Piracy in Merchandising in India
Piracy in Merchandising
in India
Piracy is a
downright menace and thorough nuisance, in all forms it assumes; be it in the
high waters or in product merchandising! As if piracy in the high seas were not
enough to give commercial liners sleepless nights, the piracy industry among
products and merchandise has given many a licensed manufacturer, woe and
heartache!
* Worldwide the value
of counterfeits in relation to total turnover:
· Computer software 35%
· Audio-video 25%
· Textiles and clothing 22%
· Toys 12%
· Perfumes 10%
· Pharmaceuticals 6%
· Watches 5%
*Source: Michele Forzley, JD, MPH, “Counterfeit Goods and the Public's Health
and Safety”, International Intellectual Property Institute
Gone are the
days when a simple product was wholesome for use and was what you intended it
to be. These days with spurious products doing the round in every facet of
sales, one has to examine every product closely to determine its authenticity,
and sometimes a close observation may not be enough!
Casualties from
contraband and unethical practices are estimated to be $200 billion per year,
and growing at a very fast pace. We are hopeful that sustained and coordinated efforts
can bring down piracy to manageable levels, single digit figure, considering
the recent initiatives and efforts taken by the Indian Governing bodies.
Considering that merchandise exports account for about 15 percent of India’s
gross domestic product, which may be far less than China it still is a
significant driver for Asia’s third-biggest economy.
To
understand more on how piracy has become a scourge to the industry it is
imperative to understand India’s growth statistics. According to the World
Bank's Human Development Report it is believed that approximately 20 to 22 per
cent of India's population owns 47 per cent of the income. This translates to
the fact that there are more than 250 million middle class consumers with
purchasing power. So when we consider the fact that 32 per cent of the
population is below the age of 15, there is a massive potential for growth in
the licensing business.
Imagine! 50 –
55 million homes expending over Rs. 50 a month on branded products that translates
into merchandising grosses of Rs. 30 – 35 billion a year!
The Indian
retail market is tremendously large, approximately about US$ 350 billion.
However, what is of interest here, is the growth prospects that organized
retail throws up! Estimated to be only US$ 15 billion there is massive
opportunity in this space and by 2010 it is expected that organized retail will
grow up to US$ 22 billion. Looking at the massive growth of organized retailing
which can reach 40 per cent over the next few years, Indian merchandising is
distinctly slated to overwhelm.
Licensing or merchandising? Flip the coin!
To bring
piracy in merchandising under control it is necessary to understand that licensing
and merchandising are two sides of the same coin. In a way they co-contribute
to the progress or growth of each other. There is a definite pattern that
emerges between licensing and merchandising, albeit not clearly defined.
Licensing calls
for finding the right medium to initiate or introduce the product into the market.
Merchandising, on the other side, is the task of the retailer or the retail
merchant to decide on how he would like to envision his product while keeping the
international brand or image of the product intact. Taking into account the burgeoning
number of licensed merchandise in the organized retail segment of the country,
it is being estimated that licensing in India is slated to be worth USD 550
million in the coming five years.
The sum of $550
million worth of licensing is still a tiny figure as compared to the well
established markets in the West; nevertheless one must take into account
India’s growing potential in the world of licensing. With malls mushrooming
around the corner, one is privy to a whole slew of licensed products all around
us. These merchandise range from steady product categories like toys, wearing
apparel, school and food products to unusual product categories such as tailor-made
vacations and even wall paints.
Over the
last few years, we have seen a dramatic change in the Indian licensing
industry. India, once a closed market, today, has transformed into a global
arena; replete with a foray of international and strong local brands to choose
from. Licensing in India today is no longer confined to character licensing. Even though
small, we are witnessing the slow yet steady rise of various other kinds of licensing
in India, ranging from, sports licensing, art licensing and brand licensing and
much more.
What exactly
does licensing hold for India, and how much can we stand to benefit from it?
Huge, I may say! The potential for India to be profited from the licensing
industry is way beyond one’s imagination. Given the growth and rise of advanced
and organized retail in India, it is estimated that the the pace is set for new cooperation grounds between
International Licensing organizations and Indian business houses.
We are
seeing a whole new spurt of licensed merchandise from licensing of brands or
trademarks, designs, personas and references (from animated cartoons, motion
pictures, etc.), celebrity names and images, events, etc. One can almost see a
boom in the growth of licensing as its popularity reaches higher levels in
India. Licensing used on various merchandise such as jewelry (pendants, etc),
apparel, lifestyle supplements and add-ons, toys, gifts, games etc. has brought
forth huge potentialities for Indian brands, businesses, distributors, retail
merchants, specialists and architects, attorneys, financial consultants and
licensing agents.
Of special
mention is the growth that we are witnessing in the character and entertainment
licensing industry. This particular domain has experienced intensely enormous activity
in the last five to six years. Children's entertainment market is gaining momentum
at a steady rate and pace and apart from television and silver screen; children’s
broadcasters are now focusing their attention to the lucrative licensing and merchandising
space.
