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A behavioral model of digital music piracy

A behavioral model of digital music piracy

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A Behavioral Model of Digital Music Piracy

Ram D. Gopal Dept. of Operations & Information Management School of Business University of Connecticut Storrs, CT 06269 Email: ram@sba.uconn.edu G. Lawrence Sanders* 310A Jacobs Management Center State University of New York at Buffalo Buffalo, NY 14260 Email: mgtsand@acsu.buffalo.edu Sudip Bhattacharjee Dept. of Operations & Information Management School of Business University of Connecticut Storrs, CT 06269 Email: sudip@sba.uconn.edu Manish Agrawal 310A Jacobs Management Center State University of New York at Buffalo Buffalo, NY 14260 Email: magrawal@acsu.buffalo.edu Suzanne C. Wagner Niagara University Dept. of Computer Information Sciences Niagara University, NY 14109-2019 Email: scwagner@niagara.edu

*: Corresponding Author

Revised January 2002

A Behavioral Model of Digital Music Piracy - Gopal, Sanders, Bhattacharjee, Agrawal, Wagner

A Behavioral Model of Digital Music Piracy
The increasing pervasiveness of the internet, broadband connections and the emergence of digital compression technologies have dramatically changed the face of digital music piracy. Digitally compressed music files are essentially a perfect public economic good, and illegal copying of these files has increasingly become rampant. This paper presents a study on the behavioral dynamics which impact the piracy of digital audio files, and provides a contrast with software piracy. Our results indicate that the general ethical model of software piracy is also broadly applicable to audio piracy. However, significant enough differences with software underscore the unique dynamics of audio piracy. Practical implications that can help the recording industry to effectively combat piracy, and future research directions are highlighted. Keywords: Digital music, Economics, Piracy, Ethics, Intellectual Property, Culture, Structural Equation Modeling.


A Behavioral Model of Digital Music Piracy - Gopal, Sanders, Bhattacharjee, Agrawal, Wagner

A Behavioral Model of Digital Music Piracy
1. Introduction
Digital piracy is the illegal act of copying digital goods – software, digital documents, digital audio (including music and voice) and digital video – for any reason other than backup, without explicit permission from and compensation to the copyright holder (SPA 1997b). Digital media falls under the purview of intellectual property and illegal duplication is prohibited by the U.S. and international copyright laws and treaties (SPA 1997a). Despite this legal protection, digital piracy is practiced in most countries around the globe (Antonoff 1987; SPA 1996). For instance, the software industry is estimated to have incurred global revenue losses worth $11.4 billion in 19981. Contrasting this with the worldwide revenues of business-based PC applications of $17.2 billion, highlights the significant negative impact of piracy on the software industry. Audio piracy, the illegal act of copying digital sound without explicit permission from and compensation to the copyright holder, has recently exploded (IFPI 2000). Incentives to indulge in such behavior are influenced by economic, technological and ethical considerations. Key technological factors include the growing pervasiveness of the Internet, rapid adoption of broadband technology, write-able CD2 technology, and the emergence of better compression technology3. This technological advancement has many interesting consequences.

SPA's Report on Global Software Piracy(1998) http://www.spa.org/piracy/98report.htm. In January of 1999 the SPA merged with the IIA to form the Software & Information Industry Association (SIIA). The IIA represented companies involved in creating and distributing print in digital formats. 2 In the paper, reference to CD includes all recording media of high sonic quality. 3 MP3 (Mpeg 1 Audio Layer 3), a well-known audio compression technology, uses a compression algorithm based on a complicated psycho-acoustic model to create CD quality music at a fraction (about 10%) of the file size of the original song.


g. The number of infringing music files available on the internet has increased twenty five fold in just three years.A Behavioral Model of Digital Music Piracy . These recent technological changes have transformed. the piracy of digital audio has spread exponentially in the past three years. Sanders. Gopal and Sanders 1997). Such an increase in the payoff would naturally increase the likelihood for piracy. Gopal and Sanders (2000) have reported on a significant price and income effect related to 4 . Much of the audio piracy activity is via the illegal copying of compact discs and the downloading of audio files via the Internet. ceteris paribus. but carries the risk of punishment. such behavior has indeed been found. Agrawal.9 billion units in 1999 with an estimated value of $4. into an effective and effortless cross-border and transcontinental music piracy. Digital music can be downloaded from the Internet into a portable music player. a music watchdog body. higher music purchasing cost would increase the payoff from piracy. These players can store several hours of digital-quality music and are smaller than a personal CD player. If piracy behavior is modeled as a utility maximizing behavior where individuals choose between illegal behavior that yields a positive consumer surplus. • • An compressed music file (e. and legal behavior that carries lower consumer surplus but no punishment. encoded in MP3) can be easily transmitted over the Internet. leading to greater illegal behavior (Ehrlich 1973). Wagner • CDs can be created that contain over 160 compressed digital music files that can play for over 14 hours on a personal computer. According to IFPI. Bhattacharjee. Economic incentives to pirate digital audio include the high costs of purchasing legitimate copies of audio CDs. The global music piracy market was estimated to be 1.Gopal. what was until recently a mostly domestic problem for individual countries.1 billion4. and increasing software prices are generally correlated with increased piracy behavior (Cheng 1997. In the domain of software piracy. with 3 million downloads of music a day. Recently.

