A couple of months ago, I was at the NBER Innovation Policy and the Economy seminar. One of the presentations was by Felix Oberholzer-Gee on copyright. His paper, File-Sharing and Copyright, co-authored with Koleman Strumpf, is now available. The paper attempts to answer the question of whether reduced copyright protection (in the form of free filing sharing) has reduced production. To answer this, they set up a series of questions.
First, does file-sharing reduce the sale of copyrighted materials? There have been a number of studies apparently both ways on this question. But the authors answer is, after comparing the data across the studies and examining the methodologies, that file sharing is unrelated to changes in sales.
Second, how important are complementary sources of income, such as concerts? I've noted in earlier postings that to survive the business model in music must shift toward live performances as the major source of income. It looks like that is happening. Artists are touring more now and concert ticket prices have risen faster than inflation. Therefore "income from the sale of complements can more than compensate artists for any harm that file sharing might do to their primary activity." For example, Paul McCartney earned an estimated $65 million from concerts in 2002 and only $4.4 million from recordings and publishing. For The Rolling Stones, the figures were $40 million from concerts and around $3 million from recordings and publishing. With only a couple of rare exceptions, the top 35 earners in 2002 all made more from concerts than recordings and publishing.
Finally, does file-sharing undermine artistic production? Apparently not. They cite figures which show the number of music albums created more than doubled between 2000 and 2007. "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." Their conclusion is that "this makes it difficult to argue that weaker copyright protection has had a negative impact on artists' incentives to be creative."
As one would expect, the discussion at the meeting provoked a strong defense of strong copyright. One questioner took issue with the Paul McCartney example - stating that he had become wealthy because of the ownership of the rights to his songs, like Yesterday. Thus, they complained that weaker copyright would prevent new bands from following in the Beatles footsteps - young musician would not be able to make a living with music, as the Beatles did in the beginning by playing in clubs in Hamburg.
This response underscores the emotional attachment to the issue - in disregard of both the data presented and other facts. For example, in the McCartney case, he does not own the rights to his own songs - like Yesterday. He has invested in the right to many songs. But Michael Jackson bought the Beatles portfolio years ago. Thus his income from much of the music portfolio McCartney owns comes from his role as an investor, not as a creator.
The reference to the Beatles day's in Hamburg was especially amusing and completely off target. It displayed a complete lack of understanding on the music business and of what the paper presented. In fact, it makes the author's point: most musicians when they are starting out make their money by playing live gigs, not through recordings. The Beatles were able to get started by playing live clubs (Hamburg and Liverpool) - not because they had any royalty income from songs, which in some cases they haven't even written yet. In fact, the Beatles early live gigs were comprised other people's song as well as some of their own material. Without these "cover" these songs, the Beatles would not have had enough material to play at the clubs and refine their talent. So, in fact, it can be said that the early Beatles - like every other start up band - only survive on other people's music.
I highlight this one response to make a point. Oberholzer-Gee is trying to pull off a very difficult task: to change the terms of the debate. Rather than focus on copyright as fixed property, he is looking at it as a mechanism to increase consumer choice by stimulating artistic production. And he has come up with a conclusion in the music case, at least, that does not fit with those who argue for ever stricter protection.
Such a conclusion might not hold for all areas of copyright. For example, few authors can make a living through live performances, unlike musicians. And we all understand the problem facing the news business in generating enough revenue to paying people for content.
Nonetheless, I wish Professor Oberholzer-Gee luck in trying to re-frame the debate. After all, he is simply trying to return the copyright (and patent) debate to its original purpose, as expressed in Article I, section 8 of the Constitution: "To promote the Progress of Science and useful Arts."
(For more of Professor Oberholzer-Gee papers see his website.)