Licensing is
one of the best developed marketing tools when it comes to appealing to kids. Through
research, kids inform us that before they enquire about a particular product,
they are eager to know of the product has been developed particularly for their
entertainment and leisure. Almost every company that targets children has realized
that the best way to inform children that there is a product or service available
to them is to link it to a recognizable character. Take for example, even at
the age of three/four, children are well aware that a picture of ‘Doreamon’ on any
children’s merchandise is meant for their use and urge parents to buy it.
Add to it,
the recently concluded IPL (Indian Premier League), which was yet another
pointer lauding the arrival and success of sports licensing in India. Licensing
in sports developed into a flourishing multibillion dollar industry in India and
around the world under the BCCI backed India Premiere League (IPL) in cricket.
Bold and Brave Steps
And in my opinion, entertainment in
its broadest sense has become a necessity rather than a luxury in life... Walt Disney
While on an
international scenario, merchandising for children movies is a hot property, in
India, it's still in its emerging stage. For example if in Hollywood, Spiderman
goods and toys lent to approximately 40% of the total revenues of the movie, In
India, the merchandise provided only 2%-3% to the total receipts. In more ways
than one, merchandising in India is still seen as a marketing tool than a revenue
earner. The movie becomes an advertising tool for merchandising. There is a
need to look beyond only one aspect!
At Kids Animation India we are of the
opinion that the reason why organizations turn to licenses is to bring down their
risk when attracting children’s attention. Hence, when it comes to selecting a
license, it is a proven fact that most fast-growing, well-versed businesses
will opt for an established, hot license property to be linked to. This is the
way to go! Animators with established hot licenses usually find their way
around kids recall value, the greatest.
We believe
in bringing the whole gamut to children’s entertainment, not satisfied with
having just merchandise, new age business cues call for a wide variety of
options to be delivered. Which is why, we at Kids Animation India have a fantastic integrated model; a holistic
360 degree model! Through our integrations of Kids TV channel (Spacetoon), Merchandising for Kids,
Publishing (Fafa & Juno), Toys,
Licensing, Events, IP division etc. we believe we have arrived at the scene
with a whole spectrum of business models for children by escalating our use of merchandising
and marketing to children.
At Kids Media India / SpaceTooon we
believe that one of the important functions of the licensing division is to patrol
our licensors to make sure that there is uniformity amidst all of the varied
projects that go out, be it in the form of our publishing division or the
creation of our characters. We realize that kids crave authenticity and are
highly perceptive of change in quality. Take for example; our “Doreamon”
merchandise. Children observe when Doreamon does not look right in the story book
and express their discontent or question about the changes they see.
Hence it is
extremely important to preserve the fantasy of our characters in being real.
When they begin to seem otherwise, it breaches their fantasy. It breaks their
thought process and their reality; the fantasy that they actually believe in their
beloved characters. And I am of the opinion that most licensers believe the
same. This is what we believe to be a major role of our company’s licensing
division. Evidently, though, a character-merchandise can only look so much like
a 2D animated character, we do the best we can! We supply our licensing
division with intrinsic and detailed-to-the-core style guides!
Take another
example - our style guides on the ‘Fafa and Juno’ series. It consists of
practically everything; from how to depict the characters, the storylines, to how
the characters act or conduct themselves, and the logos etc. It is wholly and
completely comprehensive and yet we guard it. When a licensee sends us an
example of a product, such as a school bag, they are compelled to present a
prototype to us, for our appraisal and commendation. Even through style guides
are given to licensees, we ensure to the very last detail that they conform to
our requirements.
Why look at
merchandising for children? Because it’s the next big thing! In fact the
influence children play on their parent’s decision and buying power is so
immense that research indicates 20% to 80% of purchases in most categories are
done due to children’s recommendations. Studies reveal that children have been
extremely influential in the purchase of 20% of all cars made by families with
children. And the percentage of influence goes way up when there is a product
designed especially for them and they know about it!
Understanding piracy in
India
It is
imperative to understand why piracy is so rampant in the sub-continent! The tendency
to procure cheaper products seems to be something unique and specific to Indian
consumers. While economies of piracy seem to be justified in any society, this
particular phenomenon is without doubt more predominant in evolving countries
such as India. The apparent reason for this is that India is not yet a
developed country. India’s GDP per capita does not rank in the top five or 10
or either in the top 50; and is lower than even most of the developed Asian
countries.
Approximately
36% of India’s populations live below the poverty line. Furthermore, most of
the copyright products and licensed merchandise are looked upon as an
indulgence rather than a necessity. As might be expected 'affordability' acts
as the primary restraint in the purchasing decision. Which brings us to the
point, that fake and counterfeit merchandise tend to become far cheaper than
the originals thus making pirated products an evident choice for most of the consumers.
An additional conducive factor in this circumstance is possibly the buyer’s
mental positioning towards branding and quality. Quality consciousness among
Indian consumers has yet to come to international standards. Therefore, Indian
consumers do not hesitate in purchasing inexpensive products even if they are
of rock-bottom quality. This causes the pirates to focus on churning out only
on quantity and not on character.
