How Piracy Created The Massive Movie Industry Success Of Nollywood

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We've written in the past about how the three largest movie producing countries in the world are Nigeria, India and China -- despite the fact that all three have extremely high rates of infringement. It seemed to offer the perfect counterpoint to the insistence from the MPAA that high piracy rates automatically lead to the destruction of any form of movie industry. In fact, further research showed that the amount of piracy in Nigeria actually was a big part of the reason why Nollywood has been so successful. The ability to let "pirates" distribute their films in the most efficient way possible meant that the movies were distributed far and wide across Africa and established Nigeria as the place to go for movie making.

Of course, as we've seen through the history of the development of various industries, it's always after those industries are created and growing rapidly that the existing players suddenly want to ramp up intellectual property laws to stomp out new competition. This is true throughout pretty much the entire history of intellectual property law, and it shows that such laws are not -- as we're told -- about creating incentives to invest in these industries, but rather about keeping out the competition and setting up gatekeepers to lock things down for established players. The same thing is happening in Nigeria as well, as there have been new efforts to crack down on infringement, despite it being so central to the importance of the rise of the industry.

While we've covered all this before, Eric Crampton points our attention to a new research paper that digs even deeper into this story: The Rise of Nollywood: Creators, Entrepreneurs, and Pirates by Olufunmilayo Arewa. It covers much of the same ground as our previous reports, first noting the usefulness of infringement in establishing the industry -- which appears to employ more people than Hollywood. In fact, what's amazing is that while many developing nations focus on government subsidies, insisting that that's the only way to build a local film industry, there's almost no government support in Nigeria, yet the industry is significantly bigger than comparable countries:

The rise of the film sector in Nigeria runs counter to existing trends in the film sector in which developing countries, which produce 1.2 films per million inhabitant annually, lag developed countries, which produce 6.3 films per million inhabitants annually. At current Nollywood production levels, Nigeria produces approximately 6.7 films per million inhabitants annually. Bridging the developing country film production gap remains challenging, particularly because the optimal ways to create domestic film industries remain elusive in many instances. Prior to the proliferation of Nollywood films, at least one commentator suggested that government takeover of the film industry would be the only means by which Nigeria could develop a film industry.

Notably, although many countries have sought to incentivize particular types of film production through direct government funding, subsidies, or film protection schemas involving film quotas, many of these industries have not been commercially viable in the absence of subsidies or other support schemes. In contrast, Nollywood has created significant volume of local video film content with virtually no government involvement or subsidies. The success of Nollywood may in many respects be attributable to a lack of government involvement and its decentralized nature, which has permitted Nollywood participants to be highly entrepreneurial, adaptive and innovative. Nollywood now may employ as many as 200,000 people directly with estimates of indirect employment as high as 1 million. The market-driven Nollywood approach is less costly than existing models of film production and distribution and may offer a new model for developing countries that wish to develop domestic film industries.

In fact, part of that "market-driven" approach is to figure out ways to embrace and leverage widespread infringement. That helped set up rapid and inexpensive (to free) distribution and promotion of new films. It has also continued to drive interest in new films, as people want to keep seeing more, helping to keep the industry going.

That said, the report also talks about the new efforts to crack down on infringement, but notes that this might not make much sense. It notes, correctly, that "the battle to control piracy will not be an easy one," and that such an effort to ratchet up pricing may be futile. Instead, it suggests taking a more proactive approach to providing better services and to looking at better ways to monetize the movies -- including things like advertisements and product placement.

Discussions of the piracy problem in Nollywood are based upon goals for control of distribution that may simply not be viable for Nollywood given current institutional structures and manners of doing business. In addition to dealing with piracy and issues of control of distribution, Nollywood participants should undertake focused strategies to address varied business and legal impediments. The development course of Nollywood, which in fact increasingly moving to digital distribution outside of Africa, and events in other arenas, suggest that the battle to control piracy will not be an easy one. Further, to the extent that webs of unauthorized uses enmesh consumers and end users, seeking to impose desired pricing in the face of rampant unauthorized distribution, or even the possibility of such distribution, may be futile, particularly given broad nature of Nollywood distribution networks. This ultimately may mean that price reductions may be one way to deal with problems of piracy, particularly to the extent that Nollywood participants can effectively harness other sources of value. Nollywood participants thus far have focused to a significant extent on the value of Nollywood content, which may obscure other potential sources of value to Nollywood participants. For example, the network of viewers reached by Nollywood films may be valuable to advertisers and others who may be willing to pay to have access to such viewers. The value of these Nollywood networks may actually be far greater than the value of the content itself.

The report also notes that "Discussions about the future of Nollywood should seek to move beyond discussions of copyright and piracy to fundamental reconsideration of a broader range of business and legal issues." I'd argue that applies to nearly all copyright discussions. Not just those in Nollywood.