Review of Economic Research on Copyright Issues, 2018, 15(2), 1-22
Joshua S. Gans
This paper provides an overview of economic approaches to the pricing of mechanical royalties for copy-protected music works. It argues that principles for such pricing can be provided usefully from principles of pricing access to essential facilities. In particular, the structure of the royalty should be such that the royalty level does not change if the business model of downstream entities (notably, digital music streaming platforms) changes (i.e., neutrality) and the level of the royalty should ensure that the copyright holders receive a return in excess of their next best alternative in reaching consumers (i.e., opportunity cost). Ways of using benchmarking to derive the relevant opportunity cost are then discussed including the use of methods inspired by economic bargaining approaches such as the Shapley Value.Click to read more.
Review of Economic Research on Copyright Issues, 2018, 15(2), 23-56
Christian W. Handke, João Quintais and Balázs Bodó
This paper discusses copyright compensation systems (CCS) -- that provide licenses for downloading and non-commercial use of copyright works in return for a fee -- in the light of welfare economics and transaction cost economics. Recent empirical studies suggest that CCS could improve social welfare at least for recorded music. The general theme of the theoretical discussion in this paper is a simplicity-flexibility trade-off. On the one hand, CCS seek to reduce the costs of administering and trading copyrights online. On the other hand, standard copyright licenses distort the market mechanism. This paper discusses the costs and benefits of various CCS proposals compared to alternative ways of managing copyright online.Click to read more.
Review of Economic Research on Copyright Issues, 2018, 15(2), 57-79
Richard Watt and Frank Mueller-Langer
Under current copyright law in many countries, Internet Service Providers (ISPs) can be found liable for the traffic on the websites that they host. While the ISPs themselves are not undertaking acts that infringe copyright, indirect liability asserts that they either contribute to, or encourage in some way, infringing activities, and thus they are liable to claims of indirect involvement by the affected copyright holders. The present paper explores indirect liability in a standard principal-agent setting, where both moral hazard (the act of monitoring) and adverse selection (differential costs of monitoring over ISPs) are present. The model considers the kinds of contracts that could be signed between the copyright holders (acting through a collective) and the ISPs (acting individually). We specify the contracts that are self-selecting and incentive compatible for the set of feasible scenarios.Click to read more.
Review of Economic Research on Copyright Issues, 2018, 15(1), 38-64
Promoting Intellectual Property Rights (IPRs) is of particular importance to nations engaging in significant innovation. The existing literature relating to software piracy research is typified by the use qualitative methods to analyse the impact of IPRs on software piracy. Most concern themselves with a handful of important macroeconomic factors in an effort to identify whether they possess any explanatory power, employing qualitative frameworks for analysis. More contemporary research has given greater attention to the role of key regulatory variables on software piracy using econometric methods. In this paper, the relationship between foreign political pressure, IPR regulatory reforms and software piracy is considered. We estimate a model of software piracy as a function of bi-lateral pressure and investment (where US 301 reporting is the proxy for bilateral pressure, and capital investment the proxy for bi-lateral investment), Scientific investment, trade dependence and government effectiveness. The models are estimated using data from 80 countries over nine years. The study responds to the dearth of research employing dynamic panel estimations in estimating the impact of IPR reforms on software piracy. The findings suggest out of cycle review and US 301 reporting are pertinent factors potentially moderating software piracy.Click to read more.
Review of Economic Research on Copyright Issues, 2018, 15(1), 20-37
Estrella Gomez Herrera and Bertin Martens
The EU seeks to create a seamless online Digital Single Market for media products such as digital music and film. The territoriality of the copyright regime is often perceived as an obstacle that induces geographical segmentation. This paper provides empirical evidence on the extent of market segmentation in the EU on the supply side and measures the contribution of several drivers of this segmentation. We use data from the Apple iTunes country stores in 27 EU Member States. We find that availability of EU media products across country stores in the EU is hovering around 80 per cent for music and 40 per cent for films. Recent industry initiatives to reduce the transaction costs of making digital music available across borders have resulted in a reasonably wide availability though still short of the 100 per cent mark. Supply side factors including copyright-related trade costs probably still play a role in music though we can only infer this indirectly in the absence of data on copyright licensing arrangements at product level. Commercial strategies and territorial restrictions in distribution agreements reduce film availability, more so than copyright issues. We also find evidence of price differentiation across iTunes EU country stores.Click to read more.
Review of Economic Research on Copyright Issues, 2018, 15(1), 1-19
In recent decades, the problem of illegal downloading of copyrighted material has emerged as a major concern for governments across the globe. Many countries have implemented policies to limit the impact of online piracy on revenues of creative industries. These policies, while important for a broad range of industries, have been particularly lobbied for and supported by the motion pictures industry. Film production and distribution companies have repeatedly asserted that effective anti-piracy policy is crucial to their continued success. This paper seeks to evaluate whether the anti-piracy regimes in OECD countries have been effective. It also seeks to determine whether there are patterns to the types of policies that have been especially effective or ineffective.Click to read more.
