57 Pages Posted: 1 Oct 2009 Last revised: 12 Oct 2009
Date Written: September 29, 2009
This article examines the music industry, and particularly its reaction to the file-sharing phenomenon, through the prism of the agent-principal problem. The file-sharing phenomenon shined a spotlight on the divergence of interests between the creators of music and their ultimate representatives in copyright debates, the recording industry. The economic interests of creators are focused on maximizing revenues from their works. Record companies, in contrast, are not content with their share in the revenue pie, rather are interested in maximizing their control over the exploitation of such works, in order to secure the dominant position they currently hold in the market. The constitution, however, is designed to protect creators’ incentives to create, not the market-controlling position of record companies.
The Article analyzes the measures taken to combat file-sharing, and concludes that the source of the resistance to file sharing is not its effect on revenues as outwardly claimed by the recording industry, but rather its potential to decentralize the control over music distribution and use. In that sense, the war against file-sharing is an extreme expression of the agency problem stated above. At the same time, the article points to the potential of file-sharing to minimize agency costs, by creating a more balanced power-relationship within the music industry, and concludes that legitimizing file-sharing may produce circumstances which are most likely to be consistent with the interests of both creators and society at large.
Keywords: copyrights, peer to peer, music industry, agency problem, file sharing
Suggested Citation: Suggested Citation
Helman, Lital, When Your Recording Agency Turns into an Agency Problem: The True Nature of the Peer-to-Peer Debate (September 29, 2009). IDEA: The Journal of Law and Technology, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1480255