Naila N. Robinson
Paper: Creative Industries
DOES THE END JUSTIFY THE MEANS?
Advertising can be an expensive undertaking. When Peter Jackson finished production on the Lord of the Rings Trilogy, New Line Cinema spent millions of dollars promoting the movies both domestically and abroad from 2001 to 2003.[1] Their advertising efforts were well-received. The movies received domestic and international acclaim along with record DVD sales. Emmanuel Isikaku produced the Nigerian movie “Plane Crash” in 2007.[2] This movie has high DVD sales along with domestic and international acclaim as well, yet he spent very little money to promote his movie.[3] The difference between these movies can be attributed to piracy. Without piracy, Emmanuel Isikaku would not have the means to spread his message through-out Africa and the rest of the world, but he paid a heavy price for that distribution. He failed to break even despite the film’s success.[4]
As developing nations increase production of creative goods or artistic works, the short-term benefits of piracy, such as the unsolicited promotion of an artistic work, do not outweigh the detrimental costs of piracy. If a nation implements and enforces stronger intellectual property protections for its artistic works, the country is less likely to suffer from a national “brain drain”. Without strong Intellectual Property protection, an artist gaining international popularity is unable to obtain revenues from their work at home and is likely to move to a country where they can. This paper focuses on how a developing nation, namely Nigeria, may gain substantial short-term economic benefits from piracy but will ultimately slow its economic growth if piracy remains unchecked.
Piracy in Action
Pirates in Nigeria use a complex distribution system to sell pirated DVDs. Pirates often watch local vendors to determine market demand. They will take the fastest selling DVDs to China, where they are mass-produced.[5] Pirates take the illegitimate copies back to their home country or sell them abroad. With the invention of video compression technology, one disk can now hold anywhere from 5 to 20 movies and can be sold for about $4.00.[6] A legitimate DVD in Nigeria is sold for $7.00 to $10.00. No legitimate producer in Nigeria can reasonably expect to make a profit selling a movie for $4.00.[7]
Piracy has now moved beyond physical copying. On the social networking sites OnlineNigeria, Naijapals and Jujunation users can watch unlicensed full length videos and download music.[8] Jujunation was recently asked to take down some of the hosted videos but no formal legal proceedings were initiated.[9] Some cable TV stations still air Nigerian movies without the permission of the producer, or if they do pay; Nigerian producers say they pay “peanuts.”[10]
Legitimate producers in Nigeria use a simple distribution system to sell their movies. The average Nigerian film producer self-funds the production of a movie in addition to loans from friends and family. The average budget is around $25,000.00[11] but can cost as little as $8,000 to produce using a home video camera.[12] After completion of the movie, a producer acquires the distribution rights. The producer will burn the movie himself and sell the movie using local street vendors. Movie producers in Nigeria must sell DVDS on the street because there are virtually no formal movie theaters to publicly display the movie for profit.[13] As a means of legitimate promotion, many patrons buy the movies on the open market in Nigeria and take the movie with them as they travel to the United Kingdom and other parts of the world.
It is a similar system of CD production in Nigeria. There are 15 distribution plants copying about 100,000 CDs daily. Nigerian officials say that the current distribution plants are unable to meet the demands of Nigeria’s 140 million population, leaving room for pirates to fill in the gap. [14]
Under what conditions can piracy benefit a developing country?
Piracy can be an effective tool to promote the existence of an artistic work in the absence of mass media accessibility as a promotional tool. If there are numerous opportunities for an artistic work to be introduced through traditional mass media or the Internet, pirated goods are unnecessary for promotion.[15] For example, in the United States, any major movie studio can spend millions of dollars on an international ad campaign through television, radio, internet, newspaper and magazines to promote an upcoming movie.
In the developing world, promotion of an artistic work through mass media may be cost-prohibitive or non-existent due to the lack of a national mass media or a consumer’s inability to access the media. It is likely in the developing world that either the average self-financed producer may not have the funds available to use advertising as a promotional tool or the average consumer does not have access to internet or cable, making advertising ineffective. Oftentimes, pirates have access to a more complex multinational distribution system than the average self-funded producer. The pirate is able to reach consumer markets that the average producer may have never imagined. In light of this fact, a local artist is more likely to have international fame and success from their work due to pirates. When it comes to media, what kills is not piracy, its obscurity. [16] This may explain why Nigeria’s creative industries continue to enjoy economic growth despite the rampant piracy of its works.
Does piracy help individual creators in poor countries?