Review of Economic Research on Copyright Issues, 14(2), 55-80, 2017
This study proposes a simulation model aimed at exploring how copyright law should be designed; that is, a desirable combination of copyright length and breadth. The model incorporates the specific properties of creative industries but is hard to deal with analytically because of its dynamic characteristics. Changes in social welfare under different copyright designs are thus examined by using numerical simulation. The simulation results reveal that a short and narrow copyright is the best, whereas a long and broad copyright is the worst. Moreover, in the long run, a long copyright can reduce social welfare even if the breadth is narrow.Click to read more.
Review of Economic Research on Copyright Issues, 14(1/2), 45-54, 2017
This Panel concerns possible lessons for European copyright practitioners learned from the North American experience. I pose two key questions that arise from our existing copyright tariff setting processes: 1) do we need regulatory intervention to achieve appropriate prices?; and 2) how has the process worked so far and how can we make the process better?Click to read more.
Review of Economic Research on Copyright Issues, 14(1/2), 39-44, 2017
Directive 2014/26/EC foresees that EU member States shall ensure that disputes between collective management societies and users concerning, in particular, existing and proposed licensing conditions or a breach of contract can be submitted to a court, or if appropriate, to another independent and impartial dispute resolution body where that body has expertise in copyright law. The Spanish Copyright Commission (Section I) aims to be that body in Spain. In order to reach this objective, the Commission has been empowered with new functions that will probably reduce the existing conflicts related to copyright licensing.Click to read more.
Review of Economic Research on Copyright Issues, 14(1/2), 1-38, 2017
Brett M. Frischmann
Courts, commentators, and even casebooks mistakenly assume that intellectual property laws are fundamentally utilitarian and thus the relevant objective for intellectual property laws is maximizing social welfare. Economic theories of intellectual property dominate while rights-based theories and other alternatives struggle to remain relevant in the discourse. This essay accepts that intellectual property laws are consequentialist, but it mounts a challenge to the utilitarian theories that dominate. Following the path set by Amartya Sen in the area of development economics and borrowing heavily from the Sen's analytical and normative framework - the Capabilities Approach, this essay begins to develop a human flourishing theory for intellectual property.Click to read more.
Review of Economic Research on Copyright Issues, 13(2), 1-24, 2016
I first review the theoretical apparatus that has been largely used so far to analyze information goods industries. I argued then that although this apparatus was fairly appropriate in the analog era and in the early digital era, it now needs to be significantly updated. The advent of streaming challenges indeed the main assumptions that underlie the existing models. This observation leads me to propose two main directions for future research efforts. First, one needs to better understand, and model, how streaming modifies the way content is accessed and consumed. Second, more attention should be given to the roles and strategies of streaming platforms, which become inescapable intermediaries regarding the distribution and consumption of digital goods.Click to read more.
Review of Economic Research on Copyright Issues, 13(2), 25-65, 2016
Jin-Hyuk Kim and Michael Waldman
Digital Rights Management (DRM) is employed by firms as a way of reducing illegal copying. In this paper we investigate the idea that it can also be associated with an increase in market power in the hardware market. In our main analysis content and hardware are complementary goods, where there are multiple hardware sellers and one of the hardware sellers owns a DRM technology that can be developed into a DRM system that makes legal content incompatible with hardware that does not employ the system. Our primary result is that the hardware producer who initially owns the DRM technology may employ closed DRM to gain market power in the hardware market because this is an efficient way to monetize its initial ownership of the technology. We also show that, depending on whether or not the content developer has positive bargaining power, the introduction of DRM may or may not result in an increase in content development. In addition to investigating these ideas in a number of related theoretical settings, we also consider the social welfare aspects of the argument and discuss its relevance for understanding the early history of Apple's iPod.Click to read more.
Review of Economic Research on Copyright Issues, 13(2), 66-82, 2016
Gerry Wall and Bernie Lefebvre
With the lack of direct markets to examine, copyright setting agencies often adopt a total proxy approach whereby other markets are used to formulate benchmark prices. In this paper, we utilize a "downstream" market to estimate the value to a commercial "rights user" of distant television signals. This "partial proxy" approach has two advantages: it uses data drawn from the distant signal market (i.e. vertical market information) and it uses actual market pricing data from buyers and sellers of programming content.
Using this data, we derive estimates of the wholesale market value of distant TV signals. Based on our analysis we find that the current per signal payment to distant signal rights-holders (as certified by the Copyright Board of Canada) is less than the actual market value of those signals.
Review of Economic Research on Copyright Issues, 13(2), 83-99, 2016
Research on the economic history of copyright and music publishing turned up an unusual source of data on the value of copyrights, namely detailed accounts of public auctions of musical items that were held in London between 1794 and 1960 of, inter alia, copyrights and the engraved plates from which musical works were printed. The standard contract between song writers/composers and music publishers in the 19th century bought out all rights and therefore the sale of the plates was also the sale of the copyright to the work, enabling the new owner to print and distribute the work. The sales also facilitated entry into and exit from the industry.
This paper describes the historical circumstances of copyright and the market for printed music and presents some of the more notable data, with calculations of their present day values. Though insufficient for a full statistical analysis, the paper provides some hard evidence of the asset value of copyright in musical works as perceived by the music publishers of those times. The paper also suggests a basis for further research.