Music Copyright in the Digital Age

       A legal, economic, and cultural analysis of music piracy and its implications

Alternatives to Music Copyright

The underlying objective of any of the Music market is to adequately compensate music artists and producers for the products they create. Due to the ability to create copies for free, consumers have no incentive to buy a product if they are able to obtain a perfect substitute at little to no risk. Overhauling the market, therefore, requires either:
1. An entirely different system of transferring compensation for a good to the producer of that good, OR
2. The establishment of disincentives for costless acquisition, namely the introduction of the risk of castigation for copyright violation.

The propensity of the international Internet community to engage in illegal file-sharing activities is evidence of the lack of effective disincentives. The likelihood for success of such disincentives is bleak when considering the substantial legal resources required to effectively restrict music downloading.

It is worthwhile to consider a number of alternative business models have been suggested by economists. While none yields economic perfection, Berkeley economics professor Hal Varian states that "copyright is a second-best solution to intellectual property provision."[1] Here are some alternative models:[2]


Media taxes, or taxes on physical products that produce media copies, could effectively redistribute funding to those whose media is being reproduced. Items which could be taxed include blank CDs and CD-replication hardware and software, among others.

Problems with this method: Identifying what artists should be compensated and how much. Would compensation be somehow tied to legal album sales? Or how would one measure the rate music is being shared on private networks?

Bundling & Tie-In Approaches

These approaches are rather simple, though in some sense market distorting because the particular group demanding the music product may not be entirely synonymous with the group. The idea here is that another product is sold as a necessary component of a multi-item package including the music in question. Potential bundling items would necessarily be nonreplicable, for example the artist's autograph, concert tickets, t-shirts etc.[3] In economic terms, this reduces the substitutability of the copy with the original. The most evident problem with such bundling is determining a nonreplicable item that shares the same demand function as the original good.

Other types of bundling capitalize on the tendency for the original copy to spread to non-paying users. One such example is the bundling of advertisements with an original product, so that each copy produces more advertisement exposure as well. Revenue from these advertisements flows back to the creators, adjusting the market distortion created by unauthorized reproduction. Another possibility is to use recordings to advertise live performances by the artist.

Indirect Appropriation

Indirect appropriation is a means of extracting more value from original productions to account for their reproduction. Indirect appropriation is an efficient mechanism insofar as a number of important factors can be identified. The identification of these factors is what makes it unlikely. However, it is simply too difficult to ascertain which original creations will be used to make copies and how many copies will be made. Pricing the original good is nearly impossible without this knowledge.[3]

Pure Public Provisions

Varian suggests the idea of "Pure Public Provisions" for music production. Musicians would be compensated by the government in a similar manner as researchers at large research institutions are funded, which at least ensures compensation to producers to some degree. Two concerns are whether artists would want to be compensated by the state, and how the state should determine who gets funding.[1]


  1. Varian, Hal R. "Copying and Copyright." Journal of Economic Perspectives 19.2 (2005): 121-38. PDF
  2. Towse, Ruth; Handke, Christian; Stepan, Paul. "The Economics of Copyright Law: A Stocktake of the Literature." Review of Economic Research on Copyright Issues 5 (2008): 1-22. Fokus. PDF
  3. Liebowitz, Stan J. and Richard Watt. "How to Best Ensure Remuneration for Creators in the Market for Music? Copyright and its Alternatives." Journal of Economic Surveys 20.4 (2006): 513-545. PDF