these systems do not use a central database and 4 IFPI’s Music Piracy Report 2000. the court ruled that Napster violated the Digital Millennium Copyright Act. Napster began moving toward legitimacy by negotiating distribution deals with record labels to launch an online music-subscription service (Boston 2000). this is not likely to end online music piracy. 1999 IFPI. http://www. 5 . Inc. Other file-swapping systems are now expected to grow in popularity.ifpi. including the Gnutella file-sharing system and many sorts of "instant messaging" approaches (Gomes 2001). Users could register for this service and download or listen to music that they did not own in any other form. It also began using software from Relatable LLC to create the equivalent of digital fingerprints of individual recordings.A Behavioral Model of Digital Music Piracy . In December 1999. The response of the recording industry to combat the piracy phenomenon has primarily been two-pronged. the Recording Industry Association of America (RIAA) sued Napster in federal court in San Francisco alleging copyright infringements (Clark 1999). However. Unlike Napster. Bhattacharjee. This free file sharing service was started in May 1999 to allow users to search a centralized database and then download or listen to music files stored on other users’ computers. special files that can be used to identify and block recordings from being exchanged. In May 2000. As users of Napster’s original service began to dwindle. Wagner software piracy rates. Sanders. they have realized the economic potential of offering online music services and are working on developing technological solutions that enable the viable provision of such services while protecting the copyrights of the legitimate owners. Simultaneously. One of the best known entities in digital audio file sharing is Napster. The main emphasis has been to adopt legal measures against online sites that facilitate widespread audio piracy. Agrawal.Gopal.org.

5 6 . especially ethical. Bravin 2000. Many industry experts remain critical about the long-term effectiveness of focusing on Internet “piracy facilitators” (Garber 1996. and compression technologies improve. Glass and Wood A key reason is that. 1. As bandwidth continues to increase. which is an intellectual property. Thong and Yap 1998). The decision to pirate or not to pirate an audio item. Wagner recording companies would quite likely have to sue individual customers. Bhattacharjee. identification of the factors that can steer individuals towards purchasing legal music can potentially help devise effective strategies to combat the exploding problem of music piracy (Brady and Wheeler 1996. emailing compressed songs to other users) even if centralized servers are shut down.Gopal. The concern commonly expressed is that the “genie is now out of the bottle” and that simply shutting down such services will have limited effect. At its core. 1998). to date. and more importantly. 1999. Agrawal. Digital audio piracy is a relatively recent phenomenon. is influenced by individual ethical conduct. 1997. the software industry has had the largest revenue losses due to digital piracy. This is the central focus of our paper. An understanding of the behavioral. The importance of ethics in modeling audio piracy stems from efforts to study the related field of software piracy. Glass and Wood 1996. Harrington 1996. Hardie et al. Cheng et al. The significant focus in the literature to date has been on software piracy5 (Conner and Rumelt 1991. the overall piracy is a result of decisions that individuals consciously make (Banerjee et al. dynamics that drive individuals to pirate music. Eining and Christensen 1991. Jerry 1987. Conner and Rumelt 1991. Mason 1990). a prospect they have tried to avoid (Ahlberg 2000. Clark 2000). Loch and Conger 1996. users can continue to easily pirate songs (for example.A Behavioral Model of Digital Music Piracy . Sanders. Related Research Research on digital piracy is in its infancy.1.

