Presentation on theme: "Carl Shapiro Hal R. Varian"— Presentation transcript:
1 Carl Shapiro Hal R. Varian Rights ManagementCarl ShapiroHal R. Varian
2 Intellectual Property Law “Intellectual property law cannot be patched, retrofitted, or expanded to contain digitized expression…Information wants to be free.” John Perry BarlowIs he right?
3 Production and Distribution Digital tech lowers production costsDigital tech lowers distribution costsExamplesTape recorder lowers production, but not distribution costsAM radio broadcast lowers distribution costs, not reproduction costs
4 Make Lower Distribution Costs Work for You Information is an experience goodMust give away some of your content in order to sell restCan use product line/versioningNational Academy of Sciences PressEasy to read, hard to print
5 Demand for Repeat Views Give away all your content, but only onceMusic, books, video have different use patternsChildrenBarney: free videosDisney: sued day care centersAdults
6 Demand for Similar Views Free samples direct customers back to youPlayboyMcAfee Associates$5 million in first year$3.2 billion market value by 1997Half of virus protection market
7 Demand for Complementary Products Give away index and sell contentWall Street Journal, New York Times, Economist give away indexFree content, organization/index is what mattersFarcast sells current awareness
8 Illicit Copying Timely information: not a big problem Cheap information: not a big problemNegative feedback: the bigger you are, the easier to detect
9 Lower Reproduction Costs Perfection isn’t as important as commonly thoughtDigital Audio Tape (DAT)SCMS inhibits copies of copiesAnalog video tapes:1979: 4 blanks for each pre-recorded1992: 1 to 1
10 Trusted Systems Divx -- described earlier Single-play music CDs Weak link is in rendering
11 Cryptolopes and Superdistribution Adobe’s Type on Call CDSuperdistribution: give it to a friendWeb rather than star-shaped network
12 Problems Patent battles Standards battles Inconvenience Spreadsheet copy protectionPrice of contentReliabilityTechnical and procedural
13 Historical Examples Circulating libraries Video stores 1741: Pamela 1000 libraries by 1840Video storesVideo rental as prelude to purchaseGrowing the market
14 Choosing Terms and Conditions Revenue = price x quantityMore liberal terms and conditionsIncreases priceDecreases quantity sold
15 Simple Model y = amount consumed x = amount sold p(y) = demand, assume zero costBaseline case: max p(y)yMake T&C more liberala p(y) with a>1y = bx with b < 1
16 Analysis Max ap(y) x Max (a/b) p(y) Conclusion: y the same, profits depend on a/b
17 Transactions Costs Site license v individual licenses? Who can distribute more cheaply?How effectively can group aggregate value?
18 Lessons Two challenges: cheap production, cheap distribution Cheap distribution: helps advertise by giving away samplesCheap distribution: good for bitleggers, but their need to advertise helps control them
19 Lessons, continuedCopy protection that imposes costs on users is vulnerable to competitive forcesBasic tradeoff in terms and conditions: more liberal terms make product more valuable buy may reduce salesSite licenses and other group pricing schemes are a valuable tool
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