An individual artist in the developing world may not make any money from the good itself, but in secondary markets made valuable by the good (concerts and access to the artists).[17] Piracy is an effective tool to create secondary markets. The benefits of a pirated good can lead to more opportunities for the individual creator on several levels.
Firstly, individual creators can gain valuable market data from pirates especially from pirates beyond their borders. The average producer would not normally have access to this kind of market research. The lack of a sophisticated distribution system makes it very difficult for an individual creator to track their sales. Tracking sales could create more opportunities for secondary markets or derivative works. Using this data, an individual creator can determine which song or movie is popular. In the case of a singer, the popularity of song or CD through radio requests in a particular area might enable the signer to make more money from concert performances in that geographic area. In the cases of movies, a heavily pirated movie might prompt a creator to make more movies similar to the genre of the successful movie or create derivative works from the original movies such as sequels.
When the United States was a developing country, it did not provide copyright protection for foreign artists but maintained intellectual property rights for domestic artists.[18] As a result, European novels in the United States were sold at much cheaper prices than they were sold in European markets.[19] Publishers, attempting to undercut one another, sold these books at lower prices since they could be copied without compensation to the creator. The cheap prices and availability of these books contributed to the popularity of many foreign artists in United States. Charles Dickens was able to parlay his popularity among readers into a heightened demand for complementary lectures.[20] His U.S. reading tour from 1867 to 1868 included 76 appearances and earned him the astonishing sum of $228,000 in total receipts.[21]
Secondly, promotion of work though piracy may lead to increased legitimate demand for the same work. This situation presents the creator with a real opportunity to make a profit based solely on their artistic work as if they had received strong IP protections of their work. If an artist creates a particularly popular work, purchasers of the pirated good may want a legitimate copy for “authenticity/quality purposes” or as special gifts.
In the case of Charles Dickens, he was able to make additional profits on the sale of his books in the United States as if he were entitled to IP protection. Legitimate publishers would pay him for an “authorization” or exclusive right to be his only “authorized” American publisher.[22] Foreign artists would provide advanced copies of their work to authorized publishers, hence eliminating the rush to print copies of the novel before their competitors.[23] Pirating publishers would often sell unauthorized abridged copies of foreign works or change the story to suit American tastes.[24] Thus, those purchasers who wanted a quality “real” copy of his work would have to purchase his book from an authorized American publisher.
Lastly, commissions for additional works in countries with strong IP protections may become available if goods distributed through pirated networks are seen by those with financing capabilities. For example, Hollywood has started tapping into Nollywood’s global popularity[25]. Earlier this year, “Close Enemies” the first crossover film, was produced in LA by Prince Ade Bamiro using major Nollywood stars.[26] It was made for $300,000.00, more than 10 times the average Nollywood budget. This movie was screened at the Nigerian Pavilion at Cannes. [27] Without piracy, Hollywood may have never seen the works of Prince Ade Mamiro.
Does piracy offer far-reaching benefits to a developing country?
Piracy is often a two-way street. In a nation with low IP enforcement, pirates can easily ship domestic products within the country or abroad without the authorization of the creator. That same person can easily bring pirated goods into a country with little or no repercussions because of the lack of protection standards. Because pirated goods are often sold at below market prices, this may be the only means by which the citizens of the developing world would be able to afford works of literature, music and other copyrighted educational materials from the developed world. Some critics of strong IP protections say that piracy can increase the developing world’s access to knowledge. In some contexts, copyright “piracy” merely constitutes fair use by another name.[28]
When the United States was a developing country no copyrights were granted to foreign authors because the emphasis in that era was on fulfilling the objectives of the Constitution in promoting the progress of social welfare.[29] Pirated books increased the overall amount of readership in the United States because the availability of books was much cheaper than they would have been under a strong IP protection regime for both domestic and foreign works.[30] Foreign books were cheap because of their availability and American books were cheaper because they were trying to compete for the same reader. Thus, after the reforms in 1890s, the prices of some books were higher, and the range of choices less extensive than would have been the case if the law remained unchanged. [31]
National access to cheap copyrightable material could serve as a catalyst to spark innovation and growth of a particular industry in a developing country, especially the creative industry. Access to cheap creative goods may educate the next generation of creative artists to become more innovative and increase the amount of creative goods made and sold, thus increasing the size of the national economy. Persons with these newly acquired skills in the workforce can also translate these skills into other high value activities for developing world.[32] For this reason, developing nations should pay special attention to expanding their creative industries. Goods from creative industries can spark innovation and economic growth much faster than traditional goods. Despite the rampant piracy, experts at WIPO estimate that the Nigerian film industry now generates $200 to $300 million in annual revenues.[33] This is a substantial boost to the Nigerian economy in light of the fact that this industry did not exist 30 years ago.
