Wednesday, May 02, 2007

Rethinking Piracy

Have you ever noticed how, for all the pa-pogi posturing of Edu Manzano and the Optical Media Board, it's still embarrassingly easy to grab a P60 compilation of the latest Hollywood hits? Just step over to your nearest sidewalk or downscale bazaar and talk to your nearest dibidi suki.

To call it intellectual piracy is fair enough. Producers, cast, and crew that rightfully ought to be rewarded for their work are robbed of the royalties due to them. Extend the argument further and you get a dire prognostication. Piracy makes it unpalatable for investors to put their money into the entertainment, hence the industry would collapse.

It all sounds logical but it's hardly true, is it? The situation bears it out. Hollywood still churns out movie after movie and local theaters continue to operate. The movie industry persists despite all that piracy. Just why is that?

For one thing, despite the easy availability of bootleg videos, people do still prefer to catch a movie on the big screen...if it's worthwhile. Moviemakers have learned to create "event" films. You can watch a blurry copy -- complete with bobbing heads and applauding audience -- on your itsy-bitsy 14-inch screen, or you can watch it on all its digital glory on the big screen. Enough people prefer the latter, it seems.

When it comes to theater releases, piracy, in fact, seems to have brought us two upsides: first, we now get the movies in local theaters on the day of their worldwide release; and second, there seems to a lot less drivel coming out of Hollywood nowadays.

Simultaneous worldwide release is a pre-emptive action on the part of the producers and distributors. Hold back on the release and they risk losing more box office sales. Release it at the same time and they can at least ride on the movie's hype and on the enthusiasm of the fans.

If nothing else, piracy has at least squeezed out much of the grade-C and -D charnel that Hollywood used to crank out. You know, the kind that stars Lorenzo Lamas and Michael Dudikoff (Who? Ex-aaactly....) Dibidi connoisseurs know what movies like these are worth -- watch over beer, then throw away. Producers now at least know to keep their money on bankable blockbuster bets.

Producers and distributors also do have new channels by which they recoup their costs, like cable TV and legitimate video outlets.

Part of what you pay for in your cable subscription goes to the likes of HBO and Cinemax, which in turn goes back to the movie distributor. Surprisingly, the omnipresent dibidi has done little to curb the channel subscriptions. Dibidi regulars most likely have subscriptions, too; and the funny thing is cable may actually be showing the same programs that the corner vendor is selling. And since the value of the program is in the viewing rather in the possession of the media, might it not be said that the movie has already been paid for? (Of course, cable theft is another matter....)

What about legitimate video outlets? Isn't piracy hurting them? If it is, how do we explain that so many of them still remain in operation, even thrive in the face of bootleg competition?

In recent years, legitimate outlets have had to drop prices to compete with bootleggers. Prices are in fact somewhat higher than compared with the corner dibidi market, but at least they're much more reasonable and much less inflated; and for that we have the dibidi to thank.

So why do legitimate video outlets continue to operate? Their selections are somewhat better organized so it's easier to search for a title, something a semi-mobile dibidi vendor can't be bothered with. With legitimate vendors, there's at least a higher guarantee of quality, something not always possible with the dibidi. There are other factors, too: packaging, location, and perhaps even the occasional conscience buyers. All these combined add up to value that customers may be willing to pay for.

Piracy exists because a desired product is artificially scarce or its price is kept artificially high. Ultimately, piracy is an untenable enterprise because of its illegitimate nature; it's really only a matter of time before the economics catch up with it. If legitimate channels like movie theaters, subscription media, and video stores continue to operate in the face of blatant piracy, then doesn't that point the way to which the economics need to be addressed?

In the meantime, though, we can all enjoy the comedy value that Edu Manzano and the OMB provide.


