We submit this statement in support of IIPA’s petition to review South Africa’s GSP eligibility in light of South Africa’s failure to provide “adequate and effective protection” to intellectual property as required by the GSP statute and, in particular, profound concerns with draft legislation that will, if enacted, further erode the protection of intellectual property in South Africa for U.S. and South African creators alike.

While we support IIPA’s petition, we note at the outset our reluctance to take such a position: We believe that trade sanctions are harmful to the country imposing them (and on which they are imposed, of course), and, as far as possible, should be avoided. Both the U.S. and South Africa benefit from the GSP that currently affords South African producers unilateral, tariff-free access to U.S. markets for some goods. As such, we caution that the USTR should withdraw South Africa’s GSP designation only as a last resort.

But we also believe that both the United States and South Africa share a strong interest in sustaining creators through adequate and effective protection of intellectual property, thereby promoting economic development and the production of culturally diverse materials. And, unfortunately, removal of GSP is one of the few tools available to the U.S. to protect the interests of U.S. creators of intellectual property in global markets. The USTR is legally obliged to faithfully discharge its congressional mandate by taking action to defend U.S. intellectual property in accordance with various trade laws, including by ensuring that GSP beneficiary countries provide adequate and effective protection within the meaning of the statute.

In submitting this statement, we are mindful that South Africa’s President has not yet signed into law the Bills that motivated the IIPA’s petition. If he does so, South Africa would fail to meet the conditions for GSP eligibility and USTR will be obliged to revoke all or some of its GSP benefits. We note, however, that numerous local actors have voiced concerns regarding the constitutionality of the proposed legislation and the harm that it will to do to the community of creators in South Africa. It is possible that President Ramaphosa will heed these concerns, reject the draft legislation and send it back to Parliament for reconsideration, with directions to adapt or remove its numerous provisions that conflict with South Africa’s Constitution and the country’s international treaty obligations. So doing could result in a text more consistent with South Africa’s (and the U.S.’s) cultural and economic interests. Most importantly from the perspective of this submission, by rejecting the draft legislation President Ramaphosa would at the very least defer any action on the part of USTR to revoke South Africa’s GSP eligibility.

In short, we argue that:

• Protection of intellectual property both in the U.S. and in South Africa is mutually beneficial;
• Duty-free imports from South Africa to the U.S. benefit the citizens of both countries, and those citizens will suffer as a result of the partial or full withdrawal of GSP benefits from South Africa;
• GSP withdrawal is nonetheless required if South Africa does not adequately and effectively protect U.S. intellectual property;
• South Africa’s copyright laws currently do not effectively protect the rights of artists; and
• Two Bills recently passed by South Africa’s Parliament, and championed by U.S.-based evangelists of “fair use,” would further weaken the effectiveness of copyright protection.

                    

Underpinning many policy disputes is a frequently rehearsed conflict of visions: Should we experiment with policies that are likely to lead to superior, but unknown, solutions, or should we should stick to well-worn policies, regardless of how poorly they fit current circumstances?

Read the full piece here.

Everyone loves to hate record labels. For years, copyright-bashers have ranted about the “Big Labels” trying to thwart new models for distributing music in terms that would make JFK assassination conspiracy theorists blush. Now they’ve turned their sites on the pending merger between Universal Music Group and EMI, insisting the deal would be bad for consumers. There’s even a Senate Antitrust Subcommittee hearing tomorrow, led by Senator Herb “Big is Bad” Kohl.

But this is a merger users of Spotify, Apple’s iTunes and the wide range of other digital services ought to love. UMG has done more than any other label to support the growth of such services, cutting licensing deals with hundreds of distribution outlets—often well before other labels. Piracy has been a significant concern for the industry, and UMG seems to recognize that only “easy” can compete with “free.” The company has embraced the reality that music distribution paradigms are changing rapidly to keep up with consumer demand. So why are groups like Public Knowledge opposing the merger?

Critics contend that the merger will elevate UMG’s already substantial market share and “give it the power to distort or even determine the fate of digital distribution models.” For these critics, the only record labels that matter are the four majors, and four is simply better than three. But this assessment hews to the outmoded, “big is bad” structural analysis that has been consistently demolished by economists since the 1970s. Instead, the relevant touchstone for all merger analysis is whether the merger would give the merged firm a new incentive and ability to engage in anticompetitive conduct. But there’s nothing UMG can do with EMI’s catalogue under its control that it can’t do now. If anything, UMG’s ownership of EMI should accelerate the availability of digitally distributed music.

To see why this is so, consider what digital distributors—whether of the pay-as-you-go, iTunes type, or the all-you-can-eat, Spotify type—most want: Access to as much music as possible on terms on par with those of other distribution channels. For the all-you-can-eat distributors this is a sine qua non: their business models depend on being able to distribute as close as possible to all the music every potential customer could want. But given UMG’s current catalogue, it already has the ability, if it wanted to exercise it, to extract monopoly profits from these distributors, as they simply can’t offer a viable product without UMG’s catalogue.

