Are Digital Rights Valuable? Theory and Evidence from the eBook Industry

The effective management of digital rights is a crucial challenge in many industries making the transition from physical to digital products. We present an economic model that characterizes the value of digital rights when products are sold both embedded in tangible physical artifacts and as pure digital goods, and when granting digital rights may also affect the extent of digital piracy. Our model indicates that in the absence of piracy, digital rights should be unrestricted, since a seller can use their pricing strategy to optimally balance sales between physical and digital goods. However, the threat of piracy limits the extent to which digital rights should be granted: the value of digital rights is determined not only by their direct effect on the quality of legal digital goods, but by their effect on the differential quality of legal and pirated digital goods. When the latter effect is negative, granting digital rights may have a detrimental effect on value; our model indicates ...

• Type: Conference
• Year: 2004
• Where: ICIS
• Authors: Gal Oestreicher-Singer, Arun Sundararajan
• Keywords: Digital Piracy, Digital Products, Digital Rights, ICIS 2004, Information Technology