The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

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

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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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Open Standards and Interoperability in EU Digital TV: Economics and Policy Issues

Review of Economic Research on Copyright Issues, Vol. 5, No. 2, 45-70, 2008

Nicola Matteucci

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The quest for interoperability of interactive TV has been a major concern of the EU Institutions. Its policy foundations were built on the enabling role of open standards, whose peculiar standardization process should guarantee affordable and widespread intellectual property rights. After having received considerable public support and financial funds, the interactive TV roll-out appears disappointing, and the diffusion of the main concerned standard, the multimedia home platform, stagnates. We conduct a comprehensive analysis of the main market facts and passages of interactive TV policy, to derive a multifaceted assessment of its technological, economic and institutional drivers. Several important issues stand out. Besides the inner complexity of the policy, a few normative inconsistencies and conflicting aims adversely impacted its feasibility. Several logical ambiguities also dampened the correct choice of instruments. In particular, the existing literature clarifies two main points: open standards cannot be uncritically assimilated to open source software, and the role of open standards along the broadcasting value chain is largely unexplored. Consequently, their effects here might differ from those experienced in traditional information and communication technologies markets. Finally, a certain evidence of regulatory capture of the EU policy-maker emerges.

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Value Based Pricing of Music

Review of Economic Research on Copyright Issues, 12(1/2), 16-25, 2015

T. Randolph Beard, George S. Ford and Michael L. Stern

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In the regulatory setting of rates for statutory-licensed music services, the question of value-based versus cost-based rate setting for the component-rights of a musical performance arises. In this article, we have demonstrated this value-or-cost question is a distinction without a difference. Starting with the value-based concept of second-best (or Ramsey) prices, we end with a result prescribing that cost differences should be fully reflected in compensation across the inputs to the music recording. Each price is set so that the costs are covered, no more and no less.

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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

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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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Competitive Strategy of Proprietary Software Firms in an Open Source Environment

Review of Economic Research on Copyright Issues, 2020, vol. 17(1), pp. 38-59

Edmond Baranes, Cuong Hung Vuong and Mourad Zeroukhi

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This paper analyzes the competitive strategy of a proprietary software (PS) firm in the presence of open source software (OSS) where the copyright holder has granted software users access and use of OSS without any obligation regarding source code disclosure and royalty payments. The OSS is developed by volunteer programmers, while the firm incurs costs to hire programmers to build the PS. The firm has a quality advantage because, first, it can provide professional technical support and promotion, and second, it is difficult for the OS community to collaborate for the production and maintenance of the OSS. The analysis is based on two scenarios: (1) the OSS is available free of charge; (2) the OSS is distributed by fringe vendors who can provide OSS quality upgrades. We find that both types of software can coexist in equilibrium. Furthermore, despite the fact that PS enjoys a quality advantage, it will optimally set a lower quality than OSS. The comparative statics show that a change in each market parameter can lead the firm to simultaneously increase (or decrease) both the PS price and quality. We consequently evaluate the impact on the firm's profit and consumer surplus.

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Intellectual Property and the Efficient Allocation of Social Surplus from Creation

Review of Economic Research on Copyright Issues, Vol. 2, No. 1, 45-67, 2005

Michele Boldrin and David K. Levine

Downloads:  1174


In the modern theory of innovation, monopoly plays a crucial role both as a cause and an effect of creative economic activity. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We show that, in most circumstances, competitive rents allow creative individuals to appropriate a large enough share of the social surplus generated by their innovations to compensate for their opportunity cost. We also show that, as the number of pre-existing and IP protected ideas needed for an innovation increases, the equilibrium outcome under the IP regime is one of decreasing probability of innovation, while this is not the case without IP. Finally, we provide various examples of how competitive markets for innovative products would work in the absence of IP and critically discuss a number of common fallacies in the previous literature.

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The WIPO Guide on Surveying the Economic Contribution of the Copyright Industries

Review of Economic Research on Copyright Issues, Vol. 1, No. 1, 5-15, 2004

Dimiter Gantchev

Downloads:  1171


In July of 2002, the World Intellectual Property Organisation organised a working group of economists to study the methodologies that are appropriate when attempts are made to measure the economic contribution of copyright to a national economy, with the final objective being to produce a guide-book that will enable future studies to be made, all within a common methodological framework. Dimiter Gantchev, a consultant with WIPO, was encharged with the task of writing the resulting Guide-book.

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The Efficiencies of Aggregation: An Economic Theory Perspective on Collective Management of Copyright

Review of Economic Research on Copyright Issues, 12(1/2), 26-45, 2015

Richard Watt

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The existing economic theory of copyright collectives, or copyright management organizations (CMOs) is strongly focused on the benefits of sharing of transaction costs. Here, we appeal to the contractual environment of CMOs to offer a different perspective. Copyright collectives form contracts at two principle points along the supply chain. First, there are the contracts between the collective's members themselves (the copyright holders) for distribution of the collective's income. And second there are the licensing contracts that the collective signs with users of the repertory. Using standard economic theory, the paper argues that there are significant efficiency benefits from having copyrights managed as an aggregate repertory, rather than individually, based on risk-pooling and risk-sharing through the contracts between the members themselves. Similarly, there are also aggregation benefits (at least in terms of the profit of the CMO) of licensing only the entire repertory, rather than smaller sub-sets. Both of these theses are defended by appealing to existing economic theory literature in related fields. Interestingly, there is a link between these two theories of the efficiency of aggregation which lies at the heart of the theory of syndicates, and the characteristics that imply that the group (or syndicate as a whole) can be considered as a valid "representative", sharing the same preferences as each individual syndicate member.

