Ram D. Gopal

Preventive and deterrent controls for software piracy

In an attempt to protect their intellectual property and compete effectively in an increasingly dynamic marketplace, software publishers have employed a number of preventive and deterrent controls to counter software piracy. Conventional wisdom suggests that reducing piracy will force consumers to acquire software legitimately, thus increasing firm profits. We develop an analytical model to test the implications of antipiracy measures on publisher profits. Our results suggest that preventive controls decrease profits and deterrent controls can potentially increase profits. Empirical results are also presented that support the proposition on the impact of deterrent controls on the extent of software piracy derived from the analytical model.

International Software Piracy: Analysis of Key Issues and Impacts

The pervasiveness of software piracy throughout the world is having a profound effect on the software publishing industry and the development of digital intellectual properties and technologies-especially in developing countries, where the piracy rates are extremely high. An economic model is first presented that incorporates the incentive structures for governments, software publishers, and individual consumers. The analytical model provides the economic rationale for the reluctance of a number of governments to aggressively enact and enforce intellectual property rights. An important proposition derived from the analysis states that the governments incentive to enact and enforce copyright laws are closely related to the size of the domestic software industry. The ensuing empirical study provides support for the proposition and further suggests that this relationship holds regardless of the income levels of the countries. Our analysis reveals that alliances between foreign and domestic software publishers through product relationships can be mutually beneficial and will provide an environment of increased copyright enforcement. These results provide a viable strategy to combat global software piracy. With strong policies on copyright enforcement, and a vigorous promotion of alliances between foreign and domestic publishers, a government can increase the net welfare of the country and help establish a strong domestic software industry. Through product relationships with domestic publishers, a foreign publisher can improve profits and operate in an environment of increased intellectual property protection. We then present a general model of ethical behavior related to the impact of behavioral and cultural factors on software piracy. The purpose of this model is to examine whether these determinants of piracy behavior are supranational and transcend cultural and ethical barriers. An empirical study involving U.S. and Indian graduate students suggests that the general model of ethics as related to software piracy is valid in the United States. However, the model results from the Indian sample suggest that additional cross-cultural research with revised models and improved scales is necessary.

Digital music and online sharing: software piracy 2.0?

Considering the similarities and unique characteristics of online file sharing and software piracy.

A Behavioral Model of Digital Music Piracy

The increasing pervasiveness of the Internet, broadband connections, and the emergence of digital compression technologies have dramatically changed the face of digital music. Digitally compressed music files are essentially a perfect public economic good, and illegal copying of these files has increasingly become rampant. In this article, we present a study on the behavioral dynamics that impact the piracy of digital audio files and provide a contrast with software piracy. Our results indicate that the general ethical model of software piracy is broadly applicable to audio piracy. However, significant enough differences with software underscore the unique dynamics of audio piracy. We highlight practical implications that can help the recording industry to effectively combat piracy and provide future research directions.

Do Artists Benefit from Online Music Sharing

We present a model of online music sharing that incorporates economic and technological incentives to sample, purchase, and pirate. Contrary to conventional wisdom, we find that lowering the cost of sampling music will propel more consumers to purchase music online as the total cost of evaluation and acquisition decreases. Attempts to prevent sampling will be counterproductive in the long run. Sharing technologies erode the superstar phenomenon widely prevalent in the music business. Extensive empirical investigations, based on surveys and Billboard ranking charts, lend support to the economic model and validate the key results.

Use of Data Envelopment Analysis in assessing Information Technology impact on firm performance

The purpose of this paper is to consider the effect of Information Technology on the performance of a firm. We use Data Envelopment Analysis (DEA) to study this problem. In the paper, we outline DEA and address its advantages over parametric approaches. We then develop a methodology to identify the efficiency of IT utilization and the importance of IT-related activities and their effect on firm performance, within the DEA framework. Our methodology also evaluates the marginal benefits of IT. We provide an application of our methodology through an illustration.

