No region in the world is safe from piracy. That's the conclusion of Patricia Judd, executive director of international copyright enforcement and trade policy at the Association of American Publishers (AAP) in Washington, D.C.
"Piracy is a worldwide phenomenon," Judd says. The AAP estimates losses to its members of more than $600 million a year in about 67 markets across the globe.
As more book publishers explore their offshore book manufacturing options, foreign book manufacturers are boosting efforts to lure American publishers. It's all in the name of lowering costs. But does this offshore manufacturing activity put publishers at an increased risk of piracy? "Not really," is the response from most experts.
One potential risk is offset piracy, when printers make additional copies without permission from the publishers, Judd says. "It still occurs in certain markets such as China, India and Pakistan," mainly with high-end professional and scholarly publications. Those who print the unauthorized copies could be workers or owners.
But Judd says these instances are rare and most piracy losses overseas are from commercial-scale photocopying of educational materials. "This is undertaken most often by commercial photocopy shops—some independent, some highly networked. These shops often derive almost all of their profit off of these activities," Judd says.
"As far as photocopying is concerned, it doesn't matter where the original book was manufactured, as pirate enterprises engaging in this type of activity need not have anything but a regular, legitimate copy of a book in order to destroy the market," she explains.
Another risk is online file trading of scanned books. Judd says this is starting to be a significant threat to the publishing industry. "This, of course, can be undertaken by both individuals or large-scale commercial sites," Judd says, both onshore and offshore.
To crack down on piracy, AAP is concentrating most of its enforcement efforts in Asia, Judd says. Part of the effort includes working with local officials to shut down illegal photocopying shops. AAP reports raids in Hong Kong, Malaysia, Philippines and Taiwan in 2004. The trade group also has lobbying efforts to promote stronger laws.
"It is important that governments work consistently to enforce those laws and train officers to stay one step ahead of the pirates," Judd says. "Technologies are evolving, modes of operation continually change, and it is important that solutions to this problem morph to fit the latest piracy strategies and techniques."
China agreed to enforce piracy laws during an annual trade meeting with U.S. officials in Beijing earlier this summer. U.S. Trade Representative Rob Portman and Commerce Secretary Carlos Gutierrez say the commitments by China reflect progress, but more needs to be done to address U.S. concerns. Piracy of U.S. goods ranges from music and films to pharmaceuticals, which is estimated to cost American companies billions of dollars each year. About 90 percent of software, music and movies sold in China are illegal copies, according to some U.S. industry estimates.
Judd says the AAP is "highly encouraged" by China's stated commitment to significantly reduce piracy levels. "We look forward to seeing if these commitments can be turned into effective action," Judd says. "Our industry has not yet seen a reduction in piracy, and we hope that the Chinese government can look especially hard at textbook piracy on university campuses, and online infringement and trading of book files."
Fear Not Stopping Publishers
Stan Redfern, vice president of production at Harry N. Abrams Inc.—a New York-based publisher of high-quality art and illustrated books—recently returned from a three-week trip to Asia. He says that Harry N. Abrams, a subsidiary of French publisher La Martiniere Groupe, is already doing some of its book manufacturing offshore. He says he's waiting to see if China's vow to increase regulation has any actual impact on piracy.
But this wait-and-see philosophy is not stopping publishers from outsourcing book manufacturing to Asia. The Book Industry Study Group (BISG), a member-driven trade association, reports China, the largest Asian exporter of books, eclipsed Canada to become the largest offshore manufacturer for the U.S. book market in 2004. BISG predicts that additional U.S. printers will invest in offshore print assets to offer a one-stop-shop, single-point-of-contact approach, to take advantage of potential savings.
"There are many reputable printing companies offshore, but there are also inherent risks in working outside of the U.S.," says David N. Mead, senior vice president of marketing and sales of Banta Book Group. The provider of printing and supply-chain management is a division of Banta Corp., headquartered in Menasha, Wis. Banta does not currently own any printing assets outside the U.S., but it does have partnership agreements with several major manufacturers in Asia. Plus, Banta has a number of supply-chain-management facilities for assembly and distribution in foreign countries.
"I would suspect that U.S. ownership and involvement in a Far East facility would provide some added protection on how workflow is managed," Mead says. He notes that China only allows American companies to own a 49-percent stake in any of the country's book manufacturers. But, he says, partial ownership does not provide complete protection.
