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

Author

Listed:
  • Bae Sang Hoo

    (Clark University, 950 Main St., Worcester, MA 01610, USA)

  • Kim Myungsup

    (University of North Texas, 1155 Union Circle #311457, Denton, TX 76203-5017, USA)

  • Yoo Kyeongwon

    (Sangmyung University, 7 Hongji-dong Chongro-gu, Seoul, Korea, Phone: +82 2 2287 5039, Fax: +82 2 2287 0059)

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.

Suggested Citation

  • Bae Sang Hoo & Kim Myungsup & Yoo Kyeongwon, 2017. "The Effect of Piracy and Digital Rights Management on Vertically Related Content Industries," Review of Network Economics, De Gruyter, vol. 16(1), pages 1-26, March.
    • Handle: RePEc:bpj:rneart:v:16:y:2017:i:1:p:1-26:n:2
    DOI: 10.1515/rne-2017-0035
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    References listed on IDEAS

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    More about this item

    Keywords

    copyright protection; digitalization; digital rights management; piracy; upstream-downstream;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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