Economic Analysis of Safe Harbor Provisions

Abstract

Safe harbors allow User Upload Content (UUC) services such as YouTube to escape normal copyright liability and notice and takedown provisions, which were supposed to provide a less costly substitute for copyright, have been unable to keep UUC services from having an inefficient bargaining advantage when they negotiate rates for permission to use copyrighted works on their sites. Nor have algorithms such as YouTube’s Content ID been able to correct this defect. This means that UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate. Other online services (such as subscription services, e.g. Spotify and Apple Music) are at a competitive disadvantage when competing with UUC platforms. These traditional services generate lower revenues and a reduced user base because of the distorting impact of safe harbors. As a net result, copyright owners are seeing reduced copyright payments from both UUC and other services, which would appear to be very substantial.

Keywords: copyright, dmca, safe harbor