ECONOMICS OF COPYRIGHT COLLECTING SOCIETIES*

Christian Handke
Assistant Professor in Cultural Economics
Erasmus University Rotterdam
Email: handke@fhk.eur.nl

and Ruth Towse

Professor of Economics of Creative Industries
Erasmus University Rotterdam

A final version of this paper appeared in the:

International Review of Intellectual Property and Competition Law, vol. 38, no.8, 2007, pp.
937-957.

1. Introduction
Economists have long recognised that copyright collecting societies (CCS), i.e. organisations
that specialise on administering “copyrights held by a large number of owners”1, play a
fundamental role in the copyright system. Indeed, the economic literature explains why
without such organisations, copyright law would be ineffective in some markets for
copyrighted works: the majority of authors and users would not be able to grant or obtain
permission to use many works of art, literature, music, film and other such works that
copyright law protects. In economic terms, CCS enable markets to function for the use of
copyright works in situations in which the copyright holder cannot contract directly with the
user. But because many markets for copyright works have changed rapidly over recent years,
we should ask under which circumstances CCS would continue to play a constructive, maybe
even essential, role. It has been argued many times that technical solutions to digital rights
management (DRM) will render CCS obsolete as the market for copyrights shifts online and
policy-makers such as the European Commission have begun to scrutinise the role played by
CCS in the dynamic market for copyrighted media content online (REC 2005/737/EC). The
purpose of this survey of the specialised economic literature is to take stock and to identify
possible gaps in the understanding of the economics of CCS and to advocate attention to this
literature in contemporary debates about them.

CCS act on behalf of a range of right holders – authors and publishers, as well as performers
and production firms, such as record companies and film studios. Their core economic
function is to license the use of copyright works, which they do by negotiating licence fees; to
collect and distribute royalties; and to monitor the use of copyrighted works. In the economic
literature, CCS are also referred to as ‘copyright collectives’ or ‘collective copyright
organisations’. Their function is referred to as ‘collective rights management’ (CRM).

The administration of public performance rights for compositions and recordings – in short
performing rights – has received most attention in the economics literature and will thus be

1
S. M. BESEN & S. N. KIRBY, “Compensating Creators of Intellectual Property – Collectives That Collect” 1
(The RAND Corporation, Santa Monica, CA 1989a). In contrast to publishers and production companies – that
often commercialise copyrights of many right holders/creators simultaneously – collecting societies do not own
copyrights themselves.

1
the focus of this survey, too. As collecting societies are constituted somewhat differently in
different countries, it is difficult to generalise about some of their characteristics and
activities. For instance, some music authors’ and publishers’ collecting societies play a role in
administering the compulsory ‘mechanical’ royalties record companies pay to
publishers/authors for reproduction and distribution rights.2 In the USA, for example,
mechanical royalties are administered by a separate collecting society, the Harry Fox Agency.
In other countries, authors’ and publishers’ collecting societies tend to administer both
performing and reproduction rights under one roof. Some collecting societies administer
various other types of copyrights (e.g. rental rights and adaptation rights) and on behalf of
other types of right holders, such as visual artists or video directors. An important
development was the foundation of collecting societies dealing with licences for the
photocopying of printed material.3 Collecting societies also play a role in the administration
of statutory levies on copying devices that enable home copying, such as blank tapes or CDs.
But despite these variations, it is nevertheless possible to generalise about the main economic
functions of collecting societies.4

2. The basic economic rationale of collecting societies

Economists typically see CCS as an efficient way of overcoming the problem of high
transaction costs for administering copyright in some markets. CRM reduces the costs of the
service of administering many and diverse rights granted by copyright law. Many markets for
copyright works are complex: a great number of creators and other right holders supply an
even greater number of different products that include an array of rights; it is challenging to
enforce exclusive property rights to cultural products (which is an economic purpose of the
copyright system); the pricing of cultural products is notoriously difficult; there are also often
many users with different characteristics. As a result, the transaction costs that accrue just for
the purpose of finding potential trading partners and to negotiate the terms of trade can be
very high. For right holders, the fixed costs of administering any bundle of copyrights
thoroughly among all users can be very substantial.5 Right holders need to set up procedures
to monitor use, to prosecute copyright infringements and to establish the willingness to pay of
various users. Users need to identify right holders and avoid conflict. Both right holders and
users need to negotiate the terms of use including the price. Transaction costs are particularly
problematic where copyrighted works have a relatively small value to many users6. Such a
constellation requires many transactions and sometimes transaction costs might even exceed
the market price for a licence to use a copyright work. No market will develop and both right
holders and potential users will lose out7.

2
R. E. CAVES, “Creative Industries – Contracts Between Art and Commerce” (Harvard University Press,
Cambridge, MA 2000); M. EINHORN, “Music Licensing in the Digital Age,” in: R. TOWSE (ed.), “Copyright in
the Cultural Industries” 165-77 (Edward Elgar, Cheltenham 2002).
3
R. WATT, “Copyright and Economic Theory – Friends or Foes?” (Edward Elgar, Cheltenham 2000).
4
See M. FICSOR, “Collective Management of Copyright and Related Rights” (World Intellectual Property
Organisation, Geneva 2003) for a detailed survey of the legal aspects of collective management of copyrights.
5
A fundamental problem with incomplete enforcement of copyright can be illustrated by a simple example of
right holders that consistently enforce licence payments from one set of users while they consistently do not
enforce payment from another set supplying the same market. In this situation, holding other things equal,
copyright enforcement would simply ruin those users that are forced to pay royalties to the benefit of those users
who escape payments.
6
BESEN & KIRBY, supra note 1; S. M. BESEN & S. N. KIRBY & S.C. SALOP, “An Economic Analysis of
Copyright Collectives”, 78:1 Virginia Law Review 383-411 (1992).
7
BESEN & KIRBY, supra note 1; A. HOLLANDER, “Market Structure and Performance in Intellectual Property:
The Case of Copyright Collectives”, 2 International Journal of Industrial Organization 199-216 (1984);
TOURNIER & JOURBERT, “Collective administration and competition law”, 3 Copyright 96-103 (1986).

2
However, there are also economies of scale in the administration of copyright. Where
“licensees are identical” or “the same sources of information need to be investigated to
determine use”8, the average cost of monitoring and enforcing copyrights of thousands, even
millions, of works – played, say, on hundreds of radio stations or in thousands of bars – falls
rapidly with the number of works represented. Exploiting these economies of scale and thus
reducing the costs of administering copyrights is the main economic rationale for CSS. This
includes helping users to identify and locate right holders9 by assembling directories, and
providing them with legal security where a CCS covers the entire repertoire10. What is more,
reciprocal agreements between large, national collecting societies substantially facilitate the
international administration of copyrights11.