"This is particularly true with the universal use of digital workflows and use of electronic files for content transfer from publisher to printer," Mead says. He explains that it would not be hard to transfer files to a nonreputable printer. But even this is not necessary to make illegal copies. "Books can be copied and pirated from a single copy of a title with the sophistication of today's scanning and digital manipulation," he says.
Four Colour Imports Ltd., based in Louisville, Ky., is the manufacturing representative for two foreign book manufacturing companies: Everbest Printing Co. in China and Friesens Corp. in Canada. It specializes in printing high-quality illustrated books. Four Colour's president, George Dick, says book manufacturing offshore is increasing. "We are doing more and more titles every year overseas," he says.
But he hasn't noticed more worry among publishers about piracy. Out of more than 300 customers, he knows of only one customer that has had problems. "While piracy is and needs to be a concern to a lot of publishers, I don't see the problem so pervasive that it is hurting any sales," Dick says.
He also says he has never heard about any printing companies illegally running off unauthorized copies and selling them. "I don't know of any reputable printing companies, including all of my competitors, that have ever been accused of that," he says. "So, I don't believe that working with a Chinese printer necessarily increases your risk [of piracy]."
The main concern for publishers, Dick says, is the illegal scanning and selling of copies. "If the book is popular, whether or not it has been printed in China, I think, is beside the point," he says. "If it has a market in China, it is not very hard for someone to send a book from the U.S. to China where it could be illegally copied. The fact that it is being manufactured over there, I don't think adds to it one bit."
Dick says the Chinese government is cracking down on copyright violations. He notes that before a book is printed in China, his company has to send an official letter along with the publisher's authorization to print the book in China. "I can promise you that the Chinese government is doing whatever it can to stop piracy," he says.
"Fortunately … there is a fair amount of costs to making a book … There's still paper and there's still the binding. Those materials are expensive, as opposed to someone in the video or audio business, where essentially the duplication costs are very small." Even with scanning previously printed books, Dick says, there is still a small upfront cost for equipment.
Costs, however, don't prevent piracy altogether. "[Piracy] is always going to be a problem. I just don't see the problem being so large that publishers can't manage it and continue to make a profit," Dick says.
A Measure of Protection
Marcus Leaver, executive vice president and chief operating officer of Sterling Publishing Co.—part of Barnes & Noble Inc., headquartered in New York—also downplays the risk of piracy from sourcing offshore. "There are dishonest people in the U.S. also," he says. "It's an issue, but not huge—not like in the music business." He says it's important that publishers closely co-operate with printers and use up-to-date technology to fight piracy.
Ranjit Singh, president and chief executive officer of TechBooks Inc.—a provider of composition and data conversion services based in Fairfax, Va.—also says that offshoring does not put publishers at an increased risk. "It doesn't matter whether work is being done offshore or onshore," Singh says. "I don't think it is location orientated."
Singh says his publishing customers are aware of piracy issues and have asked TechBooks to demonstrate what steps it is taking to protect data. The first rule, he says, is to have the security systems and processes in place to ensure the publisher's data is protected. "In a lot of cases, [publishers] are beginning to work hand-in-hand with us to design the processes and audit the processes for compliance," he says.
Singh says it is also important to have the right levels of checks and balances, including both physical security and electronic security. He says TechBooks goes through a lot of analysis and simulations to make sure that intellectual assets are protected against piracy. For some of his company's customers, who insist on having highly secure information, TechBooks even has video cameras placed in its facilities.
"We are regularly monitoring our people, and the network is regularly tested," Singh explains. He says that it's also important to have a guard posted outside to make sure no physical items like paper or CDs are taken out of secure areas. Plus, it's important to make sure that digital cameras, including those on mobile phones, do not go inside. He says people can steal snippets of information simply by taking a few photos. "You can send it to thousands of people around the world by just hitting one button."
Singh says it is necessary for publishers to insist that vendors provide background checks on employees and make the vendors' employees sign off on the security procedures. "We should be coming up with newer methods of protection and making it more difficult for the data to be moved. And that's the challenge."
Whether it is onshore or offshore, he says, it is important to have the proper procedures to prevent piracy. "It is no different than from someone here in the U.S. compromising a network and shifting the data to other countries. Whether you're sitting in Plano, Texas, or you're sitting in Beijing or Bangalore, it really does not matter," Singh says. "Processes and procedures—that's more important than just saying it's a particular country or a particular location in the world."
—Brian R. Hook
Brian R. Hook is a freelance journalist. He has written for dozens of publishers, including Dow Jones, U.S. News & World Report, and Kiplinger's. Contact him by e-mail at BRHook@msn.com.