The Pirated, the Copied and the Faked

Trip Start Oct 05, 2009
Trip End Mar 28, 2010

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Flag of China  ,
Monday, December 21, 2009

There is one thing that China is notorious for and that's the violation of intellectual property.  But what I hope to do with this entry is present the other side.  I refer to the pirated things like software/music, copied things which have an off-brand, and complete fakes (which are near imitation of the real product).  To be honest, I am not a proponent of non-genuine products.  I believe people do have a right to maintain their own intellectual property and should be respected.  On the other hand, I also believe that non-genuine products have their place in the market.  And are not as bad as they seem.
First, I must say that companies are greedy; this greed makes them a bit blind at times.  Therefore, any statistic that can be utilized will, of course, be biased.  What do I mean? For the sake of simplicity let's take an example of a product being copied: when a company says that they have lost $x million dollars due to copied products this is bias information.  Why?  

1)  The company has not lost anything... it has merely not sold as much.  This is a logical error.  If I came to you and said, here are boxes of tissues $5 each.  You bought one because you were sick.  And then one week later, I tried to sell you the same tissues but now, you could by "fakes" which were $1 each.  Did I lose money because you didn't buy from me?  I didn't lose anything... I merely sold less.

2)  Customer or market segmentation is not comparable to before the product was copied.  In my example, maybe two customers end up buying the tissues for $1.  Can I claim that the other ones should have bought from me too?

Let's go further, if a Rolex was copied, would this make a rich person buy the fake instead of a real one?  Doubtful.... if anything, it would have the opposite effect.  The rich person would demand a real one to show his status.  The other end of the spectrum has what you might call, wanna-be rich people.  They couldn't afford a $2000 watch in the first place.  So... they are on the low-end segmentation of the market and a $50 rip-off doesn't look so bad anymore.  Even if it breaks in a year.  Do companies like Microsoft honestly believe that a worker in China would pay $100 for a copy of XP when they can get it for 10% of the price?  Umm... no, sorry.  If you pay workers 10% as much here, well guess what? They will expect 10% the prices for goods.  This is difference in segmentation.  The harsh reality is that there was never a low-end market for these high-priced goods.

3)  Damage to the brand name is not what it seems.  Going back to those who purchased at the lower price... they are still promoting the name or product!  Even though it is a faulty product, they generally know this.  No sane person expects a fake Rolex to perform like a real one.  They just get it for the looks.  I really don't believe that company managers are that dense to believe that the free promotion of their good is a negative thing.  The additional marketing is positive and brand awareness would be nonexistent if left only accessible to the rich.  Deep down as a marketer for Gucci, I would be thrilled to see many fakes because in the end, those people would never have purchased them at full price.  And, who knows... perhaps their tastes will actually turn into an expensive urge in the future when they can really afford it.  Whatever happened to... "imitation is the best form of flattery"? =)

The trouble is, of course, when these prices reach the "developing" Western world and undermine profits there.  What happens if fakes entered the US market?  I admit, it spells disaster.  This does happen with music and sometimes imported goods (i.e. Canal St.).  BUT, I still think that overall, this does not do as much damage as is complained.  I mean, how many LESS people want to be singers now that music can be downloaded?  How many less want to put out an album?  How many less people want to work in the music industry?  That is the true gage.  The demand on that side has probably hardly fallen.  Ok, well... how worse off is MTV?  The radio? (even with the advent of online radio).  It is not as bad as newspapers which are losing readership because everything is being converted/digitalized online.  At least music is already in digital form to be readily utilized in the market.  So we could argue forever that pirated music is a horrible thing but it does get the music out there, and does no damage to the brand / band name because... well, it's the same song!

It's becoming clear that a blog entry will not suffice to cover this complicated issue.  And although I do not have solutions, my intentions were to say... the news is not as bad as it seems.  All will not end in 2012. 
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