Economic Analysis of Private Copy Remuneration

Abstract

The present Study focuses on the economic rationale and effects of the private copy remuneration (or PCR) system, by virtue of which consumers pay the holders of Intellectual Property Rights (IPR) a given amount in consideration of the private copying of their works. The scope of the Study is limited to the economic aspects of PCR and, consequently, legal, political, cultural, and other facets of the phenomenon are only incidentally referred to.This Study is not comparative, in the sense that it does not analyse alternative legal systems and, particularly, no argument is intended – either expressly or implicitly – to compare IPR systems based on fair use doctrines (such as the one currently enforced in the United States) with those that are based on legal private copying exceptions (such as those in place in most European Union countries). The Study focuses only on private copy exception-based systems. It does briefly compare systems of private copy exceptions with and without remuneration, but the conclusions reached cannot be automatically transplanted to any comparison between fair use-based and private copy exception-based legal systems.This Study focuses on the effects of PCR on the music sector. Notwithstanding this relatively narrow focus, the conclusions reached are applicable to a significant extent to all types of IPR-protected works (such as audiovisual or literary), with some adjustments to tackle certain peculiarities of the several types of intellectual and creative works. However, for the sake of simplicity and clarity, all the examples and data provided in the Study refer exclusively to music.The Study is limited to the setting and collection aspects of PCR, as well as its effects on incentives to creation of intellectual works. The collective administration of PCR, its distribution amongst right holders, and its use as a source of financing for cultural and social activities also lie outside the scope of the Study. Each of these topics might merit a separate report. Therefore, the Study assumes that PCR is efficiently distributed by the collective management societies to each rights holder according to a proper estimation of the number of copies made of her/his works.Similarly, the Study does not analyse the potential benefits to society that may derive from the cultural activities that are financed with a share of the PCR collected in different Member States. From a purely economic perspective, it must be stressed that the Study is implicitly based on certain assumptions that inevitably condition its content and its lines of reasoning, which are derived from economic theory and which will be out of question in the present Study. First, it is assumed that intellectual property rights are a part of the basic property rights on which developed economies have their foundations. Second, it is assumed that generating incentives for the creation of IPR-protected goods is a key role of economic regulation. Finally, it is also assumed that IPR-protected contents are a significant driver of economic growth for all societies and, particularly, for the Information Society.Finally, this Study does not intend to forecast precisely any future market or sector sales or penetration rates, nor does it intend to predict the exact total PCR collection by countries or products. Instead, based on sound assumptions regarding market conditions, the Study tries to assess the relative efficiency of the current system and to illustrate the potential quantitative importance of certain effects that are usually neglected in the ongoing debate about the PCR system.