|Title:||Economic Analysis of Safe Harbor Provisions|
|Author(s):||Stan J. Liebowitz|
|Citation:||Liebowitz, S.J. (2018) Economic Analysis of Safe Harbor Provisions. Prepared for CISAC, February 27, 2018.|
|Key Related Studies:|
|About the Data|
|Data Description:||The study consists of an economic analysis of the consequences of safe harbour legislation.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:|
“Safe harbors allow User Upload Content (UUC) services such as YouTube to escape normal copyright liability and notice and takedown provisions, which were supposed to provide a less costly substitute for copyright, have been unable to keep UUC services from having an inefficient bargaining advantage when they negotiate rates for permission to use copyrighted works on their sites. Nor have algorithms such as YouTube’s Content ID been able to correct this defect. This means that UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate. Other online services (such as subscription services, e.g. Spotify and Apple Music) are at a competitive disadvantage when competing with UUC platforms. These traditional services generate lower revenues and a reduced user base because of the distorting impact of safe harbors. As a net result, copyright owners are seeing reduced copyright payments from both UUC and other services, which would appear to be very substantial.”
Main Results of the Study
The study finds that notice-and-takedown provisions are ineffective and antiquated in the face of the unprecedented growth of user-uploaded content websites. The operators of these websites have little incentive to pay fair market prices for the legitimate use of content, as their hosting is without penalty. As a side-effect, competing websites which are not based on user-uploaded content (namely e.g. permission based models such as Spotify) are placed at a disadvantage, which the author predicts will eventually drive them out of business.
These factors in combination result in lower payments to right holders, which would not be the case if the safe harbour did not exist. The author notes, based on information from Digital Music News, the various payments made to music services over 1000 streams:
Apple Music - >$12 or $7.50 (signed artists)
Spotify - Approx. $7.50 or $4.4 (signed artists)
YouTube - Approx. $1.50 or $0.70 (signed artists)
The ownership structure of YouTube in particular (being part of Google/Alphabet) may further incentivise the drive to maximise profits between the two (due to data sharing). Combined with an imperfect Content ID system (of which they have no incentive to improve), this further adds to the site’s already disproportionately high bargaining power, in turn lowering copyright payments to creators.
Policy Implications as Stated By Author
Whilst the author does not make any explicit policy recommendations, the study implies that safe harbours are not fit for purpose in the face of rapidly evolving technology, and may result in the granting of unfair competitive advantage over other platforms, as well as copyright owners.