Fragmentation Versus Standardization in the Market for Digital Rights Management Solutions: A Case Study of the Online Market for Audio and Video Content

18 Pages Posted: 3 Aug 2006

Date Written: July 26, 2006

Abstract

The emergence of digital technologies has facilitated the creation and the distribution of digital content. At the same time a set of new technologies, called Digital Rights Management (DRM) Systems, has been adopted to prevent illegal copying and to control usage rights. These new systems have challenged Intellectual Property rules and have redefined the economic relationships between creators and consumers of copyrighted works. Despite the important implications, the literature on the subject is scarce and at the very early stages. A recent paper by Park and Scotchmer (2004) argues that firms will have a tendency to adopt a shared system for technical protection which will lower the prices of digital copyright protected content. The empirical evidence, however, shows that there is increased competition among different DRM systems and a tendency toward fragmentation of the market for DRM solutions. One explanation for existence of proprietary DRMs is the new possibilities for business that these systems offer. DRMs not only protect content, but have allowed companies to expand their business models, thus providing new sources of revenue. We argue there are various incentives at play in the market for digital protection and DRM systems that counter tendencies for standardization. The goal of this paper is to provide an understanding of DRM solutions and of the market environment in which these systems operate in order to better inform the emerging literature.

Keywords: DRM, Digital Rights Management, MP3, digital audio, stanards, fair use

Suggested Citation

Gee, Laura and Ivanova, Lubomira, Fragmentation Versus Standardization in the Market for Digital Rights Management Solutions: A Case Study of the Online Market for Audio and Video Content (July 26, 2006). Available at SSRN: https://ssrn.com/abstract=920711 or http://dx.doi.org/10.2139/ssrn.920711

Laura Gee (Contact Author)

Tufts University ( email )

Medford, MA 02155
United States

IZA

P.O. Box 7240
Bonn, D-53072
Germany

Lubomira Ivanova

LECG, LLC ( email )

33 West Monroe
Suite 1850
Chicago, IL 60603-5659
United States

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