The Case for Copyright Reform (12 page)

The direct impact on sales of file sharing is minimal (though it depends
on the category). In fact, the only areas actually in trouble right now may be
the sale of plastic discs (CDs and DVDs), but much of the damage has nothing to
do with file sharing, and there are indications that the “lost” money can be
made up in other ways. The report recommends moving away from criminalizing
user activities, and focusing instead on encouraging new business model
development. A quick excerpt from the conclusions:

The short-term net welfare effects of file
sharing are strongly positive given that it is practised by consumers whose
demand is driven by a lack of purchasing power. To the extent that file sharing
results in a decline in sales, we see a transfer of welfare from
operators/producers to consumers, with no net welfare effect.

The market for CDs and the market for
DVD/VHS rentals are the only sectors of the entertainment industry that are
suffering from a slump in sales. Whereas this may be attributed in part to
file-sharing activity, file sharing is not solely to blame for the decline. The
markets for DVDs and console games continued grow impressively after P2P
services were introduced, and the cinema market showed sustained growth between
1999 and 2007. The total entertainment market has remained more or less
constant, suggesting budget competition among the various products.

As long as the markets for games and films
are on the rise or remain stable, there is little reason for concern that the
diversity and accessibility of content is at stake. File sharing has
significantly enhanced access to a wide and diverse range of products, albeit
that access tends not to have the approval of the copyright holders.

In other words, pretty much everything that plenty of folks around here
have been saying for a better part of a decade is pretty much true. File
sharing isn’t damaging – and, in fact, can represent a net economic
improvement, and the business troubles faced by a few small parts of the
industry are really business model challenges, rather than legal ones. The
report makes it clear that focusing on legal solutions to dealing with file
sharing is a big mistake that tends to only backfire and seems to be totally
misdirected.

Harvard Study Finds Weaker Copyright
Protection Has Benefited Society (2009)

Canadian law professor
Michael Geist
wrote in 2009
:

Economists Felix Oberholzer-Gee and Koleman Strumpf have just
released
a new Harvard Business School
working paper
called File
Sharing and Copyright that raises some important points about file sharing,
copyright, and the net benefits to society. The paper, which includes a helpful
survey of the prior economic studies on the impact of file sharing, includes
the following:

1. The data indicates that file sharing has not discouraged creativity,
as the evidence shows significant increases in cultural production. The authors
note that:

Overall production figures for the creative
industries appear to be consistent with this view that file sharing has not
discouraged artists and publishers. While album sales have generally fallen
since 2000, the number of albums being created has exploded. In 2000, 35,516
albums were released. Seven years later, 79,695 albums (including 25,159
digital albums) were published (Nielsen SoundScan, 2008). Even if file sharing
were the reason that sales have fallen, the new technology does not appear to
have exacted a toll on the quantity of music produced. Obviously, it would be
nice to adjust output for differences in quality, but we are not aware of any
research that has tackled this question.

Similar trends can be seen in other creative
industries. For example, the worldwide number of feature films produced each
year has increased from 3,807 in 2003 to 4,989 in 2007 (Screen Digest, 2004 and
2008). Countries where film piracy is rampant have typically increased
production. This is true in South Korea (80 to 124), India (877 to 1164), and
China (140 to 402). During this period, U.S. feature film production has
increased from 459 feature films in 2003 to 590 in 2007 (MPAA, 2007).

Given the increase in artistic production
along with the greater public access conclude that “weaker copyright
protection, it seems, has benefited society.” This is consistent with the
authors’ view that weaker copyright is “unambiguously desirable if it does not
lessen the incentives of artists and entertainment companies to produce new
works.”

2. The paper takes on several longstanding myths about the economic
effects of file sharing, noting that many downloaded songs do not represent a
lost sale, some mashups may increase the market for the original work, and the
entertainment industry can still steer consumer attention to particular artists
(which results in more sales and downloads).

3. The authors’ point out that file sharing may not result in reduced
incentives to create if the willingness to pay for “complements” increases.
They point to rising income from performances or author speaking tours as
obvious examples of income that may be enhanced through file sharing. In
particular, they focus on a study that concluded that demands for concerts increased
due to file sharing and that concert prices have steadily risen during the file
sharing era. Moreover, the authors canvass the literature on the effects of
file sharing on music sales, confirming that the “results are decidedly mixed.”

The authors were one of the first to challenge the early claims about
the effects of file sharing. Years later, many other economists have followed
suit (including the
study
funded by Industry Canada). This latest paper does a nice job of expanding the
discussion, by using the data to examine incentives for creativity and the
effects on aggregate creator and industry income.

