Recorded Music Buyers in Brazil
Brazil is a land of musicality, being the home of MPB, bossa nova, samba, axe, and sertajena. How does one get in touch with music? There is live music, there is radio, there is music television, but above all there is recorded music. Whereas live performances, radio and television provide a large variety of music, recorded music represents music-on-demand that reflects one's personal favorites that are played at the time and place of one's choosing. Therefore, it is expected that recorded music might be a big business in Brazil.
We will now cite some survey data from the TGI Brasil study. This is a survey of 5,312 persons between the ages of 12 and 64 years old conducted in late 2000/early 2001. Of the respondents, 23.1% (projecting to 12,358,000 persons) said that they had purchased compact discs (CDs) within the last 3 months and 7.2% (projecting to 3,855,000 persons) said that they had purchased cassette tapes in the last 3 months. Furthermore, during the last 3 months, the compact disc buyers bought 2.9 CDs on the average, while the cassette tape buyers bought 3.6 cassette tapes on the average.
We note that the TGI Brasil study does not cover the entire population of Brazil. Rather, the survey area includes nine major cities (São Paulo, Rio de Janeiro, Brasília, Belo Horizonte, Curitiba, Porto Alegre, Recife, Salvador, Fortaleza, the interior of São Paulo state and the interior of southeastern Brazil, which totals to about half of the national population. Therefore, the projected totals of the number of CD and cassette tape buyers here understate the actual total numbers in Brazil.
The next table shows the demographics of the CD and cassette tape buyers:
|Demographic Characteristics||% bought CD in last 3 months||% bought cassette tapes in last 3 months|
The above table shows the progress of recording technologies. Whereas vinyl records once ruled the world, they can hardly be found today because they were displaced by cassette tapes. Today, cassette tapes form a shrinking market, appealing to a middle class which still owns the older, cheaper cassette tape players/recorders. Instead, compact discs form the dominant recording technology today. Since compact disc players are still relatively new and expensive, they are more likely to be present in affluent households. Furthermore, since compact discs are more expensive than cassette tapes on a per-unit basis, the affluent people are more likely to be buyers of compact discs.
We note that we cannot use the projected purchase volumes to estimate precisely the monetary value of these sales. This would have been possible if the price of a CD (or cassette tape) is more or less constant. Unfortunately, there is a big piracy market in Brazil. Whereas an authentic CD might cost US $15 in a record store, a pirated copy might cost less than US $3 from street vendors. Depending on the penetration of piracy, the total sales volume can vary significantly. The severity of the piracy problem is reflected in the International Intellectual Property Alliance's 2001 report on Brazil:
In 1999, the recording and music industries reported that the widespread audio piracy problem in Brazil worsened due to several factors including: the growing pirate market, the shift of street vendors from selling pirate audiocassettes to selling pirate CDs, and to a lesser degree, Brazil's economic troubles. Estimated losses due to piracy of sound recordings and music, in both compact disc and audiotape format, amounted to an alarming $300 million in 2000.
Alarming increases in the levels of CD piracy in Brazil first hit in 1998, when the recording industry began to call attention to the fact that piracy was increasingly threatening to destroy the world's sixth largest market for sound recordings and music. Audio CD piracy blanketed about 34% of the Brazilian market in 2000 (35% in 1999), causing about $200 million in estimated trade losses each year ...
The chief reasons for the rapid increase in music CD piracy are: (a) the lack of a strong and coordinated action by the Brazilian government, as well as the lack of a high-ranking Brazilian official accountable for copyright enforcement and empowered to coordinate the efforts of other enforcement agencies, the judiciary, and the local and state police, against unrestricted imports, distributed centers and street vendors; (b) the regional CD problem caused mainly by neighboring Paraguay, and unrestricted imports via airports and seaports in Brazil and its links to Southeast Asia; (c) the lack of proper legislation and judicial guidelines to allow the judiciary to proceed definitively against the suspect infringes; and (d) the lack of convictions and judicial sentences which deter piracy. The CD piracy problem is so sophisticated that it makes investigations and actions very difficult to accomplish without the full intervention and commitment of the federal government using all its enforcement agencies. For example, rising CD piracy caused commercial sales of legitimate product in Brazil to fall 20% in 1998 (compared to 1997) and 15% in 1999 (compared to 1998). When the legal recording market sales dropped 30% in the first four months of 1998, the industry pleaded with the Brazilian government for action, but to no avail. The market fell 47% in 1999 against the prior year. There was a slight recovery in sales figures for recorded music for 2000.
For the last four years, Brazil's audiocassette market has been completely lost to pirates. For 2000, cassette piracy accounts for 98% of the cassette market. For years, pervasive audiocassette piracy has simply destroyed the legitimate Brazilian market for cassettes. In the southern cities and in the interior, the pirate cassette market is still strong. Based on the industry's past experience, this market will gradually switch toward selling pirate CDs, which will totally undermine the legitimate music CD market. Almost 75% of this pirate product in Brazil affects Brazilian repertoire. The industry believes that this fact alone would suggest that the Brazilian government would be even more concerned in addressing the piracy problem.
Of course, a Brazilian consumer may take a very different view of this situation. Let us say that the price of a compact disc is US$15 in Brazil. If we consider the fact that median household income is about eight times higher in the USA than in Brazil, the comparable price would be US$15 x 8 = US$120 per compact disc in the USA. Now, it would certainly be difficult to imagine how anyone in the USA would pay such a high price, one that is completely out of line with the costs of production. Furthermore, the remarkable thing is that all of the recorded music producers felt that it was necessary to have keep their prices at this same level. Indeed, it may become the citizen's duty to purchase the pirated editions of the same products so as not to reward these price-fixing profit-gougers.
This type of situation exists in areas other than recorded music. Another example is university textbooks. The popular textbook The Feynman Lectures in Physics is listed at US$101 in the USA, making it beyond the reach of most third-world university students. Inevitably, this leads to 'justifiable' violation of copyrights because education assumes a higher value than intellectual property rights. Rather than combat this issue in certain countries (such as India), the US publishers have officially licensed local book publishers to print special editions of these textbooks at much cheaper prices for local consumption only. Recently, a more volatile issue is that of patented drugs to combat AIDS, in which the American drug companies eventually made concessions on both pricing and local generic drugs in the light of unfavorable public opinions about exorbitant pricing policies in the past without considering human suffering.
(posted by Roland Soong, 6/8/2001)
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