Gower on UK copyright extentions
p2pnet.net News:- The Gower report is out. And already filthy rich corporate performers are determined to get filthy richer, taking out an expensive full page advert in the Financial Times to try to make sure its main recommendations are never adopted.
As expected, "Having reviewed the existing economic literature, we consider the case for an extension of the copyright term in sound recordings to be weak," says the Economic Evidence Relating to an Extension of the Term of Copyright in Sound Recordings, to give the study its full name.
It would be, "particularly inadvisable, given our present state of knowledge, for a rational policy-maker to extend the term of copyright in sound recordings," it states unequivocally.
But, "Paul McCartney and Robbie Williams joined thousands of other performers on Thursday in an appeal for an extension to British copyright on their recordings," says Reuters.
With the Big Four Organized Music cartel’s BPI in the wings, "fair play for musicians," demands the FT ad.
Ironically, Andrew Gowers is a FT former editor.
Cliff Richard, some of whose songs will go out of copyright in 2008, has been leading the charge, and The Beatles tunes will be in the same situation from 2012.
"The performers’ rights to control reproduction and distribution of fixation would, in most circumstances, have been (or subsequently) be assigned to 10 record companies … who as assignees would be placed in a similar position to that which they would occupy had there been an increase in the term of copyright in sound recordings," says Gower.
"If the Gowers Committee is interested in responding to the claims of performers that reform is needed so that they might continue to receive revenues (at least while they are alive), it might be worth considering providing performers with inalienable rights to remuneration rather than assignable property rights."
Meanwhile, the real beneficiaries of any copyright extention into the the 22nd century will, as usual, be Warner Music, EMI, Vivendi Universal and Sony BMG, as they are at present. As the study observes, "We accept the arguments that increasing copyright term increases revenues to the record industry."
"Fair Play" to them is a quaint phrase to be used and applied by others.
PJ Harvey, The Who and The Clash also lend their support, says the NME, going on that the advert states: "We call upon the UK Government to support the extension of copyright in sound recordings."
Click here for the recommendations in full. For now, below are its conclusions:
(i) The Basic Trade-Off. At its heart, the trade-off involved in a term extension is a fairly simple one. Benefits consist of welfare from new works created because of higher levels of expected revenue under the longer term. Costs consist of the increased deadweight losses stemming from restricted access to existing and future work due to the extension.
(ii) Retrospective Extensions and the Creation of New Work. As regards retrospective increases in term, we accept the consensus of the economics profession on this issue as summed up by Akerlof et al (2002) who state categorically that (p.
"[retrospective] extension provides essentially no incentive to create new works. Once a work is created, additional compensation to the producer is simply a windfall." Investment in current artists should be based upon the prospects of profits, not the availability of past ones. We therefore believe that retrospective term increases will have no effect upon the creation of new work.
(iii) Prospective Extensions. As regards prospective increases, after surveying the evidence, it is our view that term extension will increase the net present value of revenues for new works by 1% or less. While some authors argue that this small increase might, in some circumstances, result in a disproportionate reaction, we see nothing in the empirical evidence to make us believe that this is the case as regards current levels of production in the record industry.
(iv) The Net Effect. Given the small size of this increase, the large number of works already being produced and the likely size of the deadweight loss (particularly in relation to historical works) it is our view that a term extension will likely result in a net loss to UK society as a whole.
Using a simple depreciation model of revenue (as used by PwC) and conservative parameter values, we have attempted to quantify the overall effect on welfare, arriving at a net loss in present values terms of 7.8% of current annual revenue (approximately 155 million pounds). We note that this estimate is likely to display some sensitivity to the revenue model and parameter values used and further empirical research would be valuable, particularly to obtain more precise knowledge of the demand curve and associated variables (such as the size of the deadweight loss).
(v) Benefits to the Recording Industry. We accept the arguments that increasing copyright term increases revenues to the record industry. For retrospective extensions the 2% increase in the present value of revenues (being approximately 160 million pounds) suggested by PwC would seem plausible while for prospective extensions the figure would likely be 1% or lower. Existing literature gives little indication as to how revenues would be distributed however our research did indicate that featured recording artists would likely benefit to some extent from such an extension with typical royalties rates around 5–15%.
