Let's talk about piracy

It is ironic that the passion for cinema that prompted me to film school began with pirated movies. In my home town there's a place called "camelódromo", there's no translation to the term and the only Wikipedia entry on the subject is in Portuguese. The article points out that the camelódromo is a place to concentrate hawkers that would otherwise be on street, blocking traffic in populated areas. In general, they sell illegal goods that come from the Paraguayan borders with Brazil.

Think of the structure of a camelódromo as a street fair, a long arcade and stands on both sides with counterfeit clothes, games, booze, movies, music, tax-free electronics. I worked there as a teenager until I moved to college and the customers I've seen and their demands conveyed the dynamics of piracy to me.

What do you picture as the person who goes to a booth that sells pirated movies in DVD seeking the latest releases? Probably someone who couldn't afford a ticket to the movies or an original CD, but those were the worst clients that would come once in a lifetime and we, as salesmen, couldn't create a bond to turn them into regulars, whose were wealthy or middle class from all areas.

The rich and the poor consume piracy alike, the richest even more from my experience — after all, you still need resources to procure pirated goods, digitally or physically. This throws an ice bucket on the idea people acquire illegal content due to income; the hole is deeper than that.

How the App Store hustles developers into a race to the bottom to sustain a business is well known and much criticized. One of the recurring anecdotes is that whoever complains about the already low price for apps has a very expensive phone. Recently I've read a version of this joke on Twitter stating that even purchasers of the Apple Watch Edition would still contest the app prices. I can't turn that possibility down.

Even with iOS apps hitting rock-bottom, enough for in-app purchases to become the standard business model, there's still a lot of piracy going on. Paul Haddad, from Tapbots, often tweets support requests he receives from users who pirated one of his apps.

So, if price doesn't play a role in piracy, what is there to blame for? Money is still not off the hook, but it is all about how we spend it.

Budgets and Priorities

My mother says "the more money you make, the more you spend" and I think she's absolutely right — as every mother. As our income increases, we crave for quality and lifestyle and decide how this money is spent based on priorities, which is usually something we can't avoid. But what if you could defer something indefinitely? That is what happens with media:

I'll get a pirated copy of this movie from the internet, but when this movie comes to my local theater, I'll certainly watch it on the big screen.

That's seldom the case. Since the consumer can postpone for an unlimited amount of time the expense to obtain certain media, that's what he does. The cash supposed to purchase the album, movie ticket or application becomes the beer pack, magazine and Friday night party.

It is not a case of people pirate media because they can't afford it; they mostly can, but this money is going someplace else because this cost can be delayed indefinitely. We have plenty of urgent needs devised by consumerism and we budget our priorities on what we must get.

Therefore, media campaigns to recover its slice from the consumer's budget against other consumable goods, yet piracy dwindles its immediacy and allows consumers to defer the purchase. That's why people choose the $5 Starbucks latte¹.

The Social Buzz

The swarm of consumable goods we encounter every day echoes in the aforementioned budgeting priorities and the best weapon the content industry has to fight for its spot back is social media buzz, although it is often a double-edged sword.

Even back in 2005-06, before Twitter was a thing, people were eager for the latest releases. I recall when Da Vinci Code and Superman Returns were released, the former had a worldwide release between May 17-19 and when people came looking for its DVD, all the versions available were recorded on theaters with people coughing or walking the aisles and scenes so dark you were unable to distinguish the action. Superman Returns had its premiere on June 21, was officially released on June 28 and arrived only 3 weeks later in Brazil. Guess what movie sold more pirated copies?

Superman, of course. Three weeks is an eternity when it comes to people's capability to pull off a decent copy of a screened movie and by the time people came by looking for it upon national release, there was already a decent copy. The Da Vinci Code, on the other hand, was unbearable to watch on the quality available, people had to either go to the cinema or wait.

In an industry that spends as much in advertisement as they invest in movies, this is a scenario you can't afford. When a movie is released, even in your mother's basement, the window for profit begins to narrow. The irony is that advertisement is the reason for people to look for a movie in "alternative methods", such as the camelódromo, when the industry fails to attend the audience desires.

Apple products often arrive 3-4 months late to Brazil and they can cope with it because their goods have an inherent value. If you had the opportunity to get the same experience from an Apple product 3 months before its release, do you think Apple would remain a valuable enterprise? This is the problem with any sort of digital (or could be digital) content, it has $0 value and Ben Thompson is the best person to explain it:

What makes the software market so fascinating from an economic perspective is that the marginal cost of software is $0. After all, software is simply bits on a drive, replicated at the blink of an eye. Again, it doesn’t matter how much effort was needed to create said software; that’s a sunk cost. All that matters is how much it costs to make one more copy – $0.