A key economic finding related to software piracy is that deterrent controls result in higher profits to digital publishers and higher levels of the welfare function than preventive controls (Blumstein et al.Gopal. The enormous impact of software piracy on the software industry has spurred research on the behavioral and economic understandings of software piracy activity. These controls do not directly influence the cost or effort of piracy. Examples of such technological controls include software encryption and digital fingerprinting. Mason 1990.A Behavioral Model of Digital Music Piracy . piracy is dissuaded by the perceived threat of such sanctions. older individuals (as opposed to younger college students) pirate less. Deterrent controls refer to the use of legal sanctions to check crime and include government-togovernment negotiations. educational campaigns. Gopal and Sanders 1997. It may also include innovative pricing mechanisms to make legal purchases more attractive. less important in the moral makeup of the eastern cultures) tend to pirate less (Gopal and Sanders 1998). 1978. Sanders. Studies have reported that females pirate less. Bhattacharjee. Their use in audio piracy has been relatively limited as the companies have been reluctant to prosecute individual users for fear of annoying their own customers. legal and media campaigns and are extensively used in software piracy. They are becoming increasingly important in audio 7 . Jerry 1987. are achieved through educational. or appeals to users to make ethical decisions. Preventive controls attempt to decrease piracy by forcing the copier to expend resources in the pursuit of piracy. and legal activity related to expanding domestic copyright laws and seeking to enforce those laws. and that individuals with an ethical predisposition towards legal justice (a primarily western notion. Gopal and Sanders 1997). and include software and hardware schemes to prevent the actual copying of the software. Solomon and O'Brien 1991). Agrawal. Rather. Wagner 1996. Deterrent controls. sometimes called back-end controls.

The expectation is that it would lead consumers to more ethical conduct and lower audio piracy. sold in a CD format. Bhattacharjee. Agrawal. Piracy was also positively affected by the price charged for the software product. Encryption is another technique likely to be used to prevent illegal duplication. digital audio copies are inferior to the original. Gopal and Sanders (2000) have reported on a significant price and income effect related to software piracy rates. Sanders. al. is present only for 8 . ceteris paribus. and the cost to reproduce an additional copy is close to zero. The music industry is also appealing to consumers through artists who are losing revenue from their intellectual properties as a result of online music piracy. similar to software piracy. (3) support: unlike software the use of a digital audio file does not need any support from the creator. For example. Their results suggest that an income effect. Hence price and income are potential economic and demographic determinants of music piracy. as described earlier. 2001).A Behavioral Model of Digital Music Piracy . they found that countries with low per capita income had higher instances of software piracy. (2) price differential: music. A recent study has examined the impact of economic factors on audio piracy (Bhattacharjee et. Napster has begun using digital fingerprinting technology to identify the sound patterns in copyrighted sound recordings and prevent such files from being shared. Recently. It also has the properties of a public good in that sharing with others does not reduce the consumption utility. Digital music shares a number of characteristics with software. In a multi-national study of software piracy. However. typically costs significantly less than a standard software package. several factors underscore some key differences: (1) value degradation: due to the utilization of compression technology. and (5) volume: there are significantly more audio files than software packages.Gopal. Wagner piracy as companies plan to develop online legal music services. Like software. it is expensive to produce the first copy (high fixed costs) of music. (4) size: a digital audio file is significantly smaller in size than a software package.

We begin with a model for music piracy that is based on existing research on software piracy and evaluate the role of the different constructs in the piracy of music. A number of studies have also focused on the importance of ethics on software piracy.Gopal. The underlying contention is that the decision to copy or not copy intellectual property is influenced by ethical mores. Sanders. based on current prices. The economic rationale is that as the price increases. hence we will also examine the influence of deterrent strategies. primarily 9 . The willingness to pay was found to be higher for ‘known’ songs that users attribute a higher value to than for unknown songs of questionable value. This suggests that individuals with lower incomes are likely to pirate rather than purchase and sample “new” music. The results are expected to guide future efforts to check music piracy. demographic variables such as age and gender. These factors were found to increase the price sensitivity of the music piracy. and music genre on digital music piracy.A Behavioral Model of Digital Music Piracy . The results also suggest a significant price effect on music piracy. the net value from obtaining an illegal copy increases. 1998) report evidence of a significant effect of ethics on the individual behavioral mechanics of engaging in software piracy. Absence of the income effect for known songs suggests that the decision to purchase music containing favorite songs is not significantly influenced by disposable income. Agrawal. The willingness to purchase is also influenced by the availability of music and the connection bandwidth. Bhattacharjee. and hence the negative impact of price on piracy. Thong and Yap (1998) studied softlifting using ethical decision making theories adapted from the marketing literature. The purpose of this study is to examine the role of the ethical constructs known to be important determinants of software piracy by individuals. Gopal and Sanders (1997. Wagner “unknown” songs. They conclude that efforts to encourage ethical behavior should include training in ethical analysis and an enforcement of organizational code of ethics. Digital music exhibits different characteristics than software.

