In a modern world, why are digital products still locked by region/country?



In a modern world, why are digital products still locked by region/country?

In: Economics

Mostly to ensure developers and publishers get what they’re owed and cut down on piracy.

The average consumer in lower income country can’t afford to pay the same for a product as the average consumer in higher income country. So publishers set the sales price for that item to be lower in the lower income country.

But to prevent people in the higher income country from just buying those cheaper keys, they put a region lock on it.

Sometimes the distributor only has the rights to distribute a particular product in a certain region. So to ensure they abide by their license they will lock out their product for those in other regions.

If you’re only allowed to stream a movie online in the US, the company who bought the streaming rights in China is going to be upset if Chinese customers could use your American site to stream it instead.

Because legal agreements dictate where things can and cannot be sold/viewed. Rights to media are typically on country by country basis, so the owner of that media needs to agree to terms for allowing access in that market. May simply be wanting more money for more people to have access, but might also have to do with previous agreements, say exclusive access to broadcast a particular show granted to a TV network in a certain country preventing streaming platforms from offering it.

The combination of digital media and global internet provide the framework for globalisation, but they still have to work with the reality of economic, political and industrial divides between nations.

1. People in India or Brazil can’t afford to pay the same price for a movie or game as someone in USA or UK, even factoring in exchange rates. Digital media at least have the option of setting arbitrary retail pricing to optimise sales, balancing profit vs piracy, but it doesn’t work if residents of USA can buy at Brazil prices.
2. Governments like having control of how business is conducted in their region. Different laws and regulations apply, taxes, censorship etc. A developer needs to adjust their operation for different regions, and governments don’t like it if loopholes are used to avoid those requirements.
3. Even multinational corporations rarely operate in literally every single country. It could be a closed market and they are not allowed to. There could be legal or regulatory reasons that make it difficult for them to. Even if the country has an open market they may just not have the resources to operate there, or they may have tried and failed for whatever reason. So developers often need to work with multiple partners for local distribution (yes, even for digital products), who won’t be too pleased if consumers can easily bypass these channels.

Geoblocking is an attempt to enforce the above three requirements. Yes, everyone knows it’s not foolproof but nobody has a better solution other than eliminating national borders and having a homogeneous socio-economy ruled by a world government like in Star Trek. People often claim that media companies and licensing simply haven’t caught up with the internet age, but the reality is as long as nations have sovereignty, this disparity will exist.