Liu, J (2014)
|Liu, J (2014)|
|Title:||Copyright Complements and Piracy-Induced Deadweight Loss|
|Citation:||Liu, J (2014) Copyright Complements and Piracy-Induced Deadweight Loss. Indiana Law Journal, Forthcoming; Stanford Law and Economics Olin Working Paper No. 463.|
|Key Related Studies:|
|About the Data|
|Data Description:||Data was gathered dirctly from the source so xbox prices from xbox.com and song prices on itunes from iteunes itself etc. The consumer price index was also used to compare price increases to inflation.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||Yes|
|Government or policy study?:|
|Time Period(s) of Collection:|
Conventional wisdom suggests that copyright piracy may in effect reduce the deadweight loss resulting from copyright protection because it allows the public unlimited access to information goods at a price closer to marginal cost. It has been further contended that lower copyright protection would benefit the society as a whole, as long as authors continue to receive sufficient incentives from alternative revenue streams in any ancillary markets, e.g. touring, advertising and merchandizing. By evaluating the empirical evidence from the music, performance and videogame markets, this article highlights a counterintuitive yet important point: Copyright piracy, while decreasing the deadweight loss in the music market, could simultaneously increase the deadweight loss in ancillary markets via the interaction between complementary goods. The deadweight loss in ancillary markets tends to become dominant if a substantial portion of relevant consumers have high valuation but low frequency in music consumption, are risk averse towards upfront payment with uncertain demand, and/or discount future value at a high rate. Additionally, the findings shed new lights on the current debates on several competing propositions to reform indirect copyright liabilities in the digital
Main Results of the Study
- The author hypothesises that due to increased file sharing artists cannot recoup their investment from sales of their work so they need to turn to alternative sources of income like derivative goods and merchandise.
- The author extends the idea that this causes a deadweight loss in the performance and other derivative markets because the artists need to price concert tickets higher than before in order to recoup losses from making the album for example.
- Thus, according to the author, piracy in the music industry could decrease deadweight loss in the song market but increase it in derivative markets.
The author focused on 4 areas 1. Alternative Revenue Streams 2. iPod and iTunes 3. Recorded Music and Live Performance 4. Indirect Copyright Liabilities – Public Levy and Private Ordering
- The author found the hypothesis to be supported by sales data. Comparing sales/price data to the consumer price index and seeing that the sales prices rose more in comparison to the consumer price index, for example.
- The author concluded by urging not to narrow the boundaries of property rights and instead help facilitate voluntary transactions between market players and for them on their own to discover which combination of music licensing and alternative sources of revenue was best.
Policy Implications as Stated By Author
Author urged not to narrow IPR and also for governments and other organisations to facilitate voluntary transactions between market participants.