June 20, 2006

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Movie pirates

Conventional wisdom says China's intellectual property rights (IPR) are close to non-existant. Piracy is rampant and the exception that proves the rule is the tight control over China's Olympic merchandise. That said, even the same association can't quite work out how much it's costing. Two articles from today's Standard. First:

Piracy cost filmmakers US$2.7 billion (HK$21.06 billion) last year, with domestic firms shouldering more than half those losses, according to a study commissioned by a trade group representing the major Hollywood studios. China's film industry lost US$1.5 billion in revenue to piracy, while US studios lost US$565 million, according to data released Monday by the Motion Picture Association...Some 93 percent of all movie sales in China were of pirated versions of films, according to the latest study.
Makes you wonder about the 7% that buy originals at 5 times the price of copies. The key is to note that China's film industry suffers far more than America's. But from an op-ed in the same paper:

California Democratic congresswoman Diane Watson, whose district includes parts of Hollywood, said roughly 95 percent of all CDs and DVDs manufactured in China are counterfeit. She quoted the Motion Picture Association of America, claiming that its member companies lost about US$244 million in revenue to Chinese piracy last year.
Same association, two vastly different numbers. Maybe the MPAA uses Chinese statisticians to put the numbers together?

Who's to blame here? Is it the average Chinese worker, who earns maybe 5,000 yuan a year and can either buy a copy for 5 yuan or the original for 10 times as much? Is it China's government, who's domestic industry and creativity suffers far more from piracy than Hollywood? Or is it the outdated business and pricing models of foreign companies in the Chinese market?

Update 21/6

AP points to an excellent piece on the Variety blog that also shows the MPAA numbers are fantasy and rubbery (but what else can you expect from Hollywood?), as well as making some other telling points about these "losses".

posted by Simon on 06.20.06 at 08:57 AM in the China category.


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You forgot the twin storm of Hollywood trying to delay DVD releases until well after the film is in cinemas with the fact that China imposes strict quotas (and other censorship) on foreign films (which includes Hong Kong films not made on the mainland as a JV with a quota of mainland actors and crew) making it in to cinemas at all.

So it's not just a strict economic factor of pirate versions being cheaper, but also the temporal factor that pirate versions are often available looooong before Hollywood acts to fill the demand.

posted by: Tom - Daai Tou Laam on 06.20.06 at 11:59 AM [permalink]

China's history in one word is that they are mere "Imitators".
.............piracy is a crime though under whatever circumstances it's been done. There's a n urgent need for some strict laws under which anyone pirating must be charged.

posted by: Paulcarter on 06.20.06 at 12:33 PM [permalink]

Piracy a word that is not only China's problem but every country is facing it.

there must be some law and strict action should be taken so that pirators will learn a lesson from it....

posted by: Billy on 06.20.06 at 02:31 PM [permalink]

Agree with Billy. I just think Beijing has decided that piracy is overall a net benefit to the Chinese economy and balance of trade despite stunting the film and software industries in China. Yes local officials don't always follow BJ's orders, but they do when they know what BJs priorities are.

As far as 'outdated pricing models': Of course its expensive to buy a dvd for someone not earning much, but American and other countries have this nifty little concept called video rental. Its the same with software, people complain that Photoshop is too expensive. Yes, its too expensive. Its a goddam professional program

The temporal factor (but not the censorship issue)is a by-product of the larger pirating issue IMO. Lax enforcement has allowed pirating which has given rise to large and truly efficient pirating networks. The urgency for the latest dvd NOW has not been the main impetus for piracy. The dvd's of the very very latest movies are also crap (filmed in the theater), so people wait until the movie company issues the dvd version so they buy the pirated version of that.

I will say however, that I am finding more hawkers of pirated dvd operating out of suitcases. I wonder if the city has been cracking down on storefront purveyors. Anyhow, if its a crackdown, I'd be surprised if it lasts long.

posted by: Shenzhen Whitey on 06.20.06 at 02:49 PM [permalink]

Some things to add to my verbal diarrhea:
Obviously video rental won't work here without enforcement of piracy, but I said it to show that the real thing can be affordable to most of the population. For the truly poor here, there already are video rental places...renting pirated dvd's that is.

