The Inspiration

Today’s copyright law in the US and the UK only serves the interests of a minority of participants in the creative industries and the knowledge economy. The debate in Britain about the Digital Economy Bill is actually trying to avoid confronting whether the UK and by implication the World’s intellectual property law framework is fit for the 21st Century.  Jessica Litman at the University of Michigan’s Law School has published a paper called Real Copyright Reform, see the Abstract & Download, in which, among other things, she argues there are four roles, and its her paper that inspired my blog snip, Copyright Stake Holders, dated 30th March, and that copyright law needs to serve a balanced interest of all participants. (Interestingly she misses the interests of non participants).

Early in the paper she states that,

A copyright system is designed to produce an ecology that nurtures the creation, dissemination and enjoyment of works of authorship.

and so her four roles are creator, distributor, maker and consumer.

The Distributors

The current settlement is disproportionately in the favour of one player, i.e. the distributor and she questions whether the settlement meets its goals. The bulk of economic value accrues to the distributors, because once upon time, that’s where the bulk of the cost was, it required capital investment and risk taking. Capital could only be acquired by Joint Stock Companies. Times have changed and as I have argued we need a new fair settlement that in Ms Litman’s words “produces an ecology”, and I think she agrees.

The distributor/publisher company’s profits are at the expense of the economic interests of the other players; their economic power is distorted and enhanced by the monopolistic powers in the market. These powers are based partly on their size, but also based on the legal rights conferred by copyright ownership and law. A market is monopolistic if a supplier’s output decisions change the price. The whole copyright enforcement argument is about maintaining that ability, and if you want a piece of copyrighted music you need to pay their tax. The music industry argue that they need to maintain their commercial pre-eminence in order to identify, nurture and market new acts. The costs and expense involved in marketing and artist development are market inefficiencies which are classic monopoly barriers to entry, see the Economist. It is a nonsense for public policy to reinforce a monopolists power in order to allow them invest in stronger barriers to entry. Yet this is what the Government propose to do in the UK and it seems the rest of the world.

The Makers

Litman shows that the distributors have been at a 200 year war with what she calls the Makers. Its only 200 years old because she is dealing with US law, in Europe, its probably been going on longer. She defines the makers,

This is the group of people and businesses who make instruments, devices and services designed for the enjoyment of copyrighted works. This category comprises trumpets, pianos, violins, radios, televisions, tape recorders, computers, DVD players, ebook readers, and iPods.

When I first read the article, I thought her review  of the relationship between makers and rights holders was quite amusing. Somehow including trumpet makers as copyright infringers seems so ludicrous as to be funny, but when you see the persistent record of pursuit, from trumpets, to pianos, to pianolas,  to hospitality venues, to radio stations, radio and radio cassette manufacturers , jukebox manufacturers, to audio and video tape manufacturers, to cd & entertainment centre manufacturers and on to computers, MP3 players & ipods, it becomes less funny. Interestingly, they haven’t gone for smart phones yet, but its probably only a matter of time. In most cases, the rights holders have initially lost in court, and sometimes they have got the law changed in their favour and some times not. Today, its the turn of the internet, however there are several problems for the rights holders.

There’s a lot of us and we all vote, the internet and the IT that connects to it has more purposes than consuming artistic works, and it was invented by a group of people who, rightly,  have a very different culture of knowledge management to corporate music, i.e. academia and the military. Academic study, and the pursuit of science & knowledge has always involved sharing, publication and peer review. As the dominant copyright beneficiaries seek to place legal liability on masses of people who have historically had no interest in copyright markets, more and more the equity and moral value of the current settlement will be challenged.

The other huge problem is that the makers are innovators, and if you look at the list above they always have been. They create markets and new business models and the level of reward that rights holders and their supply chain should appropriate changes, and in most cases diminishes. The new markets rely more  on the makers, and less on the distributors. Industrial Music can’t earn what they used to, the development of specialisation has reduced their value to the finished product, this is why in the case of music, artists are returning to live performances in that a higher proportion of their earnings comes from live work.


If one accepts that its the distributors who by exercising monopoly power obtain a disproportionate share of the money and profit its clear who’s paying for this. Its the authors and consumers. If one looks at the UK music business, Fergal Sharkey, Chief Executive of the BPI, stated on the Panorama Show that the median wage for a british musician was £15,000, actually he didn’t say median wage, because that’s too specific, can be measured and challenged. He said something like, “the majority of British musicians earn under £15,000 p.a.”. To put this, and his, Bono’s, and Simon Cowell’s wealth in context, the average UK wage is £20,000. Sharkey’s “fact” is almost certainly an over-estimate. I was doing some anecdotal fact finding, and a musician stated to me that, “the majority of live acts in this country pay to play music” i.e. their income is less than zero. If copyright and Industrial Music are the answer to the continued creation of diverse and enjoyable works, the identification and nurturing of new acts then I think it might be found wanting.

Many author/performers argue that free downloading denies them their living, but I question if improving copyright enforcement will help them. It takes size and wealth to enforce the copyrights. Only the rich i.e. the corporations can pursue the new criminals, it won’t help musicians, it won’t help those without a contract.  I know of no musicians/bands without a contract who believe the current music business is fair and that today’s copyright regime is a good starting point to consider the future. None support the Digital Economy Bill.

So just what is the economic model that proves an increase in revenue for the distributors means an increase in revenue for the author/creators? Trickle down?

