Anonymous Notes

President Bush of the US of A has sealed his fate with the 2nd gulf war(I really don’t want to say which way). Now as a crunching finale to their poll campaigns US legislators have been pushing bans on outsourcing. This when they are still extending agricultural subsidies to their own farmers, which implies that they are killing the local agricultural market in third world countries.
Outsourcing of US white-collar jobs has got everybody in the US shouting. Wired magazine even did a feature on this in it’s Feb issue.

From our(Indian) perspective
We have spent years upon years importing goods and services from the US. For crying out loud they almost exclusively controlled who had and who did not have computers about a generation ago. All medical services and drugs were bought from the west. The shifting of manufacturing services to other destinations was when the US was hit first. Cheap labour in South Asia and other 3rd world countries, who in the eyes of the American’s are ‘poor’ countries, have been categorically proving financially more viable alternatives to domestic production. The disparity that the Americans are proud of is the sole reason for their goods and services being imported. What we see here is world economics trying to correct a lop-sided balance. The corrective lop-side, as I would like to call it, was first seen when manufacturing of motor cars and other mass produced items became dirt cheap in Japan and other countries. In this second wave it is intellectual property which is moving out of the US. Don’t get me wrong each country is doing it’s best to gain the maximum from these winds of change.

• America is trying to hold on to it’s position and jobs by banning outsourcing
• China is continuing devaluing it’s currency to keep outsourcing profitable.
• Indian politicians are trying to extract feel-good points for the outsourcing jobs it has got over the past 2 decades. and of course the RBI is checking the rising rupee
• Even companies are thinking up new methodologies to circumvent existing laws to cut costs.

But I feel that legislations to ban outsourcing will not be well taken by the US economy. Although analysts may claim that it will be better in the long term. who are they kidding. Did the drive to buy American goods only work in the 70′s and 80′s? manufacturing has by and large shifted outside the US. US Companies like Trilogy, Sapient and Tavant have gone further and founded their branches on Indian shore. So even if a job is given to an American firm and third party sub-contracting is banned. The company itself will be using workers in India. This is one of the more direct ways of circumventing the proposed legislations. I’m sure there are subtler ways which are virtually untraceable.

So wake up I say. the outsourcing wave may do for us what the micro-devices manufacturing did for the south east Asian countries.

We have all seen marked amounts of growth in proliferation of MP3′s and DivX’s. But have we ever stopped to think that their growth is an indicator of thriving violations of copyright agreements. A parallel increase in shared software (through p2p) also suggests the same for Intellectual Property rights agreements and licenses.

In the western world the figures are , shall we say, less staggaring. According to RIAA and MPAA roughly around 25% of the copeis of music and movies going around in the US on optical medium were pirated. Similar stats for ’3rd world’ countries can hardly be fathomed. As an example, take note that the largest recordable optical medium manufactureres have changed in the past 10 years from all over the world to south east asia. This implies a more or less direct increase in pirated copies of copyrighted material.

All that was factual information. The pertinent question here is. Why? I beleive it’s a statement being made by file sharer’s is. Is it really justified that talented (or sometimes just overhyped) artists be payed huge amounts of royalty. Just so that their fans can hear their music. Here I consider the cost of the proeprietary product as against the cost of the medium of distribution.

1. An average CD when cast from a die (as mass produced CD’s are) costs around Rs 3-4 (6-8 cents) to produce.
2. Include into that the cost of packaging and printing lets say totalling around Rs 3-4 more. coming to a total of 6-8 Rs (13-18 cents)
3. Now assume that the wastage factor (peices sold /peices produced) is 0.5 i.e. if 200 CD’s are produced only a 100 are sold
4. The total cost now comes to 12-16 Rs (27-36 cents)
5. Also adding transportation and middle man margins of 100% (crazy but lets allow as much margins as possible)
6. Now the Cost to put this CD on the shelf comes out to 24-32 Rs (53-71 cents).

So you mean to tell me there is a profit above this to the tune of 200 % more. Audio CD’s are Rs 100 (2.2 $) per peice the last time i checked
The shelf cost of a movie on Video CD’s in India stands at a minimum of Rs 200-300 if bought from a legitimate source.

Consider the alternatives.
The local grey market CD dealer provides movies at Rs 100 (2.2$) and Audio CD’s for as little as Rs 30 (66 cents)
The Internet provides active P2P communities from where you can get a much wider variety of music and movie’s than ny stockist or Music store in India can provide. The only cost here is to remain connected.

So for me the end user the difference is only the difference which seems to have crept is is the difference in the cost of putting the finished item on the shelf and the cost at which it is marketted. The assumptions made about the wastage and transport and middle man are clearly prepoterous. Hence an actual record company can sell CD’s at the same price as the pirate and still make a profit.
This would help in many ways
consumer : curb the grey market products which have no quality control
Artist : would sell just as many or maybe more records than they are doing currently ( more of them through the proper channel)
Record company: would sell more peices (larger production should mean lower production cost)
MPAA RIAA : could drop the facade that they actually want to stop piracy. all they want is that more people listen to the music and the more profit they can make out of it.
What do you think?