Digital piracy : theory

This article reviews recent theoretical contributions on digital piracy. It starts by elaborating on the reasons for intellectual property protection, by reporting a few facts about copyright protection, and by examining reasons to become a digital pirate. Next, it provides an exploration of the consequences of digital piracy, using a base model and several extensions (with consumer sampling, network effects, and indirect appropriation). A closer look at market-structure implications of end-user piracy is then taken. After a brief review of commercial piracy, additional legal and private responses to end-user piracy are considered. Finally, a quick look at emerging new business models is taken.information good, piracy, copyright, IP protection, internet, peer-to-peer, software, music

White Knight or Trojan Horse? The Consequences of Digital Rights Management for Consumers, Firms and Society

Due to its ability to solve all main problems associated with digital goods, Digital Rights Management is the favourite option used by companies to tackle piracy. The aim of this article is to discuss the consequences of DRM for consumers, firms and society. The rationales of DRM are discussed and the expected benefits for firms are presented.. In contrast, consumers are shown to be likely to see few benefits in DRM. This article demonstrates that even a standard DRM system is unlikely to improve social welfare. The article concludes with some public policy recommendations.Digital Rights Management, Digital Goods, Piracy, Excludability, Durability, Sampling.

Knowledge and Information Economy, Welfare and governance: the economic nature of Intellectual Property Rights

В даній статті аналізуються підходи до оцінки економічної природи інтелектуальної власності та її використання з урахуванням економічної категорії благополуччя. Зокрема в статті доведено, що транзакційні витрати використання нематеріальних активів, зокрема прав інтелектуальної вартості значно перевищують витрати пов’язні на їх державне регулювання. Ефективність державного регулювання (ліцензування, обмеження, контроль, власність держави) значно перевищує витрати на переговори між контрагентами по впровадженню інтелектуальних прав власності. В дослідженнях «неокласиків» по просуванню інтелектуальних прав власності враховуються лише витрати на виробництво, проте транзакційні витрати ринкових механізмів не беруться до уваги. В роботі доведено, що підходи неокласичної економічної школи не можуть використовуватися для оцінки таких комплексних товарів як нематеріальні активи. Теоретичні результати дослідження полягають в тому, що приватні переговори та ринкова ефективність використання прав інтелектуальної власності не можуть бути досягнуті без інституціонального втручання, тобто без державного регулювання, необхідного для підтримки умов соціальної справедливості. Проблема забезпечення ефективності функціонування інтелектуальних прав власності полягає не лише в урахуванні виробничих витрат, а навпаки, необхідно брати до уваги транзакційні та колективні витрати. Враховуючи всю комплексність нематеріального капіталу в роботі показано обмеження теорії Коуза та обґрунтовано її відмінності з теорією Вільямсона для нематеріальних активів. Зокрема, що стосується теорії Коуза, доведено необхідність використання інституціонального посередника та регулятора для досягнення соціальної та ринкової ефективності. Ринкові механізми довели свою низьку ефективність при регулюванні та функціонуванні такої категорії благ як нематеріальні активи. В висновках можна стверджувати, що для інтелектуальних прав власності приватні переговори та ринкові механізми просування зазначених категорій товарів не забезпечують бажаний соціальний ефект, основною причиною ринкових провалів можна назвати специфіку та комплексність нематеріальних активів, неповноту та асиметричність інформації. Проведений аналіз може бути використаний в різних сферах пов’язаних з нематеріальними активами: просування товарів екологічної спрямованості, культурні товари, освітні послуги, виробництво інформації, економіка Інтернету. При цитуванні документа, використовуйте посилання http://essuir.sumdu.edu.ua/handle/123456789/9144This paper will study the different conceptions about economic nature of (Intelectual) Property Rights, and the implications in regard to Welfare. This analysis may be applied in various fields concerned with intangible components: ecology, cultural goods, knowledge and information production, internet economics, for example. In regard to the complexity of these types of intangible capital, I will show the limits of the private negotiation inspired in Coase´s approach, and underline the opposition between this approach and the Williamson´s one. При цитировании документа, используйте ссылку http://essuir.sumdu.edu.ua/handle/123456789/914

Understanding the Challenges of the Digital Economy: The Nature of Digital Goods

This article investigates the economic nature and characteristics of digital goods. Such goods are, due to their replicability, shown to be public goods (albeit in an evolutionary way) and durable goods. Furthermore, the content of such goods, combined with their durability, makes them experience goods. While only one of these characteristics would be sufficient to create difficulties for producers and lead to market failure, this article demonstrates that each of the characteristics reinforces the other. The framework presented in the article is then applied to two important issues: the new trend of massive consumer piracy and the overall problem of value of digital goodsdigital goods, public goods, durable goods, experience goods, piracy.

