Economic and Game Theory
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Some quotes of interest:
From the article, Napster boosts CD sales by Lisa M. Bowman, ZDNet News, July 21, 2000.
However, the Jupiter study refutes those charges, saying instead that people who use services such as Napster are 45 percent more likely to have increased their music buying than non-users.
On the other hand, from the legal brief, A&M Records v. Napster, Inc. United States District Court, Northern District of California at Gigalaw.com:
Even if it could be shown that Napster decreases CD music sales, it is not clear that the majority of citizens are better off with copyright law.However, Jay's overall conclusion was that "[ t]he more songs Napster users have downloaded," the more likely they are to admit or imply that such use has reduced their music purchases.
What if, once someone built Disneyland, anyone could recreate the "Disneyland experience" almost instantly, almost free, of almost equal quality as the "live" experience anywhere in the world? (I think this is a better analogy than the "perfect counterfeit ticket" scenario, since counterfeit ticket holders would impose additional operating costs (increased parking lot size, litter, lines) beyond the initial sunk costs; Napster users impose few, if any, additional costs on the record companies.)
Assuming that this were possible, would we be better off allowing anyone to recreate and distribute the "Disneyland experience", or would we be better off by granting to the Disney company a legal monopoly on the right to recreate and distribute the "Disneyland experience"?
One of the primary reasons that I think the legal recognition of property rights for physical objects is a good thing is that it helps prevent costly conflicts over inherently limited resources. I'm glad that there are generally recognized rules to distinguish between "proper" and "improper" exchanges of material goods--I would hate to have to constantly defend my car against attempts to take it. In addition, my cars loss would mean sharp curtailment in my ability to travel, and the loss of substantial fraction of my income.
However, I would be much more nonchalant, if the car cost me five cents to begin with, and if a car "thief" could "steal" my car by pushing a button, and creating an exact duplicate 2000 miles away. Likewise, intellectual objects, once created, can be duplicated and distributed at relatively small cost (bandwidth, hard drive space, and operator time), so the argument from scarcity is much less compelling.
Let's assume that unlimited copying/distribution were legally allowed. The question then becomes, why would Disneyland (or GM), invest in development to begin with?
As with costs of music production and distribution, were instant duplication of Disneyland and GM cars possible, I suspect that the cost of creation and distribution would be dramatically lower than it is now.
However, that still leaves some initial cost to be paid for. And certain kinds of intellectual products are quite costly to create--"Titanic" cost >$500 million.
My suspicion is that such products will continue to be able to derive revenue sufficient to continue to create from several different sources. For example, a budding new band gives away their first 3 albums. After a while, assuming they are good, they will have a fan base. I expect that they will then have several potential revenue streams:
If downstream licensing were eliminated, while you may see a dramatic change in the structure of the music industry, the quantity or quality of music (as measured by samplings of music sales/music downloads, and consumer surveys) available to the consumer would remain the same, but at much lower cost and with greater convenience.