Sunday, February 19, 2006

SELLING AFRICAN KNOWLEDGE: Developing the Market for African Intellectual Property

Author: Dayo Ogunyemi
dayoogunyemi@gmail.com
June 2003



Soft Sell
Does African culture have any value in the international marketplace? Ask Richard Branson (Virgin Records), Chris Blackwell (Island Records) and Clive Calder (Jive Records). Among themselves, they have sold billions of dollars worth of music through record companies built on music from Africa and the Caribbean. These examples demonstrate a simple point – African music, like much of the creative output of Africans, has an economic value in the global marketplace than would expect in light of the inattention it generates locally.

As the NEPAD planning documents point out, Africa has a vast, if underdeveloped, capacity for producing knowledge products. If Africa can improve its ability to develop and exploit this creative output, it can generate significant export income. Drawing from the recent experiences of India and Ireland, some forward-thinkers have focused on Africa’s potential to export software and other information technology products. However, the extent of the economic potential of African knowledge industries becomes much more apparent if one overcomes the natural tendency to look only at technology products. After all, intellectual property (IP) also encompasses music, literature, designs, inventions, trademarks, brands, trade secrets, and medicinal formulas, among others.

Although areas like software development and IT are promising sources of growth, it will require substantial amounts of resources and concerted policy efforts to propel Africa’s output to international significance. In contrast, Africa’s non-technology based IP products like music and literature are more immediate candidates for generating export income because they already have a presence in the global marketplace. After all, from the music of Miriam Makeba, Fela and Youssou N’Dour to the literature of Achebe, Farah, Soyinka and Gordimer, Africans have been creating world-class content for more than four decades.

Yet, African companies account for less than 1% of global music and publishing industries revenues. Africa may have world-class musicians and writers but the knowledge industries that should nurture and sustain them leave much to be desired. If Africans intend to pursue strategies to exploit a broader range of IP assets, we must first analyze the state of Africa’s existing IP industries as well as the factors that have made it difficult to fully capitalize on their economic potential.

State of the Art
A brief look at the music and film industries in two of the largest domestic markets in Africa is instructive. In South Africa, which is easily the most developed media and entertainment market, piracy is a serious problem but is not as pervasive as in other African countries. However, knowledge industries in South Africa have significant structural issues – local artists are at a distinct disadvantage to their foreign counterpoints. For instance, foreign acts account for 75% of the roughly R600 million ($75 million) in annual sales of recorded music in South Africa. Compounding the issue for local musicians, revenues from sales of South African music overseas is anemic. Sales in the US, for instance, probably account for less than R30 million ($3.75 million) – less than 5% of the domestic SA market and an imperceptible portion of the $12 billion US music market. In the film industry, the picture is similar - the domestic theatrical market is dominated by foreign releases while South African films have negligible foreign earnings.

Nigeria provides an interesting contrast. The music market there has been in a shambles for the better part of a decade and a half. Rampant piracy of domestic and international releases alike has discouraged significant long-term investments in the sector and many recording companies have collapsed. The film and video market, however, has grown to be dominated by low-budget domestic releases, much like the case in India, or for that matter, Hollywood in its early days. This is partly because there isn't much of a theatrical exhibition business in Nigeria, unlike South Africa. It is also because entrepreneurs and filmmakers have responded to a pent-up demand for filmed entertainment using affordable new technology (digital video cameras and editing suites). Unfortunately, with both music and film, there are virtually no organized international sales apart from sporadic licensing activity focused on a handful of music stars. There is, however, a booming illicit market in "Nigerian videos" in European, US and other African markets.

Hard Sell?
Clearly, African IP products face a challenging business landscape. Part of the problem is the difficulty of establishing a robust framework for intellectual property (IP) rights in Africa. The other challenge is gaining the business and legal sophistication necessary to penetrate lucrative foreign markets where there are robust IP laws and effective enforcement mechanisms. African businesses have yet to successfully manage these challenges in a way that encourages the efforts of African content creators such as musicians, authors, filmmakers and software developers.

In spite of a looming 2006 deadline for implementing the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) accord, patent, trademark and copyright issues have been low on the list of legislative priorities for many African countries. The additional absence of enforcement capabilities, to the delight of pirates, means that IP protection has been practically non-existent.

