Police say new encrypted P2P network poses threat

Abstract

Content providers from the movie industry argue that peer-to-peer (P2P) networks such as KaZaA, Morpheus, or Audiogalaxy are an enormous threat to their business. They blame these networks for their recent decline in sales figures. However, this argument would only apply if consumers can access high quality copies easily and quickly on these networks. This paper presents a simple model outlining the consumer’s tradeoff between downloading the movie legally or acquiring it illegally through copying from such networks. The model shows that there are mainly two factors affecting consumer demand for copies: the probability of getting high quality copies and the risk associated with copying. The paper goes on to empirically estimate the probability of getting such high quality copies. To date, our results show that there is a very low probability of obtaining high quality movies. We further tested our model by conducting simulation analyses to better understand current and future consumer behavior. The first simulation shows that, with the current low probability of getting high quality copies, the majority of consumers would prefer to download movies legally. The results of the second simulation focusing on the future behavior of consumers showing that the most important factors are: the risk of being caught, the perceived value of the original, the availability (probability) of high quality copies and the price of the original. Our research findings not only offer insight into the consumer behavior, but also to what extent the movie industry faces piracy. These results may serve as a new impulse for copyright holders and policy makers, allowing them to make appropriate decisions and take targeted actions to fight piracy.