Licensing in the Shadow of Copyright

Abstract

Copyright offers protection to creative works, but new technologies put pressure on that protection. Copyright owners and technology firms negotiate over new ways of distributing and transmitting creative works. Understanding the shadow that copyright casts on private negotiations will allow policy makers to better design the statute in a way that encourages more competition, diversity, and transactional efficiency in markets for digital goods. Prime examples of copyright licensing negotiations are the attempts to license digital music services over the past decade. In this Article we present the first qualitative and quantitative data about the licensing process for on-demand music streaming services, gleaned from confidential interviews with executives and attorneys. We report our findings about the time it takes to license a nascent service, if negotiations succeed; the number of record labels and publishers with which new music services typically deal; the general processes through which these licenses evolve; and how changes in the law over the period may have affected the dynamics of these negotiations. We find that copyright law, alongside business practices and professional attitudes, sets complex background rules for these private licensing negotiations. Copyright shapes, constrains, and also presents opportunities for innovation.

Keywords: Intellectual Property, Copyright Law, Innovation, Licensing, Contracts, Internet Music, File-Sharing, On-Demand Streaming, Qualitative Empirical Research

JEL Classification: L14, O31, O33, O34