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Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

Bargaining Theory and Royalty Contract Negotiations

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

Abhinay Muthoo

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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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Economists' Topsy-Turvy View of Piracy

Review of Economic Research on Copyright Issues, Vol. 2, No. 1, 5-17, 2005

Stan J. Liebowitz

Downloads:  265


Abstract

Although it was once considered inevitable that unauthorized copying would harm copyright owners, it is now understood that this is not necessarily the case. The concept of indirect appropriability played an important role in shaping this newer understanding. In recent years, however, many economists seem to have taken the message from this new understanding too far, seeing gains to the copyright owners from unauthorized copying in every nook and cranny of the economy, when in reality the instances of such gains are likely to be rather limited. The current literature on this subject, which consists mainly of theoretical models, seems to be badly out of kilter. In this paper I attempt to explain some of the problems and try to provide the outlines of what I believe to be a more balanced and nuanced view of copying. It emphasizes the importance of examining various institutional and behavioral details of individual markets, which are often overlooked by researchers.

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Decreasing Copyright Enforcement Costs: The Scope of a Graduated Response

Review of Economic Research on Copyright Issues, Vol. 6, No. 2, 13-29, 2009

Olivier Bomsel and Heritiana Ranaivoson

Downloads:  264


Abstract

The digitization of copyrighted goods and the dematerialization of their distribution over the Internet have caused a weakening of copyright, a key institution of the creative industries. One reason is that, during the broadband roll-out, copyright enforcement costs have become superior to the estimated benefits of copyright. This paper analyses the causes of this situation and suggests how a graduated response to infringers can decrease copyright enforcement costs.
The paper starts with a review of the economic literature on copyright that focuses on its industrial aspects. It then analyses how, all along the distribution vertical chain, the consumer's impunity provides incentives to free ride on copyright, which rapidly increases copyright enforcement costs. It finally depicts the graduated response mechanism and the voluntary agreement that initiated this system in France. In conclusion, the increase in the cost of free-riding for the final consumer should lead to a decrease in copyright enforcement costs and to higher returns in the creative industries.

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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

Downloads:  264


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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Exclusion, Competition and Change: The Shifting Boundaries of the Television Market

Review of Economic Research on Copyright Issues, Vol. 5, No. 1, 55-74, 2008

Giovanni Battista Ramello and Francesco Silva

Downloads:  261


Abstract

The aim of this work is to analyse the evolution of pay-TV as an example of the dynamics that characterise the media sector and in which copyright has played a pivotal role. In one simplified representation, we can identify two crucial levels on which the market is shaped: that of content, governed by copyright, and that of distribution. Control over each of these levels offers, in different ways, leverage for orienting the market, and has thus been an object of the strategies of firms. On the whole we can say that the innovation path characterising media markets extends beyond the purely technological sphere to also embrace the market as an "organisational technology" for production and exchange. Hence, the competitive process, so important for defining the market configurations, must be discussed from an intertemporal perspective in which technological choices, the regulatory framework and control of copyrights can be viewed as both exogenous and strategic variables manipulated by firms to obtain profits.

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Digital Technology, Price Discrimination, and Copyright Duration Extension

Review of Economic Research on Copyright Issues, Vol. 7, No. 2, 39-55, 2010

Michael Y. Yuan

Downloads:  252


Abstract

Many countries have yet to decide whether extend copyright duration. Technological changes were cited by a U.S. Senate report to support duration extension. This study adds to the assessment of the validity of the technological argument by simulating the effect on optimal copyright duration of increased price discrimination caused by digital technology. Simulation of a model of information product market indicates that increase of price discrimination on high-end market calls for shorter copyright duration; that on low-end market may support extension, if the discrimination benefits consumers, and otherwise work against it. It further suggests price discrimination on low-end market increases welfare and supply of original information products but that on the high-end market may either increase or decrease them.

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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:  247


Abstract

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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Revenue Sharing as Compensation for Copyright Holders

Review of Economic Research on Copyright Issues, Vol. 8, No. 1, 51-97, 2011

Richard Watt

Downloads:  245


Abstract

Essential inputs are an important topic of debate for economics. One common essential input is intellectual property, in the form of either patents or copyrights, which the producers of goods and services for final consumption must necessarily purchase from the input supplier. The ensuing monopoly power of the input supplier leads in many cases to controversial outcomes, in which social inefficiencies can occur. In much of the literature on the economics of intellectual property, it is assumed that the right holder is remunerated either by a fixed payment or by a payment that amounts to an additional marginal cost to the user, or both. However, in some significant instances in the real-world, right holders are constrained to use (or may choose to use) a compensation scheme that involves revenue sharing. That is, the right holder takes as remuneration a part of the user's revenue. In essence, the remuneration is set as a tax on the user's revenue. This paper analysis such remuneration mechanisms, establishing and analysing the optimal tax rate, and also the Nash equilibrium tax rate that would emerge from a fair and unconstrained bargaining problem. The second option provides a rate that may be useful for regulatory authorities. The model is calibrated against a (hypothetical) scenario in which the copyright holders in music are paid a regulated share of the revenue of music radio stations, a topic that is presently at the fore-front of the economics of copyright pricing.

