Recommended for you: The effect of word of mouth on sales concentration

I examine the role of word of mouth in consumer's product discovery process and its implications for the firm. A monopolist supplies an assortment of horizontally differentiated products and consumers search for a product that matches their taste by sampling products from the assortment or by seeking product recommendations from other consumers. I analyze the underlying consumer interactions that lead to the emergence of word of mouth, examine the optimal pricing and assortment strategy of the firm, and explain the impact of word of mouth on the concentration of sales within the assortment. The model provides a rationale for the long tail phenomenon, explains recent empirical findings in online retail, and is well suited for product categories such as music, film, books, and video game entertainment

Peer-to-Peer File Sharing and Cultural Trade Protectionism

We examine the Internet’s impact on the cross-border distribution of cultural goods and assess its implications for cultural policy and cultural diversity. We present a stylized model of a two-country economy where governments are endowed with political preferences over the consumption of domestic content and enact import barriers and subsidies to protect it. We introduce peer-to-peer file sharing as a distinct distribution channel enabled by the Internet that provides access to all media products at a low cost. We report two main findings. First, the Internet renders legacy cultural policy inefficient, and the elimination of import barriers and the reduction of subsidized production can be desirable even when governments exhibit paternalistic preferences favoring the consumption of domestic content. And second, even though the Internet increases cultural diversity within countries, it can also reduce diversity across them

Competing against online sharing

Purpose – This paper aims to explore online sharing of copyrighted content over peer‐to‐peer (p2p) file sharing networks and its impact on the music industry, and to assess the viable business models for the industry in the future. Design/methodology/approach – The authors analyze the evolution of the online content market over the years that followed the widespread adoption of p2p. The paper is based on a teaching case, and builds on two related academic papers that provide the theoretical underpinnings for the analysis. Findings – Based on the early developments observed in this marketplace and the aforementioned theoretical work, the paper argues that it is unfeasible to fully eradicate p2p, and so the industry must embrace it by understanding how consumers derive value from the technologies that enable it. Originality/value – The developments analyzed here offer relevant insights for the online content marketplace, allow the scope of strategies available to the music industry to be understood better, and may provide lessons for other industries transitioning to online business models

Business model responses to digital piracy

Digital piracy challenges firms by reducing revenues and shifting consumption habits. Recently, some firms have successfully leveraged business models against piracy, but the understanding about this phenomenon still lacks depth and structure. This study examines the characteristics of digital piracy in some of the most affected industries, presents comparative case studies of two iconic firms, Spotify and Netflix, and analyzes their digital business model responses. We generalize their adoption to generic digital content distributors and explain how they contribute to generate and capture value. Theoretical and practical implications for technological innovation, firm diversification, and network competition are also discussed

Strategies for managing the privacy landscape

Firms use consumer personal information to improve their products and services. Personal information is open to misuse, however, and when exploited for undesired or unexpected purposes reduces consumer's trust in the firm and their willingness to provide personal information. How should firms manage consumer privacy? We present a framework to help firms identify their privacy impact on consumers and respond appropriately. We argue that firms should consider the full spectrum of entities they interact with and which can exploit consumer personal information, which includes: the political environment (government), the security environment (hackers), the market environment (third party firms), and the social environment (peers). Firms should pursue strategies to maximize the privacy impact consumers derive across these domains, augmenting sources of positive impact and mitigating those that generate negative impact. Successful strategies for managing privacy combine four approaches: balanced cooperation with government, heightened security against hackers, limited disclosure to third party firms, and moderated propagation with peers

Digital supply chain management in the videogames industry: a systematic literature review

As industries mature, they rely more heavily on supply chain management (SCM) to ensure effective operations leading to greater levels of organisational performance. SCM has been widely covered in many industrial areas and, in line with other burgeoning sectors such as Tourism, an industry focus provides the opportunity to look in-depth at the context-based factors that affect SCM. Developments in digital distribution and rapid technological innovations have resulted in an increased focus on Digital Supply Chains (DSCs), which bring about significant changes to how consumers, customers, suppliers, and manufacturers interact, affecting supply chain design and processes. Through a systematic review of the Videogames Industry Supply Chain Management literature, which serves as a pertinent contextual example of a DSC, we look at how supply chains are affected by structural, market and technological change, such as increased platformisation, disintermediation and the proliferation of digital distribution. We distil these findings into a new research agenda, which identifies themes in line with extant DSC research, provides a series of relevant practice recommendations and identifies opportunities for future research

Business model responses to digital piracy

Digital piracy challenges firms by reducing revenues and shifting consumption habits. Recently, some firms have successfully leveraged business models against piracy, but the understanding about this phenomenon still lacks depth and structure. This study examines the characteristics of digital piracy in some of the most affected industries, presents comparative case studies of two iconic firms, Spotify and Netflix, and analyzes their digital business model responses. We generalize their adoption to generic digital content distributors and explain how they contribute to generate and capture value. Theoretical and practical implications for technological innovation, firm diversification, and network competition are also discussed

Price Competition with a Stake in your Rival

We examine how revenue-sharing and profit-sharing stakes affect price competition intensity under duopoly. Our analysis builds on the price competition framework introduced by Varian (1980) and accounts for fundamental asymmetries in terms of cost and consumer loyalty. A stake exists when a firm appropriates a share of its rival’s revenues or profits. For example, a marketplace owner that charges a third-party seller an ad valorem fee on its sales has a revenue-sharing stake, and a firm holding a minority ownership participation in another has a profit-sharing stake. We show that a revenue-sharing stake always has a stronger competition-dampening effect (leads to higher prices) than a profit-sharing stake, and explain how the introduction of a stake affects the intensity of competition between firms. Our analysis generates new insight into how stakes affect competitive interaction in the marketplace