The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

The Economics of Collective Management in the Music Copyright Industry in The Netherlands: Digital Transformation and Equitable Remuneration

Review of Economic Research on Copyright Issues, 2023, vol. 20, pp. 38-75

Nerko Hadžiarapović, Johan Versendaal, Marlies Van Steenbergen and Pascal Ravesteijn


Abstract

Economics is a popular and useful means to generate falsifiable, non-trivial predictions on how complex systems, such as the copyright industries, evolve. For the last two decades, an overarching theme in the economics of copyright has been how the copyright system relates to digitalization. Considering the swift progression of digital innovations in the copyright industries and related markets - of late with crowdfunding, blockchain technology, non-fungible tokens, the application of learning algorithms for recommendation systems or even for the creation of works - this is unlikely to change. However, it is challenging even for experts to select useful aspects of economic theory. This paper seeks to promote a 'cultural economics' perspective as a toolkit for even more nuanced and useful research on copyright. Overall, it argues that economists engaging with copyright ought to acknowledge the broader function of the copyright system as a means to approximate functioning markets in the presence of multiple sources of market (and government) failure. The copyright system does not only lay the foundations for markets by establishing exclusive, tradable rights. It also generates standards and routines that facilitate mutually beneficial transactions under real-world conditions of incomplete information and uncertainty. Overall, this paper develops novel agenda items for economic research on copyright.

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Copyright's Functions in Complex, Digital Markets

Review of Economic Research on Copyright Issues, 2023, vol. 20, pp. 11-37

Christian Handke


Abstract

Economics is a popular and useful means to generate falsifiable, non-trivial predictions on how complex systems, such as the copyright industries, evolve. For the last two decades, an overarching theme in the economics of copyright has been how the copyright system relates to digitalization. Considering the swift progression of digital innovations in the copyright industries and related markets - of late with crowdfunding, blockchain technology, non-fungible tokens, the application of learning algorithms for recommendation systems or even for the creation of works - this is unlikely to change. However, it is challenging even for experts to select useful aspects of economic theory. This paper seeks to promote a 'cultural economics' perspective as a toolkit for even more nuanced and useful research on copyright. Overall, it argues that economists engaging with copyright ought to acknowledge the broader function of the copyright system as a means to approximate functioning markets in the presence of multiple sources of market (and government) failure. The copyright system does not only lay the foundations for markets by establishing exclusive, tradable rights. It also generates standards and routines that facilitate mutually beneficial transactions under real-world conditions of incomplete information and uncertainty. Overall, this paper develops novel agenda items for economic research on copyright.

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Some Remarks on Bargaining Power, Innovation, and 21st Century Copyright Law

Review of Economic Research on Copyright Issues, 2023, vol. 20, pp. 1-10

Abhinay Muthoo


Abstract

This short article, which is my Keynote talk from the 2023 SERCI annual congress, explores and discusses some of the main issues and questions that arise when one thinks about the role of copyright. We discuss why it is needed and the relevance of transaction cost. We then explore the question of what the optimal nature of copyright is and how to go about addressing that. We discuss the crucial role of bargaining for copyright policy and optimal copyright.

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Music Licensing for Non-Interactive and Other Radio-Style Services: A Competitive Approach

Review of Economic Research on Copyright Issues, 2022, vol. 19, pp. 76-113

Jacob B. Ebin and David Reitman


Abstract

Despite significant changes over the last two decades in the way people listen to music and the primary means through which music copyright owners monetize their intellectual property, blanket or collective licensing remains the norm. The music licensing marketplace continues to have almost no actual price competition between rightsholders to have their music performed. But some of the same technological advancements that led to the changes in the way that people listen to music can also be used to transform the way that music is licensed - moving towards a more competitive alternative. In this paper we provide a framework for a marketplace that, if implemented appropriately, would allow for individual rightsholders to set their own prices subject to the forces of competition, all while still maintaining many of the transactions costs efficiencies associated with blanket licensing. Critical to the emergence of such a marketplace is a comprehensive database of all sound recordings and the associated musical works with individual prices set by the individual rightsholders for the rights necessary to use their music. With such a database in place, rightsholders could set their own prices knowing that music services will take those prices into consideration when creating playlists, thereby extending competition to pricing and freeing the licensing market from the need for price regulation.

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A Novel Dataset Measuring Change in Copyright Exceptions

Review of Economic Research on Copyright Issues, 2022, vol. 19, pp. 52-75

Michael Palmedo


Abstract

Copyrights grant creators long periods of market exclusivity during which they or their agents have the exclusive right to reproduce and distribute their works. However, copyright exceptions limit their scope and strength. National laws governing copyright exceptions vary substantially from one country to the next. This paper introduces a novel, survey-based dataset that describes changes to 26 countries' laws on copyright exceptions over time. To explore the data, I construct two indices from subsets of the dataset; one focusing on exceptions related to internet communications technologies (ICTs) and another focusing on exceptions related to educational uses. The indices show that copyright exceptions have grown more robust since 1990, and that wealthier countries tend to have more developed exceptions than poorer ones. Initial empirical tests suggest that exceptions related to ICTs are more robust in countries with larger ICT sectors but less robust in countries with larger copyright sectors. Exceptions for educational uses are more robust in countries with higher educational attainments.
Supplementary files are available here.

