Taiwan, 23 million people, lives in the shadow of its huge cousin on the mainland, China (the Peoples’ Republic), population 1.3 billion…more or less. In many ways Taiwan years ago was a microcosm of what China is today, and is today what China may one day become. There are many elements to the complicated and complex Taiwan-China relationship, and copyright is just a tiny slice of that relationship. But it is illustrative. Continue reading “From the Pirate Booksellers of Chungking Street to Taiwan Today (Taiwan Blog #1)”
In my blog last week, I talked about the growing role of China as an essential revenue generator for foreign content producers. The most recent projections indicate that China will become the world’s largest film market by revenue as early as next year. This offers great opportunity for foreign content producers, notably the Hollywood studios, but throws into relief the range of market access restrictions imposed by China, despite its membership in the World Trade Organization (WTO). Foreign content producers, particularly in the area of films, would dearly love to remove or at least whittle away at these barriers. There will be an opportunity to do so in 2017 when a US-China agreement on films comes up for renewal. Continue reading “China and the Content Industry: Friend or Foe? (Part Two)”
Chinese Box Office: Global No. 1?
In the 2015 edition of its global media and entertainment outlook for 2016-2020, PwC reported that China’s box office growth will “see it pull ever nearer to the US”. PwC estimated that China’s box office revenue would rise at a 15.5% cumulative annual growth rate (CAGR), moving from US$4.31bn in 2014 to US$8.86bn in 2019 as its cinema-building boom continues and rising disposable incomes make the cinema more affordable. Fast forward to June of this year, and PwC is predicting that China’s box office will replace the US as the world’s largest film market measured by box office revenue as early as next year, reaching revenues of US$10.3 billion in 2017, moving to revenues of $US15.08 billion by 2020. Continue reading “China: Friend or Foe of the Content Industry? (Part One)”
If an infinite number of monkeys on an infinite number of typewriters worked long enough they could produce the works of Shakespeare. Or that at least is how the infinite monkey theorem credited to the noted French mathematician Emile Borel (who sadly is more remembered for his monkey example than his other considerable contributions to the science of mathematics) was used to illustrate his thoughts on probability in 1913. However, as we know, the works of Shakespeare are not subject to copyright protection since they have long been in the public domain–but what if, instead of the works of Shakespeare, those simian creators produced an original work? Would that work be protected by copyright and if so, who would own it? Would it be the owner of the typewriter(s) who conceived of and organized the event and thus made the outcome possible, and who then sifted through the disorganized mass of typed papers to select certain material to compile an intelligible work from the random keying of the band of monkeys? Or would it be the monkeys? Or perhaps no-one? And supposing an infinite number of monkeys, or even a few monkeys, or even one monkey, could produce another form of art, like a painting or a photograph? Who would own the copyright? That of course is at the heart of the famous (or infamous) “Monkey Selfie” case and the controversy surrounding the noted wildlife photographer David Slater. Continue reading “The Monkey Selfie Case: Applying the Common Sense Test”
Bigger is better, right? More choice, economies of scale, lower costs. That at least is the approach the European Commission is taking with its proposed strategy for a Digital Single Market. But is bigger necessarily better? There is good reason to think that in the area of digital content, this is not the case. Continue reading “The European Digital Single Market: Why Bigger is not necessarily Better”
Last month I wrote about the Australian Productivity Commission’s attack on the copyright industries in Australia, through its report titled Copy(not)right. If adopted, its recommendations would effectively go a long way to killing the golden goose of creativity in Australia, an industry which according to a 2014 PwC Study last year employed just over 1 million people, constituted 8.7 per cent of the Australian workforce, generated economic value of $111.4 billion, which was the equivalent of 7.1 per cent of gross domestic product (GDP), (greater than the manufacturing and health care sectors) and was responsible for just over $4.8 billion in exports, equal to 1.8 per cent of total exports. One wonders what planet the Commission’s researchers live on. Certainly not Planet Copyright. More like the Copyright Death Star.
Repeal of the Parallel Import Regulations?