The merger with EMI—the smallest of the four major labels, with a US market share of around 9%—does nothing to increase UMG’s incentive or ability to extract monopoly rents. UMG’s ability to raise prices on Lady Gaga’s music is hardly affected by the fact that it might also own Lady Antebellum’s music, anymore than its current ownership of Ladyhawke’s music does. But, regardless, UMG has viewed digital distribution as a friend, not a foe.

Even on their own, structural terms, the critics’ analysis is flawed. The argument against the merger is based largely on the notion that the critical, relevant antitrust market comprises album sales by the four major labels. But this makes no sense.

In fact, UMG currently distributes only about 30% of the music consumed in the US, and because, like all the majors, it distributes some music over which it has no ownership rights (including no ability to set prices), it owns only 24% of music purchased in the US. EMI’s share of distribution, as we noted, is around 9%, and it has experienced significant turmoil in recent years. Meanwhile, the independent labels that some critics seek to exclude from the market (and which, ironically, probably distribute the bulk of the music they listen to) sell 30% of the records sold in the US today and do so digitally largely through a single distributor, Merlin—essentially a fifth major record label. This is far beyond trivial.

What matters for antitrust market definition is substitutability: If customers would purchase eight singles off an album in response to an increase in the 12-track album price, singles and albums are surely in the same market. Ditto consumption of singles and entire albums through streaming services in lieu of outright purchase—and it’s clear that this mode of distribution is increasingly popular. There is no principled defense of an album-only market, nor one that excludes independent labels or streaming services. And once you appreciate these market dynamics, the concerns over this merger disappear.

The reality is closer to this: EMI is effectively a failing firm. Its current owner (Citigroup) inherited the company when its previous owner defaulted, and it promptly put it up for auction. Warner and UMG both bid on EMI and UMG won. Now Warner leads the effort to stymie the deal, deploying a time-tested strategy of trying to accomplish by regulation what it couldn’t manage through genuine competition.

Everyone loves to hate record labels. For years, copyright-bashers have ranted about the “Big Labels” trying to thwart new models for distributing music in terms that would make JFK assassination conspiracy theorists blush. Now they’ve turned their sites on the pending merger between Universal Music Group and EMI, insisting the deal would be bad for consumers. There’s even a Senate Antitrust Subcommittee hearing tomorrow, led by Senator Herb “Big is Bad” Kohl.

But this is a merger users of Spotify, Apple’s iTunes and the wide range of other digital services ought to love. UMG has done more than any other label to support the growth of such services, cutting licensing deals with hundreds of distribution outlets—often well before other labels. Piracy has been a significant concern for the industry, and UMG seems to recognize that only “easy” can compete with “free.” The company has embraced the reality that music distribution paradigms are changing rapidly to keep up with consumer demand. So why are groups like Public Knowledge opposing the merger?

Critics worry that a larger UMG will stifle innovative distribution services. While that’s theoretically possible, UMG’s past practice and the industry’s changing dynamics—including the significant increase in buyer power from large retailers like Apple, Amazon and Wal-Mart—suggest the concern is speculative, at best. Albums are simply not the dominant marketing vehicles they once were for most artists, and, increasingly, consumers are content to “rent” their music through streaming and other online services rather than own it outright.

A slightly larger UMG poses no threat to the evolving distribution of music. In fact, UMG has increasingly championed digital distribution as it has grown in size. UMG’s history with digital distribution should please anyone concerned about the deal: it has been both aggressive and progressive in the digital space. UMG is often the first to license its catalogue to new services and it has financially supported the creation of some of the largest of these services. When online giant Slacker Radio added a subscription service to its Web radio offering, UMG not only licensed its catalogue for the new service but also renegotiated (and lowered) its terms for Slacker’s webcasting license in order to ease Slacker’s move into subscription services. And UMG was instrumental in getting Muve—the second largest subscription music service in the US today—off the ground. Again—the industry’s best defense against “free” is “easy,” and that doesn’t change for UMG if it gains another few percentage points of market share.

To paraphrase Timbuk 3 (from an album originally released on the famed I.R.S. label): Music’s future is so bright, it’s gotta wear shades. Music has never been cheaper, easier to access, more widely distributed, nor available in more forms and formats. And the digital distribution of music—significantly facilitated by UMG—shows no signs of slowing down. What has slowed down, thanks largely to these advances in digital and online distribution, is music piracy. Anyone looking for an explanation why UMG has been so progressive in its support for innovation in music distribution need look no further than that fact. This merger does nothing to change UMG’s critical incentives to continue to support digital distribution of its catalogue: fighting piracy and effectively distributing its music.

