Sunday, March 19, 2006

Optimal Copyrightability

One can regard copyright as an agreement between the state and producers where the state grants the producer a time-limited monopoly of distribution, enforces that monopoly with a police force and judicial system, and thereby provides a monetary incentive to produce arts and enrich our culture. This justification may be a little iffy, but the U.S. Constitution and many others, including me, use this line of reasoning. But there are three issues which makes the agreement rather suboptimal for the state.

Firstly, when applied to typical shrink-wrapped off-the-shelf computer programs, only the executable binary, not the more significant source code, will eventually fall into public domain. So perhaps in 2056 one would be free to distribute binary copies of the first MS Windows, but people still couldn't see how they were implemented. The source code will remain a trade secret forever, and hence enrich our culture much less than the legislators initially intended. This deficiency could be solved by requiring the source code of programs to be escrowed before the state granted it copyright, but I guess nobody believes the legislators would have the balls to require that.

Secondly, if the producer defaults in distribution, then it should become legal to copy and distribute the copyrighted work freely. For example, according to Lawrence Lessig's database of 18 million books, almost 90% of copyrighted books are out of print.

Thirdly, and most evidently, it seems copyright times are much longer than is really needed to guarantee an economical incentive for producers. To study this a little closer, I fetched the list of all 15980 accreditations granted by RIAA, deduced from them as well as I could the sales figures and release dates of all music albums, and computed some statistics. I know there are many deficiencies with this approach - for example not all artists bother to apply for accreditations or apply decades later - but it was still the best long-term statistics I could get my hands on.

Based on these statistics it seems that on average albums reach 90% of their final cumulative market share in 30 months, and 95% in ten years. I would, however, tend to claim that revenues from bargain sales of more than a few year old records are far less profitable, and hence almost all profit will be made within the decade. The only notable exception is occasional revivals of old very popular hits - for example the musical "Mamma Mia!" clearly boosted sales of two decades old ABBA hits.

Profit figures for record labels were harder to come by, but for example according to the Canadian record industry association, record label profits are around 7% of the VAT-free street price of a CD - profit ratio of the company would be much higher than that. So even given these probably very conservative profit estimates, these companies would still make profits even if the copyright period would be dropped dramatically. Absolutely no data justifies the current 3-4 generation long copyright periods.


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