The Effect of Digital Sharing Technologies on Music Markets: A Survival Analysis of Albums on Ranking Charts

Recent technological and market forces have profoundly impacted the music industry. Emphasizing threats from peer-to-peer (P2P) technologies, the industry continues to seek sanctions against individuals who offer a significant number of songs for others to copy. Combining data on the performance of music albums on the Billboard charts with file sharing data from a popular network, we assess the impact of recent developments related to the music industry on survival of music albums on the charts and evaluate the specific impact of P2P sharing on an albums survival on the charts. In the post-P2P era, we find significantly reduced chart survival except for those albums that debut high on the charts. In addition, superstars and female artists continue to exhibit enhanced survival. Finally, we observe a narrowing of the advantage held by major labels. The second phase of our study isolates the impact of file sharing on album survival. We find that, although sharing does not hurt the survival of top-ranked albums, it does have a negative impact on low-ranked albums. These results point to increased risk from rapid information sharing for all but the “cream of the crop.”

Impact of Legal Threats on Online Music Sharing Activity: An Analysis of Music Industry Legal Actions*

The music industry has repeatedly expressed concerns over potentially devastating impacts of online music sharing. Initial attempts to control online file sharing have been primarily through consumer education and legal action against the operators of networks that facilitated file sharing. Recent legal action against individual file sharers marked an unprecedented shift in the industry’s strategy. The focus now is on well‐publicized legal threats and actions on a relatively small group of individuals to discourage overall music file sharing. To determine the resulting impact of these legal threats, we passively tracked online file‐sharing behavior of over 2,000 individuals. We found that individuals who share a substantial number of music files react to legal threats differently from those who share a lesser number of files. Importantly, our analysis indicates that even after these legal threats and the resulting lowered levels of file sharing, the availability of music files on these networks remains substantial.

Empirical Analysis of the Impact of Recommender Systems on Sales

Online retailers are increasingly using information technologies to provide value-added services to customers. Prominent examples of these services are online recommender systems and consumer feedback mechanisms, both of which serve to reduce consumer search costs and uncertainty associated with the purchase of unfamiliar products. The central question we address is how recommender systems affect sales. We take into consideration the interaction among recommendations, sales, and price. We then develop a robust empirical model that incorporates the indirect effect of recommendations on sales through retailer pricing, potential simultaneity between sales and recommendations, and a comprehensive measure of the strength of recommendations. Applying the model to a panel data set collected from two online retailers, we found that the strength of recommendations has a positive effect on sales. Moreover, this effect is moderated by the recency effect, where more recently released recommended items positively affect the cross-selling efforts of sellers. We also show that recommender systems help to reinforce the long-tail phenomenon of electronic commerce, and obscure recommendations positively affect cross-selling. We also found a positive effect of recommendations on prices. These results suggest that recommendations not only improve sales but they also provide added flexibility to retailers to adjust their prices. A comparative analysis reveals that recommendations have a higher effect on sales than does consumer feedback. Our empirical results show that providing value-added services, such as digital word of mouth and recommendations, allows retailers to charge higher prices while at the same time increasing demand by providing more information regarding the quality and match of products.

Consumer Search and Retailer Strategies in the Presence of Online Music Sharing

Advances in online technologies and bandwidth availability have opened new vistas for online distribution of digital goods, but potential benefits for consumers are juxtaposed against challenges for retailers. Here, we investigate one type of digital experience good—music—whose market environment includes the very real presence of online piracy. Although arguments abound for and against online distribution of such digital goods, little research exists in this area. We develop a model of consumer search for such an experience good, and study different emerging market environments for retailers, where consumers can pirate music online. Retailer cost to publishers is modeled using a variety of licensing schemas. Survey results, together with data from online sharing networks, are utilized to validate a key assumption. Finally, computational analysis is used to develop insights that cannot be obtained analytically. Our results indicate that decreasing piracy is not necessarily equivalent to increasing profit, and online selling strategies can provide additional profits for a traditional retailer even in the presence of piracy. We show that leading strategies for business in such goods should include pricing options, provision of efficient search tools, and new licensing structures.