Software Piracy: An Analysis of Protection Strategies

Abstract

Software piracy by users is generally believed to harm both software firms (through lower profits) and buying customers (through higher prices). Thus, it is thought that perfect and costless technological protection would benefit both firms and consumers. The model developed here suggests that in some circumstances, even with significant piracy, not protecting can be the best policy, both raising firm profits and lowering selling prices. Key to the analysis is joining the presence of a positive network externality with the fact that piracy increases the total number of program users. The network externality exists because consumers have an incentive to economize on post-purchase learning and customization costs.software, computers, piracy, strategy, network externality

From pirates to subscribers: 20 years of music consumption research

“…The institutional context of recorded music consumption is laid out by analysing the copyright from a theoretical (Landes & Posner, 1989; Novos & Waldman, 1984) as well as an applied perspective (Ku, 2002; Liebowitz & Watt, 2006). The former frames the economic discussion on information goods and copying (Johnson, 1985; Varian, 2000, 2005) and introduces the debate on the potential positive effects of infringement: indirect appropriability (Liebowitz, 1985), network externalities (King & Lampe, 2003; Reavis‐Conner & Rumelt, 1991; Takeyama, 1994), bundling (Bakos et al., 1999), and sampling (Gopal et al., 2006). These offset the magnitude of the substitution effect between original and copies and lead to a theoretically ambiguous impact of file sharing (and copyright infringement in general) on revenue and/or profits.…”

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