Indian piracy industry packs a $4 bn punch

Indian piracy industry packs a $4 bn punch
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First Published: Mon, Mar 24 2008. 12 16 AM IST

Updated: Mon, Mar 24 2008. 12 16 AM IST
Mumbai: Piracy and counterfeiting are growing and deprived the Indian entertainment industry of some $4 billion (Rs16,240 crore), or almost 40% of potential annual revenues, as well as around 820,000 jobs, according to the first Bollywood-Hollywood collaborative study to be unveiled this week at the Ficci Frames conference.
Industry officials in both the US and India hope to use the study’s findings to call for stricter legislation and tougher policing of the grey market, part of a joint attack on piracy.
Losses to the industry from the trade in illegal CDs, DVDs, music downloads and cable television account for 38% of total potential sales, or $4 billion, an increase from the 25-30% leakage estimated in the prior year period, according to a joint report by the US-India Business Council (USIBC) and the US Chamber’s Global Intellectual Property Centre.
REVENUE EROSION (Graphic)
EMPLOYMENT SUFFERS (Graphic)
It is to be unveiled at the annual Federation of Indian Chambers of Commerce and Industry (Ficci) Frames conference on Thursday.
In an exclusive telephone interview with Mint discussing the findings ahead of a formal release, which was carried out by Ernst and Young (E&Y), business council’s president Ron Summers described the losses as “massive” and said the study’s seemingly large numbers of losses had been “conservative”.
“This is not a leaking bucket,” said Summers. “This is a huge gaping hole in a bucket that should be filling and not emptying. We need to work collectively and collaboratively to stop this scourge. It’s a rupture to the collective economy.”
Titled The Effects of Piracy and Counterfeiting on India’s Entertainment Industry, the report argues that efforts to curb piracy in India’s $11 billion entertainment industry have been hampered by the lack of a cohesive strategy.
“The industry has not been able to put together any holistic common programme to fight piracy on a proactive basis along with the consumers, judiciary and policymakers,” concludes the report.
“Further, the industry suffers from the lack of a united anti-piracy effort across industry segments.”
The report calls for “a robust legal ecosystem” from the state, including the adoption of optical disc legislation to protect intellectual property rights. “Right now, it’s mostly a slap on the wrist,” says Summers, of the punishment meted out to offenders. “The government needs to increase penalties and levy jail terms. And corporations need to raise their voices in unison.”
Acknowledging that the battle against piracy is constantly shifting with the Internet as the new frontier, Summers said piracy is still being handled in its traditional form and that mechanisms were needed to combat online theft with a goal of leakage below 10%. He added that the best way to do this was by sharing international best practice.
In absolute terms, television felt the greatest impact of the theft, experiencing a loss of $2.7 billion, against total potential earnings of $6.9 billion, as illegal cable operators under-declared subscriber numbers, resulting in a $2.5 billion loss. Film piracy totalled up to $959 million, marking a 31% loss to the industry.
As a proportion of total potential revenues, music experienced the greatest loss with piracy estimated to have stripped away 64% of total revenues, leaving $183 million in the pot for corporations, down from a potential $508 million. The gaming segment came in at a close second with estimated losses at $40 million, leaving just $24 million for gaming companies.
Furthermore, the report estimates that 820,000 jobs are lost each year to the media and entertainment industry: 571,896 of which come from the film segment and 133,434 from music—as piracy squeezes both retailers and producers and results in a reduction of total output.
But the findings are not entirely bleak, albeit “shocking” in totality, says Farokh Balsara, head of the media and entertainment practice at E&Y and key author of the report.
Innovations in technology, in particular the advent of digital cinema, have enabled films to be released simultaneously across the country in the crucial first week and substantially cut production and distributions costs, even as they thwart piracy, Balsara noted.
Another innovation is direct-to-home, or satellite television broadcasts intended for satellite-to-home reception, which is a transparent and accurate way to establish view figures, and the entry of companies such as Moser Baer India Ltd, a leading Indian optical disc manufacturer, into the market. Moser Baer acquires the rights to films, then produces quality prints for sale at less than $1—still up to 1.5 times the price of the pirated version.
Balsara added the Indian government has not yet come to grips with the phenomenon of Indian companies going global. He says that despite total outbound investment from India tipped to exceed in-bound investment this year at $15 billion, the government still attempts to treat piracy as a domestic issue.
“The whole thinking by the government is that piracy is in-bound,” he says. The phenomenon of companies going global is very difficult as it happened so quickly and the government has other burning priorities, too. The Indian government and film industry do not have the clout to stop piracy.”
Megha Bhouraskar, an entertainment lawyer at Poppe and Bhouraskar, a New York-based law firm, says the actual losses to piracy are likely to be even greater due to a lack of data.
Additionally, contrary to the report’s contention that technology is chasing technology and helping to contain piracy, Bhouraskar says that innovations in technology actually help counterfeiters to go beyond geographical limits by using the Web. “It helps them to communicate much quicker at a level where we can’t understand where they are based,” says Bhouraskar, a leading anti-piracy lawyer. “Previously, there were geographical limits to mobility and now much is done over the Web and it is harder to understand who is orchestrating the pirated product.”
The study was funded and commissioned by USIBC, a business advocacy organization of the Top 200 US companies with business interests in India. The organization, in turn, is financed by members.
The data was collated using information gleaned through interviews with industry players and entities engaged in piracy, as well as anecdotal evidence from “trusted” secondary sources, to arrive at an estimation of the revenue losses.
Balsara and his team used a three-stage process, where at the first stage, the size of the market and value of each strand within the various segments were estimated. The second stage involved determining the key factors involved in the loss of revenue to piracy, by holding interviews with legal experts, industry bodies, companies and individuals “engaged” with piracy.
The final stage of the process was to validate the findings through reconciling the estimates via data from a different set of experts and media companies.
E&Y reached its job loss estimates based on the current employment-to-revenue ratio, while accounting for other factors including the use of technology, capacity, and which stage of production would be the hardest hit.
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First Published: Mon, Mar 24 2008. 12 16 AM IST
More Topics: Piracy | CDs | DVDs | USIBC | Moser Baer |