Another
important aspect to look into is the slackness of the country's copyright
enforcement machinery that draws in unscrupulous people to piracy. Copyright
piracy is a cognizable offence according to the Copyright Act. But as in the
case many similar laws, anti-piracy enforcement of law lacks the edge and the
punch in being proactive. One hardly hears of people being caught and punished
in India, when found involved in piracy.
The remissness
in law implementation is the result of laxity on the part of the enforcement system,
namely the local authorities on one hand and the supine mannerisms on the part
of right-holders on the other.
One cannot
expect the law enforcers and the local state authorities to go after pirates
and counterfeit manufacturers, as it is not their priority and there are far
more pressing matters at hand. A credible understanding for this, as indicated by
the Departments of Police, is the greater participation and interest of the law
enforcement force in more exacting areas such as curbing murders, debaucheries and
terrorist activities etc. Moreover the intensity of the force and the
enforcement facilities and capital equipment needed for controlling piracy are
also not adequate to undertake effectively the troubles of India's size and tapestry.
Naturally,
low-lying criminal offences such as copyright piracy do not receive the requisite
attention from the law enforcers. Perhaps another issue might be the lack of acquaintance
among the law enforcing personnel with India’s copyright laws and inaptitude of
the personnel to differentiate an illegal product from the original.
This could
be the rational explanation for India not coming forth as an incorporated and
structured arena of commercial activity, of global repute. The markets in
India continue to stay divided; giving adequate range to the unprincipled suppliers/sellers
to illegally control the conditions in their favor, which in turns provides for
an ideal surrounding for piracy to multiply. Most pirated goods makers are seen
to function at local levels and cause disruptions in the local demand supply
gaps in a number of rural and town markets in India. These markets have strong
concentrations of pirates who sweep into action due to the lack of cooperative
campaigns from legitimate manufacturers.
The recent
endeavors of the Indian government in planning to spruce up the existing
legislative instrument to give more teeth to anti-piracy laws and take
necessary steps to control piracy is worth mentioning. We believe that without
governmental intervention, banishing piracy will be almost impossible. In
India, the Intellectual Property Rights (IPR) is covered under Copyright Law, misdemeanor
and encroachment of which forces both fine and imprisonment on a compulsory basis.
Ending the menace
There are
many examples India can learn from countries that have ventured successfully
into the path of licensing evolution. Establishments and institutions that control
and innovate across different facets are the ones that will come forth emerge
as victors. Hence the confrontation that India has to face in moving forward is
to rein in the contextual acquisitions of the West and to truly embrace true licensing
or Licensology, which is a body of knowledge that deals with all aspects of
licensing - making it one of the most energizing and stimulating business
models and merchandising tools in the country.
Because
infringers rarely come together for the betterment of mankind, brands must do
so. As an organized player, KAI has been proactive in instructing Indian
consumers to look at character merchandise beyond the basic means of
entertainment, but rather as an effective tool that can help better the child’s
ability to comprehend and in understanding the world around him better. As a
proactive measure we believe that the need of the hour is to initiate
developmental activities along with the numerous toy associations,
pediatricians and small informal nursery groups to inform parents on how
character and product merchandise can help the child to grow and develop more
effectively.
Similarly
organized players can also initiate promotional activities in combination through
the launch of their new products and editions to ensure a larger slice of the
market. Having said that a number of brands have actively initiated and
favorably stalled the growth of piracy but there is indeed a long way to go
especially in semi-urban and rural markets.
Some factors that can
help to lower piracy include:
· Vendor legalization efforts
· Vendor agreements with original
equipment manufacturer (OEM)
· Addressing customers demand with
appropriate supplies with appropriate pricing
· Government-led education and
escalated Enforcement with Dedicated Resources
· Creating specialized intellectual
property enforcement units at the national and local level and providing
dedicated resources to investigate and prosecute intellectual property theft;
· Increasing cross-border cooperation
among police and other enforcement agencies to improve coordination for law
enforcement in multiple countries
· Supporting the training of law
enforcement and judiciary officials (including establishment of specialized IP
courts where appropriate) and providing better technical assistance to ensure
that the people on the front lines of piracy enforcement are equipped with the
tools they need to deal with the changing nature of intellectual property
theft.
· New distribution agreements
· Public-private partnerships
· Globalization
· Implement the World Intellectual
Property Organization (WIPO) Copyright Treaty
· Create Strong and Workable
Enforcement Mechanisms as Required the WTO’s Trade-Related Aspects of
Intellectual Property Rights Agreement (TRIPS) by adopting and implementing
laws that meet international norms for IP rights protection.
· Lead by Example
At the end
of the day, a successful anti-counterfeiting elaborate and systematic
plan of action is largely supported through the agglomerated
engagement of similarly affected brands. Since this has yet to take place,
widespread acceptance of anti-counterfeiting measures has yet to revolutionize
the market. When a perceived retail outlet is seen selling fake goods of
several brands together, it is understood that the corresponding wholesaler and
importers is also partaking in fakes. Ideally, in a single sweep getting rid of
all the counterfeit stock from the outlet and warehouse can have far more important
consequences and implications than just removing limited pieces of a single brand.
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