One of the Commission’s key recommendations is a major revision to Australian law regulating the parallel import of publications. Its draft recommendation 5.2 states “The Australian Government should repeal parallel import restrictions for books in order for the reform to take effect no later than the end of 2017”. This recommendation, based on the premise that the removal of parallel import restrictions will lower the retail cost of books in Australia, has managed to galvanize the usually fractious book business—from publishers to booksellers to literary agents to writers—to unanimously push back. As reported in the Australian media, the book industry believes that abolition of the Parallel Import Regulations on foreign book imports would “cost jobs in all sectors of the publishing industry, irreversibly harm Australia’s cultural identity and impoverish authors with, at best, a marginal reduction in some book prices…”
It is worth looking at how other similar countries have dealt with this issue. New Zealand, a small market, allows parallel imports of many products, including books. Has this been successful? Australian critics of the Commission’s recommendations point out that books are no cheaper in New Zealand than in Australia, while the publishing industry there has declined. Canada, where I live, might be a better example. The “parallels” (pardon the pun) are interesting and relevant.
The Canadian Example
Both Australia and Canada have a rich literary heritage which has managed to survive and thrive in the face of enormous cultural competition from the US and UK. In Canada’s case, the US publication industry is not only powerful, it is literally next door. Most books sold in Canada are printed for the North American market and have on the back cover the cost in US and Canadian dollars. The one I have just pulled off my bookshelf, published by Doubleday in 2007, says US $27.95/$35.95 CAN. The spread varies but there is always a spread. Most Canadians instinctively chalk up the price difference to the difference in the value of the Canadian to the US dollar, although in fact the Canadian Book Importation Regulations allow Canadian publishers a maximum 10 percent markup on the Suggested Retail Price of US books and a 15 percent markup on books from Europe (adjusted for foreign exchange), the justification being that distribution costs in Canada are higher. That margin helps Canadian distributors (who in most cases are also publishers of domestic books) to earn a return on the distribution of popular foreign books for which they have exclusive distribution rights, thus increasing their ability to invest in the publication of works by Canadian writers. There are certain conditions that the distributors must fulfill in order to get the protection of the Copyright Act against parallel imported books, including notifying retailers of their distribution rights and filling orders promptly. (Australia has a similar time limit, known as the “30 day rule”, although in 2012 the Australian Publishers Association and the Australian Booksellers Association entered into an industrywide agreement known as the “Speed to Market Initiative” whereby publishers agreed to allow booksellers to import books if the publisher is unable to dispatch an order within 14 days). These Book Importation Regulations have helped the Canadian publishing industry to survive, although it is not without its challenges, especially in the area of educational publishing owing to expanded interpretations of fair dealing, as I have written about elsewhere.
Currency Factors and Public Perception
While Canadians generally seem to accept that consumer products may cost more in Canada for a variety of reasons (one of which may be to help support Canadian culture in the case of books), currency fluctuations can make things more controversial. The normally weaker Canadian dollar surged against the greenback back in 2007 and again in 2012/2013, and for extended periods was at par with the US dollar, and at times even exceeded it in value. Suddenly it was more difficult for consumers to swallow the cost differential, whether it was to support Canadian publishing or not. Another challenge to the book industry was the shift to online selling and when Amazon pushed to open a distribution centre in Canada, approaches were made by the booksellers association to the then Conservative government of Stephen Harper, arguing for an end to parallel import restrictions in Canada.
Book Importation Regulations (Parallel Import Restrictions) Upheld
In response, the Department of Canadian Heritage commissioned two independent studies (one for English language and one for French language books) to examine the issue. In a report delivered in April 2012, the consultants concluded that elimination of the parallel import restrictions would not lead to a direct lowering of the retail cost of books for consumers, and that there were significant benefits for Canada in retaining the restrictions. To cite the authors of the study that examined the English language book market,
“We conclude therefore that the Book Importation Regulations continue to play an important role in strengthening the Canadian supply chain, supporting additional investment in distribution and original-title production in the Canadian book market, and, in so doing, promoting greater access to books for Canadian consumers.”
