The Realities of Digital Piracy

There is a great report now available on digital piracy that explains some of the misinformation around the subject. It’s main focus is on why it is so prominent in developing countries—a factor it attributes to cost.

The main points are that everything from software to DVDs are being sold at prices that are unaffordable in many of these countries. It states “Relative to local incomes in Brazil, Russia, or South Africa, the price of a CD, DVD, or copy of Microsoft Office is five to ten times higher than in the United States or Europe.”

This means that a $15 DVD could cost an equivalent of $150, and this is even more pronounced when you start talking about $60 software (or even software that runs upwards of $1,000).

The report was published by the Social Science Research Council (SSRC), and I had the pleasure of interviewing Joe Karaganis, the editor of the report and SSRC program director. I wrote a story about it today in The Epoch Times.

He mentioned some points about the death of the DVD and CD, which were very interesting, but I wasn’t able to fit them into the story.

His words were:

The DVD market is a huge cash cow. It’s a $25 billion a year market.

The death throes of the DVD are going to be very painful for the major studios. But the DVD is going to die for lots of reasons, which includes piracy but is by all means not limited to it. It’s going to die because digital distribution is going to bypass it.

There will be lots of legal services for much less the cost of buying or even renting a DVD. That will be a fairly wrenching transition and they’re willing to go to the state, go to national governments and spend lots of money trying to protect that market because it’s still in their interest to try and squeeze as much from the DVD market as they can.

He added that the issue with CDs is similar:

The big four record companies were built on the CD and they’re suffering as the CD goes into decline. I think piracy plays a part in that, but lots of other things do too. It’s very hard to isolate specific causes.

[The de-bundling of albums] has crushed the unit of sale for record companies. It’s no longer a $14 object, it’s maybe a couple singles from an album.

There are a whole range of factors weighing against the big, four main labels, despite their efforts to remain very dependent on CD sales.

The report itself is also very interesting. It verifies some of the points I wrote about in an article not far back. I mentioned that while the movie industry is reporting major losses around piracy, global box office sales hit an all time high in 2010.

The SSRC report states:

Software, DVD, and box office revenues in most middle-income countries have risen in the past decade—in some cases dramatically. Sales of CDs have fallen, but the overall music business, including performance, has grown.

Photo credit: Drawing of the finale of Act I of The Pirates of Penzance from The Illustrated Sporting and Dramatic News, 1880.