Wednesday, April 19, 2006

The piracy of Hollywood

Today I saw a news blurb that said the American film industry is backing a lawsuit by the WTO against Chinese film piracy. I have two views on this issue.

The first view is that product piracy is rampant in China. There are knock-off products everywhere in this country. They even have forged artwork of Chinese artists. This is nothing new around here. And China has been stepping up efforts to reduce pirated and forged products. However, this is very difficult in such a large country with enormous cities and secluded rural communities. At least the government here is making an effort.
On the issue of movies...

Go ahead an try to find a real copy of a Hollywood film. I dare you. It's almost impossible. And if you do find one, it'll cost a week's pay for an average Chinese citizen. Hollywood needs an economics lesson. First, China could be the world's largest market for films, if the industry understood the country. Second, there isn't a lot of money to go around among the average citizen. There are plenty of menial jobs here that only pay about 1000RMB per month. The minimum wage is about 850RMB/month. The conversion rate is approximately 8RMB to one U.S. dollar. Going to the movies in China costs about the same as going to the movies in the U.S. In Shanghai, the theater costs 80RMB. Now think of the cost of a pirated DVD. It costs on average 10RMB for one DVD. And many of those DVDs are of high quality. Here is the simple economics. $10 to a person in the U.S. isn't that much to spend on a movie. Sure it seems like it, but when you're making $30,000 a year it's not so bad. Think about a person making 30,000RMB a year (which is pretty good by Chinese standards) and paying 80RMB for one movie. That's a big difference percentage-wise. If Hollywood wants to make money in the Chinese market, it must rethink it's economics. You can't charge people the same price in different regions when the standards of living vary so greatly. I can guarantee that if Hollywood charged 15-20RMB for a movie in China, the piracy would lessen significantly and theater attendance would increase. All of this would mean large profits for studios.

And that is today's economics lesson.

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