Tuesday, April 18, 2006

Pirated DVDs/VCDs Tycoons' Operations

A Fictional Account

It is a widely known fact that Malaysia is the production and distribution center for pirated DVDs/VCDs for most parts of Asia, and even as far as Souh Africa (I have a friend who can confirm that the sellers in South Africa got their supplies from Malaysia). If you think about it, to run such an empire is no easy task. I believe the mastermind behind it all would have (could have) been a very successful business person in the legit world too.

Think of all the things to manage:

1) Ensuring master copies are somehow diverted to you by hook or crook. This will mean obtaining the lucrative master copy even before it gets anywhere near the theatres. Not an easy task. Payoffs and important contacts needed to be made globally.

2) Ensuring your production center has the latest technology and speed efficiency in stamping out copies. A link-up post production unit will have to be handy with printing of covers and boxes. May have to outsource the plastic covers and boxes to a reliable source - calls for open tender every 3 months to get best prices.

3) Always be the wholesaler, appoint a master distributor for each region and get a cut of sales. For example, it may cost 15-30 sen (US 4-8 cents) for each DVD. Add in packaging, it could come to RM0.50 to RM0.60 per piece. A master distributor could take it on consignment basis - which means paying only what is sold (saves on capital) but will have to share more with the mastermind. A master distributor may be able to retail DVDs at RM8-RM10 per piece. The youths with multi colored hair may get anywhere between RM1 - RM2 per piece, with the master distributor (usually small time gangster heads) getting RM1-RM2 per piece also. Mind you, each master distributor will have a few hundred youths backing him up. Whether you buy from the front end of Jalan Alor/Petaling Street or the middle part of the streets, its the same team. At the end, the master wholesaler will get RM3-RM4 per piece. Mind you, he will have to write off a large portion of the DVDs left unsold, so his net could just be RM2 per piece.

4) Sales to overseas distribution points would be done at less than RM1 per piece net (free of shipping and delivery) as there are no returns and the sales are immediate. Poor sales items would be knocked down to half price to clear stocks. Failing that, you will sell them 3 for RM10, sure no problem, particularly at Berjaya Times Square or Sungei Wang Plaza.

5) Certain master distributors would be more savvy and appoint people with actual shops to sell their wares instead of on the streets. This cultivates customer loyalty and service. Many will have loyalty cards for redemption purposes (you are not the only ones, Starbucks!).

6) Certainly for the entire system to work, a lot of people will have to be on the payroll. Warnings of raids are known beforehand. Shops selling these stuff seldom gets raided or closed. I wonder why...

In fact, I have a sneaky feeling that I might know the mastermind behind all this.... and they are probably not from Malaysia, surprisingly. Its certain film tycoons (and triad heads) from Hong Kong. The reason being, all movies will get pirated and out to the retail market at the same time as the picture is released - except for a group of films from HK, by a certain production company. Strangely, these select films will eventually get pirated but not at least 3-4 weeks after it has been shown in the cinemas. Next time you are in Malaysia, keep an eye on certain HK movies, the ones that you cannot even get a pirated one if you offered to pay RM30 - then check out the people behind them. Problem is, many films are still financed by triad's money in HK. But why Malaysia and not in China - well, if you get caught or the authorities decides to clampdown on your activities, in Malaysia they will not shoot you and ask you to pay for the bullets.

Oh, yes.... and this is a fictional account ... in case I get rubbed off.

No comments:

How Far Should The Bloodletting Go

Euromoney came up with an article which questioned how far should the "bloodletting" continue in finance in Malaysia. I bring this...