Sudip Bhattacharjee

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.

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.

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.

A multi-period profit maximizing model for retail supply chain management: An integration of demand and supply-side mechanisms

Abstract We present a multi-period inventory and pricing model for a single product, where the product has a fixed life perishability for a certain number of periods. This problem has significant importance for an efficient operation of the marketing/manufacturing interface at the retail end of the supply chain. The profit maximization problem is modeled as a dynamic program, and the Wagner–Whitin dynamic programming recursions are developed for both perishable and non-perishable products. The structural properties of the model are investigated, and it is shown that the maximum profit function is continuous piecewise concave. Two efficient search heuristics are presented, and the results are compared with benchmark optimum values. The heuristics have been extensively tested and the results indicate that the proposed approach is robust, efficient and practically viable. Directions for future research are presented.

No more shadow boxing with online music piracy: strategic business models to enhance revenues

Novel online file sharing technologies have created new market dynamics and posed a great challenge to the music industry to try and retain customers. Consumers have created anonymous online networks to exchange audio files at little cost, which has led to millions of shared, illegal copies of music files and related sales losses to the industry. Legal efforts to counter this trend have lagged the advances in technology. This research presents an analysis of selling strategies that can increase a music sellers revenues as online piracy continues to flourish. We study and compare scenarios of traditional music store selling with those of online-based strategies. We model and analyze pure per-unit, pure subscription and mixed strategies for online music services. Analytical modeling, empirical study and simulation analysis were used to investigate the issues in detail. Our results suggest that the quality of pirated music and search effort have a significant impact on viable strategies. For instance, as the quality of pirated music approaches that of a legal online seller, the per unit service becomes the least viable option. An interesting finding was that strategies that minimize piracy do not necessarily maximize revenues. In fact, both revenues and social welfare can be maximized in the subscription-based environment, even though they may lead to higher levels of piracy. Our research findings not only offer insights into an online experience market, but can also serve as a contemporary reflection on other similar information markets.

To theme or not to theme: Can theme strength be the music industry's killer app?

Music bundling has been the mainstay of the music industry for decades. Record companies and producers have selected bundles of songs and sold them as albums, their most important revenue source. Digitization and piracy of music have threatened this standard business model with consumers increasingly purchasing music a la carte. In this study, we analyze a strategy for designing successful albums through using new concepts of themed bundling. Thematic bundling can lower consumer search costs and dampen the incentive to pirate music, and can potentially be a win-win strategy for both consumers and music companies. Unlike prior work in economics on bundling which typically seeks to determine the optimal price, bundle size and composition, we focus on a restricted bundling problem, since the price of the bundled product (i.e. an album) is generally set over a narrow range as is the number of items (i.e. songs) in the bundle. Our key results and insights are derived using analytic modeling and extended through numerical analysis. In addition, our key findings are supported by our empirical analysis of music album chart performance.

Economic sustainability of closed loop supply chains

We develop an end-to-end model of a closed-loop supply chain (CLSC), and identify the systemic decision making required for economic viability of participants in this chain. Economic viability is a key ingredient for environmentally sustainable behavior and policies, and our decision making framework includes producers, refurbishers and recyclers. We model the lifecycle of a consumer electronics product to examine the complex interactions among different participants and their decisions. Using data from recyclers and marketing and supply chain literature, we find that i) sustainable CLSC policies require a well-calibrated return rate among types of products (new and refurbished) and consumers (innovators and imitators); ii) a sustainable return policy increases sales significantly for both types of customers; and iii) product design that improves refurbishability, and marketing efforts that create perceived differentiation between products and at the same time social awareness and acceptability for refurbished products, is critical for economic sustainability of refurbishers and recyclers. Our model can be used at a company or industry level to conduct cost-benefit scenarios for all participants of the CLSC, and make decisions based on systemic value. It can also be used to create public policies and incentives to reward companies that meet these benchmarks, for sustained economic and environmental benefits. We develop a closed-loop supply chain (CLSC), and identify the decision making required for economic viability of the chain.We model the lifecycle of a consumer electronics product to examine the complex interactions among different decision makers.Sustainable CLSC policies require a well-calibrated return rate among types of products (new and refurbished) and consumers.Sustainable return policy increases sales significantly for both types of customers (innovators and imitators).Product design and marketing are critical for economic sustainability of refurbishers and recyclers.