The Social Science Research Council has released its much-anticipated study on media piracy in emerging economies. The 440 page report, which received funding from Canada’s International Development Research Centre, provides an exceptionally detailed and insightful examination of global piracy claims with specific analysis of several middle income economies including South Africa, Russia, Brazil, Mexico, Bolivia, and India. The report also features a detailed discussion of industry-sponsored piracy research, the shortcomings of the enforcement agenda, the lack of evidence that “organized crime” is heavily involved in piracy, and the ongoing failure of “education” programs.

The entire report is a must-read but key findings include:

On Internet issues:

Over the longer term, stronger consumer-directed enforcement is certain to produce an arms race between encrypted, anonymized services and industry detection techniques. Although the industry currently presents graduated response as an effective response to consumer piracy, it is far from clear that it will prove legally or politically viable, or do more than shift users to other forms of distribution. As recent MPAA and RIAA comments on enforcement submitted to the US government make clear, however, three-strikes is not the end of the digital enforcement fight but the beginning.

On copyright education programs:

Although education is generally presented as a long-term investment in counteracting these attitudes, the lack of evidence for their effectiveness is striking. There have, after all, been a lot of campaigns in the past decade—StrategyOne counted some 333 in developed countries alone as of 2009. It would be reasonable to expect some benchmarks and tentative conclusions. But such follow-up appears to be almost universally avoided.

On claims of organized crime network involvement:

Arguing that piracy is integral to such networks means ignoring the dramatic changes in the technology and organizational structure of the pirate market over the past decade. By necessity, evidentiary standards become very loose. Decades-old stories are recycled as proof of contemporary terrorist connections, anecdotes stand in as evidence of wider systemic linkages, and the threshold for what counts as organized crime is set very low. The RAND study, which reprises and builds on earlier IFPI and Interpol reporting, is constructed almost entirely around such practices. Prominent stories about IRA involvement in movie piracy and Hezbollah involvement in DVD and software piracy date, respectively, to the 1980s and 1990s. Street vendor networks in Mexico City—a subject we treat at length in the Mexico chapter— are mischaracterized as criminal gangs connected with the drug trade. Piracy in Russia is attributed to criminal mafias rather than to the chronically porous boundary between licit and illicit enterprise. The Pakistani criminal gang D-Company, far from “forging a clear pirate monopoly” in Bollywood, in RAND’s words, plays a small and diminishing part in Indian DVD piracy—its smuggling networks dwarfed by local production.

On distribution in developing economies:

Where there is no meaningful legal distribution, the pirate market cannot be said to compete with legal sales or generate losses for industry. At the low end of the socioeconomic ladder where such distribution gaps are common, piracy often simply is the market. The notion of a moral choice between pirated and licit goods—the basis of anti-piracy campaigns—is simply inoperative in such contexts, an impractical narrative of self-denial overwhelmed by industry marketing campaigns for the same goods.

On pricing and competition:

Invariably, industry groups invoke similar arguments on behalf of stronger enforcement: lower piracy will lead to greater investment in legal markets, and greater investment will lead to economic growth, jobs, innovation, and expanded access. This is the logic that has made intellectual property a central subject of trade negotiations since the 1980s. But while we see this mechanism operating in some contexts in emerging markets, we think that other forces play a far larger role.

The factor common to successful low-cost models, our work suggests, is neither strong enforcement against pirates nor the creative use of digital distribution, but rather the presence of firms that actively compete on price and services for local customers. Such competition is endemic in some media sectors in the United States and Europe, where digital distribution is reshaping media access around lower price points. It is widespread in India, where large domestic film and music industries dominate the national market, set prices to attract mass audiences, and in some cases compete directly with pirate distribution. And it is a small but persistent factor in the business software sector, where open-source software alternatives (and increasingly, Google and other free online services) limit the market power of commercial vendors.

But with a handful of exceptions, it is marginal everywhere else in the developing world, where multinational firms dominate domestic markets. Here, our work suggests that local ownership matters. Domestic firms are more likely to leverage the fall in production and distribution costs to expand markets beyond high-income segments of the population. The domestic market is their primary market, and they will compete for it. Multinational pricing in emerging economies, in contrast, signals two rather different goals: (1) to protect the pricing structure in the high-income countries that generate most of their profits and (2) to maintain dominant positions in developing markets as local incomes slowly rise. Such strategies are profit maximizing across a global market rather than a domestic one, and this difference has precluded real price competition in middle- and low-income countries. Outside some very narrow contexts, multinationals have not challenged the high-price/small-market dynamic common to emerging markets.

Owing to the funding from IDRC, an electronic version of the full report is available for free for Canadians.