Behavioral Model of Audio Piracy The focus of this paper is to understand the behavioral dynamics of digital audio piracy behavior. Sanders.A Behavioral Model of Digital Music Piracy . Agrawal. They provide users with the opportunity to sample and purchase different music genre and ultimately burn custom CDs. and ethical propensity. gender.Gopal. These compressible formats facilitate the arrangement of songs on custom CDs where the total utility of the CD generally exceeds the utility of any commercially available CD. Research Hypothesis: A general model of ethical behavior applies to digital audio piracy. There are numerous online sites containing compressed versions of legal songs that can be downloaded. for example age. Figure 2 presents the model of ethical relationships related to digital piracy that will be examined in this study. Bhattacharjee. An important feature of Figure 2 is that it also attempts to capture the economic benefits of using downloaded songs (compressed in the popular MP3 and other formats). 2. Wagner through a better understanding of individual ethical behavior. 10 . attitudes. Their model was. and the ethical decision-making framework developed by Raghunathan and Saftner (1995). This economic element is measured by the “Money Saved Using MP3” construct in the research model. researchers have proposed a variety of variables to explain an individual's propensity and rationale for digital piracy. in part. the concept of ethical predisposition set forth by Brady and Wheeler (1996). The primary research question to be answered is whether the music piracy model detailed in Figure 2 is valid. As noted above. Figure 1 presents the general model of ethical behavior developed by Gopal and Sanders (1998). derived from the descriptive model of marketing ethics developed by Hunt and Vitell (1986).

Club Size (Piracy Level): Music items exhibit the classic characteristics of a public good. where like-minded individuals associate together to share and benefit from pirated music. Fassinger 1987. The club purchases a legal copy of a music item at market price and all club members make personal copies. This leads to the concept of a piracy club. Sanders. Agrawal. Bhattacharjee. majoring in business. most in their third year of school. where the consumption utility of a consumer does not decrease when the music item is shared with other individuals. The members of the group optimize benefits of cost savings from group expansion.Gopal. Since it is the behavioral intention to pirate that leads to club formation. Such a formulation is consistent with prior research (Gopal and Sanders 1997.The average age for the sample was 23 years. a sample size of between 100 and 200 for each group appears satisfactory (Bentler and Chou 1987. Subjects were assured complete anonymity. 1995). Additional statistics for the sample can be found in Table 1. Wagner Methodology A set of questionnaires was administered to 133 undergraduate students. The incentives for the members to form a group include a taste for association and cost reductions from sharing fixed costs (Sandler and Tschirhart 1980). There were 61 females and 72 males in the sample. They describe hypothetical scenarios describing an individual making illegal copies for himself (or 11 . Although there is no clear consensus on the optimal sample size for research involving structural equation models. Clubs do not require a formal membership process and may form informally when an individual obliges an associate with a copy of the music with the implicit or explicit understanding of reciprocity. 1998). congestion and increased probability of detection. with the associated disadvantages of crowding. Three items were used to operationalize the club size construct and they are shown in Table 2.A Behavioral Model of Digital Music Piracy . Hair et al. the Club Size is used as a proxy to measure the behavioral intention to pirate music.

The sum of these responses is the club size. indicating that the scale is fairly stable and consistent. were used 12 .Gopal. for a friend or family member and for some colleagues. Sanders. Bhattacharjee. Four items. 1998). The Cronbach's coefficient alpha value for the five item scale is . based on the consequentialism theories of ethical behavior. Cronbach's coefficient alpha for the three club items is 0. For additional details on the club measure see Gopal and Sanders (1997. A higher scale value indicates higher ethical values.79. 1998). These theories suggest that individuals should identify the consequences of their actions and behaviors and evaluate the goodness or badness of such consequences. which states that an action is right if it tends to produce the greatest good for the greatest number of people. (1988). Such ethical evaluation is likely to influence individual ethical behavior. Justice--An Ethical Predisposition Dimension: Gopal and Sanders (1998) draw upon an extensive review of the associated IS literature and the philosophy literature and suggest that an individual’s ethical intentions are influenced by his or her expectations for the consequences of actions. Agrawal. to determine the ethical profile of respondents and is used here to capture behavioral intentions. indicating that this scale is reasonably stable and reliable. which is another measure of the behavioral intention of individuals to pirate. This is intended to measure the core beliefs of a respondent. A higher scale value for the club size indicates greater intention to pirate . and further refined by Gopal and Sanders (1997. The ethical index is computed by summing the responses to five hypothetical situations listed in Table 3. One way of making such a judgment is the principle of utility.88. A measurement index for such evaluation used in prior research is an individual’s belief in the justice system and the rule of law (Gopal and Sanders 1998). Wagner herself) at home. shown in table 4. The five items for this scale were adapted from an instrument developed by Wood et al.A Behavioral Model of Digital Music Piracy . Ethical Index: The ethical index is a measure of individual ethical propensity.

