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Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

Unauthorized Copying and Copyright Enforcement in Developing Countries: A Vietnam Case Study

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 87-96, 2007

Koji Domon and Kiyoshi Nakamura


Abstract

At present, Vietnam is regarded as the most notorious country regarding copyright infringement. China, joining WTO in 2001, has since implemented strict copyright measures. Even though Vietnam has laws covering intellectual property rights, enforcement is almost non-existent. We investigated how unauthorized P2P file-sharing affects copyright infringement in Vietnam. We assumed, before visiting Vietnam, that P2P file-sharing was more popular than pirated CDs and DVDs. However, few people there knew of its existence. Even when they did, they were unwilling to use it. Another astonishing fact was how pirated CDs play a role in promoting singers who relied on stage performances. Singers were not eager to support copyright enforcement. In this paper we consider these situations and explain how such behavior is commonplace in Vietnam.

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Patent and/or Copyright for Software: What Has Been Done So Far?

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 3-14, 2007

Richard Watt


Abstract

The particular case of software seems to have stretched the patent-copyright divide to the point of breakage. Inspite of being traditionally excluded from patent, software is an obvious case of a single creation that embodies both expression and innovation, and so strong arguments exist for software to be both copyrightable and patentable material. The legal profession has looked carefully at the patentability of software over the past 15 years or so, both from a fully legal perspective, and using economic-type arguments. But we are still waiting for the economics profession per sé to set to work on this issue. Here, I shall go through some of the most well known arguments surrounding the protection of software, and then put forward a personal opinion as to what theoretical economists are likely to add, if and when they include this important question on their research agendas.

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Copyright and Creativity: An Application of Cultural Economics

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 83-91, 2006

Ruth Towse


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.

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Copyright: A Plea for Empirical Research

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 3-13, 2006

Ivan P. L. Png


Abstract

I review empirical research into the economic impact of copyright law. A key difficulty is that there is little systematic measurement of creative output and copying: there are only fragmentary statistics for the various industries. Studies of U.S. copyright registrations provide conflicting results: one shows that small changes in fees have large impacts on renewals, while another shows that many movies and books have long lives. All but one studies find that music piracy - whether conventional or digital - has hurt legitimate CD sales. Studies of extensions of copyright duration yield conflicting results: one focusing on U.S. registrations finds no effect, while a multi-country study finds that extensions are associated with substantial increases in movie production. I conclude with directions for future empirical research.

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Piracy and the Demand for Films: Analysis of Piracy Behavior in French Universities

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 15-27, 2006

David Bounie, Patrick Waelbroeck and Marc Bourreau


Abstract

The purpose of this article is to identify which, if any, segments of the movie business have suffered from digital piracy. We use a sample of 620 university members including undergraduate students, graduate students and professors to assess the effect of digital piracy on legal demand. A large percentage of respondents get pirated movies from a variety of channels (on P2P networks, intranet, by physical means. . . ). Surprisingly, approximately one third of the pirates declared that watching pirated movies increased their demand for films (for instance, it led them to rent or purchase videos that they would not have rented or purchased otherwise). Using regressions analysis, we find no impact of piracy on theater attendance, and a strong impact on video rentals and purchases. However, movie piracy has no impact on video rentals for respondents who use pre-paid pricing schemes at video-stores.

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Plain Destruction or Creative Destruction? Copyright Erosion and the Evolution of the Record Industry

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 29-51, 2006

Christian W. Handke


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.

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Music Product as a Durable Good and Online Piracy

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 53-66, 2006

Sougata Poddar


Abstract

Music is typical experience good and the formats in which music is available; for example, CDs and cassettes or downloaded files are durable in nature. Using these two typical characteristics of the 'music product', in this paper, we develop an analytical framework to study the economic implications of online music piracy. On one hand, we show that no protection against piracy is never optimal for the legitimate music producer; on the other hand, we show that complete protection against piracy may not always be the best option; the decision on the degree of limiting piracy depends on the extent of the informational value of music downloads, cost of piracy and the quality of the downloaded music and as a result a partial protection can be optimal to the music producer.

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DRMS, Economics, Copyright and Competition Law: The Australian Experience - The Economic Implications of Stevens v Sony

Review of Economic Research on Copyright Issues, Vol. 3, No. 2, 67-82, 2006

Yee Lim


Abstract

This paper will examine the Sony Playstation litigation in Australia where Sony claimed the device it used in its Playstation consoles was a technological protection measure ('TPM'). The outcome of the High Court of Australia decision is somewhat different from similar litigation run by Sony in other countries. Section 3 of this paper will examine the economics of TPMs and in particular, the device which Sony claimed in its Australian litigation was a TPM. It will reveal that copyright owners such as Sony already possess strong market incentives to implement TPMs and that the level of competition is inversely related to the incentive to protect works through TPMs. Section 4 of the paper will introduce the competition law landscape in Australia and it will analyse, within the context of Australia's competition laws, the device used by Sony which it claimed was a TPM. It will demonstrate that the use of the device by Sony is arguably conduct in breach of s46 of the Trade Practices Act 1974. Section 5 will examine the role of the law in Australia in terms of incentivising the use of TPMs.

