As you likely know by now, the Republican Study Committee published a briefing paper critical of copyright, but then later pulled it down claiming the memo had not received adequate review. Some have suggested that IP-industry pressure may have led to the reversal. I hope we will find out in due time whether the paper was indeed reviewed and approved (as I suspect it was), and why it was removed. That said, I think what this take-down likely shows is a generational gap between the old, captured, and pro-business parts of the Republican Party and its pro-market and pro-dynamism future.
I also hope that this dust-up sparks a debate within the “right” about our bloated copyright system, and so it’s propitious that in a couple of weeks the Mercatus Center will be publishing a new book I’ve edited making the case that libertarians and conservatives should be skeptical of our current copyright system. It’s called Copyright Unbalanced: From Incentive to Excess, and it is not a moral case for or against copyright; it is a pragmatic look at the excesses of the present copyright regime and of proposals to further expand it. The book features:
- Yours truly making the Hayekian and public choice case for reform
- Reihan Salam and Patrick Ruffini arguing that the GOP should take up the cause of reforming what is now a crony capitalist system
- David Post explaining why SOPA was so dangerous
- Tim Lee on the criminalization of copyright and the a use of asset forfeiture in enforcing copyright
- Christina Mulligan explaining that the DMCA harms competition and free expression
- Eli Dourado calculating that the system we have today likely far exceeds what we need in order to offer authors an incentive to create
- Tom Bell suggesting five reforms for copyright, including returning to the Founders’ vision of what copyright should be
Conservatives and libertarians, who are naturally suspicious of big government, should be skeptical of an ever-expanding copyright system. They should be skeptical of the recent trend toward criminal prosecution of even minor copyright infringements, of the growing use of civil asset forfeiture in copyright enforcement, and of attempts to regulate the Internet and electronics in the name of piracy eradication. I think our movement is very close to seeing that copyright reform is not just completely compatible with a respect for property rights, but a limited-government project. We hope our book will help make the case.
Also, the Cato Institute will be hosting a lunchtime book forum on December 6. Tom Bell and I will present our views and Mitch Glazier of the Recording Industry Association of America will respond. Please RSVP to attend and tell your colleagues.
Stan Liebowitz on copyright and incentivesStan Liebowitz, Ashbel Smith Professor of Economics at the University of Texas at Dallas, discusses his paper, “Is Efficient Copyright a Reasonable Goal?” According to Leibowitz, economists could hypothetically calculate the exact copyright terms necessary to incentivize creators to make new works without allowing them to capture “rents,” or profits above the bare minimum necessary. However, he argues, efficiency might not be the best goal for copyright.
Liebowitz argues from a fairness or justice perspective that society should not favor an economically efficient copyright law, but one that treats creators of copyrighted works the same as workers in other types of industries. In other industries, he argues, workers are allowed to capture and keep rents.
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A few weeks I wrote an [intentionally provocative post](http://jerrybrito.com/2012/07/25/how-copyright-is-like-solyndra/) comparing copyright to Solyndra. My argument was that just as Congress has a knowledge problem and a public choice problem picking the right technologies to subsidize, so does it have these problems when it comes to picking winners and losers when it comes to setting out the contours of copyright.
I’m grateful for all the [wonderful feedback](https://plus.google.com/u/0/117169003326996777677/posts/TjzX6ZHLTK6) I got on that post, and I agree with those who pointed out that a problem with my analogy was that unlike subsidies to Solyndra, copyright doesn’t pick particular politically connected individuals or companies to privilege. I think it’s much more accurate to say that Congress can use copyright to privilege certain classes of well-organized industries or companies.
A case in point that shows how Congress picks winners and losers is being [debated right now](http://www.theverge.com/2012/9/24/3381396/pandora-internet-radio-royalty-bill): the framework that governs digital music broadcasting royalties for satellite radio and internet radio stations like Pandora. Today you pay a different royalty rate for playing a sound recording (like the lasted LMFAO opus) depending on what kind of radio station you are. Satellite radio stations pay 6 to 8 percent of their gross revenues each year in royalties. Pandora, however, pays around 50 percent, and it will likely be more next year. Meanwhile, traditional AM and FM radio stations pay nothing, zip, zero, zilch.