A significant chi-square value would indicate that the null hypothesis should be rejected because the model does not fit the data and the model is not possible in the population ( Bollen 1989. The chi-square statistic obtained for this structural model was 32. It should be noted that this construct measures an individual’s ethical intentions prior to an action. and . Money Saved Using MP3: One item was used to measure this variable: "How much money do you save per year because you listen to MP3 songs?" The number of users indicating that they saved money via downloading songs (compressed in the popular MP3 and other formats) was 56. Hair et al.12.70. the average amount of money saved was $249 with a standard deviation of $253 and a range of $20 to $1. a latent variable.46 with 24 degrees of freedom and a probability value (p) of 0. which signifies an apparent deterrent effect. as an ethical predisposition towards laws and the justice system (Kant 1949. Agrawal.Gopal. Of the 56 individuals. Loehlin 1992).A Behavioral Model of Digital Music Piracy . Fassinger 1987. A low value of p would indicate that we cannot reject the null hypothesis.75. The empirical results for the Justice construct are inline with the results reported by Gopal and Sanders (1998). 3.94. Rawls 1971). .84. Bhattacharjee. 1995.000. Wagner to operationalize the Justice construct. Sanders. . The items developed by Gopal and Sanders (1998) were adapted from a variety of quotes and popular sayings and subjected to psychometric analysis. Hence the null hypothesis should not be 13 . Structural Equation Modeling The structural equation model (Figure 3) tests the following null hypothesis: H0: The model of behavioral determinants of music piracy is plausible in the population. having strong factor loadings of .

Bhattacharjee. 1999 ). The following results present several goodness-of-fit indices for this model and illustrate how they compare to the recommended values for the indices when using maximum likelihood estimation of model parameters (Bentler and Chou 1987.A Behavioral Model of Digital Music Piracy . There is no one agreed goodness of fit measure for structural equation models (Chin and Newsted 1995. which are similar to the coefficient of determination values or R2 in regression analysis.11 and for Club Size 0.00 0.Gopal.99 1.28 (Figure 3). The squared multiple correlation coefficients. are moderate. Wagner rejected as the probability level of the chi-square statistic (p = 0. similar to previous research on software piracy as the paths are in the hypothesized directions. in general. Goodness-of-fit Measure NNFI (TLI): Non-normed fit index IFI (BL89): Incremental Fit Index CFI: Comparative Fit Index RMSEA: Root mean squared error of approximation Observed Value .95 > = . Hu and Bentler. 14 . Sanders.95 > = . we can say that overall the structural equation model provides a good fit for the data.12).00 1. The squared multiple correlation coefficient for the Ethical Index is 0. Various goodness of fit measures are used to compare the estimated population covariance based on the structural equation model with the sample covariance matrix that is calculated from the sample data. Agrawal. We therefore conclude that the research model in Figure 2 is a viable representation of the relationships for behavioral determinants of music piracy.95 < = . Chin and Todd 1995). The findings are.06 To the extent that the underlying assumptions hold.05 Recommended > = .

Gopal.18) from Justice to Ethical Index suggests that individuals from this particular population who are one standard deviation above the mean for Justice will be 0. ceteris paribus.07 increase in Club Size. The amount of money saved by downloading music files is a moderately strong predictor of Club Size. Justice has a very modest affect on Club Size. The path value of . however our analysis showed that income did not influence the club size. Agrawal. Wagner The path coefficients in Figure 3 are standardized partial regression coefficients. as the path coefficient from Gender to Club Size is 0. Hence.17) from Age to Club Size signifies that older individuals will participate less in pirating digital audio files.A Behavioral Model of Digital Music Piracy .18 standard deviations above the mean for the Ethical Index. In that study. as a one-unit increase in the standard deviation of Justice is associated with a -. al.02. Bhattacharjee.34 standard deviations below the mean for the Club Size. the larger the value of Club Size. on the club size. 6 15 . income had no significant effect on an individual’s Note that higher values for the Ethical Index imply being more ethical and higher values for the Club Size imply being less likely to form a pirating club and to engage in pirating MP3 files. higher levels of Justice are related to higher levels of the Ethical Index.33 suggests that the greater the perceives amount of money saved. Sanders.34) from the Ethical Index to Club Size means that individuals from this particular population who are one standard deviation above the mean for the Ethical Index will be -. The path value (-. The path value (0. To test the additional effect of income. The path (-. Gender also has a modest effect on the propensity to pirate. ceteris paribus. income was found to have a negative effect – only for unknown songs (Bhattacharjee et. ceteris paribus.. In a related research study investigating the effect of income. the structural equation model was rerun with the income parameter included. The strongest relationship is between the Ethical Index and the Club Size. 2001). another important demographic variable. In other words ethical individuals will be less likely to form groups (the Club Size is smaller) to share pirated digital audio files6.