This economic rationale helps to explain the scope of CRM. Where there are high transaction
costs and economies of scale, collective action by right holders that pools costs can make
some markets for copyright works more efficient or even help to establish new markets for
their use.12 The benefits of CRM are greater, the more numerous and the costlier individual
transactions in a market for copyrights would be without them and the quicker average
transaction costs fall when an increasing number of works is administered by the same
organisation. For example, CCS are relatively important in markets for the ‘secondary’ use of
copyrighted material, such a public performance of sound recordings in broadcasting
programmes or photocopying of published literary material. In such markets, the typical
situation is that the right holder does not make a contract with the individual end-consumer. It
is simply prohibitively expensive to strike a new deal every time an individual end-consumer
receives a copyright work on a traditional broadcasting service or reproduces a work using a
photocopier.13

The economic rationale also provides some guidelines on how to think about the optimal size
of a CCS. In practice the average costs of copyright administration within one market usually
decreases with every expansion of the repertoire managed by the same organisation. When
average costs fall as the repertoire of copyright works increases indefinitely, a single large
supplier of rights management will always have lower unit costs than several smaller
suppliers would have. Where this is the case, CCS are ‘natural’ monopolies meaning that as
monopoly suppliers they are more efficient in the sense of having lower costs than if there

8
BESEN & KIRBY, supra note 1; HOLLANDER, supra note 7; WATT, supra note 3.
9
R. MERGES, “Contracting into Liability Rules: Intellectual Property Rights and Collective Organizations”, 84:5
California Law Review 1293-1393 (1996).
10
BESEN & KIRBY, supra note 1; WATT, supra note 3.
11
R. WALLIS & C. BADEN-FULLER & M. KRETSCHMER & G. M. K LIMIS, “Contested Collective Administration
of Intellectual Property Rights in Music – The Challenges to the Principles of Reciprocity and Solidarity”, 14:1
European Journal of Communication 5-35 (1999); WATT, supra note 3.
12
HOLLANDER, supra note 7; BESEN & KIRBY, supra note 1; BESEN, KIRBY & SALOP, supra note 6; MERGES,
supra note 9; 1996; WATT, supra note 3. For criticism of the justification in terms of transaction costs and an
overview over alternative justifications see A. KATZ, “The Potential Demise of Another Natural Monopoly: New
Technologies and the Future of Collective Administration of Copyrights”, 04-02 University of Toronto Law and
Economics Research Paper (2004), also KRETSCHMER, “The Failure of Property Rules in Collective
Administration: Rethinking Copyright Societies as Regulatory Instruments”, 24 European Intellectual Property
Review (EIPR) 126-137 (2002) and SNOW & WATT, “Risk Sharing and the Distribution of Copyright
Collective Income”, in: TAKEYAMA & GORDON & TOWSE (eds.), “Developments in the Economics of
Copyright: Research and Analysis” 23-36 (Edward Elgar, Cheltenham 2005).
13
Securing that these services are available to users and that right holders are compensated may even be done
under a compulsory licence under which no permission from the right holder needs to be obtained for some types
of use but that entitles the author to remuneration (GALLAGHER, “Copyright Compulsory Licensing and
Incentives”, in: R. TOWSE (ed.), “Copyright in the Cultural Industries” 85-98 (Edward Elgar, Cheltenham
2002). CCS provide the organisation that makes such payments possible through collective administration by
distributing remuneration revenues to its members.

3
were competition14. But natural monopolies are monopolies and whether the existence of a
single supplier of CRM services for a particular bundle of rights is beneficial for society at
large depends on the extent to which CCS exploit their monopoly position to raise prices or to
tolerate inefficiencies within their organisation.

3. Can monopolistic collecting societies promote social welfare / efficiency?

As a rule, collecting societies operate in an exclusive national territory.15 Furthermore,
different collecting societies within a given territory tend not to compete but to specialise on
various sets of rights and/or types of right holders.16 Whether this monopolistic structure of
collective administration is consistent with economic efficiency and overall social welfare is
one of the central questions addressed in the economic literature. The question is complicated
by the fact that collecting societies in many countries have been created as monopolies and
are regulated by the state.

If the total savings in transaction costs from CRM translate into lower prices and more than
offset the price inflation due to the monopoly power of the CCS, then there is an overall
welfare gain. The prices of monopoly collecting societies would be lower than competitive
prices, and so it would not be prudent to enforce competition17. Again, this would be the case
where there are many small users so that the cost of administration is large relative to their
value, where economies of scale in administering transactions are large, and where welfare
losses from monopoly pricing are relatively modest18. The question is how a monopolistic
CCS that happens to be a natural monopoly can be motivated to pass on its lower costs to
users who pay for licences and right holders that finance the CCS.

The economic literature offers three main mitigating factors regarding the problem of CCS’
monopoly power: regulation, bilateral monopoly and price discrimination. First, a monopoly
CCS may well not be allowed to charge what the market would bear because its rates are
regulated. In some jurisdictions, the rate is set administratively; in others, it is bargained for
between the parties concerned but then may be subject to scrutiny by a court in case of
disagreement.

Another mitigating factor is to be found in the case of bilateral monopoly, when a single
‘monopsony’ user of performing rights bargains with a monopoly controller of copyright
works, such as a CCS administering all composers’ performing rights. This was the case for a
long time in the UK between the PRS (Performing Rights Society) and the BBC (British
Broadcasting Corporation)19. Without the solidarity of the monopoly for composers through
the PRS, the BBC would have been able to force individual composers to accept a lower
royalty. These authors also point out that the power of the collecting society monopoly is
reduced in many cases by the fact that users mostly bargain collectively with the collecting
society to set the licence fee through a trade association or similar body. Negotiations in
bilateral monopolies may even be the main mechanism through which prices approximate the

14
BESEN & KIRBY, supra note 1; WATT, supra note 3; KATZ, supra note 12.
15
Or a narrow range of national territories in the case of the Scandinavian ‘Nordic Copyright Bureau’ (WALLIS
et al, supra note 11).
16
A notable exception is the case of ASCAP and BMI in the USA.
17
WATT, supra note 3.
18
BESEN & KIRBY, supra note 1.
19
A. PEACOCK & R. W EIR, “The Composer in the Marketplace” (Faber, London 1975); H. L. MACQUEEN & A.
PEACOCK, “Implementing Performing Rights”, 19:2 Journal of Cultural Economics 157-175 (1995).