As a result, while the retailers had to tighten their margins to meet the online business threat, Canadian distributor-publishers continue to have their exclusive distribution arrangements protected by copyright, subject to a regulated markup. The Canadian dollar (the “loonie”) has depreciated again and today a US dollar is worth about $1.30 Canadian. Consequently, the higher cost of books in Canada is no longer a hot public issue. It is worth noting that while the commercial parallel imports of books into Canada is still prohibited, individual consumers are free to import books for their own use, as in Australia, from offshore providers such as Amazon.com.
It Works in Canada; Why not Australia?
The compromise seems to have worked well in Canada and has helped provide support for Canadian publishers and by extension, Canadian authors. Similarly, until now it has been effective in Australia, with exclusive distribution rights being protected by copyright law, as long as the “30 day rule” is met. (Parenthetically, the 30 day time limit rule can lead to some bizarre outcomes whereby, for example, a UK publisher could purchase the Australian rights to a book but before the book is licensed to and released by an Australian publisher, the US edition is released and is imported legally by an Australian bookseller because the UK rights holder wasn’t fast enough off the mark to get an Australian edition published). Yet this industry, which generates $2 billion in revenue annually through the publication of over 7000 titles, and which employs 4000 people, is now under extreme threat. Is there really a burning need to change a system that has generally worked pretty well for all parties? Consumers may pay a little more (the Australian industry concedes that the prices of some books may drop by about 10 percent) but it is a small trade-off to preserve and support an important domestic creative industry.
Fostering Local Culture and Literature
Australians and Canadians want and need to be able to tell and hear their own stories in a competitive world, where publishing is dominated by larger countries. A viable local publishing industry is a pre-requisite for domestic storytelling to continue. If the system isn’t broken, don’t fix it, but that is exactly what the Productivity Commission—building on earlier reviews in Australia that considered the Parallel Import Regulations—intends to do, targeting an essential support mechanism for the creative industries with its anti-copyright wrecking-ball. This has serious implications for creators in Australia, but also potentially for other countries.
Canada has looked at and rejected changes to its parallel import book regulations, and Australia could learn from this example. At the same time, an attack on creativity in one country has the potential to spill over to others and while Canadians do not have to deal with the excesses of the Productivity Commission, there are still persistent attempts by various interest groups to rollback copyright protection. There is one thing that the two countries and cultures particularly have in common. Canadian and Australian literature have both managed to prosper in the face of global competition, supported by great talent but also by measures that have helped a challenged publishing sector to survive. It would be short-sighted in the extreme to dismantle this essential support system for the ephemeral and uncertain reward of a marginal decline in the price of a few books. Canada rejected this nostrum; so should Australia.
© Hugh Stephens 2016 All Rights Reserved
You will likely never see the day when Bugs Bunny and Porky Pig, two of the most famous cartoon characters in Warner Bros’ Looney Tunes stable walk up the main street of Disneyland to greet Mickey and Donald. But that in effect is what happened at the premiere of a new theme park in China, Nanchang Wanda Cultural Tourism City, the brainchild of Wang Jianlin, reputedly China’s richest individual and chairman of real estate and entertainment conglomerate Dalian Wanda. It was reported in western media that visitors to the new theme park were greeted by costumed staff in the guise of copyrighted Disney favourites Snow White, Captain America and Star Wars Storm Troopers. This would particularly rankle the Walt Disney Company, given the investment that the company commits to developing and protecting its brand as personified by its characters, and given the trash talk engaged in by Wang about Disney’s presence in China. Just a couple of weeks prior to the opening of Disney’s flagship park in Shanghai, scheduled for June 16, Wang gave an interview to China Central Television (CCTV) in which he criticized Disney for entering the China market and said that Disney’s lone Mainland theme park would be devoured by Wanda’s “pack of wolves”, meaning the numerous parks—up to 15– that he has or plans to open in China.
Disney has already learned some difficult lessons about adapting its brand to the China market through the theme park that it opened in Hong Kong in 2005. That enterprise, a joint venture (JV) with the Hong Kong Government, got off to a rocky start and attendance did not initially match expectations. But Disney buckled down, absorbed the lessons learned, and increased its investment. The park finally turned a profit in 2012. No doubt Disney planners have taken into account their Hong Kong experience in preparing for the launch of their showpiece in Shanghai. Although strongly supported by the Shanghai government Disney, like other western brands, has struggled to get national distribution for its animated character film and television content in China. This distribution is an important promotional tool for the theme parks. China restricts foreign animation on TV and—although it has eased quota limits somewhat in recent years—maintains tight restrictions on the number of foreign films that can be released in China annually. That of course includes animated films. Disney is planning to work around these restrictions to some extent by engaging in co-production ventures with Chinese media giant Shanghai Media Group. And of course, despite Chinese restrictions, Mickey and his friends are famous world-wide including in China.
