Handbook on the Economics of the Media
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Handbook on the Economics of the Media

Edited by Robert G. Picard and Steve S. Wildman

This Handbook explores the economic features of the media and its infrastructure to provide readers with a sophisticated understanding of the critical issues and their influence on companies, audiences and regulators. The contributors explore and explain the impact of underlying factors such as multi-sided platforms, advertising and industry structure. They assess the unique economic factors affecting print, broadcast and broadband-based media, and highlight how the economics of the media can influence policy making. Each original chapter introduces the reader to a specific topic, reviews the literature on the development of knowledge in the field, explores critiques of the approach, and provides an understanding of applying this knowledge and the implications.
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Chapter 10: Economics of peer-to-peer file exchange

Nodir Adilov, Peter J. Alexander and Brendan Cunningham


Peer-to-peer file sharing reflects a technological change and subsequent “cultural revolution” that began in the late 1980s, and fully blossomed in the late 1990s and early 2000s. The technological element of this change was the transition from analog production and physical distribution to digital production and distribution; the cultural aspect refers to the changing mindset of consumers of digital products. When products were produced physically, a substantial and explicit infrastructure reflected perceived value-added that may have helped rationalize the existing pricing structure. After the transition from physical to digital production and distribution however, the analog pricing structure, constructed to reflect physical costs (including distribution networks and retail stores), may not have made as much sense in the minds of consumers, and may have induced a certain amount of “piracy” or “sharing” of content in response. That is, among the many reasons individuals might have for exchanging digital products, the price for peering substantially undercut the retail price. In this sense, consumers responded rationally to the “market” price signal. Arguably, a digital duplicate of a creative work is almost costless to produce, on the margin. And perfectly competitive prices would, therefore, be arbitrarily close to zero, an outcome which is almost perfectly replicated through free exchange. The response to consumer file exchanges from content providers has been fierce, and some changes in the regulation of the internet reflect, to some degree, the struggle between content providers and a substantial fraction of their consumers.

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