Wednesday, October 31, 2012

Arewa: Welcome to Nollywood

How should Nollywood, the rapidly growing film industry in Nigeria, protect its intellectual property (IP)? Professor Olufunmilayo B. Arewa (University of California Irvine) addresses this question in her article, The Rise of Nollywood: Creators, Entrepreneurs, and Pirates. Her article explains that a weak infrastructure coupled with a fast-paced evolution of the industry created a "leapfrog" effect in which the industry skipped through stages of the development life-cycle. As a result, certain stages of both business and law did not have sufficient time to develop. These weak environments led to the unauthorized distribution of films and copyright violations through piracy. Professor Arewa's article suggests that to sustain growth not only will Nollywood need to better enforce IP rights, but it will also need to encourage a business strategy to monetize piracy.

The Development of Digital Nollywood
Ninety-eight percent of Nollywood's revenue stream is derived from home video distribution. According to Professor Arewa, digital distribution gave Nigerian nationals—at home and abroad—a means to stay connected. Moreover, a lack of public theaters and a high crime rate made it more likely for consumers to watch films at home. To meet this demand, private investors financed low budget films with short development cycles using a straight-to-video model. Because Nollywood never truly developed a public theater market, the industry lacked the same centralized distribution network that is found in other film markets like Hollywood. Skipping through phases of the industry development cycle, i.e, "leapfrogging," did not allow for Nollywood to develop a formal business model essential for long-term industry success; rather, the industry created a model that promoted piracy through the use of unauthorized distribution channels.

Piracy and the Commercialization of Nollywood
Professor Arewa explains that Nigeria has an inefficient property rights system in which there are often questions of ownership and clear chains of title. The rapid evolution of the film industry in this environment, has created difficulties for both government and business sectors to respond to piracy problems. Professor Arewa notes that although Nigeria has enacted the Nigerian Copyright Act and created a Copyright Commission (NCC) to police piracy, enforcement is still lax. Limited legal enforcement has allowed bootleggers to make and sell pirated copies to retailers who in turn sell pirated films to consumers, without any group within the distribution chain facing fear of penalties. Professor Arewa further notes that while piracy aided the film industry by allowing the capture of a larger audience, the loss of potential revenue has affected the ability of Nigerian filmmakers to produce higher quality films.

Recommended Corrective Action
In additional to strategies that strengthen the property rights system and enforce the existing laws against copyright violations, Professor Arewa suggests that Nollywood create a blueprint to monetize piracy. This requires that industry controls be established so that data can be collected, mined, and analyzed in order to gain a better understanding of the consumer market. Data can be then used to gain revenue through advertising and to develop methods for reaching out to consumers and helping them better identify with the Nollywood brand image.

The Nigerian consumer market is only beginning to understand the value of branding. For example, Nollywood videos are of higher regard than films produced in other areas of Africa, thereby creating a certain brand value in Nollywood films. To further advance this brand image, Professor Arewa suggests implementing strategies that help the consumer distinguish between levels of film quality and pricing. For example, "Nollywood Originals" would represent this early stage of low-budget Nollywood films, in which unauthorized copies have been nearly indistinguishable from originals. Whereas "Nollywood Select" might refer to original films of such a high and reliable quality that if copied, the quality would noticeably diminish. Once consumers are attuned to this distinction in film quality, they will pay a higher market price for original works that have been distributed through authorized channels. Professor Arewa believes that apart from enforcing copyright protection, other forms of IP such as trademark protection are also important in developing the Nollywood brand.

Looking Ahead
In her article, Professor Arewa has identified key strategies that should be employed by Nollywood to increase profitability and further development. She warns that while low-cost, informal business methods are enticing, this may actually lead to long-term negative impacts on institutional development, economic growth, and employment. To this end, it appears that those directly involved in producing films have realized the economic impact of rampant piracy and are taking steps to mitigate its effects. Earlier this year, Nollywood actors and stakeholders who were upset with bootlegged movies being sold in markets held a peaceful protest in an effort to gain support against IP violations from the Lagos State Governor. In August, the Coalition of Nollywood Guilds and Associations met with the Lagos Police Commissioner to discuss the effects of piracy on the local economy. In September, the NCC carried out a raid against the illegal use of musical film works.

Professor Arewa's innovative suggestion that Nollywood monetize piracy may be the optimal solution to this problem. A few other pioneering organizations have incorporated such methods in their business models. For example, YouTube has launched Content ID, a program that allows participating members of the arts to have the choice to earn revenue through re-purposed works that have been posted by YouTube members. This program maintains a library of works that have been provided by participating members. As users upload home videos, musical scores, or other works of authorship, Content ID scans to see if any part of the upload matches the original works stored in the library. Upon finding a match, the program can follow the instructions of the participant and either block, track, or allow the uploaded file to remain on YouTube. Per the website, publishers will allow ads to run with user generated videos and this ad money will be used to compensate the publishers, songwriters, record labels and artists "so that they can reinvest in their careers and keep making great music, and the music industry can thrive."

Existing business strategies illustrate that methods to monetize piracy may ultimately provide value to all members of the Nollywood community and promote further industry development. Moreover, through data mining, the government would have a better understanding of the market dynamic. Consequently, the commercialized success as well as needs of consumers in the digital market would be met, leading towards growth and stability.

Drafted by Charu Narula, research assistant to Professor Sarah Tran (Southern Methodist University).

Charu is a third year evening student at the SMU Dedman School of Law. She acquired her BA in Chemistry from the University of Kansas and her MBA in Finance from the SMU Cox School of Business. Currently, Charu works for the Hussain Law Firm in Dallas, TX. She is also an officer the SMU chapter of APALSA and is a team member representing SMU for the 2013 Philip C. Jessup International Law Moot Court Competition.

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