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.