Movies for Nothing, Pics for Free (In China)

My morning dose of the Harvard Business Review's Daily Stat had an interesting nugget of information. A study and survey conducted in China over 2008-09 by Jie Bai at Wharton and Joel Waldfogel at the U of Minnesota, found that “About three-quarters [75%] of movie consumption in China is unpaid, compared with about 5% among U.S. consumers and less than 10% among American college students.”

In a nation of over 1.3 billion people, just under 80% of the population is over the age of 15. That’s over 1 billion potential paying consumers of movies. According to UNESCO’s Institute for Statistics, the average movie ticket in China in 2009 was $3.45. China is now the second-largest market after the US for films.

Assuming every potential paying customer in China may “consume” one movie in a year, and 75% of them “steal” it, that’s lost revenue of over $2.5 billion just there in potential ticket sales. In comparison, according to The Economist, China’s box office sales, though growing by 30%, barely touched $2 billion last year.

The loss in revenue, for both the international and domestic cinema industry in China, is staggering. Add to that lost sales in DVDs, music and other hard merchandising (that is not counterfeited), and the likelihood that people may watch several movies a year, the numbers become astronomical. China has done little to address piracy of media and intellectual property within its boundaries.

China has long-protected its local industry, as have many other countries, from the onslaught of Hollywood. The Economist noted last year that until recently, “only 20 foreign films could be screened at Chinese cinemas each year. In February the number increased to 34—though only if the extra 14 are shown in 3D or large format.” The Chinese government may also be missing the wood for the trees. This lost revenue to piracy hurts Hollywood, but it also hurts the domestic industry that might have been able to legitimately sell more theatre tickets, DVDs and other media. The real harm, in turning a blind eye to piracy, and stymieing more access to, and liberalisation of its industry, is the lost revenue and stifling of the long-term potential of its own home-grown film industry. 

And as for Hollywood. It may benefit far more from pursuing the real culprits instead of raiding the dorm rooms of students in universities across the US.

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