I won’t get into the public choice problems that may have led to this situation, but the fact is that one legacy industry is not just being subsidized with free access to an essential input (sound recordings), but it is also protected. That protection comes at the expense of a new and innovative industry–internet radio–that is being charged punishing rates for the same essential input.
My colleague Matt Mitchell recently published an excellent paper entitled [The Pathology of Privilege: The Economic Consequences of Government Favoritism](http://mercatus.org/publication/pathology-privilege-economic-consequences-government-favoritism) that catalogs the different ways government has favored particular industries. He also shows how this behavior “misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector.” The uneven playing field in the digital music space fits right in with the type of privilege he discussed.
Conservatives and libertarians who are wary of such government extensions of privilege should keep their eye on copyright as the source of many such imbalances.
Ryan Radia recently posted an impassioned and eminently reasonable defense of copyright with which I generally agree, especially since he acknowledges that “our Copyright Act abounds with excesses and deficiencies[.]” However, Ryan does this in the context of defending broadcaster rights against internet retransmitters, such as ivi and Aereo, and I have a bone to pick with that. He writes,
[Copyright] is why broadcasters may give their content away for free to anybody near a metropolitan area who has an antenna and converter box, while simultaneously preventing third parties like ivi from distributing the same exact content (whether free of charge or for a fee). At first, this may seem absurd, but consider how many websites freely distribute their content on the terms they see fit. That’s why I can read all the Techdirt articles I desire, but only on Techdirt’s website. If copyright protection excluded content distributed freely to the general public, creators of popular ad-supported content would soon find others reproducing their content with fewer ads.
I think what Ryan is missing is that copyright is not why broadcasters give away their content for free over the air. The real reason is that they are required to do so as a condition of their broadcast license. In exchange for free access to one of the main inputs of their business–spectrum–broadcasters agree to make their signal available freely to the public. Also, the fact that TV stations broadcast to metro areas (and not regionally or nationally) is not the product of technical limitations or business calculus, but because the FCC decided to only offer metro-sized licenses in the name of “localism.” That’s not a system I like, but it’s the system we have.
So, if what the public gets for giving broadcasters free spectrum is the right to put up an antenna and grab the signals without charge, why does it matter how they do it? To me a service like Aereo is just an antenna with a very long cable to one’s home, just like the Supreme Court found about CATV systems in Fortnightly. What broadcasters are looking to do is double-dip. They want free spectrum, but then they also want to use copyright to limit how the public can access their over-the-air signals. To address Ryan’s analogy from above, Techdirt is not like a broadcaster because it isn’t getting anything from the government in exchange for a “public interest” obligation.
Ideally, of course, spectrum would be privatized. In that world I think we’d see little if any ad-supported broadcast TV because there are much better uses for the spectrum. If there was any broadcast TV, it would be national or regional as there is hardly any market for local content. And the signal would likely be encrypted and pay-per-view, not free over-the-air. In such a world the copyright system Ryan favors makes sense, but that’s not the world we live in. As long as the broadcasters are getting free goodies like spectrum and must-carry, their copyright claims ring hollow.
Imagine a service that livestreams major broadcast television channels over the Internet for $4.99 a month — no cable or satellite subscription required. For an extra 99 cents a month, the service offers DVR functionality, making it possible to record, rewind, and pause live broadcast television on any broadband-equipped PC.
If this service sounds too good to be true, that’s because it is. But for a time, it was the business model of ivi. Cheaper than a cable/satellite/fiber subscription and more reliable than an over-the-air antenna, ivi earned positive reviews when it launched in September 2010.
