Regulation Problem

The legal protection of copyright law was designed to correct a market failure in markets where information was a significant component of products and where those products exhibited some of the characteristics of a ‘public good’ (particularly the ‘non-rivalry’ aspect of these goods).

These national legal protections were, to a degree, harmonized through international agreements such as the Bearne Convention. They worked acceptably well in the pre-digital age primarily because costs of production and distribution of illegally copied products (such as VHS tapes) was significant and partly because replication (except on a very small scale) was difficult and required some expertise.

The digitalising of information in the form of music on CD’s, films on DVD’s, digital radio and TV, (all files including ‘printed’ works that may be stored on a computer), have radically changed this situation. Now it is possible for millions of consumers to easily make and distribute copies of digital information. The internet can make information ‘free’ or at least freely available.

In the light of these developments, groups should attempt one of the following questions.

Film and record companies are attempting to control the distribution of their legal property in the digital age by implementing some form of DRM (Digital Rights Management). If this is successful is it likely to increase or preserve the profits of the companies?
IF DRM (see above) fails how can artists (musicians and film actors) make an income. Does DRM free music and film mean that their incomes will decrease?
Can publishers of traditional books (such as textbooks) make profits in the digital age – explain how they might attempt this.
Does the idea of free information on the internet present new opportunities for economic activities? Explain how such a new market would work.