to vastly superior online content distribution services; Hulu, Pandora, Netflix, Rhapsody etc.

In the minds of global consumers, the internet has flattened the world market, leaving only language barriers between people from different countries. When a consumer from country X is unable to get entertainment that is easily available to buy in country Y, they feel like second class citizens and look for other ways to get it. Invariably this means piracy.

As history has abundantly shown, class systems lead to resentment and revolution. The world over, potential consumers of entertainment feel perfectly justified in obtaining illegal copies of entertainment because they have no alternative available for them to obtain it legally.

Much of the problem lies in international taxation. A truly global marketplace is difficult when every country wants to get their cut of the sale. Until the world governments make life easier, global marketplaces will be difficult and complex to set up. Even when such market places have been created (such as iTunes) the sense of inequality is still present when UK residents see what a large taxation markup they must pay in comparison to US consumers.

Ignoring localization issues and taxation issues, you still find rights holders that do not distribute their work worldwide. A large proportion of iTunes content is only available in specific territory locked stores. Conventional (and I think wrong) wisdom looks at the current scale of international marketplaces and disregards those where piracy is rife. This only exacerbates the problem and if the entertainment industries don't wise up and actively work to distribute their content worldwide and on an equal footing then their primary markets will also collapse.

Because the class system works the other way too. If the consumers in the big entertainment markets see that the rest of the world is getting the same content for free, then they will also feel justified in pirating. Who wants to be the mug?

Next Week: Piracy part 2: Digital distribution of games.

Tags: copyright, IP, piracy