4
socially efficient level20. Watt (2000) even suggests subsidies to help users form collectives to
negotiate as bilateral monopolies with right holders’ collecting societies.

Some of the adverse effects of monopoly pricing might also be alleviated by price
discrimination21. Collecting societies charge users a licence fee from a tariff of elaborate
categories, such as the size of the premises, or the audience22. Frequently, they also collect
and evaluate information on the number of uses or the value generated by various users within
such categories to determine both willingness and ability to pay, two sides of the “pay per
use” principle23. Price discrimination limits the number of potential users that would be
excluded from consuming copyright works when a single, inflated price is charged by a
monopolistic CCS. Perfect price discrimination would lead to a situation where every user is
charged the maximum price she is willing to pay. No user whose willingness to pay is at least
as high as the costs of producing and administering copyright works but falls below a single
revenue maximising monopoly prices would be excluded.24 Price discrimination thus shifts
surplus from high value consumers (who do not have to pay the full price they would have
been prepared to pay at a single price regime for all users) to CCS and right holders who can
charge what the market will bear regardless of their costs. In practice, price discrimination is
bound to be limited, however, because it is costly to assemble and process the necessary
information25. This observation may, however, be outdated by digital rights management
(DRM) – see below.

4. Blanket licensing, pricing and the distribution of proceeds

A considerable part of the economic literature on collecting societies has been devoted to the
economic aspects of blanket licensing and determining what rate should be set. The
distribution of proceeds has also received some attention. Besides cooperative administration
of rights, collecting societies also set the rates of licence fees cooperatively. The typical
pricing structure is bundling the entire repertoire into a single blanket licence and then using
price discrimination to charge users according to some approximation of the intensity of use26
and this is an almost universal practice of collecting societies.

Generally speaking, blanket licensing including cooperative pricing has ambiguous

consequences. On the one hand, it provides the opportunity further to reduce transaction costs
to users and right holders. Blanket licensing spares market participants the costs of
negotiating the exact size of the bundle of rights and its price for every transaction. It can
reduce what would otherwise be very considerable transaction costs and increase efficiency27.
In other words, it is administratively efficient. On the other, blanket licensing reduces
competition between its members and enables them to exact monopolistic profits. Blanket
licensing has been criticised by economists as being neither economically efficient nor
equitable. It is often seen as a necessary compromise between the need to limit transaction

20
HOLLANDER, supra note 7; BESEN & KIRBY, supra note 1; BESEN, KIRBY & SALOP, supra note 6.
21
HOLLANDER, supra note 7.
22
S. MATSUMOTO, “Performers in the Digital Era: Evidence from Japan,” in: R. TOWSE (ed.), “Copyright in the
Cultural Industries” 196-209 (Edward Elgar, Cheltenham 2002).
23
R. TOWSE, “Creativity, Incentive and Reward: an Economic Analysis of Copyright and Culture in the
Information Age” (Edward Elgar, Cheltenham 2001).
24
It seems the equivalent point can be made for right holders of relatively low value copyright works who might
not find any users at a single price for the entire repertoire set by the CCS to maximise overall revenues for all its
members.
25
WATT, supra note 3.
26
HOLLANDER, supra note 7; BESEN & KIRBY, supra note 1; WATT, supra note 3, TOWSE, supra note 23.
27
HOLLANDER, supra note 7.

5
costs and deviation from the optimal solution a perfectly competitive market would provide if
there were no transaction costs. Blanket licences represent a ‘second best’ solution in a
complex situation.

An initial point about pricing and distribution mechanisms is that CCS need to strike a
balance between various objectives. They need to set a price that maximises net revenues for
their members. This requires two things: first, an understanding of demand conditions in order
to set the right price for each of the various types of users for the copyrights administered by
the CCS in question, which is more easily said than done in a market that is notorious for its
uncertain demand conditions; second, CCS need to keep the administration of rights simple
enough to control their own costs. Furthermore, CCS need to be perceived to be fair among
members. Sometimes they are also required to demonstrate their socially beneficial conduct,
especially where they face strong regulators.28

Nevertheless, Besen and Kirby as well as Watt29 observe that CCS enjoy considerable
discretion both in setting tariffs and in the distribution of proceeds. On the one hand, that is
because it is extremely difficult to determine what the right price of copyrights would be so
that scrutinising CCS’ pricing decisions is hard to do for any stakeholder. On the other, the
market for CRM is hard to contest and most right holders and users tend to have virtually no
alternative to the services of a CCS. Due to the economies of scale in CRM, collective
administration can be by far the cheapest option in some markets for copyrights. Members
will rarely want to defect even if they perceive their share in the distributed proceeds to be
relatively low or if they see scope for improving the internal efficiency of the CCS. In the
case of a statutory monopoly, defection would simply be impossible but statutory intervention
of pricing tends to set limits to CCS’ monopoly power.

4.1 The scope of the blanket licensing

Besen, Kirby and Salop30 raise the question whether CCS should operate as clubs that control
the size of their membership or whether all right holders should be entitled to join the society.
They focus on the effect on the number of works included in the blanket licence if
membership is open or closed. In a formal model they show that closed monopolistic
collectives able to exclude members will exact more surplus per member (i.e. right holders
can charge a price that is higher that the marginal cost of production), while the supply of
works will be lower than is socially efficient. In the case of an open collective, no surplus will
be generated for members and the supply of works will be higher than is socially efficient.
The question whether CCS should provide a general service for all right holders bears also on
the internal efficiency of the collecting society. Here the question is whether CCS should
refuse to administer the less popular works by unknown creators in order to save on costs.
After all, in practice a number of the works administered by CCS have no market value. The
selection of repertoire by monopolistic collecting societies would be prone to failure however,
because the market value of cultural products such as musical recordings is liable to sudden
changes that are very hard to predict.31 Selective, monopolistic CCS would be anathema to the
preservation of cultural heritage and diversity and it would reduce competition among right
holders because it would be very hard for outsiders to contest the market. CCS would also risk

28
M. K RETSCHMER & G. M. KLIMIS & R. WALLIS, “The Changing Location of Intellectual Property Rights in
Music: A Study of Music Publishers, Collecting Societies and Media Conglomerates”, 17:2 Prometheus 163-186
(1999); HOLLANDER, supra note 7.
29
BESEN & KIRBY, supra note 1, WATT, supra note 3.
30
BESEN, K IRBY & SALOP, supra note 6.
31
R. TOWSE, “Cultural Industries,” in: R. TOWSE (ed.), “A Handbook of Cultural Economics” 170-177 (Edward
Elgar, Cheltenham 2003); CAVES, supra note 2.

