Paper Draft: Napster Good? Welfare Economics Analysis of Music Infringement

I previously suggested that music copyright might be inefficient, because it prevents uses with a positive social welfare value and no social welfare cost. I've now expanded that idea into a paper, using public quotes about the level of filesharing to try to estimate its positive and negative effects:



In this drawing, the smaller checked rectangle represents the potential social welfare cost of filesharing, and the dotted triangle represents the social welfare gains from filesharing. As you can see, it's very possible that the gains outweigh the losses. (In fact, the balance is even more one-sided, because the gain recaptures what would otherwise be a pure deadweight loss, while the "loss" is actually a wealth transfer.)

To see how I got there, check out the paper here. (The footnotes are sparse and badly formatted at this point -- if anyone has pointers for stuff that should be in there, or other suggestions, I'd appreciate it.)

RIAA Incredibly Infuriating

We've talked before about the unreal damages for infringement of song files, which at a rough estimate might come to some 1.8 Quadrillion dollars per year.

Now I would think that damages amounting to 27 times the world GDP would be enough, but for the Recording Industry Association of America, that's just the beginning. Their platform for the future of music includes:

• Dramatically Increasing Copyright Damages: the PRO-IP Act the RIAA is pushing would treat each track on a duplicated CD as a separate infringement, increasing the damages for sharing a 10-track CD with your friends from $150,000 to $1.5 million.


• Grabbing A Bigger Cut: the RIAA is arguing before the Copyright Royalty Board that the fee paid to songwriters and publishers for each file sold in online stores should be reduced from 9 cents to 6 cents. (The artists themselves make about 5 cents on the dollar, of course).


• Taking Over Your PC: Wendy previously noted that the RIAA is asking ISPs to filter traffic -- an expensive and invasive technology that can be trivially defeated by the same technology that protects your credit card number in online purchases. Their solution would require every computer user to run special software in order to access the internet, constantly monitoring your traffic in case you do anything wrong.

Normally we talk about law and policy here, but I have to admit I didn't assemble those stories to make a coherent point. The fact that this Association has more voice in Congress on IP issues than, well, every music consumer combined? That physically hurts. That's all I wanted to say.

ISPs on Filtering

According to the New York Times Bits blog, Verizon Rejects Hollywood’s Call to Aid Piracy Fight. While AT&T was looking to work with copyright complainants to filter network traffic, Verizon expressed concern that voluntary filtering would lead to pressure to filter more and might lose the benefits of the DMCA safe-harbor.

Across the ocean, music companies represented by the International Federation of Phonographic Industries have sued Chinese search portal Baidu.

"Pirate Bay hit with legal action"

Don't know if this was mentioned in class already, but the International Federation of the Phonographic Industries (as well as the RIAA and MPAA) have been after a Swedish site, The Pirate Bay, that posts links to torrents of copyrighted material and receives advertising revenues. Now charges have actually been filed in Sweden for conspiracy to break copyright law, with major studios among the body of plaintiffs.

John Kennedy, chairman and chief executive of global music body, the International Federation of the Phonographic Industries, said: "The operators of The Pirate Bay have always been interested in making money, not music.

"The Pirate Bay has managed to make Sweden, normally the most law abiding of EU countries, look like a piracy haven with intellectual property laws on a par with Russia."

And for the personal touch, a BBC reporter goes Inside the Pirate Bay warship, where no major changes are expected as a result of the litigation. The Pirate Bay has even set up servers in other countries, just in case:

Some of these are within the EU but others are further afield - in case the EU decides to lend support to a Swedish ruling against The Pirate Bay - or other European nations come under pressure to take similar action.

Content Industry Conspiracy

So...I was reading through the article "Wired Shut" and came accross the point in the article that discusses how industry groups (content owners and technology manufacturers) got together to come up with a plan to protect digital broadcasts. The industries got together to discuss what would be the most advantageous plan for themselves, came to a self-serving agreement, and then presented that agreement to the FCC to endorse. I am doing my paper topic on the effect of the DMCA on fair use, and many of the articles/books that I have read have discussed how members of the content industry got together to come up with a plan to protect themselves from the great threat of "piracy". This group then presented this plan to Congress, which pretty much signed off on it, and it became the DMCA. I am just wondering who is looking out for the public during the planning and enactment of all of these schemes to change copyright law? It seems to me that it is Congresses' job to balance the public interest with the rights of copyright owners; after all the original purpose of copyright was to benefit the public. Congress seems to have done a poor job of protecting the public interest, but they have done a really good job of protecting industry interests.