In one of its roles as proxy for Hollywood movie studios and record labels, the US government continually complains to China that it's not doing enough to stop piracy, and threatens it with the big stick of sanctions or other actions through the World Trade Organization. While these threats are usually just hot air, the US has now formally complained to the WTO, saying that Chinese laws don't live up to WTO commitments in the area of copyright protection and enforcement. But there's a second element to the complaint, which takes issue with China's heavy restrictions on the distribution of foreign content, including DVDs, CDs, books and other products. Where things get a little bit more interesting is that the original article in the Wall Street Journal, and indeed, movie studios and record labels themselves, gloss over the second part of the complaint -- when it illustrates beautifully how backwards big content thinks.

A graph in the article says that China and France are the two nations where the movie industry suffers its biggest losses due to piracy. While the dollar amounts cited are pretty certainly bogus, is it any coincidence that the movie industry sees those two countries as the biggest for piracy when they both feature some of the tightest restrictions on the distribution of foreign content? France is pretty famous for its efforts to keep American content out of its media market, while the Chinese government allows just 20 foreign films to be shown in the country's cinemas each year. It would be reasonable to deduce that it's a lack of legitimately available, attractive products that's driving the demand for pirated goods in these countries, rather than weak enforcement of copyrights. This mimics what goes on in other markets: the content industry fails to provide consumers with attractive products to purchase -- though it's generally because of poor strategy rather than government interference -- so they turn to pirated goods instead. The market for legitimate movie downloads probably provides the best illustration of this scenario. The products offered by legitimate, studio-backed sites are so heavily restricted and overpriced that nobody wants to buy them. The idea that content providers like movie studios don't understand this is reflected in the fact that they aren't pushing the government to attack China's 20-film limit, they just want to make its copyright laws more strict. It's just another indication of how the industry won't compete with free, while it protests that it simply can't. The failure in the market isn't a failure of the government to sufficiently protect copyright holders; it's a failure of those copyright holders to provide products and services that are attractive to consumers.