The Efficiencies of Aggregation: An Economic Theory Perspective on Collective Management of Copyright

20 Pages Posted: 14 Jan 2016  

Richard Watt

University of Canterbury - Economics and Finance; The Society for Economic Research on Copyright Issues (SERCI)

Date Written: December 31, 2015

Abstract

The existing economic theory of copyright collectives, or copyright management organizations (CMOs) is strongly focused on the benefits of sharing of transaction costs. Here, we appeal to the contractual environment of CMOs to offer a different perspective. Copyright collectives form contracts at two principle points along the supply chain. First, there are the contracts between the collective's members themselves (the copyright holders) for distribution of the collective's income. And second there are the licensing contracts that the collective signs with users of the repertory. Using standard economic theory, the paper argues that there are significant efficiency benefits from having copyrights managed as an aggregate repertory, rather than individually, based on risk-pooling and risk-sharing through the contracts between the members themselves. Similarly, there are also aggregation benefits (at least in terms of the profit of the CMO) of licensing only the entire repertory, rather than smaller sub-sets. Both of these theses are defended by appealing to existing economic theory literature in related fields. Interestingly, there is a link between these two theories of the efficiency of aggregation which lies at the heart of the theory of syndicates, and the characteristics that imply that the group (or syndicate as a whole) can be considered as a valid "representative", sharing the same preferences as each individual syndicate member.

Suggested Citation

Watt, Richard, The Efficiencies of Aggregation: An Economic Theory Perspective on Collective Management of Copyright (December 31, 2015). Review of Economic Research on Copyright Issues, 2015, 12(1/2), 26-45. Available at SSRN: https://ssrn.com/abstract=2714818

Richard Watt (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

The Society for Economic Research on Copyright Issues (SERCI) ( email )

Apartado de correos 1100
Palma de Mallorca, 08080
Spain

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