6
breeding their own competition as right holders whose works are rejected would have an
incentive to set up alternative collectives. As with other aspects of collecting societies’ scope
for decision-making, their ability to exclude right holders depends upon the regulator, for
example, the Ministry of Justice that has the oversight of collecting societies, may determine
the extent to which the society is free to set its own rules.

Another critical question is whether there is scope for creating different bundles of rights
rather than just one blanket licence covering the entire repertoire of a given collecting
society.32 Splitting up the repertoire might increase efficiency where it allows for cheaper,
more narrow licences but it would always increase the total administrative costs of rights
management. This issue also has an equity dimension. Individual users will rarely ever use
more than a tiny fraction of the entire repertoire administered by a collecting society and some
users might be better off if they could licence smaller repertoires of only those works that are
relevant to them. This leads to a trade-off between the administrative efficiency of a one-size-
fits-all solution and the interests of some users and rights holders that would benefit if
narrower and cheaper bundles of rights would be commercialised separately. However, where
CCS use effective price discrimination, blanket licensing is not a problem because users are
charged according to the value that they attach to the use of the repertoire so that a radio
station playing classical music is unlikely to pay extra for the possibility to play pop music
under the same licence. What is more, Watt33 argues the benefits from dividing up the
repertoire of CCS into smaller bundles would probably be low. After all, once a
comprehensive system of administering a bundle of rights is established, the cost of
administering additional works tends to be quite modest. More narrow licences might simply
not be much cheaper to administer and turn out to cost nearly the same as a conventional
blanket licence that covers the entire repertoire of a CCS.

Another criticism of CCS on the basis of concerns for equity is that by pooling costs, the
authors of the most popular works end up indirectly subsidising other CCS members. After
all, the ratio between revenues and administration costs tends to be less advantageous for less
popular works, this practice is seen to favour smaller right holders over superstars and major
intermediary firms. This type of solidarity might be agreed upon explicitly among the
different members of the society. Such rules may also be imposed from the outside by the
regulatory body. Generally speaking, equity is an elusive topic and economists might
underestimate this issue when analysing CCS, except in relation to the distribution of
revenues (see below).

4.2 Collective pricing

Economists tend to distinguish between the collective administration of rights and collective
pricing. One reason why cooperative pricing is held not to be economically efficient is that it
does not permit individual pricing of works and so the price mechanism does not transmit
signals to the author. Market signals are muted by the blanket nature of the licence which
charges a single fee for all authors’ works. This is a valid point but this problem should not be
exaggerated because the method of distribution of licence fee revenues does enable market
signals about the popularity of their work to reach the author as the distribution of collective
revenues to individual authors is made according to the use of their works.

Besen and Kirby as well as Besen, Kirby and Salop34 contemplate whether collective
administration of rights should be separated from collective pricing with a blanket licence in

32
BESEN & KIRBY, supra note 1.
33
WATT, supra note 3.
34
BESEN & KIRBY, supra note 1; BESEN, KIRBY & SALOP, supra note 6.

7
order to retain price competition among right-holders. For example, setting a single price
makes promotional pricing impossible. This is an important issue because the market for
cultural works is characterised by bandwagon effects, i.e. demand for a product increases with
the number of individuals that consume the same product35. Right holders to new or unknown
works have an incentive to set promotional prices in an attempt to maximise future revenues,
which is impossible where a CCS set a single price for the entire repertoire. Collective pricing
can also present problems for new technologies and there is a danger of rates being set that are
not technologically neutral, thus favouring one type of product over another36.

4.3 Setting the licence fee

In terms of setting the licence fee, the service the conventional CCS is offering is a single
product – the administration of one specific bundle of copyrights on behalf of all rights-
holders. As we have seen, it will price discriminate with respect to users in order to obtain the
maximum revenue the market will bear.37 Watt, however, sees the main objective as the
maximisation of profit; that is because the society distributes to its members on the basis of
the average profit (revenue minus costs).38 The latter is more desirable if revenues to right
holders, not the CCS, and use of copyright works is to be maximised. As seen above, setting
the profit maximising price for cultural products is challenging due to network effects in the
market and technological change, say the emergence of a new distribution channel, will
complicate the matter further. CCS often take recourse to rules of thumb, e.g. “10% of the
wholesale price to the author”.

Besen and Kirby39 argue that the reservation price at which copyright owners are better off
from a new type of licence might be close to zero “since there are few, if any, additional costs
incurred when a body of work is used by a new set of users”. This does not hold where new
uses compete with old ones so that charging lower prices to one set of users might erode
revenues from another set of users. In any case, from their investigation of collecting societies
throughout major American and European economies, Besen and Kirby40 discern “no
particular justification for the actual tariff and distribution method that is chosen”.

In many cases, the rates a CCS sets to users are regulated, either directly because a court or
the Ministry has to approve them or indirectly because either party can appeal to a tribunal.
However, if CCS, whose job it is to monitor the market for copyright works, find it hard to
determine the right price, regulators will hardly find it much easier. Watt argues that statutory
regulation of prices is problematic because “determining socially optimal prices would appear
to be almost impossible” for regulators.41 This is one of the issues Merges42 and Liebowitz43
take with statutory regulation of licence pricing. In practice, regulators often allow an increase
at the same rate as the retail price index or by analogy to another type of licence44.

35
H. LEIBENSTEIN, “Bandwagon, Snob and Veblen Effects in the Theory of Consumers’ Demand”, 65:2 The
Quarterly Journal of Economics 183-207 (1950).
36
EINHORN, supra note 2.
37
MATSUMOTO, supra note 22.
38
WATT, supra note 3.
39
BESEN & KIRBY, supra note 1, at 82.
40
Id., at 83.
41
WATT, supra note 3.
42
MERGES, supra note 9.
43
S. LIEBOWITZ, “MP3s and Copyright Collectives: A Curse worse than the Disease?,” in: L. N. TAKEYAMA &
W. J. GORDON & R. TOWSE (eds.), “Developments in the Economics of Copyright: Research and Analysis” 37-
59 (Edward Elgar, Cheltenham 2005).
44
S. LIEBOWITZ, “The Impacts of Cable Retransmission on Television Broadcasters”, Canadian Journal of
Economics August 503-524 (1982).

