Infringement Risk in Copyright-Intensive Industries

Abstract

We have reviewed equity research reports issued in 2013 for eight leading companies in copyright-intensive industries: two software firms (Microsoft and Adobe); two publishers (Pearson and Reed Elsevier); the owners of two major motion picture studios (Disney and Viacom, owner of Paramount); and the owners of two major record labels (Sony, owner of Sony Music Entertainment, and Vivendi, owner of Universal Music Group). We found that the overwhelming majority of the equity research reports did not mention copyright infringement as a possible risk factor. None of the 14 reports for Reed Elsevier and 18 reports for Pearson identified copyright infringement as a risk factor. Only 13% of the 15 reports for Sony and 22% of the 23 reports for Vivendi mentioned copyright infringement as a potential risk. Just 8% of the 26 reports for Viacom and 27% of the 26 reports for Disney referred to copyright infringement as a risk factor. 26% of the 19 reports concerning Adobe and 41% of the 27 reports concerning Microsoft identified copyright infringement as a risk factor. Cumulatively, only 19% (32) of the 168 reports referred to copyright infringement as a possible risk; 81% did not. The vast majority of the reports written by sophisticated analysts simply do not consider copyright infringement a significant enough threat to the subject companies’ financial health to merit mention to potential investors. If the analysts with expertise in these industries are not concerned about the possible impact of copyright infringement, perhaps policymakers should not be either.