We also investigated whether there was a deterrent effect in the form of knowledge about the legal ramifications of pirating digital audio. However.Gopal.13). but they were also presented up-front with the following 16 . where they found a moderate deterrent effect on the formation of a software club. As a final note. because of the decidedly contextual nature of behavioral research. The formal model tested was: Club size = f (deterrence information) We followed the experimental methodology of Gopal and Sanders (1997). based on current prices. The squared multiple correlation coefficients for this sample involving audio piracy are not as strong as for the US software piracy sample (Club Size = . This suggests that individuals with lower incomes are likely to pirate rather than purchase and sample “new” music. An additional 120 subjects were given the original questionnaire detailed earlier.63) reported by reported by Gopal and Sanders (1998). Absence of the income effect for known songs suggests that the decision to purchase music containing favorite songs is not significantly influenced by disposable income. even when using similar measurement scales.A Behavioral Model of Digital Music Piracy . researchers must be careful in making comparisons with other studies. The overall model fit indices. Wagner inclination to buy known music items. Sanders. Bhattacharjee. the squared multiple correlation coefficients for the constructs in the model and the path coefficients lend support to the viability of the research model presented in Figure 3. Agrawal.12 and Ethical Index = .67 and Ethical Index = . additional insight into the differences between pirating software and audio files may be obtained by comparing this study with the study for software piracy. They are in fact much more in line with the Indian sample in terms of the path coefficients and the squared multiple correlation coefficients (Club Size = .

“If it was my program or music that someone was giving out for free. $250. That‘s right. movie clips and software programs through his campus computer connection on August 20. $250. In the case of music.000 in fines. consumers closely relate the product with the artist(s) producing it. a public policy management major. Magazine. the original 133 subjects did not receive the deterrence information and a separate group of 120 students received the deterrence information. “But for a college student who wasn’t making any money. Syracuse U. I’d want some type of retribution. Another reason may be that individuals closely associate a software product with the organization that produces it – hence they are aware of the legal ‘muscle’ of the organization. University officials noticed the hefty load of data going through Levy’s site and contacted law enforcement officials. Wagner true news story from a widely distributed university newspaper. Sanders. 9. p. makes distribution of copyrighted material illegal even when there’s no profit involved. do not have similar effect on digital music piracy. Levy was passing the equivalent of about 250 full-length MP3 songs over the school network every hour. Levy could now face up to three years behind bars and. From: The National College U.A Behavioral Model of Digital Music Piracy .” Ouch! By David Konopka. passed by Congress in 1997 under heavy pressure from the music and software industries. Agrawal. students aren’t rushing out to support the web pirate. get this. And surprisingly. rather than the music publisher or producer. hadn’t been keeping up with current Congressional policies on copyright infringement. And you thought student loans were bad. The No Electronic Theft (NET) Act. Some possible reasons for this observed difference between software piracy and music piracy may be speculated. even though Levy wasn’t charging any money for access to his site. of Oregon senior Jeffrey Levy. jail time is too much. Just ask U. One possibility is that the respondents who were provided with the story were not considering the kind of flagrant facilitation of piracy depicted in the true news story. he’s going to have to pay up big-time. So. It seems that Levy. Web Pirate: Copying Downloads For Friends? Get Out Your Checkbook The cost of college life just keeps on climbing. In essence. which had a significant influence on software piracy. This suggests that deterrent policies. This disassociation with the music publisher may lead to a reduced appreciation of the full 17 . November 1999.” says Mitch Hochhauser.Gopal. Bhattacharjee.000. At one point. who pleaded guilty to federal charges of distributing thousands of copyrighted songs. a sophomore at Syracuse U. A regression run on the club size model did not reveal a statistically significant t-value for the deterrence information coefficient. A large fine would leave any student hurting for a long time.

Gopal. Discussion and Conclusions A critical issue in digital audio piracy is the development of a behavioral model for digital piracy activity. The implication is that individuals who listen to Hip Hop/Rap will tend to form digital audio piracy clubs. Agrawal. If music publishers have insight into the behavioral dynamics of audio pirates it may lead to more effective educational and legal campaigns to educate users about copyright laws and inspire attitudinal changes about appropriate copying behavior. The individuals who listened to Hip Hop/Rap and Electronic music had a greater propensity to pirate online digital music. The first observation from the research is that the scales developed in prior research on software piracy are reliable in the context of music piracy. T-tests were also performed to determine if audio pirating activity was related to the music genre. The items in the scales for club size. Wagner legal ramifications. but their ethical index is not markedly different from the other individuals in the sample. This issue needs to be investigated further to devise an effective deterrent strategy to check music piracy. ethical index and justice have very stable factor loadings. Based on previous research results and the results of this study. Sanders. The enormous level of monetary resources at stake warrants further investigation into other determinants of digital and. more specifically.A Behavioral Model of Digital Music Piracy . but they did not exhibit a statistically different Ethical Index from the rest of the sample. the model presented in Figure 3 provides a reasonable explanation for the behavioral and ethical determinants of audio piracy activity. audio piracy behavior. 4. indicating that these scales may be used for future 18 . Bhattacharjee.

