Peitz and Waelbroeck (2006a)

From Copyright EVIDENCE

Advertising Architectural Publishing of books, periodicals and other publishing Programming and broadcasting Computer programming Computer consultancy Creative, arts and entertainment Cultural education

Film and motion pictures Sound recording and music publishing Photographic activities PR and communication Software publishing (including video games) Specialised design Television programmes Translation and interpretation

1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Peitz and Waelbroeck (2006a)
Title: Why the music industry may gain from free downloading — The role of sampling
Author(s): Peitz, M,, Waelbroeck, P.
Year: 2006
Citation: Peitz, M., & Waelbroeck, P. (2006). Why the music industry may gain from free downloading—the role of sampling. International Journal of Industrial Organization, 24(5), 907-913.
Link(s): Definitive , Open Access
Key Related Studies:
Discipline:
Linked by: Piolatto and Schuett (2012)
About the Data
Data Description: In the model profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free.
Data Type:
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: No
Comparative Study?: No
Literature review?: No
Government or policy study?: No
Time Period(s) of Collection:
  • Not stated
Funder(s):

Abstract

Downloading digital products for free may harm creators and intermediaries because consumers may no longer buy the version for sale. However, as we show in this paper, this negative effect may be overcompensated by a positive effect due to sampling: consumers are willing to pay more because the match between product characteristics and buyers’ tastes is improved. This indeed holds under sufficient taste heterogeneity and product diversity. We present a simple multi-product monopoly model in which products are located on the Salop circle and in which consumers regard each original as superior to its copy. We first consider a model with unit demand and full participation so that any increase in revenues stems from higher prices. The property that sampling allows consumers to find a better match to their tastes, tends to lead to higher profits under file-sharing. However, there is a countervailing effect: consumers have the option to download and listen to music without paying for it. In other words, consumers have the option to simply keep the download but not to buy the song or album. This tends to make not buying a more attractive option and tends to reduce the willingness-to-pay for music. We show that the former effect dominates the latter and that the introduction of file-sharing technologies leads to higher profits if there is sufficient taste heterogeneity and sufficient product diversity. We then extend the model to allow for variable demand and show that file-sharing can lead to lower prices, higher unit sales and higher profits

Main Results of the Study

Do music labels necessarily suffer from downloading on P2P networks? Our analysis shows that the answer is 'no'. In our model, profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free.

Policy Implications as Stated By Author

Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Green-tick.png
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Green-tick.png
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Datasets

Sample size: 3
Level of aggregation: Consumption parameters
Period of material under study: Not stated