Pricewaterhouse Coopers, LLP reported in 2006 that world import of audio-visuals from the developing world have increased ten-fold while world imports of traditional goods have increased only four-fold.[34] “World Bank estimates have placed the global value of creative industries at as much as 7% of the world gross domestic product” and is expected to rise 10% to 20% per year.[35]
If pirated goods motivate creative artists to become innovative and ultimately create more creative goods, supplemental industries will benefit as well. As the number of creative artists within a country increases, small creative companies will start emerging. These small companies tend to cluster in a specific geographic area for a mutual benefit. Clusters are more common in the developing world because they help small companies have a wider variety of suppliers, finer division of labor and it provides a central locate for buyers and sellers to meet. [36]
Clusters are particularly important in a developing nation because it means more people will be employed. Artists will gravitate towards these clusters in hopes of obtaining success. If success is attained, they will likely start their own company in that area, which will enable them to hire more employees. These new businesses also need more artists, security guards and secretaries just as a starting point. If a creative industry expands, it can employ millions of people. For example, the creative industry in the United States employs 1.3 million people.[37]
Furthermore, if artists tend to gravitate towards a particular geographic level to sell their artistic work, the tourists are not far behind. The success of a creative industry in a nation can positively affect the success of a nation’s tourism industry as fans grow tired of waiting for concert tours or new movies to come to their home towns. Rough numbers suggest that the music industry in Jamaica accounts for about 4 percent of Jamaica’s GDP, but the impact on the economy is still larger because reggae promotes the tourist industry, the source of nearly a half of the nation’s foreign earnings.[38]
The purchase of pirated goods can mean cheap access to educational materials for a developing nation. Access to education means more innovation from its citizens. This is particularly important for creative industries because this industry is growing at a much faster rate than traditional goods. More innovation may lead to the emergence of small companies to create and sell artistic works. These small companies may establish themselves in a very specific area and form industry specific clusters. These companies may provide work in supplemental industries for the citizens of a developing nation. As the popularity of the creative industry grows, it will develop a fan base. This fan base can turn into tourism dollars for developing nation.
Does piracy hurt an individual creator in the developing world?
Rampant piracy also makes it very difficult for an individual creator to have an economic incentive to work. The benefits of piracy are unrealized if an artist does not have enough money to continue creating or does not earn enough money to provide for their basic living expenses. Oftentimes, pirates undercut the legitimate market to such a degree that a creator will receive no financial benefits directly from the sales of a produced work, especially abroad. “For all the films sold in the Bronx or Washington, not a dime comes to the Nigerian filmmaker” says the head of the Nigerian Film association in Hollywood.[39] Creative industries in the developing world are characterized by a high degree of self-employment, individuals working on a project by project basis in precarious financial conditions. “Many workers flip in and out of employment and must supplement their creative industry work with regular employment”.[40] This situation is not likely to change as long as pirates continue to steal from legitimate creators.
Since creators cannot ascertain any profits from their works, it makes it very difficult for the average creator to obtain investor-backed financing. Simply put, investors are too scared to invest in projects in the developing world because piracy makes it very difficult for an investor to make a profit on their initial investment. This lack of financing forces individual creators to do whatever is necessary to bring down production costs, lessening the overall quality of their work. From the lack of financing, Nigerian film producers have been forced to decrease production costs and the overall quality of their work. Industry critics say that Nigerian films will never be able to maintain crossover success in more lucrative markets if they do not improve the lighting, sound and overall quality of its films.
Does piracy have far-reaching disadvantages for a developing country?
Piracy has far-reaching effects on a developing country beyond its negative impact on an individual creator. The effect of piracy on an individual creator has a negative cumulative effect on the entire industry. When a developing nation does not have a strong IP protection system in place to prevent piracy, it will ultimately lessen its economic growth. A nation without strong IP protections has the potential for expansive “brain drain” because artists are unable to ascertain any financial benefits for their work. In addition, lack of IP enforcement makes it very difficult for an artist to secure any domestic or foreign investors in their work. While some artists would prefer to support their nation’s domestic economy, it is difficult to imagine that they would stay in their home country when they could get paid for their work elsewhere.