  1. When we were in Dumaguete,we watched a pirated copy of a movie I have at home on DVD.The quality can't compare,but I imagine the price difference is significant.My in-laws could never afford to pay what I pay for a legit copy.( like your new template BTW )

  2. True enough, Robert. Paying Stateside prices for is a bit too much for most folks here. But I imagine if the price difference wasn't so great, people would go for the genuine article.

    Thanks for ze compliment!

  3. Great insights, Dominique. Your arguments make a good case for the laissez faire type of government being pushed by the likes of Alan Greenspan for years now. Mr. Manzano should take piracy as a signal that something's not right in the industry. He also needs to realise that fighting these "forces" will be just a futile act. A little bit of research and a lot of intelligence would do him good.

  4. Thing is most household can't afford to buy legit DVD on a regular basis, so they're not likely to buy. No buyers, no market, no loses. It has always annoyed me how Hollywood can claim to have loses for a non-existent market.

    I've always thought that movie distributors introduced movies in VCD format to combat pirated movies.

    Of course, pirates seem to have better insight of the market and are now offering 8-, or more, movies in one DVD. Never mind the quality, the priates know they're existence owes to the fact the market is price sensitive. Very price sensitive.

    I've always thought DVD prices were fair, at least compared to CDs...

  5. Dominique, you are looking at it purely from the purview of economics. Practical, yes, but it hardly addresses the substantial issue involved. Intellectual property right is a substantive right just like any other right. It deserves equal protection under the law. And just because the law is ineffective in curtailing the effects of piracy does not make the latter any less repugnant.

    P.S. Although I am also a dibidi regular. XD

  6. dom, i don't know if you can really connect hollywood's streamlining (ie, better movies) with the dibidi phenomenon. i don't think we have the dibidi to thank for anything. jute is right, IP is a substantial right that must be protected. btw, i don't buy pirated movies.

  7. Jute, while I agree that piracy does raise the issue of IP rights, I think Dominique is right for viewing it from an economics point-of-view mainly because I believe it is in economics where the root cause of piracy lies. The issue of IP rights is just a consequence: I doubt that people who buy pirated media are doing it because they specifically want to step on someone's IP rights. Rather, they buy pirated products because they feel there's too huge a gap between the selling price and the perceived value of said product. Furthermore, piracy also exists because entertainment businesses misunderstood the structure of the industry and its market. Before the dawn of disruptive technologies such as the Internet, however, they were shielded from the consequences of their errors. Nowadays, the dam that previously protected them has been broken and it's clear that they need to change their business model or perish.

    I agree, IP rights need to be protected. But legal protection can only go so far and if the entertainment business will look solely to the law for the safety of their business, they will die eventually. I think it's best that they change their business model rather than be whiney about the whole thing.

  8. Thanks much for the comments, guys. I didn't think I'd get this much of a reaction.

    Actually, this is a three-part series I'm writing, originally intended for the Dumaguete Metro Post. I cover some of the points you mention in the subsequent articles.

    Next part concerns friction and piracy and the third is about sideways approaches to piracy.

  9. Jute: fair enough, but if you trace my line of thinking, I'm not condoning piracy or discounting the value of intellectual property rights. But neither can we completely dissociate it from real-world economics, as Mark says.

  10. mark, I'm sorry. But looking at the issue purely through economics is missing the point all together. I am not saying that we should all together ignore economics. That would be disastrous. Rather, I am saying that the law is not only there to protect the economic benefits that intellectual property owners ought to gain. That is merely an incident, a necessary by-product of the effect of its enforcement. What is being protected here is the intellectual property right -- the right itself which can never be equated, much less reduced, into a mere summation of what benefits these pirates are supposed to be contributing.

    Now, I am not being self-righteous here because I do buy pirated movies. Also, I mostly agree with Dominique about how the entertainment industry has actually improved in the quality of their products (although there is no sufficient basis to say that this is the direct result of piracy). I am just saying that the issue is not that the movie industry can certainly make do with less box office sales, but that someone's rights are being transgressed and that is what the law is supposed to address.

