Is Not the Price, Is the Value: Revisiting Copyright Economics

Only a fool thinks price and value are the same.

No author, artist or producer invests creativity or resources with a view of recoupment in 50 or 100 years. Empirical data indicates that the investment horizon in cultural industries is well below 10 years. There is also compelling evidence that the most intensive commercial exploitation takes place at the beginning and the end of the exclusive term. However, setting a term that rationally balances under-production and under-use of copyright works is closed as a policy option as international law stands. Though, the idea that works that are not being exploited should lose protection to the degree that they can be used by others is consistent with general principles of law. We find similar principles in the law of real property –landowner may lose title if rights are not asserted-, in competition law –compulsory licenses-, or contract law –revision and termination.

Compulsory registration of copyright works contravenes the Berne Convention, the main international agreement governing Copyright, and altering that would be extremely cumbersome, but it does not prevent the development of a national voluntary scheme. In fact, there are many ‘private-national’ registration systems, such as ISBN for books, that already require information from authors by publishers and copyright libraries. Right holders who have published works often register them with collecting society and collecting societies exist for all the valuable rights protected by copyright law. There are also private companies that have registered works for the author in order to establish prior creation and provide evidence in the event of a dispute.

A registration system would enable the eventual introduction of a renewal system into the copyright term. Copyright could become more similar to a patent by having an initial term of protection of a work, say 20 years, renewable for further terms. The advantage of this is twofold: it enables a ‘use-it-or-lose-it’ regime to function and, more relevant to the economics of copyright, it enables the market to function better in valuing a work. The vast majority of works are anyway out of print because they are deemed to have no commercial value while the copyright is still valid. Knowing that renewal would be necessary would also alter contractual terms between creators and intermediaries, thereby improving the efficiency of contracting and the prospect of fairer contracts for creators.

The regulation of collective rights administration could well be informed by more intelligent economic thinking than has so far been applied. That is a complex process that includes fragmentation of rights in a particular medium, such as music, art, literature or broadcasts, setting license fees for specific rights for their use in widely varying circumstances and developing formulae for distribution of revenues to individual right owners, including remunerations from levies and compulsory licenses and registering lists of works provided by members or others who wish to license them collectively, maintaining a database of details of right owners and distributing monies to nationals and transfer credit to sister collective rights organizations abroad. Regulation and any moves to introduce competition needs to take all these activities into account.

It seems that, finally, copyright does not always ensure a fair return for creators and performers. We should then revise the foundations for the ownership of rights, not the reward they gain. Copyright’s rewards always come through the market, even where institutional arrangements have been put in place by the state to ensure that copyright is administered fairly. And so do its costs.

There seems little reason to fear that once works fall into the public domain, loosing their actual market price, their value will be substantially reduced based on the amount or manner in which they are used. I do not claim that there are no costs to movement into the public domain, but, on the opposite side of the ledger, there are considerable benefits to users of open access to public domain works. I suspect that those benefits dramatically outweigh the costs.

It is apparent that creative industries’ interest groups regard copyright as a right that must be maintained or preferably strengthened rather than as a privileged granted for the wider benefit of society. Copyright is essentially pragmatic and based on perceived net social benefit. However, focus by policy makers on the benefits of the creative industries in the form of their size and contribution to national economies emphasizes financial benefits and ignores social benefits as well as costs. Net social benefit is contingent on the state of technology and on cultural perceptions and therefore needs reviewing as technologies and consumptions habits change but so far this has just led to additions to statutes and extensions of copyrights duration and scope. Moreover, copyright is a line in the sand, and moving the line by changing the law redistributes costs and benefits between producers, intermediaries and consumers.

Resurrecting copyright formalities may be one of the most salient ways of dealing with the current needs. Because of their inherent capacities to enlarge the public domain, to define and facilitate the recognition of copyright-protectable subject matter, to improve the licensing of copyright protected works and to enhance legal certainty for users and copyright owners alike, formalities seem fit to address the challenges that copyright is presently facing.

At the end of the day, the success of copyright depends upon how well markets function for products embodying creative works. The good old laws of supply and demand. Copyright is an intervention in the market that should help not hinder them. By increasing protection for initial works, we may increase the incentives for artistic creation, but we also increase the cost of creation that draw upon those initial works. The length of the copyright term is one way –among many ways- in which this balance is struck. Too short a term, and the incentives may not be sufficient to spur initial creation, since authors may not have enough time to obtain sufficient compensation for their efforts. Too long a term, and the work may not be widely disseminated or built upon over time.

On the digital era it would be more and more difficult to search for a price, but not necessarily for a value. Once again, live fast, die young and leave a good-looking corpse.

Pedro Letai Professor of Law, IE Law School

[This research paper has been reproduced with permission of the authors, professors of IE Business School, Spain http://www.ie.edu/]