Piracy and film business models

Producing movies in a copyright free environment is theoretically impossible. The economics don’t make sense. But in the digital era, there are many things that are impossible in theory but possible in practice – such as Wikipedia, Flickr, and PatientsLikeMe. Add to this list: filmmaking to an audience of pirates. Contrary to expectations and lamentations, widespread piracy does not kill commercial filmmaking. Existence proof: the largest movie industries on the planet. What they are doing today, we’ll be doing tomorrow. Those far-away lands that ignore copy-right laws are rehearsing our future.

Excerpted from a reportage by Kevin Kelly: what happens to film revenues in countries with ‘rampant piracy’?

(the excerpt focuses on Nigeria, the full article also discusses Bollywood in India and China)

“I was in China, in part, to answer this simple question: how does the China film industry continue to produce films in a land where everything seems to be pirated? If no one is paying the filmmakers, how (why) do they keep producing films? But my question was not just about China. 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?

The answers uncovered by my research surprised me. My first surprise was the discovery that in each of these famously pirate-laden countries, piracy is not really rampant – at least not in the way it is usually portrayed by copyright police. Piracy of imported (i.e., Hollywood) films is rife, but locally produced films are pirated to a lesser degree. The reasons are complex and subtle.

The first consideration is quality. Nigerian films are a unique blend of a soap-opera and a Bollywood musical; there’s a bunch of talking then a bunch of dancing. To call some of the Nigerian films low-budget would be to insult low-budget films. Many of the thousands of Nigerian movies are more like no-budget films. But even big-budget Bollywood films are cheap compared to Hollywood, so the total revenue needed to sustain their production is much smaller than Hollywood blockbusters. Naturally the smaller the costs, the less needed to recoup the expenses. For some films even a trickle of revenues may be enough.

But more importantly, low quality is not just a trait of illegal stuff. In Nigeria, particularly in the poorer north, a vast network of small-time reproduction centers serve up copies of films for an audience of many millions. Originally an underground network of copy centers replicated VHS tapes; now the network pumps out optical disks. In the former days of VHS tape copies, the official versions had much better printed covers. These readable and brightly colored covers were their chief selling point, and printing the covers was the bottleneck at which the film industry exerted their policing. But these days in Nigeria, as in the rest of the developing world, movie disks are usually VCDs (video CDs) rather than DVDs. Although lower in resolution, VCDs are easier to duplicate, with cheaper blanks, and in a quality that is “good enough” on a cheap TV screen. These copies are rented out for a few cents from small dusty shacks. But often the cheap VCDs which rent for pennies are “legitimate” – duplicated under an arrangement with the movie producer. The filmmakers and the duplicators have cleverly reduced the price of legitimate discs near to the price of pirated disks. In fact the same operators will usually duplicate both. Since the legitimate disks aren’t that much more expensive than illicit ones, distributors have less incentive to bother with lower-quality pirated versions.

In addition the financing of films in Nigeria is closely aligned with the underground economy. Investing in a film is considered a smart way to launder money. Accounting practices are weak, transparency low, and if you are a thug with a lot of cash “to invest” you get to hang around movie stars by bankrolling a film. In short the distinction between black market disks and official disks generated with black market money is slim.

Nigerian filmmakers look to two other sources of revenue for their trickle of money: theaters and TV. Theaters in Nigeria offer a very precious commodity for very cheap ticket: air conditioning for several hours. The longer the film the better the deal. Theaters also offer a superior visual experience to watching a tape of VCD on an old television. You might actually be able to read the subtitles, or hear the background sounds. The full theatrical experience of a projected film is simply not copyable by a cheap optical disk. So box office sales remain the major revenue support for a film. As Nigeria’s nascent TV industry grows, its appetite for content means there is additional revenues for broadcasting films on either airways or cable systems.”

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