The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

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

Downloads:  41376


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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Bestselling Musical Compositions (1913-32) and Their Use in Cinema (1968-2007)

Review of Economic Research on Copyright Issues, Vol. 6, No. 2, 31-60, 2009

Paul J. Heald

Downloads:  14284


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.

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P2P and Piracy: Challenging the Cultural Industries' Financing System

Review of Economic Research on Copyright Issues, Vol. 1, No. 2, 55-69, 2004

Joelle Farchy

Downloads:  10303


Digital technology makes sophisticated means available to the general public for copying works with an equal level of quality to the originals and at increasingly lower prices. Unrestricted copying deprives producers and creators of a share of their potential earnings on the sale of originals. The whole of the traditional system for financing cultural creation could be at risk. There are three mainstays to the conventional financing system: the production of private goods, direct appropriability of revenues, temporary monopoly of exclusive rights. Each one has been called into question by P2P. Content has properties that are growing ever more similar to public goods, raising the question of whether public financing might be possible. Direct appropriability in customary markets is becoming ever more difficult, raising the question of whether new forms of appropriability might be possible, both direct and indirect. Exclusive rights are becoming increasingly ever harder to enforce, raising the question of other possible institutional solutions. To date, the solutions geared to tackling these issues have been largely defensive, and aimed at maintaining the old system's core characteristics (direct appropriability and exclusive rights) through DRM. However, a brief foray into economics literature can reveal some original alternatives solutions even if each one has its advantages and its drawbacks.

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The Economics of Digital Goods: A Progress Report

Review of Economic Research on Copyright Issues, 13(2), 1-24, 2016

Paul Belleflamme

Downloads:  3795


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.

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Language, Copyright and Geographic Segmentation in the EU Digital, Single Market for Music and Film

Review of Economic Research on Copyright Issues, 2018, 15(1), 20-37

Estrella Gomez Herrera and Bertin Martens

Downloads:  3169


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.

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The Effect of Internet Piracy on Music Sales: Cross-Section Evidence

Review of Economic Research on Copyright Issues, Vol. 1, No. 2, 71-79, 2004

Martin Peitz and Patrick Waelbroeck

Downloads:  2842


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.

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Causes, Effects and Solutions of Piracy in the Computer Software Market

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 63-86, 2007

Amy Marshall

Downloads:  2362


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.

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The Economics of Copyright Levies on Hardware

Review of Economic Research on Copyright Issues, 10(1), 20-35, 2013

Patrick Legros and Victor A. Ginsburgh

Downloads:  2227


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.

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The Economics of Copyright Law: A Stocktake of the Literature

Review of Economic Research on Copyright Issues, Vol. 5, No. 1, 1-22, 2008

Ruth Towse, Christian Handke and Paul Stepan

Downloads:  2129


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.

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Museums, Property Rights, and Photographs of Works of Art. Why Reproduction Through Photograph Should Be Free.

Review of Economic Research on Copyright Issues, 13(1), 1-28, 2016

Alain Marciano and Nathalie Moureau

Downloads:  1841


The law concerning the reproduction of works of art is unambiguous: the owner of the physical item does not own the right to copy and reproduce it. The copyright or right to reproduce a work of art either belongs to the artist and his/her heirs, or to everybody when the work is in the public domain. However, a large number of museums use their property rights to assume a copyright, i.e. a right to reproduce works of art. These illegal practices are the result of choosing a business model based on the desire to cross-subsidise the upstream market of the services provided to the public with the benefits obtained by monopolising the "downstream" market of the copies or reproductions of works of art. The objective of this paper is to show that this is not efficient. We argue that this strategy conflicts with the mission upheld by museums and prevents certain externalities from circulating in the society.

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Copyright Versus Patents: The Open Source Software Legal Battle

Review of Economic Research on Copyright Issues, Vol. 4, No. 1, 21-46, 2007

Francois Leveque and Yann Ménière

Downloads:  1761


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.

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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

Downloads:  1705


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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The U.S. Copyright Termination Law, Asymmetric Information, and Legal Uncertainty

Review of Economic Research on Copyright Issues, 2019, vol. 16(1/2), pp. 1-39

Michael Karas

Downloads:  1688


This paper investigates the conflict between authors and their publishers that occurs as a result of publishers using an ambiguous “work made for hire” clause to sue the author for copyright infringement. A Bayesian signaling model allows a publisher to send an informative signal to the uninformed author that includes his reaction towards a license termination to induce termination deterrence. The model is used to examine the effectiveness of the statutory intervention. The results reveal that complete termination deterrence is an equilibrium outcome only if a publisher sues with certainty. The mere threat to sue is not sufficient for complete termination deterrence. Under most parameter settings, the results indicate positive termination probabilities. The highest probability for a neutral publisher type is obtained in situations where an author has weak outside options or is strongly dependent on his publisher. An author with valuable outside options increases the probability that a publisher will threaten to pursue legal action. If courts tend to favor authors, then termination incentives increase, which may lead to more friction between authors and their publishers.

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The Google Book Search Settlement: A Law and Economics Analysis

Review of Economic Research on Copyright Issues, Vol. 8, No. 1, 7-50, 2011

Frank Mueller-Langer and Marc Scheufen

Downloads:  1636


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.

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Why Did Schumpeter Neglect Intellectual Property Rights?

Review of Economic Research on Copyright Issues, Vol. 2, No. 1, 69-74, 2005

Mark Blaug

Downloads:  1636


Joseph Schumpeter is the father of evolutionary economics and the origin of notion that technical change is the key to capitalism as an engine of economic growth. His most famous book is Capitalism, Socialism and Democracy (1942) which develops the thesis that capitalism is always an evolutionary process of creative destruction. When this book was published fifty years ago, there was little solid scholarship on technical advance. Now there is a great deal, so much so that it would take a book to do justice to it. Nevertheless, Schumpeter's book correctly captures many of the stylised facts about technical progress revealed in recent research but, oddly enough, he never discussed, or even mentioned, intellectual property rights and this despite the fact that patent legislation was a prominent subject of debate in nineteenth century economics. This is a puzzle I hope to resolve in this paper.

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