Contribution to Panel 5

Ruth Towse

Professor of Economics of Creative Industries,

Bournemouth University and Erasmus University Rotterdam

Topics

1. What is regulation by copyright for?

2. Did copyright ever provide an incentive to creativity?

3. Administration of copyright

4. Policy proposals

What is regulation by copyright for?

• Copyright is a clever device for getting consumers ofcultural goods to finance creativity but it has somelimitations for artists (meaning creators and performers)as well as for the rest of society.

• Copyright provides both benefits and costs to artists:benefits from protecting their work and costs in restrictingtheir access to the work of others.

My work has concentrated on the economics of copyrightrelated to artists’ labour markets, particularly the earnings

of authors and performers.

I would like to emphasise two points:

I. there has been little research on the earnings of artistsfrom all copyright sources, ie royalties and otherremuneration;

II. ii) there is no well researched evidence on the extent towhich artists and other content creators respond tocopyright incentives: are they motivated by the extramoney or perhaps more by the moral rights?

Did copyright ever provide an incentive

to creativity?1

What little evidence there is reinforces what we already know fromresearch on artists’ earnings - the top superstars earn a lot andthe vast majority of artists (authors or performers) earn very little.

There seem to be two reasons for the uneven distribution ofearnings:

i) The public has a strong preference for the work of superstars.That is something it would be hard to deal with by policy.

ii) The second reason is more amenable to policy: the ordinaryworking artist has to sell her work on through an enterprise andmost artists are in a weak bargaining position.

The share of royalties etc that artists get is relatively low: 10-15% of the retail price is standard. Most have lowbargaining power: there are usually far more artists thancompanies buying their work and those companies (atleast in the for profit sector) are typically largeinternational corporations.

• It is my belief that these corporations get a far greaterbenefit from copyright law than do the primary creators.We need to think of ways to tip the balance: however, so-called ‘strengthening copyright’ has the effect ofdisproportionately strengthening commercial enterprisesbut not the artists.

Did copyright ever provide an incentive

to creativity?2

Administration of copyright

Copyright collecting societies seem to me and to mosteconomists to be vital to the operation of copyright - bothto users and to the creators themselves – and for goodeconomic reasons (reduce transaction costs, monitoringetc).

While there are certainly problems with some of the societiesin the world, the principle of collective rights managementis sound and the policy issue should be how to improvethose with poor practices rather than replace or bypassthem.

4. Policy on copyright

One important role of economics is scepticism. Someeconomists are sceptical of the principle of copyright (andmany more criticise its duration): alternative rewardsystems have been proposed – grants, prizes, awards,honours

My view is that we should not overly rely on copyright toachieve the support we want for creativity for the reasons Ihave stated above. In addition, copyright does not rewardquality – it is indiscriminate. It works via the market andreal creativity and quality are not always recognised bythe market. This requires subsidy.

My policy proposals:

The worst problem creators have is access to finance: 8 yearsago I wrote an article proposing that there should be a staterun fund to finance artists along the lines of a student loanscheme: make loans that are repaid if the artist issuccessful and write off the rest.

Either reduce the term of copyright to 20 years or make itperpetual as proposed by Landes and Posner. (I still preferthe former!). Anyway, stop the trend to ever longercopyright that invites rent-seeking in which the strongestlobby group wins.