SpicyIP Tidbits: Indian piracy in numbers

An Indo-US film industry study has been doing some number crunching for piracy in India, of which Mint here gives us a sneak preview.

The study titled The Effects of Piracy and Counterfeiting on India’s Entertainment Industry, set to be revealed at the Ficci Frames conference later this week, estimates that piracy and counterfeiting have lost the Indian entertainment industry almost 40% of potential annual revenues, approximately Rs16,240 crore (or USD 4 billion), as well as around 820,000 jobs.

The industry hopes to use the results of this study to lobby for “a robust legal ecosystem” from the state, including the adoption of optical disc legislation to protect intellectual property rights. SpicyIP looks forward to reports of the conference, and can’t wait to see what non-traditional and innovative best practices the study has to suggest in tackling piracy, especially the online variety.

One comment.

  1. AvatarSumathi Chandrashekaran

    I received this detailed comment via email from SpicyIP reader Pranesh Prakash, which I reproduce in most part. I am in general agreement with these observations, and would only like to add: I wait for the report to examine the veracity of the claims being made in the Mint news article. After that, out with the ammunition!


    From Pranesh:

    I believe that a reliability warning should be standard procedure when reporting on numbers issued by the entertainment industry on piracy (perhaps I should generalise that to reporting on any kind of statistic). They have a slight tendency to exaggerate. (I suggest: “Reader beware: believe figures mentioned below at your own risk.” to be on the cautious side.) Let me explain.

    The Mint report talks of “loss” of “potential” sales. Decoding of that language usually reveals that the figures reported directly the estimated size of the pirate market. One has to remember that the size of the piracy market does not actually correspond to loss. It is just sales of an imitation of the actual product that the original producer did not receive cash for. Calling such lack of sales a “loss of potential sales” is like saying that Ferrari has a “loss of potential sales” to the tune of $50b in the Indian market despite its large size just because the Indian market is poor and cannot purchase Ferraris. Perhaps that comparison is a bit unfair. For many years Bollywood films were not allowed in Pakistan. Bollywood producers were not reporting that as a “loss of potential sales”. Nor do they report non-sales of Bollywood movies in Tuvulu as “loss of potential sales”. In both cases, sales are not happening. It is not a loss, but a lack of sales.

    Coming back to the Ferrari example, Ferrari wouldn’t be correct in calling the sale of fake Ferraris (which are popular, it seems, in Thailand and Italy) a “loss” of sales. Fake Ferraris, just like fake software and fake film DVDs, are a) advertised as fake; and b) cost much less than the original. If they were being advertised as the real thing and being sold at the same price, then I would perhaps not have a problem with the claim of “loss in potential sales” because those are actually potential sales. The two markets (of the original product and the fake products) would then be comparable. Even then, if the pirates were selling the fake product in a remote place where no Indian company does not sell its wares, the question of loss makes no sense. The original product does not have a market to lose.

    Thus, the minimum requisites to talk of piracy as loss are: a) advertisement as the real thing; b) costing around the same amount as the original (or at least price-inelasticity of demand); and c) pre-existence of market for the original. Basically, these three can be summarised into one condition: actual competition (in the non-economic sense) between the original and the fake.

    Piracy is sometimes a good thing. The huge market for Indian films in Pakistan is a result of piracy. Pirates are no philanthropists and are doing it for private benefit, just as the film producers are. But they are helping out the film producers by creating and sustaining the market for Indian films. I’ve presently forgotten whose paper this study originally appeared, but Lawrence Liang often cites the example of T-Series having created the market for film music cassettes in India by blatant (and illegal) disregard of HMV’s copyrights. HMV benefited immensely because people finally wanted to buy cassettes, which hadn’t been doing well till then. I would like to point out that in present day terminology, T-Series is a pirate…

    Interesting anecdote: NBC’s marketing department was uploading copies of Saturday Night Live on YouTube at the same time that its legal department was sending C&D notices to Google to remove the infringing material.

    Contrary to appearances, I am not trying to defend piracy. It is quite often a horrible thing (even without the ridiculous you’re-helping-al-Qaeda bogey). I’m just saying that it is not a cut-and-dried, black-and-white issue. For a start, the mode of calculation of “loss of potential sales” has to be made public. It isn’t provided in the Mint report nor in the two graphs which are linked to the report. I hope the actual document provides some answers when it is released. It has to be checked that the loss referred to amounts to loss in potential sales. That is, it must fit this definition: “additional amount of legal purchases that would have been made if the pirate market did not exist.” The original and the pirated goods must thus be “substitutes” in the economic sense. Thus, what should be bothering entertainers is when sale is happening through illegal means instead of legal means (substitution), and not when it is happening through illegal means in addition to legal means.

    Piracy can be harmful by depriving producers of sales. Piracy can also involve selling the counterfeit product (at a cheap price, or at a remote place) when/where the original won’t sell/isn’t being sold. And when the latter happens, it is good (market being created, popularisation of product, etc.), or, at worst, neutral for the producers. In the latter case, it is not a deprivation of sales-income. Much of the Indian market (the film market at any rate) falls within the second category. It would be interesting to know how many of Moserbaer’s (extremely cheap) releases are pirated. If you can’t beat ’em, join ’em. Am I getting it all wrong, because I though that was what the VCR saga (with Valenti’s infamous “Boston Strangler” quote) taught the film industry? Why can’t film producers release seven low-quality films in one disc for a cheap cost? It’s better to sell cheap than not to sell.


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