Sanders. suggests that demographic variables are significant in the context of music piracy. Deterrent strategies used in anti-software piracy campaigns often focus on legal issues and the potential for jail sentences and fines. A greater awareness of the implications of piracy is likely to reduce actual piracy behavior. It is possible that the intervention needs to be sustained over a longer period of time before it is effective and that the type of campaign used to inform the public is important. Since these measures exhibit the properties of public goods (efforts by one company can help all the other players). The recent agreement between Bertelsmann A. The popularity of piracy among the respondents who preferred hip-hop/ rap music. the music industry is taking tentative steps to modify their existing business models to incorporate peer-to-peer music sharing and other technological advances. Perhaps an appeal to altruism and support for the arts would work to diminish digital music piracy. public intervention etc.) may be necessary for implementation. this result is moderated by the matched samples test where the population of respondents who were informed of the consequences of piracy did not behave differently with respect to club size from the control group. Agrawal. Wagner research into individual determinants of music piracy. The weak relationship between the justice construct and club size indicates that strategies for public awareness campaigns need to be examined carefully. The results indicate that age has a moderate influence on piracy.Gopal.G. appropriate policy initiatives (consortium formation. Measures could include advertising campaigns and educational initiatives.’s BMG Entertainment 19 .A Behavioral Model of Digital Music Piracy . The strong path coefficient from ethical index to club size indicates that one possible means to reduce music piracy would be the use of awareness campaigns. Bhattacharjee. Acknowledging the reality of piracy of music on the Internet. However. This type of campaign may not work to combat digital music piracy.

Following this theme. Sanders. which suggests the development of pricing models in conjunction with ethical incentives to combat music piracy. This implies that availability of free digital music is a major attraction. will have a limited effect for audio piracy. and the focus should be directed towards preventive methodologies for diminishing digital music piracy. The music industry seems to be taking a different approach from that taken by the software industry.” However. the National Music Publishers' association announced a $30 million settlement with MP3. As such. Implications • The amount of money saved by using pirated digital music files from online sources has a significant impact on the club size. which still largely depends upon legal measures to check piracy.cfm?id=2461 20 .Gopal. to solve the same problem.mp3. 7 http://www. our results show that there exists a relationship between ethical index and copying (implying that more ethical individuals are less inclined to download online music).1. this suggests that deterrent strategies. which points to the existence of piracy. • We found no significant deterrent effect on music piracy through legal and educational campaigns.bertelsmann. Possible reasons for this have been discussed earlier in Section 3.com/press/press_item. as illustrated by the structural equation model (Figure 3).A Behavioral Model of Digital Music Piracy . Most other music publishers are also acknowledging that they “have to make buying music easier than stealing music” (Drummond 2000).com allowing it to distribute more than a million commercial tracks using its my. 4. The indirect implication is that consumers are highly price-sensitive in the presence of freely available music online. Bhattacharjee.com service. • An argument that has been put forth states that “downloading” music is not piracy but rather “sampling. Agrawal. Wagner and Napster7 is a step in the direction.

A study examining the effect of different public awareness campaigns would be very useful. and media giant Bertelsmann. One of the most important tasks facing Napster.cnn. is not clear what type of public awareness campaign will be most effective in combating audio piracy. an examination of optimal pricing strategies for music and conditions under which buyers and sellers are both better off should be studied. in the area of economics. For example publishers of hip-hop music are more susceptible to loss of revenue from music piracy than publishers of other genre. For example. This may also indicate that deterrent messages in the media are best located in synchronization with hip-hop music. However. Sanders. pricing models. and their interaction with ethical incentives. Bhattacharjee. For example. 8 9 http://www. which focused attention on the digital music piracy phenomenon.21756.html http://www. emerging game software has significant audio and video components. The development of a "unified model" of piracy would be very valuable in understanding the complex behavioral dynamics of digital piracy as it spans all areas from biology to business.00.A Behavioral Model of Digital Music Piracy . the parameters of this service has not yet been publicized9. is identifying the subscription rate for their new online service8. Future Research Digital music piracy studies are just beginning to emerge and there is room for additional research.com/article/display/0.thestandard. Wagner • Some conclusions may be obtained from this study regarding measures that will help check piracy.1151. Agrawal. Additionally.2. Finally.com/2001/BUSINESS/09/24/napster/ 21 . 4. a significant trend is the convergence of software with audio and video. are important areas of future research. As noted earlier.Gopal.

