On digital piracy. (Part Two)

VIDEO: https://www.youtube.com/watch?v=vjm6Hv4JBYw&feature=youtu.be

In our previous article we discussed the attractive nature of digital piracy, especially with consideration to the difference in our attitude between outright shoplifting and online illegal downloads.

Now to answer the question- does digital piracy really matter?

Glancing at some of the statistics, the effects do certainly seem alarming.  We mentioned them in the previous article- how in 2011 the International Federation of the Phonographic Industry claimed 95% of the music in the world was illegally downloaded, and how 42% of software running in the world was illegal. With digital piracy continuing to spread and diversify, these statistics are likely to be even higher right now.

But let's put the statistics aside for a while, and get a real life case study of digital piracy and its effect on content producers. Who better to choose than creator of the UK's most pirated music album of 2012, Ed Sheeran. In 2012, in the UK his debut album + had sold 1.2 million copies- while there were reportedly 8 million illegal downloads of the same album. This sounds a horrific imbalance, but Sheeran himself has shrug (honestly or not, only he knows) the statistic off- he instead lauds the fact that over 9 million have his music, but more importantly he claims that it does not have too much of a negative impact on the economic aspect of his career- he cites increasing ticket sales as something to balance the money 'lost' to piracy.

And there is valid reason to this- digital piracy is very effective in spreading the talent of new artists to the music scene. Clearly, many people were not prepared to pay full price for Ed Sheeran's debut album, and perhaps rightly so (not many people knew of him at the time)- but the spreading of his album via digital piracy opened it to a huge audience. Once people heard his full songs, those who liked them would then be more willing to pay the price of a concert ticket, or buy future songs (of course, the latter would not be reflective of all fans).

This opinion is part of a view that the music industry is changing- that the function of the music album is changing from an ends itself to more of a means- a means to attract people to pay for concert tickets, to buy merchandise, etc.

One could say that Ed Sheeran is not representative of the music industry as a whole- he is indeed one of the most popular and thus wealthiest artists in the world. Digital piracy may not damage him too badly, but what about the smaller artists trying to make their big break? Won't illegal downloads damage them and make their desire to make music financially unsustainable?

Well, no doubt this has happened to artists- however a simple response to this (as well as the aforementioned potential benefits of piracy) is that few small artists have their content available online to illegally download in the first place. Whereas you can easily find an illegal download of Ed Sheeran's latest album, finding one of a new, independent artist is definitely more of a task.

You wouldn't want to cross the Expendables cast by
illegally downloading their films....

It is possible to say that digital piracy has a positive, promotional effect on the movie or games industry too. Illegal viewings of 'The Expendables 2' may have encouraged many people to shell out for a cinema ticket to watch 'The Expendables 3' if they liked it. However in most cases where there is only mild interest in a film or a game, perhaps an illegal viewing may encourage someone to wait until they can illegally download the sequel.

However the effect of digital piracy on movie industry revenues has been almost invisible. A famous study by the London School of Economics stated “Despite the Motion Picture Association of America’s (MPAA) claim that online piracy is devastating the movie industry, Hollywood achieved record-breaking global box office revenues of $35 billion in 2012, a 6% increase over 2011,”. 

This growth in the face of rising internet piracy can be attributed to numerous reasons- perhaps better (and/or more) films, people recovering economically and spending more on entertainment, growth in more expensively-ticketed 3D films. It also suggests that piracy does not have a profound effect on the industry- not as many sales are 'lost' as believed.

I put 'lost' in quotation marks because it is another question we must consider- is a sale really 'lost' every single time an illegal download occurs? Globally speaking, the answer is no in many cases. A 16 year old boy illegally streaming the latest Fast and Furious film in an internet cafe in Botswana is not a 'lost' sale- it is likely that the film would not be showing in his locale anyway, or he would have more urgent things to spend money on than a ticket even if there was a showing. 

A Chinese university student illegally downloading Command and Conquer Generals wouldn't count either- because even if he wanted to purchase it legally, the game is banned in his country. 

We must be wary that such instances are included in the global statistics that we hear- and the globalised, developing nature of the world means that countries such as China do account for a large amount of the digital piracy we hear about, and in many of these cases legal sales are not possible, and thus not 'lost'. 

So we must consider all sides and dimensions of this debate. Yes, income is sometimes damaged by digital piracy, but then again income can be boosted by the positive promotional effects of pirated content. Piracy makes media widely available to all, and can be a launching pad for a music artist to become the favourite of millions, whereas perhaps if piracy was unavailable they may not have received the widespread reach that gave them their big break. 