8
4.4 Distribution of licence fee revenues and administrative charges
Regulators seem to interfere less into the distribution of proceeds than into the pricing
decisions of CCS. One common regulation is that these societies may reserve up to 10 percent
of revenues to social and cultural ends and some CCS have also agreed explicit rules on cross
subsidisation, for example, of ‘classical’ composers by pop composers. According to Wallis et
al45 such practices are more significant in author-dominated collecting societies such as the
German GEMA or Sweden’s STIM. Such social conduct might help to justify the
monopolistic position of collecting societies against strong public regulators in much of
continental Europe.

The distribution of revenues has two main aspects. First, to finance themselves, CCS typically
charge a flat percentage of the proceeds of users’ income from blanket licences.46 It is not
easy to establish what would be a reasonable percentage: evidence of comparable charges by
other societies – either the equivalent society abroad or another society at home – can be very
difficult to interpret because of different regimes and economic conditions.47 There seem to be
great differences between the share of the revenues that CCS in different countries require to
finance themselves.48

Second, the remaining revenues of the CCS need to be distributed among the members.
Generally, members receive regular payments only where their works were found to have
been used and the payment due exceeds some minimum annual value. Information on use is
obtained from logs and the like that users are required by the terms of the licence to provide to
the society, such as, for example, radio play of musical works. In this way, the bundling
together of all works in the repertoire of all the society’s members into the blanket licence for
revenue-raising purposes is now reversed in order to distribute to members on the basis of use
made of their works. Watt49 believes this “learn-then-distribute” procedure to be inefficient.
Sophisticated distribution procedures are costly to operate so that there is less to be distributed
among the members where they are in place. Watt50 suggests that collecting societies would
be more efficient and that they would provide the additional benefit of an insurance against
unpredictable demand for risk-averse members if they were to distribute their receipts evenly
rather than relying on determining actual use in a “learn-then-distribute” procedure. However,
in practice some link between the popularity of a work and a CCS’ payment to the right
holder may well be essential for equity purposes. Being seen to be fair must be a vital part of
the distribution process in a membership organisation and clarity of a play-list or equivalent
‘objective’ information reassures members that the process is fair. What is more, many CCS
are required to administer rights for all-comers, however small the market for their works is
(see above). Where this is the case, a completely even distribution of revenues would
probably not work in practice because it would undermine incentives to supply high quality
works.

5. Divergent interests within CCS

45
WALLIS et al, supra note 11.
46
Id.; HOLLANDER, supra note 7.
47
MONOPOLIES AND MERGERS COMMISSION, “Performing Rights – A Report on the Supply in the UK of the
Services of Administering Performing Rights and Film Synchronization Rights” (HMSO, Monopolies and
Mergers Commission, London 1996).
48
F. ROCHELANDET, “Are Copyright Collecting Societies Efficient? An Evaluation of Collective Administration
of Copyright in Europe,” in: W. J. GORDON & R. WATT (eds.), “The Economics of Copyright – Developments in
Research and Analysis” 176-98 (Edward Elgar, Cheltenham 2003).
49
WATT, supra note 3; SNOW & WATT, supra note 12.
50
Id.

9
An important dimension in the analysis of collecting societies concerns divergent interests
within collecting societies.51 On the one hand, there might be principal-agent-problems
between right holders and the management and staff of a monopolistic collecting society52, in
spite of the fact that CCS are non-profit organisations whose explicit purpose it is to promote
their members’ interests.

There are some important issues regarding the CCS’ relationship with its members that have
hardly been addressed by economists. For example, when is it efficient for monopolistic
collecting societies to insist on members registering all relevant works owned by them? And
under what circumstances is it efficient for collecting societies to forbid direct agreements
between individual members and specific users concerning rights administered by the
collective?53 Here, there is an obvious tension between the CCS’ purpose to serve its members
and the apparent need to insist on an all-or-nothing agreement with rightholders. Without
complete coverage, CCS could not offer comprehensive legal security to owners. If members
could withdraw works from CRM, the administration costs of CCS would be considerably
higher and the CCS might be left with only that repertoire that has a low market value.
However, marketing the entire repertoire at a single price leads to the abovementioned
efficiency and equity problems and makes it very important that CCS take great care with
their pricing, especially when rates for new types of use are established.

Furthermore, interests between different types of members might diverge along various
default lines. Established members might be able to discriminate against newcomers. 54
Members enjoying great market success will have an interest in seeing proceeds distributed
according to measured use. They might also favour a high and generally applicable licence
fee, which could price newcomers and fringe suppliers out of the market. Generally speaking,
larger intermediary right holders would be able to exploit some of the economies of scale in
rights administration if they were to administer their own rights themselves, while for smaller
right holders, self-administration would be a lot less efficient than CRM. The largest
rightholders, e.g. the four major record companies that also run the largest music publishers,
might even have acquired the critical mass to administer their own rights without large losses
in efficiency in comparison to the services provided by national CCS. Where defection seems
feasible, larger members could be in a strong position to make sure that CCS take account of
these members’ interests.

What is more, the interest of the original creators and intermediary firms that acquire
copyright entitlements from authors and performers might diverge. Publishers might have
different interests from authors, or record companies might have different interests from
recording artists.55 Intermediaries and creators differ in two main ways. First, intermediaries

51
MACQUEEN & PEACOCK, supra note 19; R. TOWSE, “Copyright and Economic Incentives: An Application to
Performers’ Rights in the Music Industry”, 52 Kyklos 369-390 (1999); WALLIS et al, supra note 11;
KRETSCHMER et al., supra note 28; M. K RETSCHMER, “The Failure of Property Rules in Collective
Administration: Rethinking Copyright Societies as Regulatory Instruments”, 24 European Intellectual Property
Review (EIPR) 126-137 (2002b); A. GAYER & O. SHY, “Publishers, Artists, and Copyright Enforcement” 18
Information Economics and Policy 374-384 (2006); V. OKSANEN & M. VÄLIMÄKI, “Music Collecting Societies
and Webcasting”, presented at the Second Annual Conference of the Society for Economic Research on
Copyright Issues Annual Congress, USA (June 2003), available at http://www.valimaki.com/org/serci_2003.pdf.
52
ROCHELANDET, supra note 48.
53
C. CRAMPES & D. ENCAOUA & A. HOLLANDER, “Competition and Intellectual Property in the European
Union” (Unpublished paper, Université de Toulouse 2005); MONOPOLIES AND MERGERS COMMISSION, supra
note 47.
54
BESEN, K IRBY & SALOP, supra note 6;
55
TOWSE, supra note 51; WALLIS et al, supra note 11; KRETSCHMER, supra note 51; GAYER & SHY, supra note
51.

