In my forthcoming book…now titled “Brand New World”…an entire chapter is devoted to piracy and pirated brands, and how this upstart phenomenon (if you discount buccaneering) is radically transforming the way companies brand and go to market.
So it’s nice to see The Economist drop this article on piracy, and how it can be a BENEFIT instead of a scourge for known brands. For instance:
In other industries, piracy can help to open up new markets. Take software, for instance. Microsoft’s Windows operating system is used on 90% of PCs in China, but most copies are pirated. Officially, the software giant has taken a firm line against piracy. But unofficially, it admits that tolerating piracy of its products has given it huge market share and will boost revenues in the long term, because users stick with Microsoft’s products when they go legit. Clamping down too hard on pirates may also encourage people to switch to free, open-source alternatives. “It’s easier for our software to compete with Linux when there’s piracy than when there’s not,” Microsoft’s chairman, Bill Gates, told Fortune magazine last year.
Another example, from agriculture, shows how piracy can literally seed a new market. Farmers in Brazil wanted to use genetically modified (GM) soyabean seeds that had been engineered by Monsanto to be herbicide-tolerant. The government, under pressure from green groups opposed to GM technology, held back. Unable to obtain the GM seeds legitimately, the farmers turned to pirated versions, many of them “Maradona” seeds brought in from Argentina. Eventually the pirated seeds accounted for over a third of Brazil’s soyabean plantings, and in 2005 the government relented and granted approval for the use of GM seeds. Monsanto could then start selling its seeds legitimately in Brazil.
Piracy can also be a source of innovation, if someone takes a product and then modifies it in a popular way. In music unofficial remixes can boost sales of the original work. And in a recent book, “The Pirate’s Dilemma”, Matt Mason gives the example of Nigo, a Japanese designer who took Air Force 1 trainers made by Nike, removed the famous “swoosh” logo, applied his own designs and then sold the resulting shoes in limited editions at $300 a pair under his own label, A Bathing Ape. Instead of suing Nigo, Nike realised that he had spotted a gap in the market. It took a stake in his firm and also launched its own premium “remixes” of its trainers. Mr Mason argues that “the best way to profit from pirates is to copy them.”
Well, there are many more examples in the book. But let’s just say that in the face of the growing explosion of pirated and knocked-off brands, the differentiator is “experience.” No matter how well the copy is, it is the brand’s ability to deliver an experience — above- or below-the-line — that will differentiate it and give it value.
Got you interested? The book cokes out shortly.