The pervasive piracy that persists in many African countries presents a number of challenges to the growth and development of local knowledge industries. Although solutions to these challenges are often couched in purely legal terms, there are various business strategies from pricing to promotions that could help to address them. The legal issues are easy enough to outline. To begin, IP rights must be well-defined within a framework that protects local knowledge industries. Then, because legal rights do not enforce themselves, these rights have to be enforced. In addition to lawsuits, enforcement requires the physical policing of pirate activities. Even in developed economies, policing can be a daunting task, as the persistence of counterfeiting centers in downtown New York demonstrates.

Unfortunately, most of the focus on strengthening IP rights in Africa has been on protecting the foreign holders of IP rights being used in Africa – pharmaceutical patents, copyrighted computer software, books and music. Already, valid concerns have been raised about the restrictions that the WTO’s TRIPS accord will place on intra-African trade in generic pharmaceuticals. Health advocates like Medilinks’ Dr. John Ssemakula Kiwanuka argue that IP rules that might be appropriate for developed economies could place further stress on public health systems that are already overburdened. Yet, the proponents of the agenda to strengthen IP laws for the benefit of trade partners argue that implementing an IP regime that safeguards Microsoft, Madonna and Mickey Mouse will also benefit African IP creators.

That assertion misses the point. As a strengthened legal framework will require costly enforcement to be effective, the inquiry should be whether stronger IP protection would increase revenues to local knowledge industry sufficiently to offset the cost of legislation and enforcement. Even if that question can be answered in the affirmative, for many African countries such a project would be a huge mis-prioritization of scarce resources considering the pressing health and education needs of their citizenry. Moreover, there is a straightforward economic dimension to domestic markets – the majority of African consumers simply cannot afford to pay international market prices for IP products. In South Africa, for example, that reality is reflected by the fact that albums of local musicians are priced substantially lower than foreign music. In the short to medium term, an outward focused knowledge economy strategy is more critical than strengthening IP regimes because the economic opportunity from foreign markets dwarfs the value of the domestic markets.

Outward Bound
This external focus could also reverse the unfortunate results that can occur when an entire industry is dependent on the efforts of a few large, usually multinational, players that dominate domestic markets in Africa. Take the case of African literature. With three Nobel laureates within the short span of five years, Africa appeared to be coming into its own in the 1980s. Then, as African economies deteriorated in the early 1990s, Heinemann, then the largest publisher of African fiction, severely curtailed the activities of its African Writers Series, drastically reducing the continent’s literary profile. Since then, the largest western purveyor of African literature, the UK-based African Book Collective, has only been able to generate less than half a million pounds in annual revenues for its 74 publisher members in Africa. If smaller African publishers had effective access to foreign markets, it is unlikely that such an extreme regression would have occurred after Heinemann’s cutbacks.

The immediate growth opportunities from IP export lie in reorganizing and revitalizing African cultural products like music and literature that already have markets, however modest, in the West. These western markets are several orders of magnitude larger than African markets – for instance, North America, Europe and Japan collectively account for over 75% of global music sales by value. With a focused strategy and some capital, African products could make further inroads in these global markets. The experience gained in those arenas could then be extended to other African cultural products that have not had a significant market abroad - artwork, film, theater, dance, fashion as well as products like medicine and software.

One strategic advantage of this sort of export growth is that IP products, unlike others, face no significant trade barriers. Compared to Africa’s traditional export base of raw agricultural products and minerals, the market for IP products is much more open. This is partly because music, films, medicinal formulas and fashion designs can be commercially exploited in new markets without any physical products having to change hands, thus avoiding red tape from customs and freight expenses. In fact, some African news, entertainment and database products are currently delivered to western audiences via the Internet.

In addition, the exchange rate and purchasing power disparities between western and African markets mean that content owners can get a much higher economic return from foreign markets than from domestic markets. For example, a Bongo Maffin CD that sells in South Africa for R50 could sell in the UK for GBP15 (R195 at current exchange rates). Even after sharing revenue with UK-based distribution and marketing partners, an astute business person could make up to four times as much net income from each UK sales as a sale in South Africa.

