Why Radiohead’s copyright assertions are economically creepy

Private property rights, as Jeremy Corbyn’s critics often remind us, are the foundation stone of free markets. Mess about with them and the whole Jenga tower of our prosperity could come crashing down.

Yet how do we define “property”? The image that springs to mind when we hear that word is probably land. Give or take the occasional squabble over a boundary wall, we generally know where our little castles start and end (assuming we’re lucky enough to have one). A farmer, similarly, knows where the edges of her fields are. Under the law, no one, not even the state (except in extreme circumstances and in return for fair compensation), can expropriate our house, or our fields, or our businesses premises. What’s ours is ours.

But much property in a modern economy is intangible, and not as intuitively definable as land. If you own a business you have a right to the profits, after tax. If you have money in the bank, you have a right to receive the interest payments. That’s straightforward enough.

But what about “intellectual” property? What about the rights to the revenues from a popular new drug that a pharmaceutical company has invented, but which could be easily recreated by competitors? What about software? Algorithms? That’s where patent laws enter: time-limited protective monopolies granted by the state.

And for films and songs we have copyright law. It emerged this week that the band Radiohead are asserting their property rights over a piece of music. They feel that parts of a song by Lana Del Rey called “Get Free” “use musical elements” from their breakthrough 1993 hit, “Creep”.

Radiohead have denied Del Rey’s Twitter claim that they are suing her and that the band is demanding “100 per cent” of any publishing royalties from “Get Free. But it’s difficult to see why they have been in “discussions” with her since August unless money is at stake.

In a much-noted irony, Radiohead were themselves previously sued by two songwriters who claimed “Creep” breached their own property rights to 1972 hit “The Air That I Breathe” by the Hollies. Radiohead were forced to acknowledge a songwriting debt and split the royalties. Perhaps they feel it’s payback time.

Defenders of copyright law in music and film generally argue it’s necessary to encourage creative endeavour. To some extent that might be true (although the folk music tradition, which is largely based on the appropriation and incremental refinement of others’ material, seems to have thrived before the era of modern copyright laws).

But a crucial question is: how long should copyright last? How many years of exclusive property rights represent fair compensation for an artist or performer? When copyright laws were first established in Britain for books in the early 18th century the term was just 14 years.

When copyright was standardised internationally in the Berne Convention in 1886 this was extended to the remaining lifetime of the artist plus 50 years. The economic significance of that should be plain: an artist cannot benefit from royalties paid after their death. This effectively made these property rights hereditable.

And there have been further extensions in recent decades, driven not by artistic need but by corporate lobbying. Walt Disney in 1998 successfully lobbied the US Congress to extend its exclusive rights to Mickey Mouse, which were set to expire in 2003, by a further 20 years. There have been similar extensions of the copyright term, after intense corporate pressure by the music industry, in the European Union.

What is the economic value of these alterations of the law? The answer is a depressing one. There is no evidence that the benefits of copyrights of the current inordinate lengths outweigh the costs. Extensions of copyright terms and aggressive assertions of their breach in the cultural realm are not really about the preservation of wealth-generating property rights. They are about wealth extraction: the simple shifting of resources from one group to another. Hail to the thief indeed.

#copyright #LanaDelRey #Radiohead #WaltDisney

The BBC played the ultimatum game with Carrie Gracie – and came off badly

The first “ultimatum game” was conducted by three researchers at the University of Cologne in 1982. Two players, unknown to each other previously and unable to communicate during the game, were asked to split a pot of money between them.

The first player got to choose the division. The second player got to accept or reject the division. But if it was rejected neither player would get anything.

According to the axioms of “rational” economic choice the second player would be expected to accept any proposed division of the pot so long as she or he received more than zero. Something is, after all, worth more than nothing. And which rational person would choose nothing over something?

But that was not the result the researchers found when they ran this game multiple times with different subjects. On the occasions when the first player divided the pot less than equally the second player often reacted badly.

“Subjects will often rely on what they consider a fair or justified result,” they wrote. “The typical consideration of player 2 seems to be: ‘If player 1 left a fair amount to me, I will accept. If not…I will punish him by choosing conflict’ ”.

This was the first study to provide compelling empirical evidence that people often value “fairness” just as much as money – and that that the principle of fairness can actually trump financial considerations. A great many other empirical studies over the past three and a half decades have supported the finding. Ultimatum games played and observed in different countries, different cultures, among different professional groups, have all pointed in the same general direction.

And this week we have had a vivid real-world confirmation of it with Carrie Gracie’s resignationof her job as China editor of the BBC on the grounds that she was being paid less than her male counterparts.

Gracie says her bosses at the Corporation offered her a £45,000 pay rise, taking her salary to £180,000, when she complained about the disparity and demanded redress. But the pay rise would still not have meant gender pay parity, so she resigned and went public with her frustrations, landing the BBC in an exquisite public relations nightmare.