Wagner Table 1: Music Demographics Amount spent on CDs every year Amount saved by listening to MP3 songs Legal copies of MP3 songs Pirated copies of MP3 songs Internet use per week Type of music listened to (not mutually exclusive) Hiphop Jazz Electronic Metal Alternative Easy Listening Latin Classic Country Blues Pop an Rock Maximum 1000 1000 1000 6000 65 Sum 14367 13.874 Mean 108 104 29 117 14 77 33 28 22 62 36 18 28 22 18 93 22 .Gopal.573 1. Sanders. Bhattacharjee.910 15.A Behavioral Model of Digital Music Piracy .675 3. Agrawal.

works as an architect at Architects Unlimited. Always Acceptable Never Acceptable • As more colleagues and acquaintances learn about these music files. a close family member comes to know about the songs and asks for copies of the MP3 files. He recently converted his favorite music CDs into MP3 format (illegally). an avid listener of music and a computer buff. Bhattacharjee. He encourages others to freely circulate information about his website. Agrawal. Doug lets him make a copy. Always Acceptable Never Acceptable • While Doug Watson is listening to the music at work at Architects Unlimited. Doug Watson decides to make these files publicly available for download from his web site.Gopal.A Behavioral Model of Digital Music Piracy . • During a holiday family get together. one of his colleagues happens to pass by and notices the music. Doug Watson emails these files to the family member. Sanders. Wagner Table 2: Club Size Items Doug Watson. and requests a copy. Always Acceptable Never Acceptable 23 . This person is impressed with the quality and the selection of the music on Doug’s computer.

The owner reported only one-half of the cash receipts for income tax purposes Always Acceptable • Never Acceptable An engineer discovered what he perceived to be a product design flaw. Always Acceptable • Never Acceptable A small business received one-fourth of its gross revenue in the form of cash. The engineer decided to keep quiet.000 a year padded his expense account by about $1500 a year. Sanders.Gopal. Always Acceptable Never Acceptable 24 . which constituted a safety hazard. a general manager used a production process.A Behavioral Model of Digital Music Piracy . which exceeded legal limits for environmental pollution. Agrawal. Bhattacharjee. a stockbroker recommended a type of bond. Wagner Table 3: Ethical Index Items • • An executive earning $50. which he did not consider a good investment. rather than taking his complaint outside the company. His company declined to correct the flaw. Always Acceptable Never Acceptable In order to increase profits. Always Acceptable • Never Acceptable Because of pressure from his brokerage firm.

Agrawal. Strongly Disagree Strongly Agree • All human beings are born free and equal in dignity and rights.Gopal. or deny. Strongly Disagree • Strongly Agree Man’s capacity for justice makes democracy possible. or delay right or justice. Wagner Table 4: Ethical Predisposition (Justice) • All individuals deserve equal treatment before the law.A Behavioral Model of Digital Music Piracy . Bhattacharjee. Strongly Disagree Strongly Agree 25 . Strongly Disagree Strongly Agree • To no man will we sell. but man’s inclination to injustice makes democracy necessary. Sanders.

Bhattacharjee. Sanders. Wagner Figure 1: General Model of Ethical Behavior Cultural Environment Demographics •Age •Gender Ethical Predisposition Deontolological or Formalistic •Justice and laws •Ideals •Customs •Mores Consequential or Teleological •Utilitarianism •Egoism •Relativism Ethical Intentions Ethical Behavior Organizational Environment 26 . Agrawal.A Behavioral Model of Digital Music Piracy .Gopal.

Sanders. Agrawal.Gopal. Wagner Figure 2: Model of Digital Music Piracy and Ethics Demographics •Age •Gender Ethical Intentions •Ethical Index Ethical Predisposition Deontolological or Formalistic • Belief in justice and laws •Club Size Money Saved Using MP3 27 . Bhattacharjee.A Behavioral Model of Digital Music Piracy .

Bhattacharjee. Sanders.34 Ethical Index .33 .18 .49 .A Behavioral Model of Digital Music Piracy .88 .07 -.11 error Club Size .00 Money Saved Using MP3 .00 Comparative Fit Index = 1. Agrawal.00 RMSEA = .05 Age Gender error Ethics -.12 Non-normed Fit Index (TLI) = .71 Just1 Just2 just3 Just4 erjust1 erjust2 erjust3 erjust4 28 .00 -.18 .17 .56 error Savings Justice .Gopal.84 error Justice .70 .46 Degrees of Freedom = 24 P-value = .02 . Wagner Figure 3: Structural Equation Model (Arbuckle 1997) Chi-square = 32.28 Club Size .94 .99 Incremental Fit Index (BL89) = 1.75 .21 .

Bhattacharjee. Agrawal. Sanders.A Behavioral Model of Digital Music Piracy . Wagner 29 .Gopal.

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