Copyright and Economic Viability: Evidence from the Music Industry

• Date: 01 December 2020
• DOI: http://doi.org/10.1111/jels.12267
• Author: Justin McCrary,James Hicks,Kristelia García
• Published date: 01 December 2020

Journal of Empirical Legal Studies

Volume 17, Issue 4, 696–721, December 2020

Copyright and Economic Viability:

Evidence from the Music Industry

Kristelia Garcı

´a, James Hicks,*and Justin McCrary

Copyright provides a long term of legal excludability, ostensibly to encourage the produc-

tion of new creative works. How long this term should last, and the extent to which cur-

rent law aligns with the economic incentives of copyright owners, has been the subject of

vigorous theoretical debate. We investigate the economic viability of content in a major

content industry—commercial music—using a novel longitudinal dataset of weekly sales

and streaming counts. We f‌ind that the typical sound recording has an extremely short

commercial half-life—on the order of months, rather than years or decades—but also see

evidence that subscription streaming services are extending this period of economic viabil-

ity. Strikingly, though, we f‌ind that decay rates are sharp even for blockbuster songs, and

that the patterns persist when we approximate weekly revenue. Although our results do

not provide an estimate of the causal effect of copyright on incentives, they do put bounds

on the problem, suggesting a misalignment between the economic realities of the music

industry and the current life-plus-70 copyright term.

I. Introduction

Creative works are widely understood to have a “non-excludability” problem. Once publi-

shed, books, songs, television shows, and movies are cheap to copy and share, which in

many cases may limit the rightsholder’s ability to appropriate the value of her work. Eco-

nomic theory predicts that this will lessen incentives to write, sing, and make f‌ilms. In

*Address correspondence to James Hicks, 395 Simon Hall, Berkeley, CA 94720; email: james.hicks@berkeley.edu.

Kristelia Garcı´a is Associate Professor of Law at the University of Colorado, Boulder; Hicks is Academic Fellow at

the University of California, Berkeley, School of Law; McCrary is Paul J. Evanson Professor of Law at Columbia

University.

For helpful discussions and comments, we thank two anonymous referees, David Abrams, Darren Filson, Josh

Friedlander, John Golden, Paul Heald, Zorina Khan, Glynn Lunney, and participants at the Conference on Empir-

ical Legal Studies in Claremont, the American Law & Economics Association Annual Meeting in New York, and

the Society for Economic Research on Copyright Issues in Montpellier. The dataset analyzed in this project is

owned by the Nielsen Company, and used under license.

©2020 The Authors. Journal of Empirical Legal Studies published by Cornell Law School and Wiley Periodicals LLC.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited.

696

response, the law provides a limited property right in many kinds of creative work. Copy-

right provides a narrow and time-limited period of legal excludability, during which the

owner of the right can prevent others from—among other things—copying, performing,

displaying, or making derivatives of her work, and can therefore command above-mar-

ginal-cost returns in the marketplace. This policy mechanism prompts a canonical legal

design question: For how long should a copyright last?

The duration of copyright has long been a fraught public policy question.

Although there has been signif‌icant academic attention to the topic within both the eco-

nomics and legal literatures, much of the debate has played out in the political sphere.

After a succession of trade deals,

1

legislative extensions,

2

and Supreme Court decisions,

3

the current U.S. copyright term for most works now subsists for the lifetime of the author

plus an additional 70 years.

4

(Corporate works—also known as “works for hire”—have a

slightly different term, but for all intents and purposes enjoy a similar duration of protec-

tion.) While the political debate in the United States has tapered in recent years, concern

about term length remains salient in many jurisdictions where it is still an active policy

issue.

5

Proponents of longer terms argue that they are essential to incentivize new crea-

tions, and that they encourage owners to continue to be good stewards of their works

long after initial release (Landes & Posner 2003). Opponents contend that long terms

vastly over-reward a select few copyright owners and create an unnecessary thicket of con-

f‌licting property rights, stif‌ling future creativity (Heller 2010).

Despite this long running debate, relatively little evidence has been introduced

about the economic characteristics of commercial copyrighted works. Yet from a theoreti-

cal perspective, this is a key threshold question. As with other intellectual property

(IP) rights, copyright is ostensibly designed to provide a f‌inancial incentive to produce

creative works. However, for an individual creator or prospective copyright owner, the

incentive operates only for the period during which its owner expects her work to be via-

ble in the market. This detail prompts several empirical questions, on which there is sur-

prisingly little hard evidence. How long does the typical copyrighted work maintain its

commercial viability? Over what period should a creator, artist, or intermediary

rightsholder expect a return?

1

See, e.g., TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh

Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994).

2

See, e.g., Sonny Bono Copyright Term Extension Act (1998) [hereinafter CTEA].

3

See Eldred v. Ashcroft, 537 U.S. 186 (2003), in which the Court upheld the constitutionality of the retroactive

term extensions contained in the CTEA.

4

The Berne Convention, to which most nations are party, provides for a minimum duration of 50 years plus the life

of the author, but signatories are free to set longer terms. Berne Convention for the Protection of Literary and

Artistic Works, Sept. 9, 1886, as revised in Paris on July 24, 1971 and amended in 1979, Art. 7.

5

In recent years, the United States has used trade agreements as a vehicle to encourage other countries to extend

the durations of IP protection. For example, the United States-Mexico-Canada trade agreement (so-called NAFTA

2.0) will extend Canadian copyright terms from 50 to 70 years plus the lifeof the author. See,e.g., Geist (2018).

Copyright and Economic Viability 697