The effects on the movie and game industries are arguably similar but of less strength- though statistics often exaggerate the cost of 'lost' sales due to piracy, and these industries are in fact flourishing (due to various reasons).

So, that's an overview of the economic effects of digital piracy- it is a matter that is certainly not as clear as it first seems.

What do you think? Comment below with your opinions and thoughts! 

SOURCES (and recommended reads):
LSE Report http://www.scribd.com/doc/172985274/LSE-MPP-Policy-Brief-9-Copyright-and-Creation
http://www.cbc.ca/news/business/digital-piracy-not-harming-entertainment-industries-study-1.1894729
http://www.bbc.co.uk/news/technology-19599527

On digital piracy. (Part One)

(Photo credit to Schwadron)

In the past, pirates were known as the squashbuckling, one-legged, eyepatch-wearing Captain Jack Sparrow-type of sailors who would brave the seas in search of precious treasures (or 'booty', as it was known). They were the outlaws of the sea, the mavericks who were both celebrated and deplored by many in their time.

However now, the digital age has brought along its own (rather less exciting) type of 'pirate'.
The treasure for today's pirates is no longer a chest of fine precious jewels, but instead perhaps an entire series of 'Game of Thrones', Ed Sheeran's latest album or the Football Manager video game- all of which are accessible easily via 'torrents', files that direct your computer to download larger ones, be it an MP3 album, a film, or anything.

Whereas to purchase Football Manager 14 from a shop, I'd have to locate the item and travel to my nearest game stores (leaving the house, oh!) to lump out 35 of my pounds, via torrenting I can get this for free, completely. All without leaving my house, right on my computer, not a pound lost from my pocket.

That's largely where the appeal of digital piracy lies- you can get something of value that you desire for free. And in the day of almost all media (even books) now being on digital platforms, you can get quite a lot.

To many, this practice raises serious moral issues, and perhaps rightly so. Is there really a difference between torrenting Fast and Furious 6 and simply walking into my nearest HMV, grabbing a copy of it from the shelves and walking out without paying? On the surface, there is little difference- in both cases you have obtained something of value that was not given willingly to you for free by the creator(s).

However, many people fail to take into account such a link, the reason why digital piracy is far more widespread than shoplifting- and it's unsurprising why many of us do not see digital piracy, perhaps irrationally, as a direct equivalent to shop theft.

The internet has hugely affected our behaviour- most notably due to the fact that it provides a proxy between communicators, it provides an environment in which relationships are usually more detached, separated by a screen.
This separation is clear in how confidence is gained by many internet users who, in the real world, have very little- cyberbullies, 'trollsters' and whatnot are largely of this type.

The lack of interpersonal communication during the process of torrenting makes it a much more appealing prospect than outright shop theft; when on the internet alone, you feel there is no one watching you (something in fact untrue), so there's no one that provides a reaction to your torrenting, there's no one to catch or stop you. This is an environment that is far more conducive to theft.

This nature is shown in the statistics- as of 2011, 42% of software running in the world was pirated, 95% of music downloaded online was pirated, and two-thirds of all torrents were illegal. Three years on, illegal downloads have continued to grow in popularity. It's clear- the world is full of digital piracy.

At the end of the day, digital piracy is the same as theft from a store. We have all been guilty of it, but perhaps we need to change our attitudes towards it; we wouldn't steal directly from a shop, so why should we steal online?

But actually, on the other hand, does digital piracy actually matter? Does your downloading of a piece of media really have any negative impact on the multi-millionaire producers of the things we download?

We'll be exploring that in the next article. Stick around.


SOURCE(S):

Online Piracy in Numbers – Facts and Statistics [Infographic] www.go-gulf.com/blog/online-piracy/ (2011)

German Cars: What Makes Them Special?

If you were to ask someone on the street what car they would like to own, without doubt among the most popular brand selections would be BMW, Mercedes or Audi.

These three German manufacturers have taken the global car market by storm in recent decades, and are now the epitome of the well-built, high quality yet mass-marketable luxury car.

VIDEO: http://bit.ly/XHupq2

Of course all their cars are not necessarily of the best quality on the market- the likes of Aston Martin and Ferrari to name just two produce cars closest to perfection- however the crucial aspect to why BMW, Mercedes and Audi are more successful and relevant to this discussion is because they are open to the mass-market. The average middle-class family cannot afford a four-door £150,000 Aston Martin Rapide; though a £23,000 BMW 3-Series is within the reach of many, an achievement highlighted best by how it has consistently maintained a spot in the ten top-selling cars in Britain since 2004. 

