Monday, August 8, 2005
Eric A. Priest has published The Future of Music and Film Piracy in China via SSRN. Here is the abstract.
Piracy has decimated the Chinese music and film industries. More than 90 percent of audiovisual products sold in the People's Republic of China are illegitimate copies, causing billions of dollars in losses to foreign and domestic copyright owners. China has modernized and strengthened its copyright laws over the past two decades, but for a variety of historical, political, and economic reasons, enforcement of these laws remains weak. As dire as the present situation is, however, an even greater threat looms. Over the past five years, demand has soared for Internet access in China, which is expected to have 120 million Internet users by the end of 2005, including 25 million broadband subscribers. Online music and movie file sharing through peer-to-peer networks is already rampant, further diluting legitimate sales. This Paper examines the historical and ideological roots of the present piracy problem in China, as well as the current structure of Chinese copyright law and impediments to its effective enforcement. The Paper then considers three general policy approaches from which the Chinese government might choose going forward as it grapples with copyright enforcement in the Internet age: (1) cracking down hard on piracy; (2) staying the present course; and (3) developing an alternative compensation system for audiovisual works shared on the Internet. I first consider the Chinese government's capacity to crack down on piracy, and conclude that it is unrealistic to expect the government to prosecute an effective, sustained crackdown on piracy in the near future due to several extant political and social factors, institutional deficiencies, and the rise of illicit file sharing on the Internet. I next consider the likelihood that China will continue implementing measured and gradual reforms rather than engage in sustained efforts to crack down on piracy. Using Taiwan's experience as a point of reference, I argue that progress in China's intellectual property reforms will likely be measured in decades, not years. In the meantime, I argue, copyright owners will increasingly seek alternative sources of revenue in China that will allow them to capture returns from their creative works without having to rely on copyright law. Lastly, I propose a solution to the piracy problem in China that recognizes the Internet can be utilized as an aid, rather than feared as a threat, in the fight against piracy. The Chinese government could accomplish this by establishing an online alternative compensation system, which would allow users to download unlimited music and movies from the Internet, while at the same time ensure that copyright owners are fairly compensated for their works. Such a system could provide the optimal balance between the objectives of consumers (more entertainment at a lower price), copyright owners (fair compensation), and the Chinese government (social enrichment and reduction of Internet and physical piracy).