Updated Research Showing, Yet Again, That Weaker Copyright Has Benefited Culture And Society
from the good-news dept
Almost exactly a year ago, we wrote about a draft version of a paper from Felix Oberholzer-Gee of Harvard and Koleman Strumpf of the University of Kansas concerning the impact of weaker copyright enforcement on society. It appears that they've now updated that paper and, as a whole bunch of you have been submitting, it's finally getting some press attention. The full paper is embedded below, and is quite similar to the draft we discussed last year, but since so many people seem unfamiliar with it, we thought it was worth reposting the whole thing, and some key points from it:
The paper looks at the overall market, rather than just the narrow market for direct sales of content, and finds, as we've been pointing out for years, that the increased ability to make, share, promote and distribute content hasn't hurt the content market at all. In fact, the opposite has happened:
Data on the supply of new works are consistent with our argument that file
sharing did not discourage authors and publishers. The publication of new books rose
by 66% over the 2002-2007 period. Since 2000, the annual release of new music albums
has more than doubled, and worldwide feature film production is up by more than 30%
since 2003. At the same time, empirical research in file sharing documents that consumer
welfare increased substantially due to the new technology.
While file sharing disrupted some traditional business models in
the creative industries, foremost in music, in our reading of the evidence there is little to
suggest that the new technology has discouraged artistic production. Weaker copyright
protection, it seems, has benefited society.
One of the key points that the paper makes is that many people have difficulty (especially beforehand) in recognizing whether certain products are substitutes or complements. If products substitute for others (i.e., downloads take away from sales), then a market can be harmed. However, if the products are actually complements (i.e., more content boosts other parts of the market), then a market can actually be helped. The detailed research that Oberholzer-Gee and Strumpf go through clearly shows (pretty unequivocally) that file sharing is a complementary good that has massively boosted many different ancillary markets, and created a fantastic consumer surplus without actually decreasing output. In fact, quite to the contrary, as noted above, creative output has risen at a dramatic pace. And, when you actually look at the overall market, you see that the actual spend on these markets is increasing, not decreasing:
The role of complements makes it necessary to adopt a broad view of markets
when considering the impact of file sharing on the creative industries. Unfortunately, the
popular press -- and a good number of policy experts -- often evaluate file sharing looking
at a single product market. Analyzing trends in CD sales, for example, they conclude that
piracy has wrecked havoc on the music business. This view confuses value creation and
value capture. Record companies may find it more difficult to profitably sell CDs, but
the broader industry is in a far better position. In fact, it is easy to make an argument that
the business has grown considerably. Figure 7 shows spending on CDs, concerts and
iPods. The decline in music sales -- they fell by 15% from 1997 to 2007 -- is the focus of
much discussion. However, adding in concerts alone shows the industry has grown by
5% over this period. If we also consider the sale of iPods as a revenue stream, the
industry is now 66% larger than in 1997.
The report also takes on the policy questions, and notes (as we have so many times) that too much of the policy debate is on how to help a particular industry, which is not what copyright is intended to do at all:
Copyright exists to
encourage innovation and the creation of new works; in other words to promote social
welfare. The question to ask is thus whether the new technology has undermined the
incentives to create, market, and distribute entertainment. Sales displacement is a
necessary but not a sufficient condition for harm to occur. We also need to know
whether income from complementary products offset the decline in income from
copyrighted works. And even if income fell, welfare may not suffer if artists do not
respond to weaker monetary incentives.
From there, the report notes evidence that the income from complementary products has, in fact, increased while at the same time pointing out that artistic output is clearly not suffering. While the report notes that further study on these issues is definitely required, it's amazing that so few people are talking about this. I've brought it up to both the USTR and the IP Enforcement Coordinator, and neither seems inclined to care. Both seem wholly focused on responding to the claims of industry lobbyists that they are being harmed. But industry players failing to react is not the same thing as actual societal harm, and -- as we have pointed out repeatedly -- the entire point of copyright law is supposed to be about benefiting society as a whole.