As for Gracie, she will come away, not quite with nothing (she will remain employed in a more junior capacity at the BBC), but with considerably less money than she could have had if she had accepted the offer. “I didn’t want more money. I wanted equality,” as she put it. The principle was more important than the money.

It may be naïve to expect BBC managers to be familiar with the scientific literature on ultimatum games. Yet one presumes they are pretty experienced in staff negotiations about salaries. So why did they get it so disastrously wrong on this occasion?

The answer is that they were probably doing what they have done in the past: addressing the case of a valued staff member unhappy about money by offering them a bit more cash. But of course the terms of this negotiation were very different. As in the ultimatum game, both sides had full information. Ms Gracie knew, roughly, what her male counterparts were being paid because the Government had forced a high level of pay transparency on the Corporation. £45,000 is a lot of money: more than the average UK wage. But Mr Gracie was able to put it in context There is a lesson her for bosses not just at the BBC but everywhere. An informed workforce on matters of relative pay levels is one that is liable to put more of a premium on principles. They will be less amenable to being bought off. Games of what Gracie terms “divide and rule” of the staff will not work in the way they might have in the past. The Government’s deadline for all firms with more than 250 staff to reveal their overall gender pay gaps will fall in April. This will even out the informational playing field between staff and managements in larger companies to some extent. But not much. The breakthrough in the BBC case was allowing people doing similar work and with similar levels of seniority and experience to work out the gap between them. Aggregate firm-level gaps will not facilitate this individual-level comparison. The best hope for those suffering from wage discrimination – and the worst nightmare for bosses guilty of discrimination – is that the aggregate gender pay disclosure requirement is merely the beginning of a new comprehensive era of pay transparency. For information really is power.

#pay #ultimatumgame #genderpaygap #BBC #CarrieGracie

The economic puzzle of the ticket tout

Back in 1987 The Independent wrote a famously provocative editorial in praise of ticket touts.

“The tout offers a genuine service and takes real risk of loss in the pursuit of his frequently modest profit,” we argued. “If the Queen knighted touts rather than civil servants she would do more for economic growth than all the government’s departments and quangos put together.”

The prospect of a knighthood for touts today seems rather remote. Incarceration in the Tower of London feels more likely. Last week the creative industries minister, Matthew Hancock, unveiled legislation designed to crush the new breed of highly organised scalpers who use automated software to acquire tickets for concerts and sporting events in bulk the minute they go on sale online, and then flog them on at inflated prices to the real fans who missed out (usually also via online marketplaces).

Whether The Independent’s editorial writers of 1987 would have saluted the new breed of industrial-scale digital touts in the same way they admired their analogue predecessors is open to question. Yet the existence of touting, in whatever form it takes, raises an interesting economic puzzle. The existence of considerable markups in the secondary market implies concert and sporting tickets are being priced by event organisers at below the equilibrium price, where supply meets demand. If the tickets were priced “correctly” in the first place there would be little profit margin for the scalpers.

So why don’t the artists and venues charge more to extract that value for themselves, rather than allowing it to go to fans (many of whom pay less than they would actually be prepared to) or to ticket touts? Why are they leaving money on the table? The answer probably lies in the particular nature of concerts as economic events. As the US economist Alan Krueger has pointed out, buying a ticket for a pop concert is a different kind of economic transaction from buying your weekly groceries, or purchasing a new TV. First, you’re not buying a good but an experience. Second it’s a particular type of experience: one freighted with social and cultural meaning.

“In many respects, concerts could be thought of as a giant block [neighbourhood] party instead of a traditional market,” he explains. “While it is socially appropriate to charge neighbours some fee for coming to a block party to pay for the provisions, it is inappropriate to charge them enough to make a hefty profit… Many artists have been reluctant to raise prices to what the market will bear for fear of garnering a reputation of gouging their fans.”

This is why pop stars like Ed Sheeran and Adele themselves often ostentatiously condemn gouging by touts, making sure to dissociate themselves from the taint of exploitation.

There are other nuanced commercial motives too. At occasions like music concerts and sporting events the atmosphere matters in terms of the quality of the experience. This was cited by Vincent Kompany, the thoughtful Manchester City captain, last week when he argued that Premier League football clubs should reduce ticket prices for fans. Kompany claimed this would enable more of the less well-off, but more noisy, supporters to attend. He made the shrewd additional point that a better atmosphere at live games should enhance the value of the already highly lucrative TV broadcast rights, since it makes for a better spectacle.

Some might dismiss all this as hypocrisy from neurotic pop stars and pampered footballers. Others will see it as a charade forced on event organisers by the need to pander to economically-illiterate fans who don’t understand market forces.

Or you might regard it another example of how the simplistic tools of supply and demand are inadequate when it comes to explaining how our sophisticated, socially embedded, market economy often actually works. As a Victorian showman once said: “You pays your money and you takes your choice”.

#popmusic #TheIndependent #AlanKrueger #concerts #tickettouts