Izhmash Arms, Russia's "official" manufacturer of Kalashnikov AK-47s, may be on the verge of bankruptcy, reports SpiegelOnline.
I say "official" because there are many Kalashnikov manufacturers dotting the globe, the legacy of an era in which licenses to make the rifle were distributed freely, for ideological purposes. Profit wasn't supposed to be the point of the Soviet Union, after all.
As reported by Benjamin Bidder, a slump in arms exports, high levels of outstanding debt, and the machinations of a mysterious ultranationalist businessman are all plaguing Izhmash. But the real problem may be more akin to the woes currently afflicting the newspaper industry and recorded music business: It's very hard to make a buck when your product is easily copied and widely accessible.
Two years ago, in the post "How Is an AK-47 Like a QWERTY Keyboard," HTWW considered the theory of Oxford University's Phillip Killicoat, as presented in "Weaponomics: The Global Market for Assault Rifles," that the worldwide success of the Kalashnikov owed less to its inherent quality than to its achievement of "path dependent lock in."
The AK-47's ubiquity could alternatively be explained as a result of a path dependent process. Economic historians recognize that an inferior product may persist when a small but early advantage becomes large over time and builds up a legacy that makes switching costly. In the case of the AK-47 that early advantage may be that as a Soviet invention it was not subject to patent and so could be freely copied.
The QWERTY keyboard may be the most famous example of path dependent lock in, although the triumph of the VHS cassette format over Sony's Betamax gives it a run for the money. But the intellectual property aspect of the AK-47's ubiquity adds a fresh angle. Despite all the whining that proprietary software companies do about "piracy," the industry has long been aware that it's not always such a bad thing to have everyone illicitly copying your products. Get everybody hooked, and then start selling the upgrades, or support services, or other nifty add-ons. For open-source software companies, the strategy is a fundamental plank of the basic business model.
By not defending its intellectual property in the early days of the AK-47, the Soviet Union ensured the rifle's worldwide popularity and ubiquity. That genie appears to be out of the bottle.