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Week 3 Notes

by: Isabel Hubeny

Week 3 Notes BUS-G202

Isabel Hubeny
GPA 3.565
Corporate Social Strategy

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Day 5 Lecture Notes and Day 6 Notes with Napster Debrief
Corporate Social Strategy
Class Notes
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This 4 page Class Notes was uploaded by Isabel Hubeny on Monday February 23, 2015. The Class Notes belongs to BUS-G202 at Indiana University taught by Kreft in Winter2015. Since its upload, it has received 63 views. For similar materials see Corporate Social Strategy in Business at Indiana University.


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Date Created: 02/23/15
Day 5 Topic 2 Global Intellectual Property Ma nagement in the Face of Weak Property Right REgimes 3 Types of Property 1 Communal Property a No owner everyone has access as long as it lasts therefore resource doesn t last long and over utilization No incentive to conserve for the future gt tragedy of the commons i ex potlucks 2 Government Property a decisions made by small group of elected representatives 536 people b inefficiencies scale up 3 Secure Private Property a incentives to create value with property that benefits others ex McDonald s Big MAC b Maintain property and future conservation ex Virginia logging industry sustainable source of revenue c innovate and create new technology to extract more resources d engage in voluntary exchange instead of forced trade Intellectual Property IP Rights 1 Patent Right to exclude others from using producing or selling an invention 2 Trademark distinguishes goods A word name symbol or device that is used in trade with goods to indicate their source ex tiffany blue box 3 Copyright exclude others from reproducing distributing or producing work ex writings software music art movies tv programs Gary Becker s Criminal Decision Rule key economist Modeled risk reward and cost benefit of criminals model crime with impact on income success gt income increases Yo G Failure gt fine income decreases YoF Variables Current utility Yo pi probability of getting caught use pi as a variable not as a number Equation for Expected Utility Eu Expected Utility 2 1pi YoG pi YoF If expected Eu is gt current Utility then criminal will commit the crime rationally EUU Criminal is indifferent ex Vegas slot machine can build in ethics morals and risk aversion ex commit if EU is 30 gt U Mquot very risk averse Government can prevent by investing in technology and increasing the F or the size of the fine Fines deter crime but also are revenue builders Ex Speeding tickets Tickets are not very high because nobody would break the law therefore there would be no revenue for the government Speed traps are used so those who cause traffic violations will be caught and there would be more tickets and more revenue Corrupt government Income current utility has no impact on whether you commit crime It only matters when the decision rule changed to ie of income higher benefit for committing crime Variables of Interest Government intentions use of strategic revenue gain F Probability of being caught pi government can change probability with technology and criminals can change the probability with technology Strategic Payoff of crime G not strategic individual can t change to achieve an objective income y not strategic in a simple model ex fake ids cost cheaper over time because technology becomes cheaper more suppliers lower price Punishment larger penalties for bars honoring fake IDs Therefore bars start scanning harder and bars pay bouncers 10 per fake caught Response Fake ID people invest in more advanced technology ex online file sharing probability of getting caught 0 because copyrights stop country s borders and can t target all individuals global enforcement is not feasible Therefore focus on punishment ie 750150000 fine per song US is in the top 20 in property rights protection in the world India and China are rapidly catching up with property protection because economies are moving from production to innovation Countries that are growing in IP protection and want respect of own IP must respect other countries IP Therefore file sharers can t just move to another country to develop because they can t depend on low government interaction Day 6 Napster Debrief How did it start Was there a business model No model for Napster in the beginning Recording Industry was controlling production and distribution Napster hurt RI on both ends w Napster production cheaper technology increased w Napster music was free and instantaneous global Background Sean Fanning tech starter and founder 1999 No business model in the beginning In the future would have been monetized profits encouraged Napster user young 1829 more males included elderly mainly college kids though College internet bandwidth taken up by Napster therefore NYU was the first to ban Napster from campus Napster was a central server linking two computers together to file share It bridged peertopeer but there were no files stored Napster was just the link Effect on Industry Some purchased more music because they were exposed to more artists 1 Record Label Arguments Napster is bad a loss lots of revenue bc of Napster i evidence blank CDs sales skyrocketed ii claim Napster has caused a shift in behavior 2 Napster Counters a shifts accountability gt nothing is on servers only on users b protects users gt AudioHome Recording Act Sharing among friends and family is okay as long as it is not for commercial purposes Court Decision against Napster 1 Napster allows users to copyright and business model is 95 awed 2 Audio Act does not apply to the 100005 ofpeople only to family small group file sharing Reaction gt Limewire and other sites grow and take out central server in the business model that Napster had gt users don t notice Napster leaving because it was gone way before due to court case gt businesses develop outside ofthe US Recording Industries Combat Napster Effect create an online version bad because limited to a lot focus on touring of artists go after individual users pay people to upload corrupt files in order to make people pay four real song Apple 100 080 ofthe purchase goes to the Recording Industry 020 goes to AppleItunes Ofthe twenty cents 7 cents goes to credit card company and the rest is applied other fees and maintenances In the past Apple lost money and now it is only making 710 cents in profit For Apple Musicsong purchases is not profitable Therefore the company focuses on selling devices to store music other files It even profits off of illegal file sharing This makes the Record labels mad but they can t do anything because they have 80 of the song purchases revenue Apple doesn t care about the song price because it wants more illegal sharing so that devices sales go up Illegal File Sharing Benefits gt Concentrated RIAA ltRecording Industry Association of America Costs gt Concentrated file sharing companies ie NApster Napster Update Record companies are looking to gain revenue This has led them to solutions like IMatch where they would update users 1000 illegally downloaded songs to the actual high quality version for 25 because this way they are at least making 25


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