The success of the German car industry can especially be noted when compared to that of Britain's. In 2011, Germany produced 5.9 million cars, the highest number in Europe- Britain a paltry 1.3 million- many of these not for British brands but for foreign ones such as Nissan and Honda. 
And the domination of the Germans extends much further- two typical 'British' car makers, Bentley and Mini, are in fact far from British; Bentley is owned by Volkswagen, Mini by BMW. 
There are in fact no longer ANY mass-market 'purely British' brands- Jaguar, Vauxhall, Land Rover, even Aston Martin, are all foreign-owned. 

Germany's success in the car industry must also be put into perspective- consider that less than a century ago the nation was facing huge economic turmoil, the sort that provides textbook examples of hyper-inflation: the wheelbarrows of cash, the 200 million mark loaves of bread, the extremely volatile prices, the lot. 
Post-war reparations had put Germany in a terrible state in the early 20th century- but looking at Germany now, with such economic might that makes it the most influential state in the EU, it is clear that the German system has produced fantastic results.

There are numerous reasons for the Germans' successful car market, but one key reason is the industrial mindset, the 'manufacturing culture' that is fostered by the Bavarians. 

Britain's manufacturing industry has had a rough last 30 years- in this period shrinking by two-thirds. Margaret Thatcher's time as PM during the 1980s to many killed the secondary industry in Britain. I'm sure you've seen the images of striking factory workers, unhappy at Thatcher's crushing of worker unions and the closures of numerous car factories throughout the nation. 

Meanwhile, Germany has only been growing since the Second World War- whereas British car factories became a battleground for a class war between management and labourers, German factories were tight-knit, harmonious and therefore far more efficient. 

The closer relationship between workers and management is part of Germany's attention to what is known as the 'social market economy'- a type of capitalism that does not co-ordinate market activity itself, but at the same time provides support for society- be it in the form of universal healthcare, unemployment insurance and, most relevant in this discussion, trade unions. German workers enjoy among the highest secondary sector wages in the world, and are provided good working conditions. In contrast to the system in the USA for example, where entry-level factory wages were halved from $28 to $14 an hour, the Germans' higher investment in the workers pays off, creating a more co-operative and committed environment, where workers develop loyalty to their company, an idea almost lost in the US labour economy. 
German workers are in fact the most loyal in Europe- the job market is far more stable, meaning companies can afford to invest more in long-term training, and crucially it means workers on the production line are experienced and efficient in their job.

Output is also helped by the power given to the workers on the German production line. Almost all German factories will have members of the regular workforce on the executive committee of the factory- as a result the workers are given a voice in the running of the factory, and have the power to suggest changes that may improve efficiency. 
To those who may believe this system can be abused to benefit the workers at the cost of the company, this is where the German system really makes a difference. Loyal German workers who are decently paid already are more likely to not abuse their power to push such agendas.
This system making workers a part of the running of their factories increases the workers' morale, making them feel more empowered as part of a democratic operation.

The education system is arguably the biggest factor in German industrial success. Whereas in Britain all youths are pushed through the same educational system until the age of 16, after which they are offered either further education or half-heartedly the option of vocational education- such as BTEC, or Apprenticeships.
These being relatively young programs, they are not well-established and are avoided by many students, partly as they are seen as for those intellectually inferior to the further educationers (certainly not always the case).

Meanwhile Germany offers more choice to specialise at an earlier point. After the age of 10 (or 12 in some areas) student can study at the Gymnasium to pursue higher education such as university, or can opt for the Realschule or Hauptschule, schools that will provide education in core subjects such as Maths but have a heavier focus on vocational education and practical work experience.

These extra years provides a head-start for German workers and has created skilled, respected workers, ready-made to enter the world of manufacturing at the age of 18. German factories have had no shortage of skilled workers- and as a result the production lines are efficient and smoother than most others in the world.

Germany have certainly set the benchmark for efficiency in the manufacturing industry. It must be noted that Japan are similarly capable in car production. 
Worker empowerment, the social market economy and an established, effective specialist education system have propelled Germany to the top of the global car industry- and while other countries may not be able to fully translate German practices into their own car industries, it is certain that they can learn lessons from it.