I see that if a royalty deal is signed, then its obvious, but are most music contracts signed with royalty payments? It seems to me that the willingness to sign poor contracts is part of the selection criteria; while producing music that sells is important reason for signing an artist or band, there’s a lot of people that can do that, particularly once Industrial Music’s marketing budgets get behind a band or album. The inequity of any negotiations between an unknown musician and distributors was explored in the British court case in 1993, where George Michael sought to have his contract with Sony overturned; he failed. While it is hard to have any sympathy with George Michael, most people on under £20,000 p.a. will think him well enough paid, the case explored in some detail the one sided nature of any negotiations that might and do occur. Sony acquired George Michael’s contract and copyright by buying another company. For more on the court case, see Wikipedia’s article, George Michael vs. Sony.

There are copyright reforms that could benefit the authors. The lengthening of the copyright contract and protection period is not in the author/creator’s interests. Litman in her paper, identifies that before the US  Congress made copyright renewal automatic, Distributors would usually let their rights lapse returning them to the author, today however, once its sold, its sold, even if the rights holder i.e. the licensee no longer wishes to monetize or distribute the asset. Today’s copyright law fails to place a duty of maintenance, and permits abandonment, and neither authors nor fans can legally use this material because “Copying is theft”.  This seems particularly egregious in the case of the original creator/author but is wrong in the case of anyone else as well; it’s an inhibition/constraint on innovation. Litman argues that a statutory right to revoke a copyright assignment would be a positive measure.

I have changed my mind slightly due to debates with some of the saner author’s rights correspondents, but I started from the position that resources should be available at their opportunity cost. The opportunity cost is the next best use for that resource/asset.  In the case of digital content this is near zero. I think that some protection of authors rights needs to be developed to protect against industrial scale theft but this bill is about the profitability of parasitical corporate entities not creativity. Neither authors nor distributors have a right to tax consumption or receive money for not working. The rest of us have to work i.e. rent our time, why should you be any different. Its the business model that needs to change. Furthermore with a few exceptions, artistic authors do not get their fair rewards from what they create and it is the copyright laws that allow and reinforce this.

We need a new fair copyright law in the interests of all players and this would benefit everyone. Musicians and their Union should be against the DE Bill  and in favour of copyright law reform. A reform that enhances the rights of creators.

The Consumers

These are the people that pay for it all. I started my intellectual journey to the view that digital content should be free in the commercial IT world.  Software, data and now new media content should be available at the opportunity cost. In a capitalist society, we use a market approach to ensure the bulk of goods and services are available at a price that reflects the costs to make/deliver. This means that people and things need to be rented, and bid for against other uses. Ideas, have also historically been bought and sold at a cost to acquire, we used to buy books, or academic papers, but in the digital world, this cost is near zero and the supply is infinite.  A monopoly will charges more than the cost to construct and that surplus is a super-profit or non-government tax. (In this economic model, corporate profits are a rent on entrepreneurship, and should also be subject to market forces).  Lets bear in mind the majority of people paying this tax don’t earn very much themselves.

Free is the right price for digital content.

The Guardian published an article called There is no UK music business without the fans – so look after them, in which they explore the anomaly that free down loaders seem to spend more on music, than those that don’t. This is because they like music. As the Guardian says,

if anyone’s a “new partner” in the music business these days, it’s the fans. They’re the ones promoting the music on social networks, uploading fan videos and homebrew remixes. They’re creating the atmosphere that makes live music more of a draw than ever before, they’re the ones buying – yes, buying – more singles than at any time in British music history.

But here’s the problem, the money isn’t there, monopoly eliminates competition and creates high prices which the consumer can’t afford. The scarcity in this market is purchasing power.

A new copyright settlement is required. Innovation in ideas is one of the growth engines of the economy, and the input is other ideas.  Earlier this week, the Ordnance Survey, finally agreed to release their information, (see this BBC Report) that we as tax payers have had to pay for collection, for use by anyone. This is partly the result of a long term campaign to have the government use the internet to make its data available to those who’ve paid for it, so they can innovate. Why is the Government going in one direction on its data and another for music and film?  Mashups create value in the commercial world but are also a growing important hobby activity, one that’s brining new fans to  music. Pursuing the line that the distributors need more rights so they can punish their customers will kill them. They’re pretty lonely now, just immensely wealthy and can afford the legislation the best lobbyists can buy.

Litman argues in her paper that  consumers need new rights. I agree.  We need the right to use, including a rock solid fair use clause, that includes the right to create new non-commercial derived works,  the right to backup, the right to enjoy the works immaterial of consumption method i.e. format switching should be unquestionably legal, sharing within a family should be legal, time shifting should be legal. Litman explores the idea that all non-commercial re-use should be a consumer right, but places this in the context of the first sale doctrine i.e. end user consumers should pay something for a right to do with as they choose. If an academic such as Litman can argue that non-commercial use should be a consumer right, then who am I to disagree.

The current copyright law works disproportionately in favour of the distributors, it should be reformed in light of its true purpose which is nurturing creativity, not corporate profitability.

The Digital Economy Bill’s clauses on file sharing and web blocking  does not improve things, its not in the interests of musicians, nor fans, nor the makers, nor non-participants in the market. It should be sent to Committee and restarted in the  new parliament.


While comments on this page closed a long time ago, you can can comment at my Intellectual Property Page on my companion wiki.

Real Copyright Reform
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