Abstract

This paper generalizes the two-period model of Watt (2000) who demonstrates the possibility of optimal accommodation of a pirate when the royalty rate applying to a creation is uniform and second-period Cournot competition applies. Admitting nonlinear contracts with period-specific royalty rates that leave total payments unchanged, simulation analysis shows that a producer of originals does better to increase the royalty rate in period 1 and decrease the rate to a negative level in period 2, thereby more than offsetting the usual cost advantage available to a pirate. Watt's illustrative examples regarding piracy accommodation (but not piracy exclusion) are overturned when a nonlinear contract is chosen optimally, although accommodation remains optimal in some other cases. Further, where exclusion is impossible under uniform royalties, cases exist where exclusion is feasible under nonlinear royalties. Even so, accommodation may be a preferable strategy.

Abstract

We use a 1998-2002 cross-section dataset to analyze the claim of losses due to internet piracy made by the record industry. The results suggest that internet piracy played a significant role in the decline in music sales during the early days of file-sharing networks.

Abstract

Much literature has been devoted to exploring the protection of computer programs. The decreasing effectiveness of copyright and patents has been extensively examined and alternative forms of protection, both physical and market-based, have been laid out. A large proportion of writings is dedicated to describing the significant network externalities that exist in the software market, and the effect that these have on the optimal level of protection. A large number of surveys have been undertaken to analyse the characteristics of software pirates and their incentives to pirate. This paper attempts to provide an overview of this literature.

Abstract

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.

Abstract

The fight against illegal music downloading has taken many forms. Beside legal prosecution (Hadopi in France, for example), many countries have chosen to tax blank tapes and CDs, both to reduce their use for illegal copying, but also to redistribute the proceeds to content providers. This has become less effective, since now illegal copying is stored on hardware devices, such as smartphones, computers, MP3 players, and external hard disks. We provide an economic analysis of the effects of copyright levies on hardware used to access original content. A first effect is to decrease the consumption of both illegal and legal content. We show that in a static model, content providers can hardly be compensated, and therefore are made worse off by the levy. We also consider a dynamic model where current sales contribute to the reputation of the content provider, and to his future revenues. A levy on hardware tends to penalise 'young' content providers in terms of reputation acquisition.

Abstract

This article is a survey of publications by economists writing on copyright law. It begins with a general overview of how economists analyse these questions; the distinction is made between the economics of copying and the economic aspects of copyright law as analysed in law and economics. It then continues with sections on research on the effects of copying and downloading and the effects of unauthorised use ('piracy') and ends with an overall evaluation of the economics of copyright in the light of recent technological changes. Economists have always been, and still are, somewhat sceptical about copyright and question what alternatives there are to it. On balance, most accept the role of copyright law in the creative industries while urging caution about its becoming too strong. And although European authors' rights are different in legal terms from the Anglo-American copyright, the economic analysis of these laws is essentially the same.

Abstract

Open Source Software is often viewed as an anti-intellectual property regime. In contrast, we argue how intellectual property law is at the heart of open source model since licenses that organize the innovation and business relationships between developers, distributors and end-users are based on copyright law. The proliferation of software patents can, however be seen as a threat for the development and deployment of open source software. We present the nature of the threat and review a series of initiatives undertaken by the open source community to address them effectively. These initiatives, such as the redesign of licenses and the creation of patent commons, are a testiment to a genuinely creative use of intellectual property law by the open source community, not its undermining.

Abstract

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.

Abstract

The record industry has become emblematic in debates on reforming copyright law. Economists have mainly studied the extent to which a surge in unauthorised copying is destroying the industry by displacing demand for authorised copies. The effect of technological change on industry structure has received little attention. This paper presents evidence for an extraordinarily high number of market entries by small record companies during a severe recession in the German market for phonograms. This finding is more consistent with a restructuring of the record industry in the context of technological change - i.e. creative destruction - than with plain destruction due to diminished appropriability. If that is the case, isolated attempts to reinforce copyright protection could be misguided. They should be complemented by efforts to promote innovation within the record industry.

Abstract

Beginning in December 2004 Google has pursued a new project to create a book search engine (Google Book Search). The project has released a storm of controversy around the globe. While the supporters of Google Book Search conceive the project as a first reasonable step towards unlimited access to knowledge in the information age, its opponents fear profound negative effects due to an erosion of copyright law.
Our law and economics analysis of the Book Search Project suggests that - from a copyright perspective - the proposed settlement may be beneficial to right holders, consumers, and Google. For instance, it may provide a solution to the still unsolved dilemma of orphan works. From a competition policy perspective, we stress the important aspect that Google's pricing algorithm for orphan and unclaimed works effectively replicates a competitive Nash-Bertrand market outcome under post-settlement, third-party oversight.

Abstract

The ten papers in this book were first presented at the SERCI annual congress in Madrid in 2002. In her introduction to the volume, co-editor Wendy Gordon notes that the technology that enables us to preserve and make reproductions of creative works changes the entire cultural landscape, as it provides authors with a means of earning income from the general public as consumers, and not just from patronage appointments. This shift in the source of income will change the kind of works that are created. Importantly, "it was to harness the extra value enabled by technology that copyright was invented" (p. xviii). It is therefore appropriate that much of this valuable volume of new research on the economics of copyright is concerned with the response of copyright policy and market contractual arrangements to changing technology.

Abstract

This paper argues that the emphasis by policy-makers on creativity and economic growth in the creative industries, fostered by copyright law, is not well grounded and cultural economics gives little support for these policies.

Abstract

There are many gaps between what economists know and what they don't know. This article reviews this situation in the light of what policy-makers say they want to know about the economic effects of copyright. The article sets out what I see as misunderstandings on the part of policy-makers as to what economics can offer in the way of evidence on copyright. The paper is based on my limited experience of advising and consulting as well as on reading calls for evidence in policy documents.

Abstract

Some economists assert that as valuable works transition from copyrighted status and fall into the public domain they will be underexploited and their value dissipated. Others insist instead that without an owner to control their use, valuable public domain works will be overexploited or otherwise debased. This study of the most valuable musical compositions from 1913-32 demonstrates that neither hypothesis is true as it applies to the exploitation of songs in movies from 1968-2007. When compositions fall into the public domain, they are just as likely to be exploited in movies, suggesting no under-exploitation. And the rate of exploitation of these public domain songs is no greater than that of copyrighted songs, indicating no congestion externality. The absence of market failure is likely due to producer and consumer self-regulation.

Abstract

The idea of alternative compensation methods for recording artists has gained increasing popularity as Internet copying has started to seriously threaten record sales. We start this article by looking at the general theory on alternatives to copyright royalties and show that recording artist income is in practise not dependent on record sales. Then we move forward and map the features of the current alternative proposals and construct yet another iteration of a levy-based compensation method. As an example, we analyze what our model would imply for Finland. In the end we reflect on the idea of a levy-based compensation method to the current predictions of technical advances in communication networks and note that the traditional copyright royalty model is seriously threatened by tremendous personal copying covering practically all the music ever created. We conclude this article by discussing what this will mean for the alternative compensation proposals and the music industry in general.