Causes of Ilegal Music Product's Existence

What causes the existence of Illegal Music Product in Indonesia ? Let’s see factors below:


•Advance of Technology
Let’s imagine what if there is no technology advance in Indonesia and people don’t know how to record song whether by burning a CD, downloading song from internet or the other ways, I believe the piracy will not become a serious problem for us. Actually, the advance of technology purposed to be good but, in this difficult economic condition, it is hard for people not to take advantage for this easiness in making the illegal copy and sell it for profit of their own. All they need just Computer (can be bought or just hire it ), Printer, Scanner, Empty CDs, Master CD, Paper and Plastic Seal and, they can be suppliers. What an easy way to get money. So, by this easiness for being the suppliers, how can Illegal CD and MP3 doesn’t exist in the market?
•High Price of original Music Product
As what have been told before, Illegal Music Product exist as the substitution for the original one because of the expensive price of that good so, we can make one conclusion here that, the pricing policy connected with original goods determines the existence of the Illegal one. Because, as what have been said in substitution theory, the more the price of the original increased, the more the demand for Illegal. In this case, supplier of the original also realize this condition but, they can’t do nothing about the price because the price covers their cost and the reduction of price will create loss for them. So, what makes it expensive?
To make one original product, there are many procedures to be passed. One of it is payment of royalty, for the artist, composer ( mechanical royalty / copyright ) and Producer. Royalty can be divided into : Royalty paid for unit product sold and Royalty paid as a whole. Royalty for a new artist is around 5,5 – 6% from the unit price, middle-level artis is around 7 – 10 % and upper-level artist is around 10-11%. Royalty for the composer which exist after the composer gives the authority for the other parties ( can be record company or publisher ) to produce his/her product. Then, Royalty for the producer. The existence of this royalty is usually for the making of solo album and, usually, this royalty is almost half from the unit price. Beside royalty, there are PPN (Pajak Pertambahan Nilai) which is around 10%, PPH ( Pajak Penghasilan ) which is around 15%, PPBM (Pajak Penjualan Barang Mewah) which is around 20-35%, Seller Agents fee, Copyright tax paid to ASIRI (Sound Recording Industry Association of Indonesia), box and packaging cover, retribution, production cost ( based on whether the cost is high or not ), Marketing Cost and other miscellaneous costs. So, it is not weird if the price of the illegal Music Product is cheaper, that is, because they don’t have to pay and pass all the procedures above.

Then, after it existed, it began to develop and develop until its quantity exceeds the original one and become the winner in the competition. So, what actually can support it to be happened? Just see the factors below :

•Supported complement
In this case, the complement also takes role and what could be the perfect complement for illegal CD and MP3 beside the player? It has been told before that there are also the Illegal Goods In the form of CD and VCD player and illegal here means cheap so, when the Quantity demand for Illegal Music Product increases, Quantity demand for Illegal CD and VCD Player will also increases. Then, CD and VCD player supplier will supply more for profit and of course, it will increase the demand for Illegal CD because people tend to buy more CD if they already had the player.
•High profit for the sellers
Now, talking about the sellers. What makes them interested to involve in this business ? the one and only answer is its profit, which tease them to involve in this risky business. Based on one sample case from POLDA SULUT, the seller just buy it for Rp.2,200,-/unit and sell it around Rp. 5,000.-. The profit they get is around Rp.2,800.-/unit. Let’s assume If in one day, there are 50 units sold, the profit will be Rp. 140.000,-. About the capital, just say they must buy 1000 pieces so, they just prepare Rp.2,200,000.- to begin this business and create profit. It’s very easy way in building a business, isn’t it?


•Consumer Preferences
Consumers are heterogeneous which means, in this case, we can divide the consumers to : Consumers who like Quality product, like Cheap Product, and some like Quality and cheap product. This concept explains that, it’s not impossible for middle-upper income people to buy illegal while the other middle-income people keep purchasing the original one. This preference also will determine whether illegal will be normal goods or inferior goods while income increases. Some people who prefer original Music Product to illegal one will leave illegal while their income increases but, for those who prefer illegal Music Product with good quality to better-quality original will buy more illegal Music Products consider that, they can get more entertainment (counted based on quantity purchased ) than just buy small quantity of original one. These preferences that determine the demand for Illegal and because currently, Indonesian people tend to be illegal Music Product -minded, there will be high demand and high demand will stimulate high supply that creates more existence of illegal
• Indonesia’s position as Developing Country
In this case, Indonesia’s position is as developing country especially, as low- income level country which means, there is a serious poverty problem inside ( see Figure 6 ) and the poor thing here, in the previous year ( 2005 ), poor people increases until 29.7 % or around 73 millions people. What a suprising value, consider that, government expect the decreasing quantity of poor people in 2005. This quantity then, support the existence of Illegal Music Product because low income people tend to love the cheap goods than the original one because of their less affordability through the goods also, poor people need extra income and it can be got by selling Illegal Music Product.

•Less Awareness to Intellectual Property Right
According to data from Indonesia’s General Directorate of HCPM ( Intellectual Property, Patent and brand ), since 1991 – 1997, for usual patent, there are 19,282 foreign patents and 319 domestic patents while for simple patent, there are 349 foreign patents and 260 domestic patents. As the information, the quantity of domestic patents registered never has a significant increasing, just around 1.9 - 4%. Just compare it with Japan which register around 320,000 domestic patents / year or USA which register around 100,000 domestic patents / year. This low quantity in Indonesia happened because, as general, in getting Intellectual Property right, people must propose an application or register the intellectual property and that’s the main problem here because, the creator in Indonesia just give a little attention connected with registering their product because, they think, in Indonesia, the law protection still weak so, why should they waste money and time to register ( while the time can be used to create ) if later, their Music Product will be pirated and no significant action from the law enforcer. Now, less attention to Intellectual Property Right will make many products created and existed without protection and it will be a very good news for the people who pirate the goods because, there will be less or no fine for them to copy or pirate the original goods.

•Weakness of Law Enforcement in Indonesia
Actually, for destroying the existence of Illegal Music Product in Indonesia is not so difficult for the law enforcer in Indonesia because there is UU No.19 / 2002 about intellectual property right which become the strong reason for the Law Enforcer to arrest and seizure connected with illegal Music Product. As what have already happened in Indonesia, Law Enforcers begin from socializing this law to its entire staff especially about its fine to the people who break this law which are in the form of Jail or just Material Fine. After the socialization, begin from 2003, Law Enforcer did some arrests and seizures in some places but, it doesn’t take a long time consider that after some periods, this activity become less and less and finally, the Illegal Music Products still exist even, there is a trade center in some cities in Indonesia like Jakarta and Surabaya so, what actually cause this thing happened ?
This case may be happened because of lack of knowledge about the characteristic of Illegal Music Product itself which create a barrier for law enforcers to do arrest and seizure directly also, less budget and Human Resource connected with destroying the illegal Music Product then, create big weaknesses of Indonesian law to destroy the piracy activity in Indonesia and these weakness gives more opportunity for the people who create the illegal Music Product.