08 July 2005

Value for money


If I go down to the market here in Phnom Penh, I can buy something rather extraordinary — pirated books. They have things that travelers want, like Lonely Planet guidebooks, and David Chandler's books on the Khmer Rouge, as well as various textbooks and computer manuals that are useful to Khmers who cannot afford the real thing. These books are cheap. A legitimate copy of the Lonely Planet Cambodia sells for $17.99, but the pirated copy is only $4-5, depending on your bargaining skills. The pirated book's photos don't look as good, since they're photocopies, but that's not what you buy a guidebook for.

My question is this: why aren't pirated books available in the US? Certainly part of the answer is that the cost of making even a pirated book is higher there than here; there's also the little matter of enforcement of intellectual property laws. Both of these would push up the price of the pirated book in the US. Still, the illegal copy should still be cheaper than the real deal. So why doesn't it happen?

The answer is that the cost savings for the pirated book in the US would be small enough that the extra value of the legitimate one — better paper, clearer text, better pictures, not getting arrested — makes the extra price worth it.

And that's how CD and DVD sellers can stop most piracy. They just have to reduce their prices so the added value of the legitimate item is at least equal to the extra cost. They can do this with packaging, or special discs (remember colored LPs?), or other included goodies. But the big thing is to reduce the price.

Apple's iTunes store has been a success by adding value. Getting music from them is easy and convenient, allows you to buy only the one song you want from an otherwise dismal album, gives you consistent audio quality, and is legitimate.

Now, Morgan Freeman and Intel plan to do much the same with movies. Their efforts won't reduce the piracy problem here in Cambodia, where I can buy a DVD for $2, and downloading a full movie would cost $70 in data transfer charges. But in richer countries, as long as the price isn't too much greater than the pirated discs, they should be successful, and more power to them.