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A Practical Model of Copyright Economics with Intermediaries

Review of Economic Research on Copyright Issues, 2022, vol. 19, pp. 1-51

Peter DiCola


Abstract

After streaming, what should copyright economics look like? The standard model of copyright economics used by courts and other policy makers - the "protect what would otherwise be a public good from copyists" model - is not general enough. It is particularly poorly suited for the era of internet streaming, because it assumes that the producers of creative works are vertically integrated with the utlimate retailers of those works. In this paper I argue for a new, rough-and-ready framework for use in formulating copyright policy. Rather than assuming a vertically integrated producer—retailer, my proposed model disaggregates the producer and the retailer, which I refer to more generally as an intermediary. One central feature of the streaming era is the growth and resulting bargaining power of technological intermediaries, including the large internet platforms and various popular streaming services. My proposed model of copyright economics allows for variation in the bargaining power of intermediaries, rather than implicitly assuming their power away. Making this shift in our mental model - our metaphor - for how copyright works changes the way we think about copyright law's economic functions. It also suggests the need to refocus copyright policy on the important dynamics between producers and intermediaries.

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Victor Hugo Betrayed: The Domain Public Payant as Intended in the 19th Century and as Implemented Today

Review of Economic Research on Copyright Issues, 2021, 18, 56-80

Maximiliano Marzetti


Abstract

This article traces the origins and evolution of the paying public domain (or domaine public payant), from its foundations in 19th century France, particularly as exposed in two famous speeches delivered by Victor Hugo, to its current versions in force in a handful of Latin American and African countries. We analyse the economic aspects of the copyright-public domain relationship. We emphasise the contrasts between original and contemporary versions of the paying public domain and provide a hypothesis to explain its mutation and subsistence.

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Aria Rentals: The ’Grand’ Performance Right at Work in the Royal Swedish Opera During the Twentieth Century

Review of Economic Research on Copyright Issues, 2021, 18, 26-55

Staffan Albinsson


Abstract

This study describes how composers were compensated during the twentieth century for their work in the Royal Swedish Opera through a performance right for drama, known as the ’grand right’. The study is based on primary data until the end of the 1980s. During this period a percentage-based tariff was used. The main finding is the doubling of the percentage rate claimed by publishers during the three decades following the end of the Second World War. The trade agreement concerning the commissioning of new music, the monopolistic position of publishers, the lack of reuse of new operas, and audience tastes are also discussed.

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Music Licensing For Non-Interactive and Other Radio-Style Services: Is It Finally Time To Move Away From Blanket Licensing?

Review of Economic Research on Copyright Issues, 2021, 18, 1-25

Jacob B. Ebin and David Reitman


Abstract

Advances in technology over the last two decades have led to significant changes in the way that music is consumed, with music streaming services now being the dominant means through which people listen to music and the primary means through which music copyright own- ers monetize their intellectual property. The way that music rights are licensed by these digital streaming services, however, has not meaningfully changed. Blanket or collective licensing is still the norm and the marketplace is almost entirely devoid of any actual price competition between rightsholders to have their music performed. But some of the same technological advancements that have allowed digital streaming to emerge also can be used to transform the way that music is licensed — moving towards a more competitive alternative. In this paper we review the economic tradeoffs that have provided the primary justifications for the current blanket licensing systems, and then describe the institutions and regulatory environment that have developed to implement those systems in the U.S. That sets the stage to describe an alternative competitive marketplace taking advantage of streaming technology and data, which we do in our companion paper, Ebin and Reitman (forthcoming). Such a marketplace, if implemented appropriately, would allow for individual rightsholders to set their own prices subject to the forces of competition, while still maintaining many of the transactions costs efficiencies associated with blanket licensing.

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Collective Management of Music Copyright in China: Insights for the Regulation of the Monopolistic and Monopsonistic Power of the Music Copyright Society of China from a Comparative Legal Approach

Review of Economic Research on Copyright Issues, vol. 17(2); 23-52

Qinqing Xu


Abstract

This paper discusses the regulations which limit the monopolistic and monopsonistic power of the Music Copyright Society of China (MCSC) in the context of the broader legal framework for the collective management of music copyright in China. The paper identifies "inadequate regulation" as a major cause of the misuse of such market power by the MCSC. Using a comparative approach, the paper analyses the regulatory regime that addresses the abuse of the market power of the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), the two oldest performing rights organisations (PROs) in the United States. Drawing lessons from the United States experience, this paper challenges the notion that establishing more musical collective management organisations (CMOs) in China would decrease the monopolistic and/or monopsonistic power of the MCSC. While the Chinese Anti-Monopoly Law cannot be applied to regulate the market power of the MCSC, this paper advocates for improving the current Regulations on Copyright Collective Administration (RCCA) as an alternative option for preventing the misuse of power by the MCSC.