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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:  243


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.

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Royalty Rate Setting for Sound Recordings by the United States Copyright Royalty Board: The Judicial Need for Independent Scholarly Economic Analysis

Review of Economic Research on Copyright Issues, 12(1/2), 1-15, 2015

David R. Strickler

Downloads:  242


Abstract

Judges who set copyright royalty rates through litigation, like all trial Judges, are constrained by the evidence and testimony. Thus, we can only determine rates that are supported by the record. For the record to be sufficient, testifying economists must be able to apply a sufficient body of work in the economics of copyrights. In my address to the 2015 SERCI Congress, I emphasized the judicial need for continued and comprehensive research in this field, so that testifying economists can provided a foundation for our determinations. In this article, I explore such issues in more detail.

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The Efficiency of Droit De Suite: An Experimental Assessment

Review of Economic Research on Copyright Issues, Vol. 9, No. 1, 93-121, 2012

Maryam Dilmaghani and Jim Engle-Warnick

Downloads:  236


Abstract

Droit de suite entitles visual artists to a percentage share of the resale price every time their works are resold over a given time span. The legal systems of the world do not universally accept the concept of droit de suite, and its economic efficiency has been a matter of debate for a few decades. In this paper, we model a work of art as a lottery to investigate experimentally the impact of this right on the art market. We find evidence that a number of known behavioral biases in decisions under uncertainty affect a seller’s willingness to accept. In light of our results, we conclude that the interaction of these biases and droit de suite can reduce the number of transactions in the art market to a larger extent than previously suggested in the literature.

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The Winds of Change. Journey of UK Music from the Old World to The New World

Review of Economic Research on Copyright Issues, 11(2), 27-59, 2014

Maurice C. Samuel

Downloads:  229


Abstract

Digitisation and adoption of increasingly fast broadband Internet represent the two fundamental 'winds of change' that have transformed the UK music industry since the 1980s. This paper examines the impact of these changes on sales of music and, by extension, on the royalties of creators of music, in both nominal and real terms. It identifies weaknesses and threats in both, opportunities that might be developed as responses, and possible hypotheses for future economic research that are likely to be of interest to the sector in providing evidence in the debates around appropriate strategies and policies.

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Intellectual Property Rights and Cultural Heritage: The Case of Non-Cumulative and Non-Degenerative Creation

Review of Economic Research on Copyright Issues, Vol. 1, No. 2, 97-117, 2004

Veronique Chossat and Christian Barrere

Downloads:  228


Abstract

This paper studies the case of cultural and creative goods that onstitute both private and common heritage assets and analyses the difficulties involved in protecting them by the means of IPRs. The specificities of non-cumulative and non-degenerative creative heritage assets prevent any universal model of protection and thus the building of a market of IPRs. The standard model of property rights is partially irrelevant depending on the specificities of cultural heritage assets. So strategic behaviours concerning the uses of cultural heritage assets can arise. Two creative industries are studied: Haute Couture and French Grande Cuisine.

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The Incentives for Contributing Digital Contents Over P2P Networks: An Empirical Investigation

Review of Economic Research on Copyright Issues, Vol. 5, No. 2, 19-35, 2008

Fabrice Rochelandet and Tushar K Nandi

Downloads:  220


Abstract

In this paper, we examine the determinants of sharing behaviour by envisaging two types of behaviour, namely contribution against free riding. In doing so, we evaluate the theoretical predictions about reciprocity and altruism in the presence of non-rival goods and anonymity. We use a probit model and primary data from a survey that collects information about P2P sharing behaviour of more than 2000 individuals. Our econometric results suggest that the motivations for contributing are poorly determined by rational self-interested behaviour. We then envisage policy implications in terms of copyright enforcement and business.

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Technological Transformation, Intellectual Property Rights and Second Best Theory

Review of Economic Research on Copyright Issues, Vol. 4, No. 2, 5-28, 2007

Richard G. Lipsey

Downloads:  215


Abstract

Over the last decade, the research interests of myself and my co-authors have concerned economic growth, technological change and general purpose technologies - pervasive technologies that transform our whole society. Our many publications culminated in Economic Transformations: General Purpose Technologies and Long Term Economic Growth by Richard Lipsey, Kenneth Carlaw and Cliff Bekar (hereafter LCB). This work has only incidentally raised issues concerning intellectual property rights (IRPs). So what I will cover in this paper is first a brief survey of some of the historical parts of LCB. Then, I give some general discussion of economic policy with emphasis on second best issues and, finally, some of the IPR issues that arose incidentally in our work.

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