Task: 4- Internet Piracy

Task: 4- Internet Piracy

Thesis Statement

With the rise of the computer and the internet, an increasing number of digital products and services have been copied and distributed most of the time without the authorization of legal owners.

Introduction

Books, software, music and video files are the main target of internet. (Chen and Png, 2003) This trend has become a concern for both product manufacturers and policy makers.

Digital Products

Digital products can be compressed without losing much information or quality. Thus, digital copies have a technical quality similar to the original. However, the original digital product is often bundled with other non-digital components such as a printed manual for software and printed booklet (with lyrics, pictures, song and artist information) and CD case for music CDs. This suggests that the original gives some additional value compared to the copy.

In addition, there may be complementary products for which access can be controlled (examples are live concerts as complements to recorded music and customer support as a complement to software). Complementarities may allow firms to indirectly appropriate some of the rents generated through end-user copying. (Alvisi, Argentesi, Carbonara, 2002) In most cases, digital products also involve interactions. These interactions can be of two different natures: formal interaction for software that requires to exchange standardized/formatted information, and social interaction for music and video files about which people like to talk about with their friends. These formal and social interactions imply that there possibly exist network effects in the use of a digital product.

Also, many digital products are complex in the sense that the amount of information required to describe them is large. As a consequence (Gayer, Shy, 2003a), consumers need to test them in order to correctly value them. In other words, some digital products are experience goods and a copy can be useful in providing information on their characteristics. This feature applies not only to digital products such as music CDs but also to software with a large number of commands and a large potential number of interactions with other computer components and software, etc.

Non-authorized copying of digital products can be done in two different ways: by borrowing originals from friends and family members or by downloading from the internet. In the former case, networks of friends share the good on a small-scale basis. Then it is possible in some cases to indirectly appropriate revenue from sharing activities as we will argue later on. (King, Lampe, 2003) The copying process only requires a storage device such as a hard-drive or a CD Recorder or any portable media device. Information on the characteristics of the copied product is easy and cheap to obtain by word-of-mouth.

In the latter case, monitoring copies from copies is arduous. However, copying using file-sharing technologies often provides a lower value than copying directly from friends for several reasons. (Gayer, Shy, 2003b) First, users are spending time looking for and downloading files. Secondly, the digital copy lacks valuable information such as instructions on how to install the software or song ...