Abstract
Under the current legal system, the primary economic incentive to create digital music files lies in the ability to copyright digital information and sell exclusive usage rights to consumers.The government intervenes in the market to grant exclusive private property rights over copyrighted digital music files that would otherwise exist in the public domain.These monopoly grants give copyright holders the legal right to earn monopoly profits by setting a price of the digital information far above the marginal cost of distribution. But a legal right to restrict distribution only has relevance to the copyright holder?s ability to enforce that right. That ability is wilting in the face of significant piracy. However, rapid technological change opens doors to exciting alternative business models. This paper evaluates these new business models for their feasibility and efficiency to create and deliver digital music. Given the potential efficiency gains from these business models, this paper calls for weaker copyright protection and less government intervention in the market for digital music files.This should enhance social welfare by drastically increasing digital music consumption while only slightly reducing its production.