SOURCES (And recommended reads): 

How German cars beat British motors - and kept going bbc.co.uk/news/magazine-23406467 (BBC, 2013)

Mercedes Benz, BMW and Audi Seen as Top Three Car Manufacturers in Terms of Overall Brand Quality By Europeans, According to New Harris Interactive Survey prnewswire.co.uk/news-releases/mercedes-benz-bmw-and-audi-seen-as-top-three-car-manufacturers-in-terms-of-overall-brand-quality-by-europeans-according-to-new-harris-interactive-survey-155096425.html 

Why doesn't Britain make things any more? www.theguardian.com/business/2011/nov/16/why-britain-doesnt-make-things-manufacturing (The Guardian, 2011)

Manufacturing lessons from Germany

www.tradegood.com/en/insights/viewpoints/market-features/manufacturing-lessons-from-germany.html

German Lessons: DEVELOPING INDUSTRIAL POLICY IN THE UK www.tuc.org.uk/sites/default/files/tucfiles/germanlessonsedit.pdf

US carmakers cut pay as Australia's hourly rates soared www.theaustralian.com.au/national-affairs/us-carmakers-cut-pay-as-australias-hourly-rates-soared/story-fn59niix-1226779288772?nk=7680174eef8fa1a758fb359ff5cd292a (The Australian, 2013)

Consumer confidence drives record year www.smmt.co.uk/2004/01/consumer-confidence-drives-record-year/ (SMMT, 2004)

German workers 'most loyal in Europe' www.thelocal.de/20121014/45553 (The Local, 2012)

German School System www.howtogermany.com/pages/germanschools.html

What If Everyone Had A Job?

In recent times of economic trouble, unemployment in Britain has risen considerably in the past decade. From a relatively healthy 4.5% rate in May 2005, in April 2014 it was recorded at 6.8%- not an insignificant rise in any sense. This has led to the more and more citizens becoming reliant on state benefits- easily proven by the debate over benefits of the last few years, and shows like 'Benefits Street', which makes quite a crude reality-style show out of the lives of a group of unemployed people on benefits.

The ideal situation to most people, after having constantly been hearing news of unemployment in the last few years, is that everyone has a job- that no one is unemployed, that we have full employment.

Full employment has no agreed definition, though of course it cannot mean purely 100% employment- as there is always likely to be Frictional unemployment- that is the unemployment of people who may be searching to change, or is in the process of changing their employment. Christopher Pissarides, professor of economics at LSE states "full employment never meant zero unemployment".

The apparent benefits of full employment are clear- more people would have a wage, would be able to afford a living, homelessness would decrease, no one would have to depend on benefits- but the potential effects of full employment go deeper. Let's look at just a few.

Firstly, an advantage (though I'm sure some would disagree with me) is that full employment would empower regular workers. Employment is a scarce resource, just like oil or gold- and, just like these scarce resources the value of employment increases as unemployment decreases. As more people gain jobs, the pool of unemployed workers will grow smaller and smaller. It will be harder to find employees.
Thus the employees will be empowered more in a world of zero unemployment than in one of unemployment. We've seen recently, perhaps moreso in the USA, that mass unemployment has decreased the value of workers- that they have become almost disposable. As a business could easily find someone else desperate for their job, workers have been suppressed via long working hours, terrible pay and the like. A world of full employment would be the opposite of this.

On the other hand, the potential wage rise that could result from this could simply lend itself to a larger cycle.
As wage demands increase, so would inflation- this was notable for example in the 1970s, when acceptance of union demands for higher wages was closely linked to rising general inflation.
What this does is in effect create a nominal wage increase- people may begin to see a higher number on their paychecks, but the benefits of this would most likely be cancelled out by rises in prices of everyday items, the general cost of living. Take an example- if your wages rose by 4%, but the price of bread rose by 4%, you wouldn't directly benefit on your weekly shop- because the extra money you earned would be spent on the same things you purchased before. If you could normally only afford 1 loaf of bread, after your nominal wage increase you'd still only be able to afford 1 loaf.
This is not what we really want, a real wage increase. A real wage increase would mean increase in purchasing power- so that you could afford an extra loaf after your wage increase rather than one.

The 'cycle' mentioned earlier relates to the business' viewpoint of this. An increase in expenditure on wages that full employment may enforce would be an extra cost that potentially could lead to spending cuts, if the business is not willing to absorb the costs of extra wages (certainly not a rare occurrence). This would lead to people losing their jobs- reversing the effect of full employment. Of course this would be a long term shift, but arguably it implies full employment is no sustainable solution itself, but part of a larger repeating shift in the economy.

So, full employment has potentially far deeper effects than at first glance. Only two have been mentioned here (for the sake of relative brevity)- what do you think about full employment? An ideal target or a false friend? 

Why Do We Buy Designer Clothes?