    Now, again, as for the effectivity of the enforcement of the law, I agree with Dominique. It is ineffective and the regulatory body that is supposed to enforce it is likewise ineffective. I think perhaps Congress needs to enact a law and put more teeth into it.

  11. Jute: just missed your latest post.

    To follow your argument, though: how then do you propose to protect the intellectual property right? Monitor the sidewalks and the malls 24/7? Hire more police to run after bootleggers? Prosecute buyers and sellers? Increase the fines beyond the accused's capacity to pay? Build more prisons to hold the offenders?

    Pretty soon you'll bump your head against economics again: it's very expensive to build an infrastructure to enforce this sort of thing, and therefore efforts will be ineffectual.

    So rather than flail wildly (and fail spectacularly), it's better to use economics to bring down to a manageable level where the application of the law can be effective.

  12. Blogie: oh, I think the point on the unintended consequences of piracy is quite arguable.

    Take for instance the phenomenon of the simultaneous worldwide release. Sure, you can argue that the film company simply wants to take advantage of the hype they generate, but...on the other hand, gearing for simultaneous release is also an expensive undertaking. So why do it?

    Take a look at local DVD and VCD prices as well, as Hoovenson points out. One could say that the distributor simply wants to price it right for the market...but bootlegging, if you include it as part of your economic equation, also does help in finding the right price point.

    I'll get to more "benefits" of piracy in the next installment.

  13. Dominique, I concede that you have a point. All I am saying that it is not the whole point. True that your post did not necessarily preclude the substantial issue of intellectual property right involved but your manner of presenting it felt to me like you are sweeping it under the rug in favor of something that is more...I don't know...pragmatic? Which is only right. No argument in that.

    But I am not a lawmaker. Neither do I bang my head against the wall thinking about what should be done I actually adopt the wait-and-see attitude with this.

  14. Hi Jute. Thanks for your reply. I actually agree that we also need to consider the moral aspect of piracy. However, note that the moral aspect of piracy has limited use for us. Specifically, we can only use moral issues as a means to drive home the point that the problem is serious. But we've already established the seriousness of the problem for quite some time now.

    For the purpose of solving the problem of piracy, however, I believe that viewing it from an economic perspective will suffice for a number of reasons. First, piracy started mainly as someone's "solution" to an economic problem. Second, dealing with the moral aspect in this case can lead people to think that preserving the industry's traditional practices/structure is critical. However, history as taught us that in the face of a changing market/industry structure, the best thing to do is to adapt.

    Here's how I see things: Previously, the balance of power tilted in favor of the entertainment industry mainly because the market did not have the technologies to effectively negotiate for fair prices. Back then, when this was so, the entertainment industry exploited it as much as it could. Now that the market has the necessary technologies, however, the balance has shifted, and the market has bargaining power. The ball is now with the industry and it needs to react to balance things. Right now it's playing around with legal measures, perhaps to buy time, or perhaps out of laziness. If it wants to stay in the game, however, it has to do more than that. It needs to adapt.

  15. What I have noticed, however, is the distinct lack of video rental places nowadays. Anyone remember that tiny era where movies could be rented for a relatively small amount and taken home for two- or three-day viewing?

    Nowadays, however, the rental outfits are mostly gone. ACA has fewer places now. Video City has focused on sales. And the smaller, unaffiliated rental places have mostly packed up their tapes and slowly faded away.

    Might the so-called "dibidi" phenomenon be responsible for the loss of this tiny industry? After all, you could pick up a pirated DVD for what is arguably the same price as a single rental...

  16. i've read few years about this big american music mogul (forgot the name though but he was the one who made alicia keys popular) said piracy is detrimental for the industry but he would be more worried if there is no pirated version of a certain album, read as that album is a ho-hum and isn't worth for to be replicated. that made me wonder though if these pirates also think twice of the waste of money if they are going to make pirated copies of non popular movies and albums.