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Transactions Costs and Administered Markets: License Contracts for Music Performance Rights

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 61-74, 2006

Michael A. Einhorn


Abstract

Performance rights organizations (PROs) provide transactional efficiency for music users and copyright owners by negotiating contracts, collecting revenue, and paying royalties for the rights to publicly perform musical compositions, thereby replacing their need to deal individually with one another in bilateral licensing. Historically, performance rights for catalogued works have been made available to users through blanket licenses, which convey the rights to perform, or have performed on licensed premises, all registered works in the corresponding catalog of registered works. While blanket licenses may enhance transactional efficiency, the same licenses are sometimes recognized as anticompetitive restrictions that compel each user to make an all or nothing choice that may force acceptance of a full license contract in place of a less inclusive alternative that may actually be preferred. Competitive concerns at the Antitrust Division of the U.S. Justice Department regarding blanket licensing at ASCAP and BMI led to a separate series of Consent Decrees for each of the two major PROs in the U.S.
To explore the disparate claims of economic efficiency, the paper finds that concepts from public utility regulation may be particularly helpful. Three characteristics are considered: where prices are subsidy-free, whether license provision is a natural monopoly, and whether any competitive submarkets can be structurally separated from the regulated core.

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Bargaining Theory and Royalty Contract Negotiations

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 19-27, 2006

Abhinay Muthoo


Abstract

This article shows how the principles of modern bargaining theory can help develop a better understanding of contractual terms such as royalties between copyright holders and users such as between an artist and a recording company (or between an author and a publisher). We develop the main principles in a non-technical and illustrative manner.

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Digital File Sharing and Royalty Contracts in the Music Industry: A Theoretical Analysis

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 29-42, 2006

Norbert J. Michel


Abstract

Although several researchers have examined the impact of copying in other contexts, relatively little theoretical work exists that allows for the presence of a profit maximizing music industry as an intermediary between the creators of intellectual property and consumers. This paper develops a simple theoretical model of interactions between artists who create original musical compositions, record labels that distribute them, and consumers who have the option of copying rather than buying music. The model provides testable price and demand equations and suggests that file sharing may have been undertaken by consumers who were previously not in the market for music.

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Licensing and Royalty Contracts for Copyright

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 1-17, 2006

Richard Watt


Abstract

This paper reviews briefly how the owner of the copyright to a creation can best market access to that right to licensees under a variety of assumptions concerning the market. After an introductory section, the paper considers a situation of full certainty, in which the value of the final product that is sold by licensees is fully deterministic. In that setting, we consider a very simple model in which the copyright holder himself may or may not compete with the licensee in the final product market. Above all, it is shown that a linear form for the royalty contract always suffices in equilibrium. After that, a model with certainty as to the market value of the final product is developed. In this model, we consider Pareto efficient sharing contracts, and it is shown that now a linear form is unlikely to suffice. Throughout (i.e. in both sections), we shall be interested in exactly when a linear royalty contract is efficient, since these types of contract are so prevalent in the real world.Finally, as an introduction to the papers contained in the symposium, I devote a few words to each of them in turn.

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Piracy Accommodation and the Optimal Timing of Royalty Payments

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 43-60, 2006

Alan E. Woodfield


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.

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Enforcement Sharing and Commercial Piracy

Review of Economic Research on Copyright Issues, Vol. 3, No.1, 83-97, 2006

Dyuti S. Banerjee


Abstract

This paper uses a strategic entry-deterrence framework to analyze the effects of enforcement sharing between the government and the monopolist in dealing with commercial copyright piracy. The monopolist is the incumbent firm and is responsible for monitoring the illegal operations of a commercial pirate, the possible entrant, who illegally reproduces and sells unauthorized copies of the monopolist's product. The monopolist bears the monitoring cost and the government is responsible for setting a penalty. We show that even when enforcement is shared the socially optimal penalty may result in no piracy in equilibrium only if the government is sensitive to piracy.

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Copyright Levies as an Alternative Compensation Method for Recording Artists and Technological Development

Review of Economic Research on Copyright Issues, Vol. 2, No. 2, 25-39, 2005

Ville Oksanen and Mikko Valimaki


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.

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