10
can usually pool their risks by acquiring rights to copyrighted works that are the output of
several creators. Second, creators will frequently acquire income from all available ways of
commercialisation, say for music – live performances, sales of recordings, licensing of rights
– whereas intermediaries can be more specialised. Thus, creators might have less of an
interest in strict copyright enforcement56 and a greater preference for promotional pricing,
especially at the beginning of their career, than do intermediaries. In the music industry,
intermediaries seem to be more apt at promoting their economic interests than creators. 57
Towse58 provides evidence showing that intermediaries’ share in the revenues far exceeds
those of creators. Furthermore, Wallis et al59 observe that major transnational conglomerates
have acquired interests in both the publishing business and the production business and might
have conflicting interests with more specialised members of the respective collecting societies
of which they are members.

Finally, now that performers have individual rights, it is not so clear how these rights will be
administered60. An awkward question in this context is that as new groups of claimants are
given rights, the proportion of the pie available for existing claimants must be reduced. If the
size of the pie is increasing, however, the reduction may be obscured by its growth.

6. Regulation
In practice, supervision and regulation arrangements range from direct political control or
continuous scrutiny by specialised supervisory bodies to a simple application of competition
and contract law. 61 Rochelandet62 presents a preliminary empirical investigation of the highly
regulated German society GEMA, the lightly regulated British PRS, and the intermediate case
of the French SACEM in order to determine what factors affect efficiency and concludes that
what determines the performance of the society is the concentration of ownership and the
strength of the internal control, which might in turn depend on the degree of regulatory
control (though results here are inconclusive).

In contrast to Rochelandet’s empirical contribution, the question how much regulation of CCS
there should be is usually discussed as a matter of principle. Merges63 argues that the
legislature or judiciary is inherently inferior to industry insiders in shaping a proper
framework for the commercialisation of copyrights. To him, spontaneously founded
collecting societies illustrate the ability of the industry to create its own solutions on the basis
of property rights. Kretschmer64 takes the opposite view and favours a scenario in which
collecting societies would be unequivocally treated as regulatory instruments. Watt65 believes
that, if there is just one society – the natural monopoly outlined earlier – some public
supervision and regulation might promote efficiency. Economic arguments for regulating
collecting societies include the need to limit the market power of monopolistic societies vis-à-

56
GAYER & SHY, supra note 51.
57
WALLIS et al, supra note 11; KRETSCHMER, supra note 51,
58
TOWSE, supra note 23.
59
WALLIS et al, supra note 11.
60
R. TOWSE, “The Singer or the Song? Developments in Performers’ Rights from the Perspective of a Cultural
Economist”, forthcoming in Review of Law and Economics (2007).
61
ROCHELANDET, supra note 48; BESEN & KIRBY, supra note 1; BESEN, KIRBY & SALOP, supra note 6.
62
ROCHELANDET, supra note 48.
63
MERGES, supra note 9.
64
KRETSCHMER, supra note 51.
65
WATT, supra note 3.

11
vis users as well as new members.66 Other arguments include the provision of effective
conflict resolution mechanisms67 and the promotion of public services.

Wallis et al68 regard collecting societies as providing a public service that goes beyond
promoting short-run efficiency by providing modest support for newcomers, niche
productions, in particular ‘serious’ music, or for music education. Kretschmer69 suggests such
measures would improve economic efficiency – as well as promoting equity – and might
constitute an alternative justification for collective administration of rights. This aspect of the
system might be in danger of collapsing not least because major conglomerates seek to more
completely appropriate the value generated on the basis of their repertoire. In this way,
several authors attempt to incorporate other developments such as vertical and horizontal
integration in the music industry into the analysis of collecting societies.70

As seen above, there are a number of control variables at the disposal of regulators. Many
authorities limit CCS’ sway over who gets to be a member, influence license fees or the
distribution of receipts. For some rights, e.g. broadcasting rights of musical recordings on US
radio stations, rights-holder are even obliged to deal with a collecting society under
compulsory licensing arrangements mandated by the legislator.71 CCS also play an important
role where they provide the infrastructure necessary to implement statutory blank media
levies and other such taxes.

7. Technological change
In recent years, a debate has ensued on the role of CCS in the context of recent technological
and structural change in the copyright industries and the problems these have brought72,
which revolves around the possibility of DRM. The economic literature on CCS provides a
structure in which to think about the effects of technological change on these organisations.
Besen and Kirby73 had already acknowledged the ambivalent effects of technological changes
on the need for collective administration of rights. Back then, new copying technology and
new, additional distribution channels were seen as increasing the complexity of administering
copyrights and reducing the ability of individual copyright holders to go it alone.74 Collecting
societies were seen as likely to become more important due to these changes. On the other
hand, new technologies were also seen as facilitating the information handling aspects of
administrating copyrights and allowing right holders technical control over access and use,

66
BESEN, K IRBY & SALOP, supra note 6.
67
MONOPOLIES AND MERGERS COMMISSION, supra note 47.
68
WALLIS et al, supra note 11.
69
M. K RETSCHMER, “Copyright Societies Do Not Administer Individual Rights: The Incoherence of Institutional
Traditions in Germany and the UK,” in: R. TOWSE (ed.), “Copyright in the Cultural Industries” 140-164 (Edward
Elgar, Cheltenham 2002a).
70
WALLIS et al, supra note 11; KRETSCHMER, supra note 69; to some extent also KATZ, supra note 12.
71
TOWSE, supra note 23.
72
See COMMISSION OF THE EUROPEAN COMMUNITIES (EC), “Study on a Community Initiative on the Cross-
Border Collective Management of Copyright” (Commission of the European Communities, Brussels 2005),
available at http://ec.europa.eu/internal_market/copyright/docs/management/study-collectivemgmt_en.pdf;
EUROPEAN PARLIAMENT (EP), “Report on the Commission Recommendation of 18 October 2005 on collective
cross-border management of copyright and related rights for legitimate online music services (2005/737/EC)”
(European Parliament, Brussels and Strasbourg 2007), available at
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A6-2007-
0053+0+DOC+PDF+V0//EN.
73
BESEN & KIRBY, supra note 1.
74
Also HOLLANDER, supra note 7.

