1. Rights Management Competitive Strategies for Network Economies

2. Economics of Information - Mike Shor2 Overview Legal Approach Enforcement Approach Business Model Approach

3. Economics of Information - Mike Shor3 Legal Approach First sale controversy Copy protection, right of subsequent use Permanence Publication vs. “fleeting image” Fair Use “General benefits derived by the public” Monetary Ramifications Framing, deep-linking Time and space shifting Sony, Xerox, and Napster

4. Economics of Information - Mike Shor4 Legal Approach Where has publication occurred? What furthers the “promotion of knowledge?” What is a “copy” ? Laws are reactionary! Contracts instead of property rights.

5. Economics of Information - Mike Shor5 Enforcement Approach Watermarks(Digimarc) Web Crawlers(RIAA) “Reattaching the bits”(Hardware Keys) No enforcement for noncreative works Databases Scientific Knowledge “Trail of Argument”

6. Economics of Information - Mike Shor6 Enforcement Approach But: Technologists are hard to stop And: Protection lowers value for honest consumers Small scale piracy hard to stop! Internet: small scale on a large scale!

7. Economics of Information - Mike Shor7 Customer Acceptance What level of convenience are we willing to give up for copyrights? Hardware keys Active CD insertion In all cases – DRM lowers value Only question is “how much”? ex. Microsoft Windows XP

8. Economics of Information - Mike Shor8 Business Model Approach “The first line of defense against pirates is a sensible business model.” Make the content easier to buy than steal Promote traditional product with free digital content Focus on Auxiliary Markets Pricing for Copying!

9. Economics of Information - Mike Shor9 eMusic Make the Content Easier QUALITY to Buy than Steal Per Use (no longer available) MP3 single: $0.99 MP3 album: $8.99 Per Time (unlimited download) Month:$15 Year:$10 / month One month free “MP3s hosted at EMusic - not someone's bedroom”

10. Economics of Information - Mike Shor10 Cross-Promotion Promote traditional product with free digital contentCONVENIENCE Tom Petty released new song track for free on the web Creed Top single from “Human Clay” released free Album debuted at Billboard #1

11. Economics of Information - Mike Shor11 Grateful Dead Focus on Auxiliary Markets DEMAND CREATION Permitted taping of live shows Permitted distribution of live bootlegs Released for free live recordings Increased concert attendance Strategically played new material live Generated interest in new studio recordings

12. Economics of Information - Mike Shor12 Unfortunate Fact The business model approach implies that the price charged depends on the added value of information flow above that obtainable by illicit means

13. Economics of Information - Mike Shor13 Pricing for Copying! If it is inevitable, make it work for you. Copiers need an original Library journal rates Early VHS releases Franchising Metrowerks CodeWarrior Mac and Windows versions on separate CDs One CD for documentation Encourage copying among low-value users

14. Economics of Information - Mike Shor14 Pricing for Copying! Pricing to copiers is like bundling in reverse Sell one copy to multiple users, instead of sell multiple goods to one user Profit advantage remains – group pricing Challenge: small groups are easier to manage and price

15. Economics of Information - Mike Shor15 A Unified Approach Legal Maintain the right to your property Enforcement Maintain “universal access” only for you Keep copying rings small or offline Business Model Leverage universal access Let copying promote your product “Bundle” to small copying rings