a beautiful economical case in Jordanian Market- DVD Market

[Ghaith Saadeldeen]

Hello again,
I was thinking about Jordanian unique business cases, it might be not just jordanian case but I'm sure it not popular as here in jordan,
that is DVD market, here DVD stores Owners created a new economy, now its more popular than ever, where now Jordan have one of the strongest IP laws in the region but this business apparently unstoppable.
Lets look at it at economical way:
1. Suppliers/owners perfected matching the industry economy of scales

2. According to my knowledge and observation its one of the most structured markets in Jordan by nature. The structure is, few known suppliers, wholesalers/distributers and then retailers (i.e. its based mostly on mass production and cost efficiency). we can tell by the quality and packaging are very same cross most of retails which means from same supplier.

3. Free Market or an Open one,because any retailer or supplier can produce his own DVDz so no entry buriers or/and costs, also if there is a monopoly its been created purely by competition not a enforced.

Therefore its an open competition in a an open market.

I think the main reasons for above are:

a. No governmental regulation because it illegal. but in the other hand, guys we are back to US market in 1920s where government has no rule in running the economy. I'm not say this is a good, I'm against this but it is an eyes opening case, so keep watching and guess where this market will end up with.

b. No entry costs- anyone can open a shop and produce and sell his/her own DVDs but the reason SMEs dont do this, is economies of scale, they cannot produce enough quantity to match the targeted profits or costs, in other words, buying ready product is cheaper than produce it in house. Here we go, another way of defining large enterprises and having our own Jordanian Alfred Sloan (pls research this name, he is one main of the figures in economics)

c. Switching cost: tangible cost- as consumer,it costs me 1500% to switch to an original
intangible cost- waiting time to issue the original DVD, availability, and guilt

d.Entertainment is a huge part of the society stress relief so by making it more costly and less available society will not be much happy.

Those Owners created an open market with no barriers but its standardized (i.e. generally one price, quality, offers, etc ) and naturally structured. This occurred out of need of verity of choice and cheap entertainment. this industry worths many millions and recruits many thousands. This market might exisit all over the world but i doubt as this open as ours.
However, I'm not encouraging this illegal and if there is now IP laws my business wont generate a penny, but again its an eyes opening case.

Ghaith

[Fadi Otaqui]

Ghaith,
Your economic rationale is great, and your conclusion that paternalism, high costs and over-regulation are killing entrepreneurship and business development in Jordan are accurate.

However, I would be concerned with the implied support of DVD piracy. You propose that for 1JD most Jordanians can now get access to cheap entertainment, at a cost of ignoring IP law.

But I propose that the economic and social costs are higher than one considers at first glance.

First, ignoring IP laws kills domestic knowledge-based and creative industries.
The business and commercial justifications for high economic-value businesses like software development, film and television production, music production, technology and electronics are greatly diminished, so you simply don't enter these sectors. The Jordanian market's size for any of these products is nearly zero, so sadly these businesses are almost non-existent.

Secondly, the pirate-DVD business is consumerism and waste at its worst.
The piles of fake DVDs collecting dust and ultimately thrown out a testament; it's not entertainment, it's hording.

Thirdly, ignoring the law.
Sadly Jordan is a place where breaking the law seems to be habitual. You see it in the absence of Rule of Law and the exercise of arbitrary power by government, the daily breaking of road traffic law by practically everyone, the blatant disregard for order in other instances.
This habitual breaking of the law renders the law incapacitated and inadequate.... A problem for anyone trying to live, do business or even just visit Jordan.

The costs are way too high!

I also propose that banning pirate-DVDs and enforcing IP law will not kill Jordanians' access to entertainment. After all, DVD rental businesses could easily rent out DVDs for 1 JD; this legal industry can replace and outgrow the pirate-DVD sector.

The emergence of a rental business is hindered by policy (again!),
1- The absence of a credit system, and the consequent ability to avoid paying money that one owes! (Take the DVD and never return it, with no repercussions)
2- Censorship, Jordanians are now used to getting unrestricted access to every film on this earth. A legal business would have 30% less content on offer as it would likely become inaccessible.

Of course creating and implementing complex policy regarding credit and censorship requires a competent, accountable Government body…. (anyone seen the state of our legislature lately?!)