Abstract
The article discusses the microeconomic theory behind copyright licensing. It analyses and mentions (at the least) the general economics of copyrights and how the income that is generated along the value chain can be transferred and shared using contracts, issues related to risk and risk bearing in copyright licensing, issues related to market power, issues related to hold-up and essential inputs, and issues related to collective licensing arrangements. The flavour of the article is theoretic, and it is written at a level of upper undergraduate economics courses. It equips the reader with a good knowledge base for understanding the principle issues that are at play as far as copyright licensing is concerned.
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Notes
- 1.
The exception are the author’s moral rights, which cannot be traded or licensed.
- 2.
The sorts of creative works here are such things as musical compositions, lyrics, novels, poems, and art forms. These would be presented to consumers embedded in musical CDs and files, movies, books, and paintings.
- 3.
In principle, the copyright holder and the distributor will freely bargain over the payment terms in the contract. However, in practice publishers typically hold a much stronger bargaining position than do most authors, and so authors are only offered a take-it-or-leave-it standard contract. Some authors – those with established reputations – offer a much lower risk to publishers, and will be able to negotiate more favourable contracts for themselves. The issue of bargaining will be discussed in more detail below.
- 4.
It is more normal for movie script writers to be paid by a flat fee, and not to participate in the future revenues of a film as might directors and principal actors.
- 5.
Often, a “fixed fee” payment is actually an upfront payment against future royalties, that is, the licensee pays a royalty advance. As noted earlier, this mimics exactly a deductible insurance contract under which the licensee insures the licensor. It thus reduces risk for copyright holders, and increases risk for copyright users (see Watt 2013).
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Watt, R. (2018). Licensing of Copyright Works. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_3033
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DOI: https://doi.org/10.1057/978-1-349-95189-5_3033
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