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MillimeterMoney Talks
May 1, 2008 10:00 AM, By S. D. Katz
An alternative view of piracy.
Illustration by Shengchuang. Art Direction by S. D. Katz
Finding a legitimate, studio-authorized DVD in Beijing is not easy. On the street where I live, there are three pirate DVD stores. You want Iron Man or Hitchcock's North by Northwest? Mei wen ti (no problem). There are also sidewalk dealers selling pirate DVDs below the 10-yuan cost ($1.40) that illegal storefronts charge. Try to get gross points on that revenue.
OK, you've heard this before. You know that the Chinese government turns a blind eye to piracy despite the fact that it's clearly a huge business with slick manufacturing and distribution that should be fairly easy to disrupt. Studio execs, the Motion Picture Association of America (MPAA), and the Recording Industry Association of America (RIAA) rant about the moral issues and the importance of free markets, even as they market their products in the United States on airwaves that are a massive government giveaway enhanced with payola and other anti-competitive advantages. This rigged market helps account for the high price of DVDs in the United States, but the studios also have a point: Piracy is stealing.
So it might come as a surprise that DVD piracy in China has had a positive social effect that may very well offset the loss of revenue to the studios. More than Radio Free China or other U.S. information initiatives, DVD pirates do a much better job bringing uncensored information to China. While China makes a vigorous effort to cleanse the Internet and regularly filters websites and search engines (an effort dubbed The Great Firewall of China by observers in the West), DVDs are free from government scrutiny. So you can find documentaries on censored topics such as Tibet or Tiananmen Square on pirated DVDs at many DVD stores. Most political content on DVDs, however, is unintentionally provocative. For example, most Chinese children learn in school that Japan was defeated in China during WWII with little or no mention of the United States or the Allies' defeat of Japan in the Pacific. Spielberg's Empire of the Sun shows a different end to the Second Sino-Japanese War that may leave some Chinese people curious to find out more.
A DVD store in China is like the World Book Encyclopedia of Western values distributed in a pop-culture wrapping. Chinese students often use movies to learn English — possibly encountering their first introduction to concepts such as individualism, democracy, and inalienable rights. The fact that these ideas are often submerged in horror movies, thrillers, romantic comedies, and science fiction is perhaps an advantage because it is clearly not outright propaganda. Of course, Hollywood's version of history is often a good distance from the facts — but some information is better than no information. In the end, it's not political propaganda that promotes change — it's consumer culture. In Western movies, wealth is everywhere. And it's not just the cars, suburban homes, and swimming pools; it's the sense of entitlement that is projected in Western consumer culture — having lots of stuff is a birthright. This has a huge impact on Chinese DVD watchers. Nothing fuels dissent like want.
Hollywood studios might appreciate the value of promoting Western lifestyles, but until recently, they have not understood why our way of life can't be sold for $19.95 per DVD. Studios project their losses due to piracy at Western rates, which produces some impressive statistics, but the buyers in China (apart from a few thousand expats) could never pay Western prices for DVDs. Studios are certainly taking a financial hit in China, but the loss estimates should probably be calculated using the exchange rate — about 7:1. That would set a more realistic value for a Chinese DVD at about $3. And therein lies the only possible solution for Hollywood: lower prices to compete with the pirates.
In 2007, Warner Bros. partnered with China Audio Video to release DVDs at more affordable prices — releasing both Harry Potter and the Order of the Phoenix and Superman Returns on DVD two months ahead of the rest of the world. Paramount has now joined Warner in a joint venture to continue taking on the pirates, and while this effort is a good first step, the market is a tough one. Warner Bros. is selling its DVDs for 15 yuan when they are typically available in stores for 10 yuan and from street vendors for as little as 7 yuan. In China, haggling in the marketplace over 1 yuan is part of the culture, so even a 5-yuan premium on Warner Bros.' product is not the breakthrough it might be. Similarly, the early release strategy is unlikely to beat out the pirates who usually have a version of any blockbuster on the streets the day a movie opens. Some of these early copies are substandard, but often they are just good enough. For many Chinese, price takes precedence over quality. However, Warner Bros., in a joint venture with Paramount, is taking the right steps — and Fox is following suit. The next challenge will be accessibility. The pirates have the most widespread franchise in China, while the studios only have deals with a few premium stores.
No one said it would be easy. In the meantime, Hollywood can take solace in its unintentional and immense propaganda effort to sell the West to the East.