Cross-posted from Forbes

Stan Liebowitz (UT-Dallas) offers a characteristically thoughtful and provocative op-ed in the WSJ today commenting on SOPA and the Protect IP Act.  Here’s an excerpt:

You may have noticed last Wednesday’s blackout of Wikipedia or Google’s strange blindfolded-logo screen. These were attempts to kill the Protect IP Act and the Stop Online Piracy Act, proposed legislation intended to hinder piracy and counterfeiting. The laws now before Congress may not be perfect, and they can still be amended. But to do nothing and stay with the status quo is to keep our creative industries at risk by failing to enforce their property rights.

Critics of these proposed laws claim that they are unnecessary and will lead to frivolous claims, reduce innovation and stifle free speech. Those are gross exaggerations. The same critics have been making these claims about every previous attempt to rein in piracy, including the Digital Millennium Copyright Act that was called a draconian antipiracy measure at the time of its passage in 1998. As we all know, the DMCA did not kill the Internet, or even do any noticeable damage to freedom—or to pirates.

…

Scads of Internet pundits and bloggers have vehemently argued that piracy is really a sales-promoting activity—because it gives people a free sample that might lead to a purchase—or that any piracy problems have been due to a failure of industry to embrace the Internet. Yet these claims are little more than wishful thinking. Some reflect a hostility to commercial activities—think Occupy Wall Street, or self-interest. Others make “freedom” claims on behalf of sites that profit by helping individuals find pirate sites, makers of complementary hardware, or companies that benefit from Internet usage and collect revenues whether the material being accessed was legally obtained or not.

In my examination of peer-reviewed studies, the great majority have results that conform to common sense: Piracy harms copyright owners. I was also somewhat surprised to discover that the typical finding of such academic studies was that the entire enormous decline that has occurred is due to piracy.

Contrary to an often-repeated myth, providing consumers with convenient downloads at reasonable prices, as iTunes did, does not appear to have ameliorated piracy at all. The sales decline after iTunes exploded on the scene was about the same as the decline before iTunes existed. Apparently it really is difficult to compete with free. Is that really such a surprise?

Do check out the whole thing.

 

 

Filed under: business, copyright, economics, intellectual property, music, technology

Jonathan Adler and Orin Kerr chime in over at VC to make the point that MSNBC’s rules against contributions from television personalities is pointless, or perhaps counterproductive.  Here’s Adler…

Read the full piece here. 

Apparently, the Illinois Attorney General is investigating Lollapalooza for potential antitrust violations arising out of exclusivity clauses that the concert promoter includes in the contracts signed with artists who play the show.

Read the full piece here. 

I don’t know.  But apparently, industry analysts preliminarily think not.   I tend to disagree.  At least, I think its far too early to be confident in either direction. Press reports, such as this one,  are primarily relying on the report of an analyst who correctly points out that Apple’s market share would be an obstacle for a case against Apple…

Read the full piece here. 

Abstract

I examine the key instrument (German kids on vacation) used by Professors Oberholzer-Gee and Strumpf in their analysis of the impact of file-sharing on record sales, published as the lead article in the Feb 2007 JPE. Their measured relationship between the instrument (German students on vacation) and the variable that it is instrumenting for, American downloading, is seen to have outlandish implications in the often overlooked first stage regressions. The coefficient implies that if German secondary students all go to school, American file-sharing would drop to zero. A nonsensical result of this sort indicates an important error somewhere in their data or analysis. The instrument is also shown to be related to American record sales, contrary to the claims of Professors Oberholzer-Gee and Strumpf, and contrary to the requirements of their analysis. Further, their measurement of downloading varies wildly from week to week and is inconsistent with downloading data from Big Champagne. In addition, their data on file-sharing, which Professors Oberholzer-Gee and Strumpf state is representative of worldwide file-sharing, is actually biased according to some of their own statistics which they failed to examine, considerably overstating the share of German files. Finally, I demonstrate that German students on vacation cannot have a measurable impact on American downloading (and thus American record sales) negating its potential usefulness and implying that the approach taken by Professors Oberholzer-Gee and Strumpf could never have provided useful information about the impact of file-sharing on record sales.

When I first met my father in law, he spent hours trying to convince me of the cultural superiority of his tastes. Some of these were indeed triumphs. I’m thinking here of “Dr. Strangelove,” “The 400 Blows,” and the music of Richard Wagner. (Others were not. I’m thinking here of “Children of Paradise,” a movie about mimes.) His love of Wagner is curious; he was born in Israel and almost his entire family was murdered in the Warsaw ghetto. This is not a trivial issue. Hitler loved Wagner too, and used his music for political ends. Wagner was himself a hater of Jews. Accordingly, Israel banned public performance of Wagner’s music nearly six decades ago, and the taboo was not broken until 1995 when “The Flying Dutchman” was played on Israeli radio. Six years later Daniel Barenboim (a Jew) led the Berlin Staatskapelle in a performance of an overture from “Tristan und Isolde” at an Israel Festival, which only reignited the controversy.

Read the full piece here.