Sinha, Machado and Sellman (2010)

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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

Sinha, Machado and Sellman (2010)
Title: Don't Think Twice, It's All Right: Music Piracy and Pricing in a DRM-Free Environment
Author(s): Sinha, R. K., Machado, F. S., Sellman, C.
Year: 2010
Citation: Sinha, R. K., Machado, F. S., & Sellman, C. (2010). Don't think twice, it's all right: Music piracy and pricing in a DRM-free environment. Journal of Marketing, 74(2), 40-54.
Link(s): Definitive
Key Related Studies:
Discipline:
Linked by:
About the Data
Data Description: Two successive studies used data from > 2000 undergraduate students of diverse disciplines at a “major public university”.

Study 1, in Spring 2007, used a final clean survey sample of 816 respondents - 58% male, average age 19.7 years, 91% owned a portable music player, 44% attended concerts regularly, 27% visited music stores regularly.

Study 2 survey was administered to 1,312 students during Autumn 2008.

Data Type: Primary data
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:
  • 2007
  • 2008
Funder(s):

Abstract

The music industry has widely viewed digital rights management (DRM) as an effective strategy for reducing digital piracy. Digital rights management systems aim to prevent unauthorized copying and to reduce the overall rate of piracy. Therefore, the recent move toward offering DRM-free music by some major online music sellers appears paradoxical. In this article, the authors propose a model that conceptualizes and estimates the concept of hardcore piracy in an attempt to resolve this apparent paradox. Based on two large empirical studies and a validation exercise with a large sample of more 2000 college students, the model results indicate that the music industry can benefit from removing DRM because such a strategy has the potential to convert some pirates into paying consumers. In addition, a DRM-free environment enhances both consumer and producer welfare by increasing the demand for legitimate products as well as consumers’ willingness to pay for these products. The authors find that producers could benefit by lowering prices from currently observed levels. The article concludes with a discussion of the practical implications of the findings for managers within the music industry.

Main Results of the Study

  • Two related studies consider piracy from a demand perspective. A new model introduces the concept of “hardcore pirates”, offering a new and unique method for conceptualizing and measuring piracy in terms of willingness to pay (WTP).
  • The results indicate that Digital Rights Management (DRM) is not a control mechanism that is independent of consumer preferences but rather an important product attribute that consumers include in their evaluation of online music products.
  • The removal of DRM increases the utility of legally purchased music – for example, it can be played on different devices. This might increase consumers’ WTP for legally sold digital music.
  • Both studies therefore conclude that reducing DRM controls might increase overall revenues for digital music, while converting some hardcore pirates into paying consumers.
  • Reductions in prices for music that is popular among college students might also be beneficial for both consumers and producers, though increased legal sales digital music.
  • Although the study was limited to college students, external evidence indicates that a significant proportion of software pirates are in that population.

Policy Implications as Stated By Author

  • “These results provide important ‘consumer-based’ rationale for the emerging trend toward a DRM-free environment for music.”
  • “In addition, they provide support for the notion that under certain circumstances, consumers may prefer to pay for a product, even if they can obtain it for free.”
  • “A key implications of our findings is that regardless of the specific effects, consumers include the control mechanisms that DRM imposes on digital music not only in their valuation decisions but also in their decisions to become ‘nonpaying’ consumers.”
  • Consequently, the “managerial logic” is that “pursuing a pure DRM-free or significantly relaxed DRM strategy may be optimal”.
  • It would be worthwhile researching whether removing DRM and reducing prices would be an optimal strategy for the producers of all digital goods.


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)
Green-tick.png
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
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)
Green-tick.png

Datasets

Sample size: 816
Level of aggregation: University students
Period of material under study: Not stated


Sample size: 1312
Level of aggregation: University students
Period of material under study: Not stated