Brain drain has already started to occur in some parts of Africa. Audio visual piracy in Africa is so rampant that some production houses are refusing to distribute in their home countries, preferring to sell their shows to immigrant Africans in better regulated markets.[41] Some producers in the Ivory Coast prefer to sell their DVDs directly to African immigrant populations in Europe and via internet download. They refuse to sell their DVDS in their home markets; Xavier Abidjan’s sitcom “La Cour Commune” is available for purchase in Paris at local Virgin Megastores for 15 Euros.[42] Deals similar to this one are being negotiated in China, Great Britain and the United States. This situation is unfortunate because local residents may be unable to enjoy local artists. However, this may be the only manner in which an artist from this part of the world will receive any compensation for the creative work.
Financial investment in creative industries is also lacking in the developing world. Movies in Nigeria are financed by a distributor buying the rights to the completed movie in its entirely, equity financing through friends and family and personal loans.[43] This method of financing does not provide enough money to the distributor or individual creator to produce high quality films. Movies in the United States are financed though equity financing, pre-sales, production loans and production studios who may buy some or all of the rights in a completed movie.[44] Under the traditional Nigerian financing system, there are not enough domestic resources to help distributors generate profits from Nigerian movies.
Foreign investment would certainly help distributors generate more revenues from their work. At this stage, foreign investors will not invest in a Nigerian film because of the level of risk associated with the piracy and lack of enforcement from the Nigerian government. The Nigerian example is indicative of the level of IP protection in most of the developing world. Creative industries in the developing world are dominated by the informal economy, operating without regulations that would raise finances, improve labor conditions or upgrade the industry.[45] Few developing countries have given the industry the same level of attention in terms of the supportive or promotional policies that exists in developed countries. Although for some developing nations, the sector could become more valuable than their traditional low value added, commodity based industries. A failure to create supportive or promotional policies could cost a developing country its creative industry from “brain drain”.
Encouraging economic growth in the developing world without piracy
Looking at the benefits and detriments associated with piracy suggests that appropriate intellectual property institutions are dependent of the level of economic and social development of each particular nation. If a developing nation is at the beginning stages of establishing a creative industry and it does not have an effective mass marketing system, less IP protection may be necessary to facilitate its growth. Piracy could be an effective tool to showcase its work. The cost of piracy is a reasonable expense to promote an industry. As the creative industry grows, the cost of piracy may become too expensive. The publicity associated with the piracy does not outweigh the loss of investment opportunities and revenues to the individual creators and the industry as a whole.
The difficulty arises for developing nations in determining when to enforce IP rights after years of “looking the other way.” Nigeria is the perfect example of a developing nation in this situation. They have outgrown the benefits of piracy. Piracy helped build its creative industry but individual creators in the country are demanding governmental support in enforcing their rights. Nigeria is now in a position where it must implement strong IP rights or its creative industry will disappear. Individual creators will move to other countries where their financial interests will be protected and Nigeria will lose the annual revenues between $200,000,000.00 and $300,000,000.00 per year.
Nigeria has decided to start enforcing IP protection standards to protect its domestic creative industry. Nigeria has initiated public awareness campaigns to grammar school-aged children about piracy and established the Nigerian Copyright Commission.[46] Nigeria has also enlisted international resources and is using the frameworks established in TRIPS and WIPO to implement national IP protection standards.
Nigeria has painfully learned that the benefits of piracy are short-lived. When domestic artists start complaining about the detriments of piracy over its benefits, a developing nation should respond to those complaints by increasing the level of IP enforcement procedures. A failure to adequately respond to those complaints could cost a developing nation its creative industry. Due the important role the creative industries now play in international trade, it is very important for a developing nation to implement strong IP protection law to protect that industry in order to facilitate its overall economic growth.
[1] New Line Cinema, at http://www.newline.com.
[2] Main Mackay, Nollywood Losses Half of Film Profits to Piracy, say Producers, at http://www.cnn.com/2009/SHOWBIZ/Movies/06/24/nollywood.piracy/index.html
[3] Id.
[4] Id.
[5] Id
[6] Id
[7] Id.
[8] Munashe Gumbonzvanda, Nigerian Movies Are Starting To Emerge Online… Is This Piracy, at http://www.techmasai.com/2009/07/nigerian-movies-are-starting-to-emerge-online-is-this-piracy.
