Business Models

by Mike Masnick

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

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.

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  1. icon
    Overcast (profile), 8 Apr 2010 @ 11:10am

    Re: same reson in 2005 - 2006

    when piracy was peaked in Canada that sales of music were up 110%, and as they throttled and capped sales went down

    people cant try before they buy , they just DON'T BUY
    and if i cant afford it and tell my bud who might take his wife or friend or whatever to see a film then ive adverted your flick freely and word a mouth is always the most powerful advertisement

    You are 100% right. Everyone - think to yourself...

    how many CD's have you went out and purchased *BEFORE* you had heard anything on the CD?

    In my case, out of the many CD's I own - maybe one or two. - Maybe.

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