A survival analysis of albums on ranking charts

Abstract

Maintaining security in the digital world continues to grow in complexity. Firms must protect operating hardware and sensitive data against increasingly innovative threats. With the emergence of digital goods comes a new security front where firms face the reproduction and rapid distribution of the digital goods themselves. Certainly, firms already have had to protect many of their goods from "knockoffs," but protecting digital goods represents a new level of challenge since the cost of copying and distributing such goods is virtually zero and can occur extensively within very short periods of time. The music industry has been the "poster industry" for facing such threats. The industrys goods are digital by nature. Further, the appearance of Peer-to-Peer networks offered the means to copy (download) the goods and distribute (share) them rapidly. Through its industry association, the Recording Industry Association of America (RIAA), the music industry has continued to pursue mostly legal and technological strategies to eradicate the security threat of illegal copying and distribution. A recent study by Bhattacharjee et al. (2006a,b) provides evidence that, while individuals have tended to reduce their own sharing activity in response to RIAAs legal threats and actions, significant piracy opportunity remains. While individual firms may take steps to secure their digital goods, such constraints have two major drawbacks. First, such measures tend to impede the consumers use of the digital good since they can restrict portability or require additional steps (e.g., security actions) that reduce consumer utility (Halderman 2002). Second, the measures have proven less than "foolproof" and rather easily beaten (Reuters 2002, Felten 2003). Sony BMGs recent use of a rootkit with the XCP technology (Reuters 2005, Bergstein 2005) provides a prominent illustration of how an attempted technological security constraint can backfire (Bradley 2005): Part of Sonys anti-pirating strategy is that some of its music will play only with media software included on the CD. When a user inserts the CD, he or she is asked to consent to an "end user licensing agreement" for a Digital Rights Management application. If the user agrees, the rootkit automatically installs and hides (or "cloaks") a suite of DRM software. Unfortunately, the rootkit application created a possible secret backdoor for hackers which led Sony to "hastily" post a patch. However, the tool to remove the XCP application itself created new vulnerabilities (Russinovich 2005). The tale continues as California quickly filed suit under both unfair and deceptive trace acts and consumer protection acts, Texas filed suit for including "spyware" in its media player, and the Electronic Frontier Foundation filed suit seeking class-action status over its copy-protection software (Smith 2005). A posting (by concord (198387), 11/10/05, #13996982) in slashdot.orgs bulletin board offers the following perspective on the Sony anti-piracy actions: Now for the first time it is actually safer to download and listen to pirated music then [sic] it is to purchase and use compact disks and DVDs. Piracy will become a matter of self-preservation. In addition, security professionals have consistently noted that all CD and DVD encryption techniques that have been tried by the entertainment dissemination of the encrypted music product among users (factors that make breaking encryption easier), it is not unusual to observe such copy protection technologies being defeated by smart users (Bergstein 2005, Felten 2005). Thus a firm considering possible actions to protect its digital product may find little return in costly technological and legal anti-piracy measures. But can the firms identify and respond to the changing market they face? The post 19981999 period is characterized by consumers who increasingly search and consume music products in digital formats. Here we focus attention on what significant changes have occurred in the landscape of music products and their market life cycle since the introduction of significant new technology, including Peer-to-Peer networks, and other market forces (including online music stores, higher penetration of broadband into homes, digital rights management (SDMI initiative), and evolving copyright laws (DMCA 1998, Sonny Bono Copyright Term Extension Act 1998). We first develop an analytical model of music album life cycle to provide a robust foundation to develop effective decision making tools for a music company to better manage its music products in the market place. The model demonstrates how the pattern of album life cycle has undergone a shift in the years following the introduction of new technologies and other market forces. Following the analytic model, we examine how some of the album specific and artist specific variables affect the album survival. Thus, incorporating key exogenous factors helps a decision maker to better predict and respond to market success of a digital good in a dynamic environment. A firms ability to act with these decision tools, which combine product life cycle analytics with analysis of consumer actions on online computer networks, would provide greater market value protection for the firms digital products than would technological and legal anti-piracy measures alone. © 2008 Springer-Verlag New York.