Chapter 4 Rights Management, Part II Patrick Léger MGT-523

Overview  Impact of lower reproduction costs –Historical examples –Leveraging lower costs  Intellectual property –Choosing terms and conditions –Transaction costs  Where are we heading? –Open source movement –Microsoft.NET –Digital Rights Management (DRM)

Lower Reproduction Costs  Is this new?  Historical examples: –Library –Photocopier –Video

Potential Opportunities  Benefit from economies of scale  Grow your market  Maximize the value of intellectual property, don’t overprotect it

Intellectual Property  More liberal IP policies tend to make products more valuable to users  This increases demand, but…. –Can companies ask higher prices?  Liberal terms means lost revenues to resale/substitution

More Intellectual Property  Successful firms will find the right balance  Policies should also minimize transaction costs for buyers and suppliers –Site licensing

Open Source Software  Free distributions continuously available (Linux, Apache, StarOffice, etc)  Rapidly increasing quality  Fast development cycles, network effect, and innovation

Licensing Terms of Open Source  Freedom to share and change software –Freedom as in “free speech,” not “free beer” –Redistribution freedom (program + source) –Freedom to integrate into new software –Can charge for services/products if you wish  Responsibilities: –Must give recipients all the rights that you have –No warranty on software –Cannot make software proprietary through patents  Source: GNU General Public License,

Open Source & Traditional Software Firms (…my unsolicited opinion)  Disruptive force  Operating systems and basic applications increasingly commoditized  Support/consulting/training  Increasing specialization in software market  Seize the opportunity, don’t be threatened  Grow the market

Microsoft.NET  Software as a service  Easier management of licensing terms  Reduced transaction costs  Economies of scale on development  Leverage role of WWW  Higher customization/self-selection  Deflect regulatory pressure (FTC)

Digital Rights Management (DRM)  Aims to disseminate digital information easily, while preserving copyright protection  Greater demand for these solutions in response to copyright infringement  Digital watermark & required infrastructure –Contents of watermark –Embedded into many media players  Will this work?

Summary:  Use lower reproduction costs to your advantage  Maximize the value of your intellectual property without overprotecting it  Watch for emerging trends in Rights Management

Discussion