The research aims to answer these questions: 1) Given that digital technology exacerbates the appropriability problem of information-intensive industries by lowering the marginal costs of content reproduction, what will be the response of Hollywood's trade association as it seeks to protect the market dominance of American films? 2) What factors must come together in order for the industry's business-government relations representatives to deem the issue critical enough to merit substantive action? This thesis hypothesizes that it was the conjunction of a growing reliance on revenues from content licensing, as opposed to content exhibition, and a growing dependence on overseas profits, that were the two shifts in cost structure which prompted strategic changes as it became necessary to consider the intellectual property protection infrastructures of foreign nations. Furthermore, it analyzes how a shift in industry cost structures due to digital technology has impacted the issue priorities of film industry trade associations and lobbyists in their efforts to set and shape the US Government's legislative and foreign trade agendas. This study examines the impact of the global digital economy on cost structures in Hollywood, as an example of an information-intensive - or intellectual property-dependent - industry. The findings of the research indicate that those who engage in cyber piracy not only financially spend more on authorised products proliferated by the entertainment industries compared to those who do not engage in piracy, but are also willing to move away from committing tortious acts of copyright infringement if the industries can provide a viable alternative means of digital delivery, inter alia. The analysis and theory is supported by the results of a research study carried out by the author in February 2007, which are presented in this paper. The model is then expanded to encompass the Efficient Distribution Theory which argues that, through the application of measures which can be cheaply and easily implemented by the entertainment industries, a number of factors can mitigate any negative effects file sharing may cause to the extent that widely distributing digital copies can be directly beneficial to the industries. An analysis of various theories relating to the routes, impacts and effects of file sharing is applied to a digital distribution model. This paper argues that the industries, with the assistance of the legislature in certain circumstances, should be focussing their attentions not on limiting the natural evolution being brought about in the digital age, but by recognising that many of the parties labelled as scurrilous pirates are actually a rich market which can be tapped into through alternative means. The ongoing battle between file sharers and the entertainment industries is one which has been largely approached from the point of view of the latter parties with the reasoning that the law should be invoked to clamp down on the distribution of unauthorised copies of works through peer to peer networks.
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