(vi) Costs to consumers. Existing economic theory plausibly suggests that the extension of copyright term increases costs to consumers (consumers should be construed in a wide sense to include all users of recorded music including bars, film-makers, broadcasters etc). While the immediate cost of prospective extension is likely to be small, the immediate cost of an extension applied to existing works would likely be significant. Using PwC’s figures for the benefits to the recording industry we estimated that retrospective extensions would result in costs to consumers of between 240 and 480 million pounds. We also note that with the growing digitisation of public domain resources, it is likely that many existing public domain works will be made available to the public for free. If this is so it implies an increase in the costs to consumers of a (retrospective) term extension.
(vii) Balance of Trade. Some submissions hint at significant benefits to the UK from a term extension in terms of balance of trade. However, there is little empirical evidence to support this view. While the UK record industry may make an important positive contribution to Britain’s creative economy, increasing the copyright term would subject British consumers to increased costs to the benefit of record companies outside the UK, while Britain is already able to access many of the longer terms in important foreign markets (the US, Australia) without increasing term domestically. We therefore believe that increasing copyright term in the UK from 50 to 70 (or 95 years) is likely to have a significant, negative effect, on balance of trade.
(viii) Additional Costs. We accept the theoretical arguments that increased term of copyright may impose additional costs in the form of increased tracing and transactional costs. However, beyond scattered anecdotal evidence and that of a few small scale studies, the literature provides little guidance as to their extent or significance.
(ix) ‘Stakeholder’ Arguments. The theoretical arguments that some incentive is required to induce publication, archiving and preservation activities in relation to old works seem to us to be plausible. However, we are yet to be persuaded that sufficient incentives are not provided by lead time, copyright in arrangements and other derivative works, and other intellectual property rights (such as trade marks). We share the doubts of a number of economic theorists that the need for such incentives would justify giving existing copyright holders an extended term of protection in the original work.
(x) Employment. In the time available to us, we have not been able to address the impact of a term extension on employment directly. However, given the small relative size of the revenue increases from a term extension, it is likely that other factors (such as digitization) will have a far more profound affect on employment in the music industry.
(xi) Cultural Skew. We are sceptical of claims that extending the copyright term will address the perceived issue of cultural skew. It seems to us that the UK domestic market is larger than the US market for UK music, that UK recordings will receive the same levels of protection as domestic recordings in the US and that the UK recognises broader rights which may be more valuable. Thus, it is unlikely that the size of the US market and the greater length of copyright term will lead to cultural skew. However, we note that our calculations are based on data not specifically adapted for the purpose and further work on this area may prove useful.
(xii) The ‘Irreversibility’ of Term Extensions: Implications for Decision Making. Modern systems of law regard the protection of established rights as fundamental. That is, once granted, modern legal systems rarely reduce existing entitlements and, where they do so, it is only where there is an over-riding public need and compensation is paid. The effect of the principle of respect for established rights is that it is much easier to extend copyright term than to reduce it (so much so that term extensions are likely to be ‘irreversible’). Thus any errors in policy-making, due to poor or incomplete data say, will have asymmetric effects: if term were extended now but further research over the next ten years showed the extension to have been a mistake, it would be very hard to correct this error by reducing term back to its original level; on the other hand if term were not extended and research over the next ten years showed this lack of extension to have been a mistake then it would be relatively easy to correct this error by introducing a term extension. This has two implications. Firstly, any decision to extend term should be based on stronger evidence than one to keep term at its current level. Secondly, the prudent policy-maker faced with uncertainty should prefer a course of inaction so as to keep options open and await better and more precise data. Thus, the case for an extension would have to be especially compelling to make it preferable to keeping term at its current length. This, combined with our conclusion that the case for term extension is, in fact, weak, means it would be particularly inadvisable, given our present state of knowledge, for a rational policy-maker to extend the term of copyright in sound recordings.
Also See:
filthy richer – Big Music UK copyright defeat?, November 28, 2006
Reuters – Help! Ex-Beatle Paul demands copyright fair play, December 7, 2006
NME – Kaiser Chiefs and U2 back copyright campaign, December 7, 2006
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