--The number of police in Shenzhen are restricted by the Official size of the city, which is different than reality. In Shenzhen you will see a lot of people in a uniform and on bicycle who are not police and have basically no power.
--a tremendously small percentage of police actually are on patrol etc. A huge number are basically bureaucrats pushing the many forms around that we all fill out--which is why you see so many policewoman wearing pumps amd policemen wearing loafers.
--Recently those few police in Shenzhen on patrol have been cruising around at slow speeds with their lights flashing. As if "hey pirateers! hide your stuff for a few minutes while we drive by so we don't have to get out of the car and actually do something."

posted by: Shenzhen Whitey on 06.20.06 at 03:24 PM [permalink]

I'm noticing lots of bashing of pirates here, so I will be devil's avacado for a moment.

Piracy of entertainment content is welcome in China due to the strict regulation and censorship that is placed upon all forms of visual entertainment.

I would wager good money that the majority of China's AmCham and EU Chamber of Commerce members buy pirated DVDs or rob broadcast signals trough illegal sattelite dishes. I imagine that this is also the case for party officials, journalists and employees of MPAA-member companies. It would challenge a person's sanity to only have access to CCP-approved material for viewing.

The majority of pubs where expats are meeting to watch football are not using 'legal' sattelite feeds of pay-per-view matches... they have hacked decoders and illegal dishes.

And the "loss of sales" numbers are complete crap. I picked up a pirated copy of "Bloodrayne" last week for five yuan. It was dreadful and I would never have spent $20 on a legitimate copy, nor would I have wasted 3 bucks on a rental at Blockbuster. Would the MPAA still count that as a full $20 in lost sales? I doubt it.

Until China has a free media, I welcome rampant piracy. (Knock offs of jet-engine parts, medicines and food products is anoter matter)

posted by: myrick on 06.20.06 at 03:26 PM [permalink]

"It was dreadful and I would never have spent $20 on a legitimate copy, nor would I have wasted 3 bucks on a rental at Blockbuster. Would the MPAA still count that as a full $20 in lost sales? I doubt it." ---

correction not "I doubt it" but "I expect so."

posted by: myrick on 06.20.06 at 03:52 PM [permalink]

While the stuff you quote is no doubt current, the stuff you've added is way out of date ...

legitimate DVDs of Hollywood films are now available for as low as 15 RMB and the price for most western studios' products has topped out at 30.

A certain major Hollywood studio is now testing selling their DVDs to pirate shops, providing incentives such as promotional materials and displays and generous return policies.

And now, a piece of old news ... "Beijing" has not decided that piracy is beneficial to the economy. However, a number of party officials and army officials at all levels have financial interests in the illegal replication plants and shops and it is their personal interest to see piracy continue as is.

And ... news flash ... the Chinese worker who earns 5,000 RMB per year usually cannot afford to buy a DVD player or a TV. The average urban worker, who earns in a range of 30,000 to 50,000 RMB per year, can afford a TV, a DVD player, and a legitimate 15 RMB DVD.

posted by: Spike on 06.20.06 at 05:26 PM [permalink]

Variety's Asian cinema blog, Kaiju Shakedown, offers a post today that makes the same point that I attempted to (although much more concisely),:
"But, as we all know, these numbers regarding China are completely bogus anyways. Because most MPAA member movies can't be sold in China so they have no loss. China only allows 20 foreign films to be imported each year, and usually 14 - 16 of these are from MPAA members. So what the MPA is talking about in this report isn't "profits lost to pirates in China" but "profits lost to closed markets in China".

posted by: myrick on 06.21.06 at 09:29 AM [permalink]

Chris, China only allows 20 foreign films to be screened in cinemas each year. There is no limit on the number of foreign films that can be released on home video. Of course, Chinese censorship does play a roll, so that innocuous fluff like Corpse Bride is banned - but widely available from pirates. Anything that is deemed to be too violent, that shows China in a bad light, that deals with the occult, too sexual, that shows criminals getting away with their crimes is usually banned.

posted by: Spike on 06.22.06 at 05:24 AM [permalink]

Oh my ghosh !So huuuuuuuuuuge losses, bear it now. Everybody has to pay for the bad deeds, now there's no use of crying on split milk.
..........if China and America still dont realise, atleast i can imagine their dark future with economy falling at a rapid speed.............so...........

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posted by: olga on 07.02.06 at 12:36 AM [permalink]

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