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6 Rev. Econ. Rsch. on Copyright Issues 1 (2009)

handle is hein.journals/rvwoecrh6 and id is 1 raw text is: Review of Economic Research on Copyright Issues, 2009, vol. 6(1), pp. 1-11 PROFITABLE PIRACY IN MUSIC INDUSTRIES KOJI DOMON AND TRAN DINH LAM ABSTRACT. This paper considers how optimal copyright enforcement is af- fected by the development of those media industries promoting musicians. Ac- counting for situations in both developing and developed countries, we point out two cases, a strictly convex and a strictly concave profit function with re- spect to the level of copyright enforcement. In the first case a copyright holder prefers a minimal level of enforcement under immature media industries, and a maximal level of enforcement under mature ones. This means that opti- mal copyright enforcement switches from minimum to maximum along with the development of media industries. In the second case, optimal copyright enforcement gradually increases concomitant with the development of media industries. If there are various levels of singers, a conflict regarding optimal copyright enforcement among them is more sever in a convex case than in a concave one. 1. INTRODUCTION In most developing countries, copyright infringement is problematic with almost no enforcement.' From the standpoint of developed countries, such a situation appears to damage copyright holders as well as consumers by resulting in less con- tent. Policymakers in developed countries consider strict copyright enforcement to be beneficial for developing countries, as well as for themselves, by preventing their content being illegally supplied to developing countries. Domon and Nakamura (2007)2 did field work on this problem for three years in Vietnam, which joined the WTO in 2007. Domon and Nakamura conclude that, as far as domestic music copyright holders are concerned, copyright infringement did not damage but rather increased their profits. Although a few top singers complained of pirated CDs and DVDs, most singers felt that piracy brought people to their performances as a main source of their earnings, that is, piracy played a role as a form of promotion. Behind such a phenomenon, we must consider the situation of media industries in developing countries. Unlike developed countries with their This paper was supported by Okawa Foundation and Grants-in-Aid for Scientific Research for the Promotion of Science ((B) 20402034) in Japan. We would like to thank an anonymous referee for helpful comments. 'See Business Software Alliance (2007). 2See Domon and Nakamura (2007) concerning the situtation of piracy in Vietnam. They explain how piracy played a role in promotion and that P2P was unpopular. I

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