MPEE Mailbag: Career Options

We get mail:

Dear MPEE,

I’m a former banker fallen on hard times and am looking for a new line of work.  I have read in the IIPA report that “the mark-up for DVD piracy (a relatively low-risk activity) is much higher than that for cocaine and heroine trafficking,” and also read in your report that enforcement doesn’t work, which is an important issue for me.  This sounds like an interesting opportunity, and I wanted to ask your advice about career options in this area. 

I am a little concerned by some other things I have read in the IIPA report, namely that “Piracy has been taken over in many countries by organized crime syndicates; this includes both physical and online piracy phenomena.”  I also saw on TV that “even terrorist groups, view IP crime as a lucrative business.”

So here’s my dilemma: I can rationalize destroying the economy when it’s just business, but I don’t think I’m cut out for the rigors of gang life and terrorism is probably not for me.  Would I have to join a gang or terrorist group?  Is there no room left for individual entrepreneurship?

Thanks for any help you can provide,

D.F.

Dear D.F.

I hate to say it, but I think the IIPA and MPAA are doing a real disservice to people like you by talking up the opportunities in this area.  Investment and career opportunities in the piracy field have diminished dramatically in the past decade, first as disc players and burners became cheap, and second as digital distribution grew and piracy became a mostly non-commercial, consumer-driven activity.  You can probably find some gang involvement if you look hard enough.  But our work suggests that these are niche players in the overall pirate economy–not the growth sector you’re looking for.

As for whether profits from piracy are greater than from the drug trade, I’m sorry to disappoint you there too.  Here’s what we said:

The initial version of this claim appears to come from a 2001 story in the French newsweekly Marianne, which stated that a kilogram of pirated CDs was worth more than a kilogram of hashish. The claim was picked up by Interpol in its 2003 report to the US Congress on “The Links Between Intellectual Property Crime and Terrorist Financing” and from there began a long life of circular citation in industry reports. This claim has been challenged before (Piracy Is Not A Crime.com 2006), but to update and reiterate the point: according to US customs authorities, a kilogram of hashish in New York sells for around $30,000. A kilogram of pirated DVDs (amounting to 60–65 discs averaging 16 grams each) has a street value of about $300 in New York, at the going rate of $5 per DVD. The IIPA repeats a version of this claim in its 2010 submission to the USTR.

Now, I do have to admit being humbled by the discussion of this issue in the comments to this Ars Technica story, which display considerable erudition on drug pricing.  Clearly it is possible to get drugs for less in New York.  But complaints on this front should really be directed to US Customs.

Is it all bad news?  Not entirely.  There is still room for individual entrepreneurship–at least for a few years while there is still a market for optical discs.  If you work hard and get lucky (and move to Mexico City), you could be like Geraldo:

Geraldo (not his real name) is an example of this process of economic dislocation and adaptation. His father used to run a successful leather workshop employing dozens of workers to produce handbags for an upscale Mexico City department store called Paris. But when tariffs on Asian goods were lowered, the store shifted to imported bags, forcing his father out of business. His father’s next and last venture was a small taco stand in Tepito, which his family helped run until he died. His widow, unable to work the stand herself, rented out the space to Korean merchants and lent Geraldo and his brother money to purchase a street stall, where they sold imported baby clothes. The brother left, discouraged by lowsales, and Geraldo struggled on until he made an arrangement with a friend in 2000 to sell pirated music CDs. Pirated CDs were still relatively expensive and the supply was limited, but overtime he was able to establish relations with better suppliers and eventually buy his own CD burners. By this point Geraldo was earning enough to rent an apartment outside Tepito and send his children to private schools. A year before our interview, however, his site in Tepito was raided and his equipment (fifteen burners) and CD materials were confiscated. After that, the family had to give up the rented apartment and the private schools. With a loan from friends, he was able to buy some old burners and start to build up his business again. When we next met, Geraldo had ten working burners and was back in business.