Thinkcorps

Given this recent Wired News article in which the record industry purports that the mob is taking over CD/DVD piracy, all evidence within leads me to assume that record industry executives (and their spokespeople) are genetically predisposed to be morons.

“The markup for a kilo of heroin is 200 percent,” Hoffman says. “The markup for pirated CDs and DVDs is 800 percent.”

This just struck me odd. I mean, come on. Drugs are not that cheap and pirated CDs sold by street vendors are not that pricey. What’s wrong with this picture? Come on friends, let’s do some math.

Google gives me this page, where I learn about South Asian heroin:

The fee for smuggling heroin from Bangkok to New York can go as high as $5,000 to $10,000 per unit, according to DEA intelligence reports. The risks are high, as are the potential profits. The 6-inch by 4-inch white brick of pure Southeast Asian heroin (described as a unit in the opening paragraphs and priced at $3,000 at the refinery) generally is sold in New York City at a wholesale price of $70,000.

This generally jibes with DOJ info from 2000 on NYC heroin prices.

MATH TIME: Based on our data, we can safely guess that it might cost you $15,000 to get a 700-gram brick (adding some misc. expenses) to NY where you could sell it for $70,000. The markup? 367%

Now, how about pirate DVDs? An 800% markup means that a $10 disc costs $1.11. Hmm, I don’t know. Based on some informal research, I think we can assume that it’s gonna run around $1.50 per DVD-9 disc including packaging for 5,000 units. Now, there’s still middlemen to deal with. Let’s be conservative and say you can get the discs for $1.60 each to sell on the street for $10 or so. That’s a 525% markup.

But wait! We just quoted a street price for DVDs. What about a street price for heroin? Apples to apples and all that.

Well, going back to our SE Asian heroin info, we read near the bottom that a single delivered brick at $15,000 will generate $280,000 in sales on the street. Now our markup looks a little different at 1,767% doesn’t it?

Still, I think the pirated DVD markup is high. That $1.11 figure seems closer to a base production cost than anything. You’re not doing massive volumes of each DVD title, after all. If we assume that, then we should compare the base production cost of heroin, which is only $3,000. Now our heroin markup spikes to 9,233%.

So, recording/motion picture industry, if I were you, I’d focus less on markups and more on quality.

Street heroin is averaging 60% purity these days. Can you honestly say your movies beat that?