Economics

The Effect of Piracy and Digital Rights Management on Vertically Related Content Industries

Document Type

Article

Abstract

The purpose of this paper is to investigate how digitalization affects vertically related content industries with the threat of piracy. We construct a model of vertical relationship where an upstream [a downstream] firm is considered as a content provider [a retailer]. Three business models are proposed depending on who has the right to implement digital rights management (DRM): a vertically-integrated entity, an upstream, and a downstream. First, we analyze how different modes of control on DRM affect the optimal prices and the level of copy protection. The results are dependent upon the different control modes of DRM and the degree of opportunistic behavior responding to increasing piracy costs. Second, we analyze the effect of two types of piracy depending on distribution channels (non-digital versus digital). Strengthening intellectual property rights (IPR) protection results in a price hike for both cases, while we have opposite changes in quantities depending on the types of piracy.

Publication Title

Review of Network Economics

Publication Date

3-26-2017

Volume

16

Issue

1

First Page

1

Last Page

26

ISSN

1446-9022

DOI

10.1515/rne-2017-0035

Keywords

copyright protection, digital rights management, digitalization, piracy, upstream-downstream

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