12
thus providing “an alternative to collective administration”75. Arguably, this ambiguity of
technological change for CRM continues to provide a good guideline for the discussion. In
any case, up to the mid-1990s, the prevailing notion was that collecting societies were
becoming more important.76 Moreover, their role was also being promoted by the EU in its
‘Rental Directive’77. More recently, it has been claimed that self-help systems such as DRM
might render some collecting societies obsolete.78

DRM can refer to the application of advanced ‘digital’ information and communication
technology to administer all types of copyrights. DRM can also refer to the more narrow task
of the administration of copyrights for works that are distributed as binary (i.e. digital) code.
Accordingly, two issues concerning CCS can be distinguished: the digital management of
rights using DRM techniques and the way in which CCS accommodate new, emergent ways
of delivering copyright works such as online downloads. For CCS, both these aspects of DRM
entail important challenges.

Technical solutions to DRM may well come to facilitate the gathering and processing of
information on use and users of copyright works very substantially and this will probably
prove to be easier to implement in new ‘digital’ markets. Cheap and effective DRM
techniques would certainly have a range of important implications. Within a CRM system, it
would allow for a much more precise assessment of the use of individual works and for more
extensive price discrimination so that individual works can be priced more precisely
according to their value and even individual user’s willingness to pay. This would also
improve the process of market signalling so that supply would be more tightly linked to
paying consumers tastes. It should also help CCS to reduce costs in most of their activities
from back-office tasks to collecting and evaluating data as well as the enforcement of rights.
However, CCS would probably have to extend on their ICT expertise to exploit these
opportunities for innovation and they seem very unlikely to be able to develop most DRM
techniques themselves.

DRM might even make CRM of the current type obsolete altogether where it would allow for
direct transactions between suppliers and individual end-consumers. There is a paradox here
that DRM techniques – say watermarking and encryption – if applied by CCS have the
potential to improve the collectives’ performance while it could also come to erode the reason
for CRM in some markets for copyrights. However, it is important to consider that there will
be economies of scale and network effects in the market for DRM techniques. In other words,
there will probably be one or a few dominant suppliers of such services. The expression “self-
help system” obscures the point that it is likely that most, if not all, individual right holders
will purchase DRM services. IT firms such as Microsoft and Apple as well as major right
holders such as SonyBMG have taken the lead in developing DRM techniques. Where DRM
replaces CRM, there will probably be a shift from the highly-regulated, non-profit monopoly
of national CCS to a multinational, for-profit oligopoly or monopoly that provides essential
services related to the management of copyrights in some markets. The challenges to
regulators are unlikely to be less intense in the latter case. What is more, individual licensing
would reduce the solidarity of the collecting society and put the author at the mercy of

75
BESEN & KIRBY, supra note 1.
76
BESEN & KIRBY, supra note 1; BESEN, KIRBY & SALOP, supra note 6; MERGES, supra note 9.
77
EC Directive on Rental Right and Lending Right and on Certain Rights Related to Copyright in the Field of
Intellectual Property, 92/100/EEC (Luxembourg 1992). TOWSE, supra note 23.
78
KATZ, supra note 12; C. GRABER & C. GOVONI & M. GIRSBERGER & M. N ENOVA (eds.), “Digital Rights
Management – The End of Collecting Societies?” (Stämpfli, Berne 2005).

13
individual bargaining through the market79, where all but the very top superstars would be in a
relatively weak bargaining position80. So far, it has been mostly held that DRM techniques are
complementary to collective licensing rather than a substitute for it, though that view may
change if its use increases. One critical issue is hard to overlook, however: to this day, no
DRM system has withheld the strains of the market. Ambitious initiatives by major right
holders and ICT firms have repeatedly run into insurmountable obstacles. It seems premature
to rely on a solution that is fit for the market to emerge in the near future.

Other contentious issues related to the emergence of new digital media, online delivery of
copyrighted works and multimedia services have also motivated a number of comments on
the role of collecting societies and of their statutory regulation.81 In a broad paper on
collective administration of rights, Merges82 has asked whether regulation is necessary to cut
through a “burgeoning thicket of rights” that requires producers of new media services to
negotiate with a multitude of right holders and creates obstacles for the swift emergence of
new products and services. He concedes that regulation might generate short-term savings by
circumventing or speeding up time-consuming negotiations of the terms for new types of
licences but notes that it would also preclude the development of private solutions, which
would “perform similar functions in a superior manner”83. He concludes that, over time,
regulation would thus create inefficiencies and is not desirable.

Regarding the emergence of the music-distribution online, including the growth in popularity
of file-sharing, Einhorn84 took a different view. He argues for an intervention by the US
Copyright Office to speed up the creation of viable solutions for new digital media. Oksanen
and Välimäki85 argue for more flexible pricing – e.g. by creating different bundles – and
statutory intervention to promote an “efficient solution in webcasting”. Snow and Watt86, on
the other hand, specifically reject a compulsory license for Internet downloads – and with it a
publicly controlled CCS – as a measure of “very last resort”. They point to the regular
superiority of market mechanisms in co-ordinating production and consumption and to several
specific difficulties that could arise in the context of an expansion of public control and
collective administration of copyrights.

One basic observation by economists about technological change is that its timing and
consequences are often not anticipated correctly by stakeholders. The emergence of markets
for ‘digital’ downloads and streams of copyright works via the Internet or mobile telephony
networks is probably a case in point and so is the diffusion of DRM techniques that would in
theory give right holders greater control over use in this digital and other markets for
copyrights. Moreover, how individual creators and performers could effectively bargain in
setting licence fees is not clear. At this point in time, the establishment of DRM still seems
very much open-ended and we can expect the discussion to be ongoing as DRM develops.

8. Taking stock and conclusions

79
KretscHmer, supra note 69.
80
CAVES, supra note 2; TOWSE, supra note 23.
81
MERGES, supra note 9; EINHORN, supra note 2; KATZ, supra note 12.
82
MERGES, supra note 9.
83
Id.
84
EINHORN, supra note 2.
85
OKSANEN & VÄLIMÄKI, supra note 51.
86
A. SNOW & R. WATT, “Risk Sharing and the Distribution of Copyright Collective Income,” in: L. N.
TAKEYAMA & W. J. GORDON & R. TOWSE (eds.), “Developments in the Economics of Copyright: Research and
Analysis” 23-36 (Edward Elgar, Cheltenham 2005).

14
Economists have developed a relatively stable rationale of CCS. These cooperative
membership organisations pool the costs of rights management and exploit economies of
scale in the services of copyright administration. CCS hereby reduce the cost per member and
make licensing cheaper for both copyright holders and users. They thus make some markets
for copyrights more efficient and they can even assist the creation of markets for copyrights
that would otherwise not exist.

