Piracy Creates a Hit Film in Brazil

Hollywood studios have always insisted that piracy hurts the financial returns for a film -- and likes to count every unauthorized viewing as lost revenue. Critics generally respond that pirated DVDs do not necessarily represent lost revenue, especially in countries where ticket prices are high and average wages are low. Piracy in those circumstances is symptomatic of an out-of-whack market that refuses to meet actual consumer demand.

No one has ever been able to “win” this debate because there is very little empirical evidence to be marshaled. Now comes the Brazilian film, Tropa de Elite -- “The Elite Squad“ -- a gritty, thinly fictionalized account of Rio street crime and police torturers.

Street vendors started selling illicit DVD versions of the film in July, months before its planned November release. An angry director, Jose Padilha, claimed that the pirated DVDs would cause serious financial harm, and urged the authorities to crack down on the illicit copies.

Then something happened that made mincemeat of the film industry’s anti-piracy propaganda: the unauthorized circulation of the DVD made the film one of the biggest hits in recent Brazilian history. In the city of Sao Paulo alone, an estimated 1.5 million people saw the DVD before its release, according to Paula Martini, who wrote about the incident on the iCommons website. (I rely on her account for details here.)

Originally, the studios anticipated that the film would open in 150 theaters and be seen by one million viewers. Once the film got out, however, public interest in it soared. The studio moved up the release date by two months and opened the film in 300 theaters. The first weekend, without any TV advertising, 180,000 people paid to see the film in theaters. (Few Brazilian films are seen by more than 100,000 people.) The opening weekend audience was 90 percent larger than the audience for the hit film City of God, which was the highest-grossing foreign film in the U.S. in 2003.

The producer of the film, Marcos Prado, now estimates that five million people will see The Elite Squad. Street vendors are now creating “sequels” that trade on the name Elite Squad, but which actually recycle previous films about drug violence. The “sequels” have attracted new audiences to those films, sometimes exceeding the size of their original audiences.

Piracy is theft, of course. But I do think that piracy, when it occurs, says a great deal about the closed, unresponsive nature of a market -- a reality that studios typically don’t want to discuss. Open up the distribution channels to newcomers, and offer lower-priced fare and material that interests the audience, and business will be brisk. As blogger Paula Martini put it, “If there is one thing to be learned from the Elite Squad case, it is that there is a huge demand on the part of the Brazilian population at-large for cheap, interesting movies that deal with their often-difficult reality.” Another, more consumer-friendly market structure is possible, as Nigeria has shown with its wide-open DVD-driven film industry, now the third largest national film market in the world.

Although the director of Elite Squad is gratified to see how piracy accidentally made his film a hit, Brazilian legislators apparently still don’t get it. They are considering tougher penalties against piracy.