So this is a new and still very early stage project. On copyright theory, we've been hearing about tents just now we're going to when I'm done we're going about pants again. This is the copyright portion of the program and copyright theory. And patent theory, both say that they want to promote innovation. But patent theory has an easier time, comparatively, figuring out what are what what stuff is it that we would look for to be able to measure whether we're actually achieving that goal as our.
Cars are safer are our drugs are more therapeutic our batteries last long or whatever it is when it comes to expressive goods like a novel or a film or a song it's harder copyright has no self. Evident theory of whips are better. And which are worse so version, 1.0, the copyright scholarship just kind of intended to say, well, let's just get more stuff. Whatever it is just more work, what of whatever kind, and it's only recently that there's been more of a qualitative shift and people are paying. More attention to what kind of works does the copyright system encourage and that's, the sandbox that I'm playing in here.
Usually when policymakers talk about the social cost of the copyright system, they are talking about the constraints that it imposes on everyone else, besides the copyright owner up I. Am I bracketing that issue. Entirely Here. I. Am I focusing on a different kind of social costs. And that is a cost that is driven by how copyright protection by how being the benefit beneficiary of. Copyright protection can affect your ex ante investment decisions.
And my argument is that marginal changes in the level of copyright protection can be structured. Even if unintentionally in a way that skews the direction of investment towards a universe of works that is more homogeneous than perhaps society might want. This is largely a story about risk. So given my surroundings here, I thought, I would kick this off with a recent quote from Bollywood musician, Benny Dayan yahoo, who said, you know, I.
Feel Bollywood music has got stereotypes and conventional and certain aspects as audiences. We need to be more receptive to change and accept your transition opening will happen over a period of time. Movies are just revamping old songs and playing it safe.
More risks can change the scenario for the better. Now I, don't know whether anyone agrees with this assessment or not speaking for myself, I, am thoroughly agnostic I, don't, particularly care, whether this is accurate or not what I do care about is. That this sentiment that there is a desire for risk-taking in the arts is a sentiment that you will encounter all over the place. So another example, director Francis, Ford, Coppola recently said at the Marrakech Film, Festival, I, don't know if you can, if you can read that from where you are, but he said, you know, you try and go to a producer today and say you want to make a film that hasn't been made before they will throw you out because they want the same film that works that makes money.
They. Don't want you to take chances for me? This raises an important question, which is, if we want to see artists taking risks in their work, what are the optimal conditions for supporting investment in creative risk-taking and I want to try and convince you that copyright law actually has a lot to deal with the conditions? The Coppola is describing here that arguments are spans three points.
First copyright policy needs to take into account the reality that markets for cultural goods are intermediate. And so copyright protection should not be just about authors, but also the institutions that support authorship and make it possible. Number two, at least at a high level of generality stronger, copyright protection can raise the upside of risks making a risky venture more financially palatable than it. Otherwise, would be. And maybe at the margin making it more likely that more groundbreaking works are going to get made I think that's.
This is a particularly relevant point in a discussion about. Emerging media marketplaces where you will sometimes see the argument that these economies would be better off with stricter copyright protection, because it would encourage creative upstarts to innovate rather than rely on what already exists. But that brings me to my third point, which is that it ain't so simple, in fact, I think increasing protection. If it's done in the wrong way can have just the opposite effect. It can discourage investment in risky projects, and it can do. So because copyright. Protections private value to the owner can be unevenly distributed across the range of activities that a copyright protects.
And we should expect investment to skew towards the rights, which have the highest value in the marketplace. And that skew can make the resulting works more homogeneous, and I'm. Using an example here of the US film industry, which is extremely capital intensive, and it's often in the United States, put forward as the poster child for why we need a strong copyright protection in. Hollywood the overall value of copyright protection is skewing more and more towards the adaptation right?
And that I am arguing is driving Studios away from differentiated products and more toward similar low risk blockbuster franchises that are best equipped to exploit that right? Ok? Let me take a step back and deal with some bedrock here. So when a lot of people think about copyright, they think about authors write some lone creative individual working away on some song or naval, I, don't know, Made some software code, but the copyright there's a lot more than just help those individuals, even in 2016 with all the lower barriers to entry that digital technology and the internet have facilitated. There is still an important role to play for intermediaries like record labels and movie studios. They are able to pull risk, and thereby bring capital-intensive works to market that would probably never be made to begin with. If we were living in a totally disinter mediated world.
The reason for. That is that markets for cultural goods, almost always our lottery like you have a few massive winners and then a bunch of losers among us films. For example, last year over twenty-five percent of total box office revenue came from five felts.
And so by amassing large and diversified portfolios of works. Intermediaries can take on risk that a rational actor would never take on if it were just dealing with a single capital intensive work in isolation. Those firms know that markets for cultural. Goods are pretty unpredictable. You are essentially guaranteed to have some flops, no matter what you do. And so you need to ensure that you can appropriate enough value from the hips to be able to survive, the cost of those flops, if you're going to be successful. Now that seems to push in favor of some strong, appropriate ability mechanism, whether it's copyright or something else.
