“Congress appears to have neglected to seriously consider…”

Here is one of the key provisions of US copyright law:

17 U.S.C. §106 Exclusive rights in copyrighted works. Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies or phonorecords; (2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) . . . to perform the copyrighted work publicly; (5) . . . to display the copyrighted work publicly; (6) . . . to perform the copyrighted work publicly . . .

Mark Nadel of the AEI-Brookings Joint Center has examined this provision and come up with some surprising findings. The abstract:

This article questions the economic justification for copyright law’s prohibition against unauthorized copying. Building on the thesis of Stephen Breyer’s 1970 Harvard Law Review article, “The Uneasy Case for Copyright,” it contends that not only may copyright law’s prohibition against unauthorized copying (17 U.S.C. §106) not be necessary to stimulate an optimal level of new creations, but that §106 appears to have a net negative effect on such output! It observes that the higher revenues that §106 generates for popular creations are, in the lottery-like entertainment markets, generally used for promotional efforts (rent seeking), and that such marketing crowds out many borderline creations. The article also identifies and explains how new technologies and social norms provide many viable business models for financing new creations relying on only a heavily abridged version of §106. Hence, the article questions whether the current §106 could survive the intermediate scrutiny standards of the First Amendment, given the lack of evidence that the benefits of §106 exceed its costs.

His conclusion:

The analysis above reveals that the long accepted, but rarely examined, public value of §106 of the copyright law is highly questionable. §106’s impact on generally overlooked endogenous marketing costs appears to lead to a decrease in the economic viability of borderline C 3 s, diminishing net new creations, thereby undermining the presumption that it serves the public interest in this manner. Meanwhile, Congress appears to have neglected to seriously consider some less burdensome alternatives for stimulating creative output, both those raised in Stephen Breyer’s 1970 article and those based on more recent technologies in combination with social norms. Moreover, §106 represents a key obstacle to what may be the best chance for stimulating a deliberative democracy in cyberspace incited by educational, entertaining, and engaging C 3 s.

If §106 was severely abridged there would likely be some initial negative effects, but primarily to publishers and the wealthiest creators, not the rest. Once creators recognized that the world had changed, they would likely adjust their expectations, just as actors who demand $10 million fees for films projected to earn $100 million in revenues accept much smaller fees for creations expected to generate much lower revenues. As long as creators and publishers can earn more than their opportunity cost, they will continue to produce C 3 s. Meanwhile reducing constraints on dissemination of C 3 s would be likely to increase societal welfare.