{'fraction_non_alphanumeric': 0.0168997668997669, 'fraction_numerical': 0.0, 'mean_word_length': 4.860068259385666, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Effect of Piracy on Adoption of Technological Innovation in the Entertainment Industry

Advances in technology have enabled producers of entertainment goods to reach customers in innovative ways. However, new technologies also make it easier for users to infringe on the content. Producers argue that piracy hurts their ability to innovate, while critics argue that piracy acts as a leveler and encourages consumer friendly innovation. In this paper, we explore the interplay of piracy and technology adoption based on a dynamic model. In this model, the firm always releases a physical product initially and has to make a decision on whether and when to adopt a newer digital platform to facilitate digital release. The new platform can help the producer target broader customer base, but can be costly and might lead to higher piracy level. We show that, when the cost for innovation adoption is small, the piracy in the existing channel has no effect on the timing of technology adoption. However, when this cost is sufficiently high, piracy in the existing channel will act as a competing force and lead to an earlier adoption of digital channel if a large number of users are willing to move to the new legal version at a full price. If not, piracy discourages and delays adoption. In addition, the piracy caused by new channel adoption can lead the monopolist to delay the adoption. Thus, only under specific conditions, does piracy create incentives to adopt innovations. In most case, piracy actually discourages the adoption of innovation. While we find that some level of piracy is beneficial to consumers, a higher level of piracy delays adoption of the digital platform, hurting overall consumer welfare.