Soon thereafter, however, a group of broadcast networks, affiliates, and content owners sued ivi in federal court for copyright infringement. The court agreed with the broadcasters and ordered ivi to cease operations pending the resolution of the lawsuit.
ivi appealed this ruling to the 2nd Circuit, which affirmed the trial court’s preliminary injunction earlier this month in an opinion (PDF) by Judge Denny Chin. The appeals court held as follows:
- The rights holders would likely prevail on their claim that ivi infringed on their performance rights, as ivi publicly performed their copyrighted programs without permission;
- ivi is not a “cable system” eligible for the Copyright Act’s compulsory license for broadcast retransmissions, as ivi distributes video over the Internet, rather than its own facilities;
- Allowing ivi to continue operating would likely cause irreparable harm to the rights holders, as ivi’s unauthorized distribution of copyrighted programs diminishes the works’ market value, and ivi would likely be unable to pay damages if it loses the lawsuit;
- ivi cannot be “legally harmed by the fact that it cannot continue streaming plaintiffs’ programming,” thus tipping the balance of hardships in plaintiffs’ favor;
- While the broad distribution of creative works advances the public interest, the works streamed by ivi are already widely accessible to the public.
As much as I enjoy a good statutory construction dispute, to me, the most interesting question here is whether ivi caused “irreparable harm” to rights holders.
Writing on Techdirt, Mike Masnick is skeptical of the 2nd Circuit’s holding, criticizing its “purely faith-based claims … that a service like ivi creates irreparable harm to the TV networks.” He argues that even though ivi “disrupt[s] the ‘traditional’ way that [the broadcast television] industry’s business model works … that doesn’t necessarily mean that it’s automatically diminishing the value of the original.” Citing the VCR and DVR, two technologies that disrupted traditional methods of monetizing content, Mike concludes that “[t]here’s no reason to think” ivi wouldn’t “help [content owners’] business by increasing the value of shows by making them more easily watchable by people.”
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I’m working on a project looking at libertarian views on copyright (more on that soon), and I’d like to solicit your feedback on an analogy I’m developing. I’ve set up [a comment thread at Google+](https://plus.google.com/u/0/117169003326996777677/posts/TjzX6ZHLTK6) and I’d sincerely appreciate your thoughts on this post. Email feedback is also appreciated. Here goes…
Libertarians, conservatives and other supporters of a free market tend to be critical of government programs that subsidize particular industries. For example, the loan guarantees that allowed Solyndra to set up shop. We don’t like them because they distort the market and tend to lead to rent-seeking, if not corruption.
Why do we have loan guarantees for renewable energy projects like Solyndra’s solar power technology? Quite simply it’s because we’d like to see more renewable energy technology developed; more than is profitable to develop right now. So, the government offers a subsidy to incentivize the creation of such technology, which will eventually benefit the public at large. So far so good, but there are problems with this kind of [government privilege](http://mercatus.org/publication/pathology-privilege-economic-consequences-government-favoritism).
First, there is a [knowledge problem](http://en.wikipedia.org/wiki/Local_knowledge_problem). How do we know that we’re not already getting the right amount of investment in renewable technologies? Without a government subsidy, there would still be investment in renewable energy technologies. We just think it’s not enough. But even putting aside how we can know that, the other question is, how much investment is optimal? Without a market process to guide investment, we don’t know how much is enough. So when the government offers subsidies, it’s guessing. It’s likely offering too little or too much, with each error introducing its own inefficiencies. Continue reading →
Christopher Sprigman, professor of law at the University of Virginia discusses his upcoming book the Knockoff Economy: How Imitation sparks Innovation co authored with Kal Raustiala. The book is an accessible look at how industries that do not have heavily enforced copyright law, such as the fashion and culinary industries, are still thriving and innovative. Sprigman explains how copyright was not able to be litigated heavily in these cases and what the results could teach us about what other industries that do have extensive copyright enforcement, such as the music and movie industries, could look like without it.
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On Wednesday morning, the U.S. House of Representatives Energy & Commerce Subcommittee on Communications and Technology will hold a hearing on “The Future of Video.”
As we Tech Liberators have long argued on these pages (1, 2, 3, 4, 5, 6, 7), government’s hands have been all over the video market since its inception, primarily in the form of the FCC’s rulemaking and enforcement enabled by the Communications Act. While the 1996 Telecommunications Act scrapped some obsolete video regulations, volumes of outdated rules remain law, and the FCC wields vast and largely unchecked authority to regulate video providers of all shapes and sizes. Wednesday’s hearing offers members an excellent opportunity to question each and every law that enables governmental intervention—and restricts liberty in—the television market.