But if it's not copyright, you should have a good explanation for what it's going to be also the more competition that is. Out there for people's leisure time, the more expensive, it is to market your product to cut through all the noise in the U.S. film production budgets can be over. Fifty percent of total production cost. And so that's, a very steep cost, and you're going to need to have some way to be able to cover it. If you're going to compete again, seems to push in favor of some strong, appropriate ability mechanism and that's.
One dominant narrative met you here. If you want to see more creative risk-taking in. The concept industries, jack up copyright protection raised the upside of your risky. Bet makes the expected value of those vets higher, and maybe you'll see them taken on more frequently. If you look at the film industry today in the u.s., you know, risk-taking is not a word that is usually used to describe it.
You might have noticed the rise of sequels and franchises on in recent years. This is a projection from 2014 of all the comic book franchise is coming down the pike. This actually is under-. Inclusive we now know today, but still do to give you a pretty good idea. If you expand it to just franchises, generally it's, a lot of sequels of every shape and stripe, not just comic book, and as others have documented, this makes some economic sense right now, because your average return on investment for sequels, the blue line here is higher than what it is for non sequels of red line below it. But it hasn't always been this stark. So sequels are doing more work now than they have ever.
Done we are seeing franchises responsible for a rising percentage of box office revenue out of the top 100 films? So it used to be that sequels accounted for around. Ten percent of total box office revenue now we're up near 50. So why is this happening? If you ask some analysts to cover the film industry, they'll just chalk this up to growing risk aversion on.
This was a very widely circulated piece in from a journalist that covers the film industry who said that, you know, this is the problem here. Is that you know, these executives, they don't have a creative bone in their bodies. They've lost the joy and creative risk. It's just been replaced by a dread of losing I, don't know, maybe this is part of it, but I think at best there is a lot more to the story here. I think you know, film has always been a business. These are sophisticated players that know how to take on risk when it is in their best interest. I don't think you can explain this away by just some generational change in executive risk.
Preferences, instead, I think part of it has to you with changes in how studios are capable of appropriating, the value of their products, the private value of the right to perform or the right to make reproductions, which are part of the copyright bundle is not worth as much today as it used to be part of that is for reasons that are entirely innocuous. So TVs are getting bigger there's more programming on television than there ever has before that means that any given film is facing more competition. For viewers leisure time than ever before. Ok? Some of it is not so innocuous.
So here I have to mention piracy. So even if there are alternative outlets for consumers to get content, piracy is still going to lower the price that's on that content can command in the marketplace. And so I think there's a plausible case here that those risky bets aren't worth as months, and so we're seeing fewer of them.
Instead. We are seeing firms playing it safe by producing more sequels. These are safer in part because. Past performance does give some signal of future performance. Even if that signal is somewhat noisy.
So director, Viral That basically said as much recently for why Studios in Bollywood might choose to use pre-existing storylines part of this is it goes back to marketing its, just easier to market a product if there's a pre-existing brand recognition. So you might think based on everything I've said, so far that the culprit here is simply a weak copyright. And this brings me to my last point. Which is that I think things get tricky here that the culprit isn't, just the parts of copyright that have gotten weaker it's, also the part of copyright that has remained strong. So this is the adaptation right?
Remember that copyright is a bundle of different rights. And some of those rights are under certain circumstances can be worth more in the marketplace than others. And if the exploitation of a higher value right correlates with a particular kind of work, we should expect to see a qualitative. Skew toward that kind of work, and guess what that is what we're seeing out of Hollywood, because while the value of other rights, they have declined the adaptation right has remained robust. Us courts are not hesitant to find violations of the derivative work right.
And because exploitation of it tends to be in a business-to-business context, there's a more meaningful threat of enforcement than there would be and more consumer facing right where, you know, if you don't like the price of something you. Can go download something illegally, and realistically you're, not going to face a meaningful threat of getting sued for it and so what's, the profit maximizing studio to do make more films that can tap into those higher value of revenue streams. And that means more films that can serve as platforms for adaptations. Sequels video, games, merchandise, etc., right now on, and I'm going to wrap up with this. If the adaptation right were weaker, a couple of things might happen.
We might get a lower level of. Investment overall, and you know, maybe we'd have fewer special effects. But we also might get a more diverse slate of releases from year to year, which is more valuable to society is a normative question.
I am not going to answer here at least I'm, not going to answer it in this paper. You know, my guess it's going to vary from society to society for my purposes, though I would be content if we could just acknowledge that. There is a trade-off between these two effects on that may be happening, depending. On how we structure our copyright policy. So to wrap up when we think about how IP can help or hurts creative upstarts in an emerging media marketplaces, I think, it's important to frame the policy question as more than just how much protection should we have as if it's a single variable, but also to consider how that protection is going to be structured stop there. Thank you.
Dated : 18-Apr-2022