Disney will be taking Chairman Wang’s challenge seriously. Dalien Wanda is a formidable opponent and Disney, like western companies in other sectors, is no doubt finding the playing field somewhat uneven when it comes to the China market. China is eager to absorb technology and expertise, and will offer the potential of its enormous market to entice western investment. But once the technology and market expertise has been absorbed, the Chinese government has a habit of trying to squeeze out the foreign competition in China to the benefit of Chinese companies—and then encouraging those companies to compete with their erstwhile foreign investor partners in their home market. Dalien Wanda has followed this model. At one point it had a JV with Warner Bros International Cinemas to design and develop cinemas in China. That ended after Wanda decided it didn’t need its foreign partner any longer, and Warner unceremoniously exited the Chinese cinema market. Dalien Wanda however went on to one success after another, opening hundreds of multiplexes in China tied to its shopping malls and then moving to the US to acquire AMC Cinemas for $2.6 billion. Subsequently it expanded its reach in the US film industry by acquiring Legendary Entertainment for $3.5 billion.
One of the areas where the playing field traditionally has been far from level in China is intellectual property (IP). Respect for copyright, trademarks and patents has been severely lacking even as China has climbed the IP ladder itself. In the area of copyright, the list of problems cited by International Intellectual Property Alliance (IIPA) in its 2016 Special 301 submission on China ranged from media and set top box piracy to sites that index pirated books to next generation pay TV signal theft to camcording in cinemas to other evolving forms of online and mobile piracy. So why should we be surprised at knock offs of Disney characters in a Chinese theme park? In response, Dalien Wanda issued a statement denying that it was responsible for deploying the Disney lookalikes;
“Media reports say that Disney characters appeared within Wanda Park. This is inaccurate. The characters in question appeared in the business area of the Wanda Mall inside the Nanchang Wanda Cultural Tourism City. Nanchang Wanda Cultural Tourism City, or Nanchang Wanda City, is a multi-business complex that houses Wanda Mall, an outdoor theme Park, hotel resorts, a bar street, etc. Wanda Park, which is a combination of the theme park, ocean park and movie park, has never used any Disney characters for display or promotion. Some relevant stores within the Wanda Mall use Disney characters on some merchandise and for promotional purposes. The use is officially licensed by Disney. No infringement has occurred. Dalian Wanda Group attaches high importance to the protection of intellectual property rights, and Nanchang Wanda City owns several cartoon characters with their own intellectual properties…”
Well, perhaps…..although it is hard to believe that Disney would allow Bugs or Porky to get anywhere close to the Magic Kingdom. But things are done differently in China. Maybe we have a theme park with “Chinese characteristics”?
Building theme parks in China is not new. There have been booms and busts in the theme park business before and China currently has a plethora of second-rate attractions. How many theme parks does it need and which ones will succeed? In addition to Disney, Six Flags and Dreamworks are also building in China—and of course there is Dalien Wanda with its 15 mega-parks. Which ones will the Chinese public patronize? It’s a safe bet that the brand recognition of decades of character development and promotion—along with global experience in running parks that attract repeat business—will position Disney well. Thus it is no surprise that Disney was not amused by reports of its characters being hijacked at Nanchang Wanda City as it made clear in its statement, as reported by Bloomberg;
“We vigorously protect our intellectual property and will take action to address infringement…Our characters and stories have delighted generations, these illegal and substandard imitations unfortunately disappoint all who expect more.”
As has been shown many times before, the main value of a company often rests in the intangibles of its copyrights and intellectual property. Wang Jianlin can build a mega entertainment city, and will no doubt be very successful, but he should do it without Mickey, Donald or Snow White.
© Hugh Stephens 2016 All Rights Reserved