Reading Practice: Tackling Media Piracy

4 Invariably, industry groups will continue to invoke strong arguments in favour of stronger media control and enforcement. Their key argument is that lower piracy will lead to greater investment in legal markets and that such investment will then lead to economic growth, jobs, innovation and expanded access. It is this logic that has made intellectual property a central subject of trade negotiations since the 1980s. However, while this mechanism certainly operates in some contexts in emerging markets, there are other forces that play a far more meaningful role.

5 Clearly, the common factor for successful low-cost models is neither the creative use of digital distribution nor strong enforcement against piracy, but rather the presence of firms that actively compete on services and price for local consumers. Such competition is endemic in some media sectors, such as in the United States and Europe where digital distribution is reshaping media access around lower price structures. It is widespread in India also, where large national movie and music industries dominate the domestic market, setting prices that attract mass audiences and compete directly with the distributors of pirated media. Furthermore, it is a persistent factor in the business software sector too, where open-source software alternatives, Google, and other free online services limit the market power of corporate commerce.

6 However, with a handful of exceptions, such practice is marginal everywhere else in the developing world, where multinational firms continue to dominate domestic markets. Yet local ownership matters. The domestic market is the primary market of national companies, and those companies will compete for that market. In contrast, multinational pricing in emerging economies signals two rather different goals: (1) to protect the pricing structure in the high-income countries that generate most of their profits and (2) to maintain dominant positions in developing markets as local incomes slowly rise. Such strategies are profit maximizing across a global market rather than a domestic one, and this difference has prohibited real price competition in middle- and low-income nations.

7 Media businesses will either learn to compete downmarket or continue to settle for the very unequal splits between low-priced pirated goods and high-priced legal sales. This is a status quo that appears viable for most sectors of the multinational-driven media business. Software, DVD, and box office revenues in most middle-income countries, for example, have risen in the past decade – in some cases dramatically. While CD sales may have fallen, overall the music industry has grown.