Tepito!

As I mentioned above, I'm in Mexico to study Mexican copyright policy (I'm actually comparing the implementation of the WIPO Internet Treaties by Canada, the United States and Mexico to see what it can tell us about North American governance, but I'll save that for later). A few weeks ago, I went with my neighbour and his girlfriend to Tepito. If you're interested in copyright, then you've heard of Tepito. If you're a political junkie in Washington, you go to Capitol Hill; if you're into copyright, you gotta check out Tepito.

It's an infamous thorn in the side of the copyright industries and the Mexican government (Outside of copyright, it has a colourful history). The International Intellectual Property Alliance (IIPA) - the main lobby group for American copyright companies - claimed in 2008 that Tepito accounted for "65% of the pirate music product manufactured and distributed" in Mexico. Thanks to its deep connections with organized crime, it's also a no-go area for law enforcement.

Based on what I'd read about the place, I wouldn't have gone without my Mexican neighbour, but once there, it's an eye-opener (and it didn't feel too dangerous, but I may have been oblivious). That it's a veritable warren of stalls makes it familiar to anyone who's ever been to the night market in Chaing Mai, or countless other places throughout Asia and Latin America. I didn't see any CDs being burned, but I did see hundreds of DVD covers in the process of being prepared for assembly. Anyone who's interested in copyright and how it interacts with the real economy should definitely check it out.

Some thoughts and observations:

Free marketers would love Tepito. It's remarkably complex and has developed in the absence of government regulation. Many vendors specialize (some exclusively offered porn, Mexican movies, and arthouse flicks). They may also have overcome the quality problem associated with pirated materials. According to a professor I interviewed for my field research, many vendors offer you the opportunity to return the DVD if you're not satisfied with the quality. To me, this suggests that these vendors have developed roots in their community.

What's also interesting, for a lapsed economist, is the complementary (or symbiotic) economy that has developed around Tepito. Much (or most) of the stuff sold there may be stolen, but there are also a lot of vendors selling food (a lot of which looked quite tasty) and crafts. There is also a market (or more than one; I was unclear where Tepito ended and the others began) near Tepito; I'd bet that one depends on the other.

Price competition. Seeing the low prices for DVDs (three to five dollars Canadian) made me think that the really interesting question for copyright aficionados is not how to eliminate copyright violators, but why people still buy full-price CDs and DVDs and go to movies, when substitutes are available at a fraction of the price. Economically, it makes zero sense. I'd love to see any work that's been done on this (I've been too focused on the philosophy of copyright and the Internet treaties to be of much use here, unfortunately).

Full-price DVDs may be a status symbol: a form of conspicuous consumption unavailable to the majority of Mexicans, 50% of whom live below the poverty line. So what you have is two markets: the rich and the poor. The professor I mentioned earlier said he thought his students bought so much bootlegged material because while they've been trained to consume, being students, they lacked the means to buy authorized goods.

Extend this argument to the entire economy and you've got a situation in which an illegal market may not necessarily be a bad thing for the content industries. Cheap knockoffs may get people interested in consuming these status products; once they make enough money, they might switch to the more expensive legit (status) copies.

It also made me wonder what would happen if the copyright industries slashed their prices to compete with the bootleggers, and what the industry would look like at those prices. I'm going to have to do some hunting for papers on the economics of piracy. I'd love to know what their profit margins are.

Grist for a post-doc, maybe.

Availability. Contrary to what you read, you can't buy everything in Tepito. I looked high and low for a copy of Star Trek - for research purposes, of course - and I couldn't find a copy anywhere. I saw it on the streets for the first time two days ago. Wonder if they took any special precautions to keep it from leaking out.

The future. Mexican Internet penetration rates are still quite low. It would be interesting to come back in ten years and see if the commercial market for illicit CDs and DVDs had been replaced by non-commercial (potentially illicit, depending on what the law says at the time) file sharing by Net-savvy Mexicans. Tepito's days may be numbered, not by law enforcement, but by technology.