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.

Filed Under: benefits, copyright, felix oberholzer-gee, koleman strumpf, society

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  1. icon
    Hephaestus (profile), 21 Jun 2010 @ 12:50pm


    "further, it is clear that revenues are not in line with the increases in product created, which means the average take per product is lower."

    Thats just basic economics, the market is swamped with content and the price goes down. With newer and better software for music and video creation the amount of quality content will go up. With the increase in the content available the consumer, price will be driven towards zero. This will fit nicely under a bell curve with the top 5% being what people will pay for.

    "short term benefits to society of wider availablity may appear good, but once the financial motivations are taken away from the producers of higher end / higher cost content, they will just stop producing at those levels."

    Actually you are wrong. Technology will be the solution to this. Virtual sets, CGI done on GPU machines, sound and video editting software, online resources like Google SketchUp, 1080P and 3D cameras for a few hundred dollars, project software, and collaboration tools will make large scale production cost drop. In five to ten years the processing power to do Avatar will be available on a mid to high end workstation.

    "a study that actually looked at the longer term implications of this cycle might be much more useful and revealing."

    Disruptive technologies have always interested me. I have been forecasting the trends of the internet as a disruptive technology for a while now. It doesnt bode well for the newspapers, record labels, and studios. They collapse in different countries at different rates. The collection societies fail 2-3 years later. Infringement plays a part. The true cause of the failure is competition from both inside and outside the industries.

    We started out with the record labels having a monopoly, add to that 2,000,000 plus bands on facebook and myspace. Its called competition.

    We started out with 4 - 5 TV stations in any market ABC, NBC, CBS, PBS, and a local or two. We now have cable systems with over 200 stations. There are only so many advertising dollars to go around. Again its called competition.

    The external competition also eats into the record labels, and studios profits. Gaming, e-mail, texting, farmville, blogging, surfing the web, chatting online, etc all add to the competition for our "limited" time and money.

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