Piracy as a marketing tool

Have you noticed that a flop product or a flop movie is never in the pirate’s stockpile? The bootlegger selling a pirated DVD is the best indicator of authentic market demand. He immediately discards what doesn’t sell – bootlegging what people buy, not what companies arrange to be placed on the shelves. True markets are reflected in small street carts, not in brightly-lit and neatly arranged product aisles. Go through the torrent lists of The Pirate Bay and you’ll get a clear picture of which software products and movies are downloaded the most. Walk the streets and burrow into the small shops to see what products are pirated. The smaller the operation, the less the room for error – pirates have to keep a close watch on how the market moves to survive. They walk on the wrong side of the law, so there’s no way they’ll get protection when they are caught. They are real barometers of mass market taste and current demand.- because they are finely tuned to what the majority is willing to pay for. No one wants to imitate a failure, so pirates and counterfeiters only make copies of what has market value.

Let me be blasphemous here – the pirate’s price is actually the fair price for the product. It may not make sense to manufacturers or turn in a profit at all – but it is the perfect indicator of demand with all the fluff in between neatly sliced off.- not the inflated projections that are displayed in PowerPoint presentations. It’s sad that pirates are on the outer fringes of the market and are rarely surveyed to estimate actual market size or acceptable price points. A few years ago, Moser Baer, a company manufacturing compact discs created a sensation when they began to retail ‘genuine’ or legal DVDs and CDs at a price that competed with the street pirate price. Moser Baer acquired rights of music and movies right across the spectrum in all Indian languages. They did not bother to check if it was on a pirate list. Today, the business is just chugging along – but if the price was the only reason for piracy, they should have been a billion dollar company. They probably have some very expensive stocks of low-priced duds!

Microsoft, Adobe, and Corel have pirates to thank for the speed at which their markets expanded and grew. Their legal teams have a lot of work figuring out how to get people to pay for the products, but they had to pay nothing for adoption – which is a great way to lock in consumers. Apple bolted their operating system but they got the magic 99 cent price to make people pay for everything from music to software to games – which is what most pirates charge their customers!

There’s very clear evidence that piracy increases market size. Unfortunately, there is no distribution system that taps into this very perceptive network. And incumbent market leaders use copyright law all the time to protect their turf. Maybe our demand estimation models need a quick upgrade instead of the scorn with which we view this underbelly