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CH 4 Rights

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24 views19 pages

CH 4 Rights

Uploaded by

nina.a.por.ti.a.n
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 19

Information Rules:

A Strategic Guide to the Network Economy

Rights Management
Carl Shapiro
Hal R. Varian
Intellectual Property Law
• “Intellectual property law cannot be
patched, retrofitted, or expanded to contain
digitized expression…Information wants to
be free.”
John Perry
Barlow

• Is he right?
Information Rules 2 Spring 98
Production and Distribution
• Digital tech lowers production costs
• Digital tech lowers distribution costs
• Examples
– Tape recorder lowers production, but not
distribution costs
– AM radio broadcast lowers distribution costs,
not reproduction costs

Information Rules 3 Spring 98


Make Lower Distribution Costs
Work for You
• Information is an experience good
• Must give away some of your content in
order to sell rest
• Can use product line/versioning
– National Academy of Sciences Press
– Easy to read, hard to print

Information Rules 4 Spring 98


Demand for Repeat Views
• Give away all your content, but only once
• Music, books, video have different use
patterns
• Children
– Barney: free videos
– Disney: sued day care centers
• Adults

Information Rules 5 Spring 98


Demand for Similar Views
• Free samples direct customers back to you
• Playboy
• McAfee Associates
– $5 million in first year
– $3.2 billion market value by 1997
– Half of virus protection market

Information Rules 6 Spring 98


Demand for
Complementary Products
• Give away index and sell content
– Wall Street Journal, New York Times,
Economist give away index
• Free content, organization/index is what
matters
– Farcast sells current awareness

Information Rules 7 Spring 98


Illicit Copying
• Timely information: not a big problem
• Cheap information: not a big problem
• Negative feedback: the bigger you are, the
easier to detect

Information Rules 8 Spring 98


Lower Reproduction Costs
• Perfection isn’t as important as commonly
thought
• Digital Audio Tape (DAT)
– SCMS inhibits copies of copies
• Analog video tapes:
– 1979: 4 blanks for each pre-recorded
– 1992: 1 to 1

Information Rules 9 Spring 98


Trusted Systems
• Divx -- described earlier
• Single-play music CDs
• Weak link is in rendering

Information Rules 10 Spring 98


Cryptolopes and
Superdistribution
• Adobe’s Type on Call CD
• Superdistribution: give it to a friend
– Web rather than star-shaped network

Information Rules 11 Spring 98


Problems
• Patent battles
• Standards battles
• Inconvenience
– Spreadsheet copy protection
• Price of content
• Reliability
– Technical and procedural

Information Rules 12 Spring 98


Historical Examples
• Circulating libraries
– 1741: Pamela
– 1000 libraries by 1840
• Video stores
– Video rental as prelude to purchase
– Growing the market

Information Rules 13 Spring 98


Choosing Terms and Conditions
• Revenue = price x quantity
• More liberal terms and conditions
– Increases price
– Decreases quantity sold

Information Rules 14 Spring 98


Simple Model
• y = amount consumed
• x = amount sold
• p(y) = demand, assume zero cost
• Baseline case: max p(y)y
• Make T&C more liberal
– a p(y) with a>1
– y = bx with b < 1

Information Rules 15 Spring 98


Analysis
• Max ap(y) x
• Max (a/b) p(y)
• Conclusion: y the same, profits depend on
a/b

Information Rules 16 Spring 98


Transactions Costs
• Site license v individual licenses?
– Who can distribute more cheaply?
– How effectively can group aggregate value?

Information Rules 17 Spring 98


Lessons
• Two challenges: cheap production, cheap
distribution
• Cheap distribution: helps advertise by
giving away samples
• Cheap distribution: good for bitleggers, but
their need to advertise helps control them

Information Rules 18 Spring 98


Lessons, continued
• Copy protection that imposes costs on users
is vulnerable to competitive forces
• Basic tradeoff in terms and conditions:
more liberal terms make product more
valuable buy may reduce sales
• Site licenses and other group pricing
schemes are a valuable tool

Information Rules 19 Spring 98

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