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Drilling down into the Economics of Copyright

August 14, 2010

There is a report out recently with the catchy title of ‘The Economics of Copyright and Digitisation: A Report on the Literature and the Need for Further Research‘ by the UK’s Strategic Advisory Board for Intellectual Property Policy (SABIP).  It’s an interesting read and it seeks to set a research path on the issue of the economics of copyright:

“The report undertakes a critical overview of the theoretical and empirical economic literature on copyright and unauthorised copying. On the basis of this literature, this report also identifies the salient issues for copyright policy in the process of digitisation, and formulates specific research questions that should be addressed to inform copyright policy.” (p.7)

So what does it conclude?  Quite a lot. It concludes that there is not enough data to draw robust conclusions as to the central question around if a culture of abundant free copies damages the income of businesses built around copyright, for example:

“Some empirical studies have produced evidence that digital, unauthorised copying has asymmetric effects on creators, contrasting well-established incumbents on the one hand and fringe suppliers or newcomers on the other. Blackburn (2004) found that sales of publications by previously well-known artists are diminished as file-sharers substitute purchased copies for downloads. On the other hand, file-sharing appears to boost record sales for previously unknown artists. They seem to gain more from the additional exposure of their works than they lose due to a substitution effect.” (p71)

However they suggest that there is a slight balance of evidence pointing to it harming new production.  This contrasts with the huge US Government Accountability Office report that concluded that it is “difficult, if not impossible, to quantify the economy-wide impacts.”

The authors conclude that with more research a comprehensive policy around copyright could be developed to address the issues of illegal copyright, the market regulation rope it plays and a longer term view of it’s impact on the production of new works.  The authors also acknowledge that too much focus in on the rights of the copyright holder and not enough on the consumer:

“A particular challenge for policy-makers seems to be to develop a more balanced approach, which takes account of the full range of costs and benefits of unauthorised copying among all stakeholders. For example, surveys should target rights holders and users in order to enable a balanced assessment of the effects of unauthorised copying and the existing copyright system. Even where rights holders are concerned, surveys should address the relative weight of the benefits and costs of copyright protection and unauthorised copying. At the moment, there is still a tendency to focus on rights holders’ benefits only. The costs of copyright for follow-up innovation and for consumers require greater attention.” (p.91)

However, I feel that what this report is missing is a wider context (though they do touch on the issues): copyright ceased to be about only the economic side of the equations some time ago and we not see it being deployed as a proxy-means of censorship (for example via DMCA takedown notices), as a means of business strategy (for example see the YouTube vs  Viacom battle) and as a means of political expressions (for example the rise of single-issue ‘Pirate Parties‘).

There is also no discussion on the costs, practicalities and impacts of enforcing any given system (never mind the same questions around the system itself).  For example figures emerged on the net looking at the costs vs the monies recovered from copyright lawsuits in the US where $17 million was spent to recover just under $400K.  It appears that it costs much more to sue than you recover – but then I’m assuming the legal actions are part of a strategy that looks further than recovered money into areas such as deterrence?

In short copyright is a bigger issue and it needs to be addressed in a bigger arena than just economics – it’s interlinked with culture, politics and technology too.  To understand it is to look at all of these.

(Also published on the p2p foundation blog Hat-tip to Michel for the initial link thanks.)

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