[9] Id
[10] Main Mackay, Nollywood Losses Half of Film Profits to Piracy, say Producers, at http://www.cnn.com/2009/SHOWBIZ/Movies/06/24/nollywood.piracy/index.html
[11] Id
[12] Steven Gray, Nigerian On-Screen, ‘Nollywood Film’ Popularity Rising Among Emigres, at http://www.techmasai.com/2009/07/nigerian-movies-are-starting-to-emerge-online-is-this-piracy
[13] Main Mackay, Nollywood Losses Half of Film Profits to Piracy, say Producers, at http://www.cnn.com/2009/SHOWBIZ/Movies/06/24/nollywood.piracy/index.html
[14] WIPO Magazine, STRAP and CLAMP – Nigeria Copyright Commission in Action, at http://www.wipo.int/wipo_magazine/en/2008/05/article_0009.html
[15] Koji Domon and Tran Dinh Lam, Profitable Piracy in Music Industries, Review of Economic Research on Copyright Issues, 2009, vol. 6(1), pp. 1-11.
[16] Yi-Jian Ngo, The Benefits of Piracy, at http://www.microsoftstartupzone.com/Blogs/yi-jian_ngo/Lists/Posts/Post.aspx?List=74bc9d42%2Da50b%2D42e6%2D9cc8%2Db0081b4e6957&ID=101
[17] Mike Masnick, The Benefits of Piracy Aren’t Always In the Expected Places, at http://www.techdirt.com/articles/20080822/0336542063.shtml
[18] B. Zorina Khan, Does Copyright Piracy Pay? The Effects of U.S. International Copyright Laws on the Markets for Books, at http://www.nber.org/papers/w10271
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Main Mackay, Nollywood Losses Half of Film Profits to Piracy, say Producers, at http://www.cnn.com/2009/SHOWBIZ/Movies/06/24/nollywood.piracy/index.html
[26] Id
[27] Id
[28] B. Zorina Khan, Does Copyright Piracy Pay? The Effects of U.S. International Copyright Laws on the Markets for Books, at http://www.nber.org/papers/w10271
[29] Id.
[30] Id.
[31] Id.
[32]Diana Barrowclough and Zeljka Kozul-Wright, Creative Industries and Developing Countries: Voice, Choice and Economic Growth, at http://www.springerlink.com/content/x31566524q6w2601/
[33] Dayo Ogunyemi, Film Financing in Nigeria: Opportunities and Challenges, at http://www.wipo.int/edocs/mdocs/copyright/en/wipo_ip_fin_ge_09/wipo_ip_fin_ge_09_theme4_ogunyemi.ppt.
[34] Diana Barrowclough and Zeljka Kozul-Wright, Creative Industries and Developing Countries: Voice, Choice and Economic Growth, at http://www.springerlink.com/content/x31566524q6w2601/
[35] Id.
[36]John McMillian, Trench Town Rock: The Creation of Jamaica’s Music Industry, at http://faculty-gsb.stanford.edu/mcmillan/personal_page/documents/Jamaica%20music%20paper.pdf
[37] Diana Barrowclough and Zeljka Kozul-Wright, Creative Industries and Developing Countries: Voice, Choice and Economic Growth, at http://www.springerlink.com/content/x31566524q6w2601
[38] John McMillian, Trench Town Rock: The Creation of Jamaica’s Music Industry, at http://faculty-gsb.stanford.edu/mcmillan/personal_page/documents/Jamaica%20music%20paper.pdf
[39] Katrina Manson, Piracy film makers out of African Market, at http://www.reuters.com/article/industryNews/idUSTRE52332M20090304
[40] Diana Barrowclough and Zeljka Kozul-Wright, Creative Industries and Developing Countries: Voice, Choice and Economic Growth, at http://www.springerlink.com/content/x31566524q6w2601
[41] Katrina Manson, Piracy film makers out of African Market, at http://www.reuters.com/article/industryNews/idUSTRE52332M20090304
[42] Id.
[43] Dayo Ogunyemi, Film Financing in Nigeria: Opportunities and Challenges, at http://www.wipo.int/edocs/mdocs/copyright/en/wipo_ip_fin_ge_09/wipo_ip_fin_ge_09_theme4_ogunyemi.ppt.
[44] Id.
[45]Diana Barrowclough and Zeljka Kozul-Wright, Creative Industries and Developing Countries: Voice, Choice and Economic Growth, at http://www.springerlink.com/content/x31566524q6w2601
[46] WIPO Magazine, STRAP and CLAMP – Nigeria Copyright Commission in Action, at http://www.wipo.int/wipo_magazine/en/2008/05/article_0009.html
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