VIDEO: http://bit.ly/XHuw51

I was in a Ralph Lauren store just yesterday- being the unenthusiastic spender that I am I had been attracted by the large sign in the window that boasted of 'Generous Savings'.

A thousand pounds for a jumper, anyone?

I went in, walked straight to the sale rack and I saw these 'Generous Savings'- a white V-neck sweater was the first to catch my eye. Knowing Ralph Lauren is something of a 'prestigious' brand, I expected it to be overpriced- perhaps £100, on sale at half price to £50?

But no. I was wrong. Very wrong indeed.

The fuzzy Christmas-style sweater was £995.
And the 'Generous Saving'?
£300 off- the sweater, on sale, with roughly 30% off, was £695.
SIX HUNDRED AND NINETY FIVE POUNDS.

Or how about this £46 equivalent?

Other than making me leave the shop immediately in fearful haste, this small event made me think about what we know today as 'designer clothes'.
No doubt, this jumper I saw at Ralph Lauren was not the only one of its kind- I returned home to find a very similar jumper for £46 at Debenhams; still an exorbitant price for a jumper in my opinion, but far less than the RL equivalent.
So what is it that we are paying for if we are to buy this £995 jumper?
Ralph Lauren refused to give exact figures of the cost to make it, but we do know it's handmade, by 'Pure Cashmere Yarn'- which, according to my father (who made these when he was young) would cost a maximum of £30 (considering today's £15 per 50g price of the material) plus labour costs.
Now, unless labour and other costs (eg. transport) for each jumper were over a couple of hundred pounds, it's fair to say the profit margins on every jumper sold would be huge for RL. It wouldn't take an economist to determine that.
Yet people still buy designer clothes. Someone must have bought the jumper; the product department at RL aren't misinformed enough to invest in a product no one would buy.

So why? Why would people buy the Ralph Lauren jumper rather than the Debenhams one?
In the interest of not writing a book of reasons, I tried narrowed this down to three; it was difficult, and I haven't included many, but I think I've done it well enough.

REASON 1- SHEEP MENTALITY
You'll know this if you lived during the craze of Superdry Windcheater jackets (I admit to being guilty myself in this case). This mentality was what enabled David Beckham, in a single magazine photoshoot, to help the Cheltenham fashion brand to grow from a single shop to what is now a global icon in pop fashion, making sales of almost £400m last year.
Essentially, once more people begin to wear designer clothes of a sort, people feel pressured (often unwittingly) to wear the same- to 'fit in', to 'look cool'. Social pressure, exacerbated by the celebrity lifestyle forced into our faces via the media, creates this sheep mentality, of obsessively following trends. Remember crocs? They were once considered cool.

REASON 2- QUALITY
It's a thought perhaps the biggest of cynics (cough cough, my uncle) cannot really deal with, but it is often the case. You'll expect a £165 Barbour fleece Jacket to be made of better materials than a £15 Primark equivalent- and thus the Alcantara-lined Barbour Jacket does cost more. Many people care about the quality- and more often than not designer, expensive brands offer better quality, usually through better, more expensive materials and/or better production procedures, that would make them more comfortable/last longer.
However I think it's safe to say there are exceptions- the aforementioned RL jumper an example of this.

REASON 3- SOCIAL STATUS
This is probably the main objective for the fortunate buyer of the RL jumper- it links well to reason 1 as well. The little logo of a horse, or a seagull, or whatever logo for some people is the main reason for their purchase- because it sends a message to people who see it: that the wearer is wealthy enough to buy expensive designer clothing. That they are fashionable, 'trendy'. It would be overly cynical to state this is the objective of all wearers of designer clothes, as it isn't, but it does explain some of the more ridiculous designer purchases- such as the RL jumper, or these nine-grand Louis Vuitton binoculars (pictured right) that perform the same function no better than a regular £20 pair.

One could argue that designer clothes are unnecessarily expensive- and in many cases they'd be right. For £4 north of £995 I could buy a MacBook Air- which would certainly be of better quality and perform everyday tasks quicker than a £30 laptop (if one exists), saving me time- while the £995 RL jumper would not hold such an advantage (in terms of practical value) over a £30 jumper.

While the quality must be taken into account also, it's worrying in my opinion that a growing focus on outward appearance is increasingly taking its toll on the largely cash-strapped wallets of the Western world. The impact of social pressure, this 'sheep mentality' cannot be underestimated.

So think, next time you're at the Armani, Superdry or dare I say even the Ralph Lauren store. Question your motives; and you potentially could save yourself (or your parents) a few bob.

Thanks for reading. This is probably the longest I've ever taken to discuss largely a single jumper.