I suggest you read everything Ben writes about business models for content creators — and how he stands for his subscription model — and Taylor Swift, then insert piracy as a context whenever he discusses content value.

Hollywood's leverage is that the low quality of illegally obtained copies from the internet upon movie release compels consumers to the theaters, where studios actually make money, if they want to remain on top of the trending conversation topics they participate. Welcome to the age so abundant in information it becomes socially shameful to be unaware of something.

However, when the studio can't supply for the demand, you get what happened with Superman Returns: by the time the buzz grows, there's already a good, sometimes ripped from DVD, copy of the movie online and people can skip the expense without an accountable loss. This is hardly an issue with blockbusters, I believe the most affected niche is indie movies, often sidelined to a few theaters on US and delayed over distribution deals to overseas release. When these movies hit internationally, they commonly already have a DVD released in the US and uploaded to the web. Of course, if they ever reach your city at all, even at one of the largest cities in Brazil, some movies I'm deeply interested to watch don't reach the silver screen. In 2007, Into the Wild arrived in my home town's cinema one week after it was available for rental as DVD.

People will find a way to stay up to date with the current trends, mainly those boosted by advertisement. In the information age, if you don't know about it, you're out.

Back in 2005, Steven Sodenbergh had a little movie you probably never heard of called Bubble, released simultaneously on cable, DVD and theaters. DVDs are barely something these days, yet, despite my lack of deep knowledge on the subject, I'd suggest to reduce the window between release on theaters and video on-demand for non-blockbusters movies. Video on-demand offers the scale no regular distributor overseas can provide and reaches potential viewers at the same time, however, Hollywood is reluctant to concur that subscription-based streaming may be its future beyond the theaters².

The music industry has a bigger challenge since it is a digital media by nature; recently, Kendrick Lamar's new album, To Pimp a Butterfly, was accidentally released 1 week before expected due to an error from the part of the record label. They pulled it from iTunes, but you can't put wind back in the bottle. A couple hours later the album was available for illegal download, then was back on iTunes and Spotify. That was a smart move for the last reason for piracy I'll mention on this article.

Convenience is Everything

I've been living without a microwave for 2 years and, damn, it became clear why people pay for convenience. Piracy has an entry difficulty you can't ignore, that's why back in 2005-06 someone could build a business around burning DVDs, even if their customers knew how to download something illegally, they still preferred the comfort of a physical copy they could store and watch any time.

It is effortless to purchase something nowadays and seems like it is going to get further more. Yet doesn't matter if you have the simplest payment system if consumers don't visit your store, so you still need advertisement to attract customers to your web. But here's the catch: will your customers visit your store daily asking: Hey, where can I spend my money?

I don't think so, but that's where streaming excels; if subscribers don't visit the service, it is, in part, their loss. If you use either Netflix, Spotify or Rdio, I bet you interact with their product more frequently than you look up the iTunes Store. The definitive convenience would be a single service where users could subscribe and get all the new releases, without country-based limits or other restrictions. An utopia, of course.

Muddy Waters

The three pillars to piracy I mention are loosely connected:

• Advertisement generates interest the distributors must address, otherwise customers will find alternative ways to consume the latest social trend. Worldwide releases spanning multiple platforms provide users with an immediate way to access the content in a profitable manner;
• People will prioritize to pay for goods they can't obtain for free by any means and is the hardest issue to tackle. Either you kill piracy entirely, which has proven to be resilient, or you force every other industry to back off, which I doubt is achievable. I don't think there's a way to overcome the budgeting issue directly and perhaps the best route would be to invest in content distribution and convenience;
• Convenience matters and users are willing to pay for it, if turns out to be more opportune for a customer to acquire an item illegally rather than legally, they'll flow through the cracks and get it illegally. Convenience is probably how the industry could increase the value of its products and, maybe, get back into the customer's wallet.

Should the industry embrace streaming then? Probably, but with moderation to preserve their products, mostly based on how they administrate the buzz. I think they're heading in the right direction, but should move quicker.

How this applies to app piracy, you may ask, but I think it is too early to tell because I doubt developers are in a position to debunk piracy, they should solve the race-to-bottom before that. I didn't deal enough with app piracy to propose a solution and I can only claim for what made my attitude towards it change: I met developers. Having a face behind a product turned me from a guy who never bought a piece of software into someone whose library of apps and licenses costs more than the devices they're developed for. Software humanization, we could name it, but I'm the exception.

Piracy cannot be undone, regardless of our efforts to improve distribution, aggregate value or increase convenience, some people never get back. Perhaps we should aim at those who can be pleased by what the industry can offer instead of hitting the brick wall trying to turn all crap into gold. If the industry succeeds doing so, I like to believe our culture will slowly negate piracy as socially acceptable if we take the right decisions now.