The objective of this note is to provide a comprehensive and up-to-date overview of digital piracy. Although the emphasis is on the economic analysis, it also briefly presents the legal context and its recent evolution. As digital piracy consists in infringing intellectual property laws, it is important to start by understanding the rationale of such laws. That allows a more precise definition of what is meant by digital piracy. The study then moves on to the economic analysis of piracy, starting with the basic analysis, which explains why piracy is likely to decrease the profits of the producers of digital products; also examined is how the producers have reacted to digital piracy when it started to grow. Next is a review of more recent contributions to the field that point at possible channels through which piracy could improve the profitability of digital products. These channels have inspired new business models for the distribution of digital products, which are described in the last part of the essay. Throughout the essay are reported the results of some of the most recent empirical studies, so as to quantify the impacts of digital piracy.
Main Results of the Study
- Levels of piracy have negatively affected profits by copyright owning producers and businesses.
- Empirical research provides mixed results when assessing the effectiveness of anti-piracy measures such as HADOPI in France.
- Technical measures such as DRM were not successful and in general have been phased out of the music industry (but not book publishing).
- Digital piracy may have a positive affect on profits as there is a 'sampling effect' where consumers may be exposed to the work and go on to purchase a legitimate copy.
Policy Implications as Stated By Author
- Anti-piracy measures have had mixed results and it is unclear whether the affect on the level of piracy is significant.
- While it is clear that physical sales and profits for copyright industries like the Music industry have been negatively affected, it is unclear whether the overall effect on the industries are negative, as there are positive effects of piracy that can mitigate the negative effects
- More empirical research is needed to determine the effectiveness of various anti-piracy measures
Coverage of Study
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