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The Economic Contribution of Copyright-Based Industries in Singapore

Review of Economic Research on Copyright Issues, Vol. 5, No. 2, 127-148, 2005

Kit B. Chow

Downloads:  1168


Started in November 2003, the study is the first in Asia to adopt the new comprehensive WIPO framework for measuring the economic magnitude of copyright-based industries. Singapore's copyright-based industries generated in 2001 an output of S$30.5 billion and value added of S$8.7 billion which was equivalent to 5.7% of GDP. The 29 copyright-based industries provided employment to 118,600 persons or 5.8% of Singapore's workforce in 2001. Through linkages with the rest of the economy, the combined nine core copyright industries are found to have greater-than-average impact on the economy as reflected in their higher output, value added and employment multipliers than that for the whole economy.

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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:  1166


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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More Music in Movies: What Box Office Data Reveals About the Availability of Public Domain Songs in Movies from 1968-2008

Review of Economic Research on Copyright Issues, Vol. 9, No. 2, pp. 31-54, 2012, Illinois Public Law Research Paper No. 11-23

Paul J. Heald , Peibei Shi, Jeffrey Stoiber and Qingyao Zheng

Downloads:  1165


A previous empirical study suggested that as copyrighted songs transitioned into the public domain they were used just as frequently in movie soundtracks as when they were still legally protected.That study, however, did not account for the number people who viewedeach movie in the theater. Since the debate over copyright term extension centers on the continuing "availability" of works as they fall into the public domain, a better measure of the availability of songs in movies would account for the relative box office success of the movies in which the songs appear. The present study collects box office data for hundreds of movies from 1968-2008 in which appeared hundreds of songs and concludes that public domain songs were heard by just as many people in movie theaters before and after they fell into the public domain.

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The Economics Fair Use/Dealing: Copyright Protection in a Fair and Efficient Way

Review of Economic Research on Copyright Issues, Vol. 9, No. 1, 3-46, 2012

Marcel Boyer

Downloads:  1158


The Canadian Copyright Act (R.S.C., 1985, c. C-42) includes several exceptions to the exclusive right of copyright holders. Among the most important are the provisions concerning "fair dealing", which state that the use of a copyright protected literary or artistic work for the purposes of private study, research, criticism or review, or news reporting does not constitute a violation of copyright. Our objective in this paper is to characterize the role and nature of this exception from the standpoint of contemporary economic theory and analysis and in the light of the recent Supreme Court of Canada decision on this subject (CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13). We propose in the conclusion a market based approach to maximize the dissemination of works while avoiding unnecessary recourse to the fair dealing exception.

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A Taxonomy of Empirical Research on Copyright - How Do We Inform Policy?

Review of Economic Research on Copyright Issues, Vol. 9, No. 1, 47-92, 2012

Christian Handke

Downloads:  1157


This paper summarizes key results in the empirical literature on unauthorized copying and copyright, and puts them into context. Casting the net more widely than previous surveys, it highlights noteworthy gaps and contradictions in the literature. There is initial evidence, for example, that the economic effects of digital copying vary between different industries, but these differences are not yet well understood. Most importantly, the empirical literature is unbalanced. The bulk of econometric research has focused on unauthorized copying and rights holder revenues. Little is known about the implications for user welfare, for the supply of copyright works, or about the costs of running a copyright system - and the preliminary evidence is often quite surprising. Much work on these issues remains to arrive at reasonable implications for copyright policy.

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Economics of Copyright Collecting Societies and Digital Rights: Is There a Case for a Centralised Digital Copyright Exchange?

Review of Economic Research on Copyright Issues, Vol. 9, No. 2, 3-30, 2012

Ruth Towse

Downloads:  1154


Copyright collecting societies have attracted economists' attention for over 30 years and the attention of government regulators for even longer. They have typically been accepted by economists and by courts of law as necessary for reducing transaction costs and enabling copyright to work. The advent of digitization has led to renewed interest in the topic and to the view that though new technologies offer the possibility of improved rights management, collecting societies are not responding sufficiently to these opportunities. That view was evident in recent enquiries into the role of copyright in the digital age in the UK, which proposed the formation of a Digital Copyright Exchange (DCE) that would promote online digital trade. This paper evaluates the case for the DCE in the light of what economists know about collective rights management.

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Forever Minus a Day? Calculating Optimal Copyright Term

Review of Economic Research on Copyright Issues, Vol. 6, No. 1, 35-60, 2009

Rufus Pollock

Downloads:  1153


The optimal term of copyright has been a matter for extensive debate over the last decade. Based on a novel approach we derive an explicit formula which characterises the optimal term as a function of a few key and, most importantly, empirically-estimable parameters. Using existing data on recordings and books we obtain a point estimate of around 15 years for optimal copyright term with a 99% confidence interval extending up to 38 years. This is substantially shorter than any current copyright term and implies that existing terms are too long.

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