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Figuring It Out: Applying economics to copyright royalty rates for streamed music

Review of Economic Research on Copyright Issues, 2020, vol. 17(2), pp. 1-22

Ruth Towse


Abstract

Economists are often, even regularly, used as consultants to the various parties involved in the process of regulating copyright and as witnesses in court procedures to set royalty rates. What insights from economic analysis do they offer? Are their contributions widely accepted or controversial? The article offers two case studies relating to streamed music: the US Copyright Royalty Board (CRB)’s judgement on Phonorecords III, and the discussion on ‘usercentric’ versus ‘pro rata’ methods for distributing music streaming royalties by CMOs. Both clearly demonstrate the conflict between efficiency and equity principles; however the main focus of the article is the extent to which ‘platform economics’ was adopted in the discussions of music streaming and how, if at all, that approach influenced procedures.

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Compulsory licensing for radio-play of music in India: Recent history and economic context

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 60-77

Megha Patnaik


Abstract

Compulsory licensing of sound recordings is practiced in different countries, though the trajectories and rationale for arriving at this framework may differ. Developing countries often introduce measures to protect "infant" industries, but policy persistence can make subsequent changes hard. In 2010, the Copyright Board of India passed an order prescribing 2% of net advertising revenues to be paid by radio stations as compulsory license fees to copyright owners, citing the infancy of the private radio industry and the lack of access to music in India. Since the original order, the private radio industry has matured in size, coverage and listenership. Access to music today is facilitated through a far-reaching radio network, as well as widespread mobile and internet usage. The original order will be reviewed in September 2020. Given the maturation of the private radio industry over the past decade, this paper recommends India transitioning to the perspective considered for countries with mature radio industries. But how can the regulator determine the fair price of music closest to that found in a competitive market? Several strategies demonstrated in the literature can be used to establish a baseline valuation, following which adjustments can be made to account for any spillovers between the two industries.

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Competitive Strategy of Proprietary Software Firms in an Open Source Environment

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 38-59

Edmond Baranes, Cuong Hung Vuong and Mourad Zeroukhi


Abstract

This paper analyzes the competitive strategy of a proprietary software (PS) firm in the presence of open source software (OSS) where the copyright holder has granted software users access and use of OSS without any obligation regarding source code disclosure and royalty payments. The OSS is developed by volunteer programmers, while the firm incurs costs to hire programmers to build the PS. The firm has a quality advantage because, first, it can provide professional technical support and promotion, and second, it is difficult for the OS community to collaborate for the production and maintenance of the OSS. The analysis is based on two scenarios: (1) the OSS is available free of charge; (2) the OSS is distributed by fringe vendors who can provide OSS quality upgrades. We find that both types of software can coexist in equilibrium. Furthermore, despite the fact that PS enjoys a quality advantage, it will optimally set a lower quality than OSS. The comparative statics show that a change in each market parameter can lead the firm to simultaneously increase (or decrease) both the PS price and quality. We consequently evaluate the impact on the firm's profit and consumer surplus.

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Accounting for Creativity: Lessons from the Economic History of Intellectual Property and Innovation

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 1-37

B. Zorina Khan


Abstract

Social progress depends on the realization of inventive ideas, and economic history provides valuable lessons about creativity in technology and culture. The empirical study of over one hundred thousand innovative individuals who obtained patents, copyrights, and prizes, sheds light on the relationship between institutions, incentives, and transformative ideas and expression, over the past two centuries. The European growth model assumed useful knowledge was scarce, and top-down administered innovation systems offered rights and rewards to "exclusive" groups. By contrast, American policies regarded creativity as widely distributed in the general population, and further promoted "inclusive" market-oriented mechanisms that fostered diversity in ideas and outcomes. The evidence suggests that property rights in patents facilitated markets in ideas, and ensured that returns were aligned with productivity and market demand. Whereas, such administered systems as innovation prizes and publisher's copyrights in the "creative industries" benefited the few rather than overall social welfare.

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Music-Use Tariffs, Options, Regulation and Bargaining

Review of Economic Research on Copyright Issues, 2019, vol. 16(1/2), pp. 40-67

Frank Mathewson, E. Jane Murdoch and Gerry Wall


Abstract

This paper discusses the connection between rate regulation and bargaining out- comes. We consider the case of licensing musical works for radio broadcasting. Our model illustrates the impact when music broadcasters can switch to a talk format. Using a generalized Nash bargaining setting, we interpret the revenue sharing rules established within the regulatory regimes in the US and Canada. In any negotiations over a sharing rule with the collectives that own the musical works rights, the ability of broadcasters to switch from a music to a talk format constitutes the threat point for the broadcasters. Using US and Canadian data for 2014 and 2015, we derive the bargaining weights that would generate the same revenue flows for broadcast- ers and collectives as those produced under the shadow of a copyright regulatory regime. These numerical examples show a higher weight to collectives than appears from the stated tariff rates.

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