The Hargreaves Review Of UK IPR Policies
(2011)

The UK government commissioned a review of its policies on copyright,
patents and other intellectual property rights (IPR), which was presented in
May 2011. The review was done by
Professor Ian
Hargreaves
, who holds the Chair of Digital Economy at the Cardiff
School of Journalism, Media and Cultural Studies and Cardiff Business School.

The resulting
Hargreaves
Review
(pdf, 130 pages) is very interesting reading.

One thing should be made absolutely clear: The Hargreaves Review is not
a ”Pirate Manifesto”. It is written from a general pro-IPR perspective, and
there are many cases where the Pirate Party disagrees with the proposals made,
or thinks that they do not go far enough. In particular, the Review offers no
solution to the problem of illegal file sharing, other than the usual
enforcement/education policy that has failed so spectacularly for at least a
decade.

But if we leave that aside, there are many positive concrete
recommendations in the Review that deserve to be taken seriously.

Evidence-based policy making
is the first thing that the Review calls for. Already
in the Foreword, it says:

We urge Government to ensure that in future,
policy on Intellectual Property issues is constructed on the basis of evidence,
rather than weight of lobbying…

This is indeed an area where there is much room for improvement. In the
Executive Summary, the Hargreaves Review states:

The frequency of major reviews of IP (four
in the last six years) indicates the shortcomings of the UK system. In the
1970s, the Banks Review deplored the lack of evidence to support policy
judgments, as did the
Gowers Review
five years ago. Of the 54 recommendations advanced by Gowers, only 25 have been
implemented. On copyright issues, lobbying on behalf of rights owners has been
more persuasive to Ministers than economic impact assessments.

On copyright, the Review first of all advocates a ”digital copyright
exchange [that] will facilitate copyright licensing and realise the growth
potential of creative industries”.

Although it would cause no harm if somebody feels like trying to
establish such an exchange under today’s copyright legislation, it is very
doubtful if this would be enough to solve the problem of easy pan-European
licensing, and to lay a foundation for Europe as a Digital Single Market.

But there are other very constructive suggestions. The Review states in
its Recommendations:

4. Orphan works.
The Government should legislate to enable licensing
of orphan works. This should establish extended collective licensing for mass
licensing of orphan works, and a clearance procedure for use of individual
works. In both cases, a work should only be treated as an orphan if it cannot
be found by search of the databases involved in the proposed Digital Copyright
Exchange.

5. Limits to copyright
. Government should firmly resist over regulation of
activities which do not prejudice the central objective of copyright, namely
the provision of incentives to creators. Government should deliver copyright
exceptions at national level to realise all the opportunities within the EU
framework, including format shifting, parody, non-commercial research, and
library archiving. The UK should also promote at EU level an exception to
support text and data analytics. The UK should give a lead at EU level to
develop a further copyright exception designed to build into the EU framework
adaptability to new technologies. This would be designed to allow uses enabled
by technology of works in ways which do not directly trade on the underlying
creative and expressive purpose of the work. The Government should also
legislate to ensure that these and other copyright exceptions are protected
from override by contract.

All in all, the Hargreaves Review is well worth reading for anyone who
takes an interest in IPR policy. Although the Review is written from a UK
perspective, most of the reasoning is equally relevant at the EU level and in
other member states.

But the most interesting question is of course to what extent the UK
government will follow the Hargreaves recommendations. Unfortunately, only a
couple of months after the Hargreaves report was published, we all got a sharp
reminder of what the political reality still is. One of the strongest and most
unequivocal recommendations of the Hargreaves report was not to extend the
protection time for recordings from 50 to 70 years, since there would be a
deadweight loss to society and no incentivising effect on the cultural sector.

So, what did the UK government do? In September 2011, four months after
it got the Hargreaves report on its table, it pushed for a copyright term
extension in the EU Council of Ministers, and got it through.

Having the studies is one thing, getting the policy-makers to read them
and act upon them is another. But having access to the studies and knowing what
they say brings a clear advantage to anybody interested in policy-making in the
copyright field.

The Proposal Revisited

Let’s have a more in-depth look at the proposal that was presented in
Chapter 2. This is what the Pirate Party and the
Greens/EFA
group in the European Parliament
propose:

• Moral Rights Unchanged

• Free Non-Commercial Sharing

• 20 Years Of Commercial Monopoly

• Registration After 5 Years

• Free Sampling

• A Ban On DRM

Taken together, these points constitute a proposal for copyright reform
that solves 99% or more of the problems today’s copyright legislation is
causing, while at the same time allowing 99% or more of the business models
that are viable today to continue to be viable.