Oren Amram
Professor Perritt asked me to
summarize my opinion as to why the majority student sentiment in favor of
peer-to-peer FREE music downloading is bad policy:
In general terms, property refers to a
resource over which an individual or business holds legal interest. In contemporary societies, money serves as a
medium of exchange to acquire property ownership. Accordingly, the property you own is protected
by legal rights over both its use and monetary value derived from its use. With this in mind, most fortune five-hundred
companies make capital expenditure decisions primarily based on the potential
to yield returns above a predetermined hurdle rate: the minimum amount of
return required before decision makers will give the green light to make an
investment in property. This minimum required
return is usually determined by the cost of raising capital plus a desired
premium for an anticipated level of risk.
One thing is for sure – an investment will not be made unless it returns
at least the cost put into it.
If
we stop and think about this process, most of us (at least informally) engage
in the same analysis when making capital decisions in our own lives. For
example, if the expected compensation for lawyers was the minimum wage, then not
many students would spend over $100,000 and 3 years on a legal education. Moreover, financial services companies would hesitate
to make such loans given the obvious risk of default. Further, the opportunity cost of investing in
a legal education will become very high; in other words, the
next-highest-valued alternative use of that resource (time and money) would be
much more profitable than investing it on a legal education. Thus, forces of capitalism will cause
resources to shift out of the legal field and into a more economically
attractive venture. Inevitably, the
legal industry as we know it would suffer severe human-capital losses causing significant
impairments to the industry as a whole.
One
can argue, however, that we also spend money to obtain property rights in highly-depreciable
goods such as cars and in consumable goods such as food. Yes, here we can say that our buying behavior
is driven by something other than a “hurdle rate.” But, even these purchases are made in light
of our current wealth and present value of expected future incomes; in the long
run, we must invest resources to make a certain rate of return required to
maintain a certain standard of living. Otherwise,
it is only a matter of time until our pool of resources will dry up and leave
us unable to acquire any new property at all.
Like
the law student in the example above, there is always an “individual” composer
at the start of the value chain who depends in major part on royalties to earn a
living. Why would it be okay to bite
into his fair share of royalty revenue? Sales of music recordings make up a
fundamental component of the art of music.
If we deprive the musician of these royalties we thereby limit the stock
of resources available to create music for public distribution. If everything else remains equal, the
musician’s standard of living will decrease, the opportunity cost of making
music will increase, financial services companies will hesitate to lend a hand,
and resources will naturally shift out of the music recording industry. Of course, numerous recording and
distribution related jobs will be lost and government- collected taxes will decrease. Naturally, record companies and CD labels
will suffer the same consequences.
Accordingly, “[t]he immediate
effect of our copyright law is to secure a fair return for an author’s creative
labor.” Sony Corp. of Am. v.
Advocates of free music downloading are in effect advocating a socialist music regime based on collective free ownership of the artists’ work. They argue that the widespread listening of music will increase the band’s popularity. This in turn will filter out the “bad” music and increase the demand for live performances. Accordingly, “real” musicians would still be able make “enough” money (or even more than previously) from live shows. Even if this is true, why should we not extend this logic to other professions? For example, what makes musicians so much different from attorneys? In both professions we can find “good” and “bad” workers, passionate and detached workers, and creative and uncreative workers. Why then not advocate that attorneys should only charge for hours spent inside the courtroom and not for hours spent outside of it. Thereby, the demand for legal work will rise, lawyer popularity will increase, “bad” lawyers will be filtered out, and the economics of the entire industry will improve. Similar to the distinction between live performances and music recordings, a substantial amount of legal work takes place outside the “live performance” settings in the courtroom. Why not reason that lawyers can make “enough” money by charging only for “in-court” time while forfeiting all property rights to “out-of-court” time? This would inevitably cause the legal industry’s economics to mark significant change: either resources will naturally shift out of the industry or some structural change (in terms of pricing or product offering) take place in order to meet an acceptable hurdle rate for the efficient use of those resources.
A further consideration is that,
if out-of-court time is made freely available to the public, then (at least
until capacity constraints kick in) lawyers would be unable to exclude others
from using their services. Just as an
attorney may not want to be associated with a particular client, so too might a
musician desire the same privilege. For
example, the band Leonard Skynard probably would not want its newest album Red,
White, & Blue made available on BMW’s website as part of a marketing
campaign. Accordingly, as a matter of
principle, some bands may refuse to make their works available to the public
without a secured right to exclude others from free use.
Another common argument in favor
of music piracy is that people were creating music long before any intellectual
property rights were even recognized. Thus,
even without any copyrights, artists will continue to create. This argument fails for very basic reasons:
back then, technology was not an available vehicle with which property rights
could be violated. Moreover, even if an
ice-ages analysis would be relevant, a certain secured monetary return had always
been integral to the composer’s continued creativity and ability to reach the
general public. Mozart, for example,
performed in concerts for money, sold his works to publishers, played in salons
of the nobles and wealthy personages of
In sum, legally acceptable peer-to-peer
free music downloading would violate traditional notions of property rights at
unprecedented levels. There is no logical reason to draw a distinction between
property rights in music files and rights in other traditional or modern
properties. In the long run, if all else
is equal and music piracy becomes the legally acceptable norm, resources in the
music industry will be diminished and output will decline both in terms of
quality and quantity.