It’s high time for Congress to free up America’s video marketplace and unleash the forces of innovation. Internet entrepreneurs should be free to experiment with novel approaches to creating, distributing, and monetizing video content without fear of FCC regulatory intervention. At the same time, established media businesses—including cable operators, satellite providers, telecom companies, broadcast networks and affiliates, and studios—should compete on a level playing field, free from both federal mandates and special regulatory treatment.
The Committee should closely examine the Communications and Copyright Acts, and rewrite or repeal outright provisions of law that inhibit a free video marketplace. Adam Thierer has chronicled many such laws. The Committee should, among other reforms, consider:
Here’s to the success of Sen. Jim DeMint, Rep. Steve Scalise, and other members of Congress who are working to achieve real reform and ensure that the future of video is bounded only by the dreams of entrepreneurs.
Writing over at the conservative Big Government blog (part of the Breitbart.com network of blogs), someone who goes by the pseudonym “Capitol Connection” has posted an editorial about the debate over retransmission consent reform that is full of misinformation and misguided policy prescriptions, at least if you believe is truly limited government. The piece is entitled, “Big Cable Would Prefer if You Paid Their Bills,” and the problems are almost immediately evident from that headline alone. First, what is a supposedly small government-oriented blog doing using a silly label like “Big Cable” to describe a vigorously competitive sector of our capitalist economy? Using terms like “Big Cable” is a silly lefty tactic. Second, no one in the cable industry is proposing anyone “pay their bills” except for the customers who enjoy their services. Isn’t a fee for service part of capitalism?
Anyway, that’s just the problem with the title of the essay. Sadly, the rest of the piece is filled with even more erroneous information and arguments about the retransmission consent regulatory process as well as the bill that aims to reform that process, “The Next Generation Television Marketplace Act” (H.R. 3675 and S. 2008). That bill, which is sponsored by Senator Jim DeMint (R-SC) and Rep. Steve Scalise (R-LA), represents a comprehensive attempt to deregulate America’s heavily regulated video marketplace. In a recent Forbes oped, I argued that the DeMint-Scalise effort would take us “Toward a True Free Market in Television Programming” by eliminating a litany of archaic media regulations that should have never been on the books to begin with. The measure would:
- eliminate: “retransmission consent” regulations (rules governing contractual negotiations for content);
- end “must carry” mandates (the requirement that video distributors carry broadcast signals even if they don’t want to);
- repeal “network non-duplication” and “syndicated exclusivity” regulations (rules that prohibit distributors from striking deals with broadcasters outside their local communities);
- end various media ownership regulations; and
- end the compulsory licensing requirements of the Copyright Act of 1976, which essentially forced a “duty to deal” upon content owners to the benefit of video distributors.
This represents genuine and much-needed deregulation of a market that has been encumbered with far too much top-down control and micro-management by the FCC over the past several decades. To be clear, none of these rules apply to any other segment of our modern information economy. Every day of the week, deals are cut between content creators and distributors in many other segments of the media industry without these rules encumbering the process. The DeMint-Scalise bill is an attempt to get big government out of the way and let these deals be cut in a truly free market without regulators putting their thumb on the scale in one direction or the other. Continue reading →
There is a Senate Commerce Committee hearing today on online video, and our friends at Free Press, Consumers Union, Public Knowledge, and New America Foundation argue that it should be used to investigate ISP-imposed data caps.
If data caps had a legitimate economic justification, they might be just a necessary annoyance. But they do not have such a justification. Arbitrary caps and limits are imposed by multichannel video providers that also provide broadband Internet access, because the providers have a strong incentive and ability to protect their legacy, linear video distribution models from emerging online video competition.
As someone who uses an ISP with a data cap and who is a paid subscriber to three different online video services, you might think that I too would concerned about these caps. But to the contrary, I think there are some legitimate economic reasons ISPs might impose data caps, and I don’t see a reason to stop ISPs from setting the price and policies for the services they offer.
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