Software and Video Piracy

Malaysia is in the news – twice on the same day and for similar reasons: software piracy.Indian movies and American software.

I’ve always believed that piracy is the market’s response to a gap between the perceived value of something and its price. Unless content and software are sold at prices which maintain this gap, piracy will continue. Prices of music CDs and software tend to remain the same across the world. If their relative value with respect to a basket of goods is to be the same (ie people’s preferences remain the same) then their price relative to the same basket of goods must also be the same. When it is not, piracy steps in to make it so.

Piracy itself is a crime. But curbing it does not rest on effective policing alone; the underlying economics must not be ignored. Malaysia introduced price controls for CDs recently – a very crude intervention by the government – but a step in the right direction.