Countering Culture Vultures
For Africa to benefit from these overseas opportunities, Africans must lose any naïveté about how IP rights are managed and exploited in developed economies. Historically, African content creators have had a lack of awareness about the international market value of their IP creations as well as the complexities of copyright and contract law that govern their trade. This has meant that more sophisticated international operators have been able to cheaply or surreptitiously acquire and control critical rights in areas as diverse as medicinal formulas and music. Other African IP assets like folklore, traditional medical remedies and traditional symbols and designs are regularly “discovered” by western visitors who then assert that the communities that created these knowledge assets have no property claims to them, only to turn around and introduce them into western markets as proprietary IP assets.

For example, an American visitor to Nigeria in the early 1970s learnt from a master artisan techniques for making traditional Igbo udu pot drums. On his return to the US, he trademarked the name "Udu" and began producing so-called "enhanced" udu drums for sale to US percussionists. He even managed to get “his” udu drums added to a prestigious US museum collection. In another situation, a western “author” of a book of “African stories” for children acknowledged that a Nigerian exchange student shared these “traditional stories from his homeland” with her but registered the copyright in the book in her name only.

It is bad enough that African authors, artisans and musicians as individuals are often uninformed (to be fair, the same can be said of many of their western counterparts) about the business and legal framework within which their creations are commercially exploited. Unfortunately, the local businesses that acquire these creations can also be shockingly shortsighted or ignorant about the potential of these works in foreign markets.

In 1939, Solomon Linda, a South African songwriter, recorded a song called “Mbube” for which he was paid the princely sum of ten shillings by Eric Gallo, the Italian owner of one of South Africa’s first record labels. In the early 1950s, The Weavers, an American music group remade “Mbube” as “Wimoweh”. Although Gallo registered a US copyright for “Mbube” in 1952, he inexplicably traded it for the right to administer “Wimoweh” in South Africa, a much smaller market. The song was remade again as “The Lion Sleeps Tonight”, generating millions of dollars in revenues from numerous adaptations and uses, including Disney’s smash hit “The Lion King”. The songwriter, Solomon Linda, died practically penniless and only a dispute between rival American music publishers over royalty splits finally led to an arbitration ruling in 1992 that established Linda’s rights to a significant royalty share. Currently, Linda’s heirs, with the assistance of Gallo Record’s current management, are struggling to collect back royalties.

These cautionary stories show that much work is needed to raise awareness about how to safeguard economic and cultural interests through IP laws and contracts. This must be done domestically and internationally to develop the underserved market for African cultural and intellectual property products.

Brave New Markets
Still, the key to successfully addressing western markets is not simply maintaining equitable control of rights. Even after rights have been safeguarded, they still have to be translated into revenue. This requires gaining a comprehensive understanding of foreign markets. It also means committing the resources necessary to secure the marketing and distribution means with which to compete in those marketplaces. This has been a difficult task for African knowledge industries. Their inability to assess the market place and develop effective market-entry strategies has been a large part of the reason for their lack of success in the international market.

What could help is a collaborative approach that applies lessons learned from knowledge industry players who have succeeded in foreign markets. For instance, Arthur Nwankwo, a Nigerian publisher, has created a detailed analysis of economic opportunities for African publishers in foreign markets. His analysis could provide a starting point for African film and music companies also looking at entering these markets. Also, record labels or software publishers can learn from the successes and challenges of the African Book Collective, the African publishing industry’s collaborative approach towards addressing foreign markets. Opportunities also exist to coordinate the activities of a range of private sector, governmental and NGO players to share best practices for entering foreign markets.

As far as domestic IP protection, governments must take a leading role in developing the framework but this must be in consultation with local knowledge industry players. It would be worse to have an IP rights agenda defined solely by western players than to have weak enforcement. In fact, these strategies should be a NEPAD priority as there is a need to coordinate practices across the continent as the 2006 date for implementing the WIPO TRIPS accord draws closer.

Since many of the early opportunities in IP exports are in media and entertainment, African businesspersons and governments must change the mindset that dismisses these cultural products as frivolities. If knowledge products like music and literature can be successfully transformed into export earnings, there will be more of an experience and resource base with which to develop outward-focused exploitation strategies for other IP products like pharmaceuticals and software that may require greater technological and capital inputs.

A successful effort to surmount these business and legal challenges could reverse Africa's status as a net-importer of IP products and establish a booming export market in IP products that would provide a much-needed boost to Africa's economic growth prospects. Just as importantly, it would have the added benefit of highlighting the cultural and scientific offerings Africa has to offer to the world and thus reversing the perception of Africa as merely a dumping ground of consumers and primary producers.