What we know, what we don’t know and what policy-makers would like us to know about the economics of copyright

Governments the world over are looking for evidence on the economic effects of copyright law, the more so since the increased emphasis in government growth policy on the role of the creative industries has led to the justification of copyright as a stimulus to the economy. This article summarises the current economic evidence relevant for copyright policy and discusses why it falls short of what is wanted

The Impact of DRM Technology in the P2P Age

The innovation of P2P technology in digital world challenges the present copyright institutions and retailers. People are declined to look for the protection from the traditional law in digital circumstance. As the trend of extending copyright protection term across the world, most intellectual property institutions implement new technologies to deal with such situation. This paper uses a panel of country-level data to investigate the extent to which this is a consequence of the extension of copyright protection. Utilizing the economic model, the analysis suggests that the economic effects of implementing DRM technology are generally negative, albeit uncertain. The available evidence suggests the implementation of the technologies like DRM (Digital Rights Management) in copyright protection is likely to have little significant effects on music sales. The key factors that may have impact on music sales include Population, GDP, Internet Penetration and Domestic Piracy. Confronting the impact of new technological innovation, there might be temporarily declination in music industry and confusion in digital property protection system, but a balancing situation will finally be reached

Selling Digital Music: Business Models for Public Goods

This paper considers the market for digital music. We claim that the combination of the MP3 format and peer-to-peer networks has made music non-excludable and this feature is essential for the understanding of the economics of the music market. We study optimal business models for selling non-excludable goods and show that despite promising theoretical results, adding just a slight uncertainty about the number of customers has significant negative implications for profitability. Indeed, as the average number of customers tends to infinity the average payment per customer converges to zero. Therefore, the music industry should concentrate on alternative ways of creating profit such as selling access to listeners, concerts, merchandise, ringtones etc.digital music; experience good; public good; music industry; piracy

Copying, Superstars, and Artistic Creation

We provide a new perspective on the impact of unauthorized copying and copy levies on artistic creation. Our analysis emphasizes three important aspects of artistic markets: the predominance of superstars, the dynamics of talent sorting, and the importance of promotion expenditures. In the short run, piracy reduces superstars’ earnings and market share, and increases the number of niche and young artists. From a dynamic perspective, piracy may help more young artists start their careers, thereby increasing the number of highly talented artists in the long run. The long run impact on artistic creation of levies on copy equipment may crucially depend on whether their yields primarily accrue to superstars or are allocated to help young artists.artistic creation, superstars, private copy, piracy, levies

Are Digital Rights Valuable? Theory and Evidence from the eBook Industry

The effective management of digital rights is a crucial challenge in many industries making the transition from physical to digital products. We present an economic model that characterizes the value of digital rights when products are sold both embedded in tangible physical artifacts and as pure digital goods, and when granting digital rights may also affect the extent of digital piracy. Our model indicates that in the absence of piracy, digital rights should be unrestricted, since a seller can use their pricing strategy to optimally balance sales between physical and digital goods. However, the threat of piracy limits the extent to which digital rights should be granted: the value of digital rights is determined not only by their direct effect on the quality of legal digital goods, but by their effect on the differential quality of legal and pirated digital goods. When the latter effect is negative, granting digital rights may have a detrimental effect on value; our model indicates that this kind of effect is more likely to be observed for digital rights that aim to replicate the consumption experience of physical goods, rather than enhancing a customer’s digital experience. We test the predictions of our analytical model using data from the ebook industry. Our empirical evidence supports our theoretical results, showing that four separate digital rights each have a significant impact on ebook prices, and establishing that those two that are most strongly associated with digital piracy have a negative impact on seller value. We also show, both analytically and empirically, that sellers should increase the prices of digital goods as the prices of their physical counterparts increase, but decrease them as the technological sophistication of their potential customers increases. Our results represent new evidence of the importance of an informed and judicious choice of the different digital rights permitted by one’s DRM platform, and provide a framework for guiding managers in industries that are progressively being “digitized.”NYU, Stern School of Business, IOMS Department, Center for Digital Economy Researc

Are Digital Rights Valuable? Theory and Evidence from eBook Pricing

The effective management of digital rights is the central challenge in many industries making the transition from physical to digital products. We present a new model that characterizes the value of these digital rights when products are sold both embedded in tangible physical artifacts, and as pure digital goods, and when granting rights permitted by oneâs digital rights management (DRM) platform may affect the extent of digital piracy. Our model indicates that in the absence of piracy, digital rights should be unrestricted, since a seller can use its pricing strategy to optimally balance sales between physical and digital goods. However, the threat of piracy limits the extent to which digital rights should be granted: the value of digital rights is determined not only by their direct effect on the quality of legal digital goods, but by a differential piracy effect that can lower a sellerâs pricing power. When the latter effect is sufficiently high, granting digital rights can have a detrimental effect on value â our model indicates that this kind of effect is more likely to be observed for digital rights that aim to replicate the consumption experience of physical goods, rather than enhancing a customerâs digital experience. We test the predictions of our analytical model using data from the ebook industry. Our empirical evidence supports our theoretical results, showing that four separate digital rights each have an economically significant impact on ebook prices, and establishing that the digital rights which aim to replicate physical consumption while increasing the threat of piracy are the ones that have negative impact on seller value. We also show that if the pricing of a digital good is keyed off that of an existing tangible good, optimal pricing changes for the former should be more nuanced, rather than simply mirroring changes in the price of the latter, and we discuss the effect of the technological sophistication of potential customers on optimal pricing and rights management. Our results represent new evidence of the importance of an informed and judicious choice of the different digital rights granted by a DRM platform, and provide a new framework for guiding managers in industries that are progressively being digitized.Information Systems Working Papers Serie