In economic terms, the collecting society is likely to be a natural monopoly with perpetually
decreasing unit costs as the repertoire managed expands. But how natural monopolies should
be regulated is contentious. It is probably fair to say that most economists believe a natural
monopoly is best left in tact but regulated87 and in practice many CCS are strongly regulated
either directly or indirectly. That, of course, raises the question of how and how much, which
has been controversial. Both the strength of regulation as well as the control factors used to
influence CCS differ between different countries and there is no obvious best practice.

Blanket licensing is a universal feature of collecting societies and appears to be the most
administratively efficient system for organising some markets for copyrights; it is essentially
a solution to high costs of individual transactions, though it may well also contribute to risk-
reduction, solidarity and diversity of supply. Even so in welfare economic terms, this is not an
optimal solution because the conditions of perfect competition cannot be met; that is what
economists mean by saying blanket licensing is economically inefficient. This stance,
however, does not take into account the distortion to an idealised competitive market that
copyright law itself introduces nor the likelihood that without collective rights management,
some markets for copyrights are unlikely to exist. We live in a ‘second best’ world in welfare
economic terms, not an ideal ‘first best’ one envisaged in theory and the observation that
CRM is inefficient in this strict economic sense does not automatically mean that we know
how things could be improved in practice.

Because copyright law is national law, collecting societies usually operate in national
territories (but there is no inherent reason why copyright holders should not join a society
outside the country of domicile and, indeed, they do). Thus national monopolies are natural
monopolies (or vice versa). However, there is probably no economic justification for limiting
the size of CCS to the size of a national market. Where copyright law would be integrated
across borders, say in the EU, larger CCS should provide a more efficient solution but
integrating the collective administration of rights will also have its drawbacks: for example, it
will reduce national sovereignty in conducting cultural policy via regulating CCS, it will
create CCS with even greater market power, and the process of integration will almost
certainly be a highly politicised one.

If an industry is a natural monopoly, it is highly unlikely that a competitor will enter the
market without regulatory intervention. Forcing competition by regulation would cause costs
to rise in most markets. Moreover, even in very large markets – say an integrated market for
the entire EU – there would probably be a tendency towards monopoly in the provision of
CRM services because of the economies of scale and the network effects in this activity. One-
off initiatives by regulators would thus probably only enforce competition for a limited time.
However, pro-competitive initiatives could certainly change who the monopolistic supplier of
CRM services is88, and reforms seeking to promote competition between CRM providers need
to take account of the fact that the population of members and, in some cases, the users with

87
W. BAUMOL, “Applied Welfare Economics,” in: R. TOWSE (ed.), “A Handbook of Cultural Economics” 20-31
(Edward Elgar, Cheltenham 2003).
88
EINHORN, supra note 2.

15
which many collecting societies negotiate terms are often dominated by a few large,
multinational conglomerates. In such a setting, challenging the monopolistic position of
national CCS could allow the exercise of their market power and diminish competition in the
copyright industries rather than the reverse89. Collectives in which creators play a significant
role might be increasingly dominated or even replaced by major intermediary rightholders or
ICT multinationals. These private, for-profit organisations might well turn out to be more
adept in exploiting new opportunities for CRM in a changing market. They will probably not
be easier to control than conventional CCS.

There remain important gaps in the economic literature. For instance, it remains difficult to
develop more detailed and generally applicable insights on collecting societies because their
scale and scope as well as the regulation arrangements and copyright legislation differ from
country to country.90 In many countries, they were set up by the state under a grant of (legal)
monopoly and it is thus very difficult to distinguish the economic from the institutional
influences. Even those societies, like the UK’s PRS and SACEM in France, which developed
spontaneously, are regulated and regulation can in some cases be very strong.91 There have
been studies by economists of societies in particular countries besides the now somewhat out
of date general overview by Besen and Kirby: for the U.S., Einhorn and Caves; on the UK see
Towse; on the UK and Germany, Kretschmer; and on France, Germany and the UK,
Rochelandet.92 What is clear is that so much differs between even those societies that are both
geographically close and ‘trade’ with each other regularly. Quite a few of these differences
are ignored by economists, for example, whether the society acts on assignment from the
rights-owner or as the agent, or whether or not membership requires exclusivity.

The existent economic literature on CCS provides a good starting point to address several
pressing questions. First, in a volatile environment, does collective administration of
copyrights offer the most efficient solution available? This is largely a question of whether
technological changes or changes to the market structure have a strong effect on the relative
efficiency of collective administration versus individual administration of copyrights.
Theoretical contributions identify countervailing factors. Thus, as so often with applying
economics in the ‘real world’, there is a need for more empirical work in the area. Some
cultural economists strongly doubt the viability of individual creators or performers to
successfully promote themselves93, which points to the need for collective administration.
Over the lifespan of present day collecting societies, various technological developments have
changed users, producers and means of doing business. It will be interesting to see if DRM
permits top stars to leave and go it alone managing their own rights, as some believe they will.
If so, they will undoubtedly want to charge a fee higher than the blanket licence fee, thus
making users worse off. The only reason the fee would be lower would be if the star’s costs of
administering her rights were considerably lower than those of the collecting society;
economists’ admittedly theoretical understanding of these matters suggests that that would be
unlikely. It certainly seems that some users have persuaded the European Commission that
greater competition in the provision of rights management services would be beneficial.94 Our
understanding of the economic literature suggests this is unlikely. That said, there are no
doubt opportunities for improving these services both on the part of the collecting societies

89
WALLIS et al, supra note 11;
90
See e.g. KRETSCHMER et al., supra note 28.
91
ROCHELANDET, supra note 48.
92
BESEN & KIRBY, supra note 1; EINHORN, supra note 2; CAVES, supra note 2; TOWSE, supra note 23;
KRETSCHMER 2002b: supra note 51; ROCHELANDET, supra note 48.
93
J. FARCHY, “Internet:culture,” in: R. TOWSE (ed.), “A Handbook of Cultural Economics” 276-280 (Edward
Elgar, Cheltenham 2003).
94
EC, supra note 72.

16
themselves and of the regulators and particularly so as digitalisation becomes more
widespread. No doubt the distribution rules will become easier to administer. However, equity
will always demand that they are seen to be fair not only efficient. Even the bundle of rights
that is efficiently administered together could change and collecting societies could merge to
reduce administrative costs further – but that means even bigger monopolies. A lot will also
depend on how the copyright system itself survives, as it seems likely to (if only because it
has already weathered other supposedly destructive technological changes in the past). An
element of economic history is useful alongside the more hardnosed economic analysis.

Secondly, where there is a case for collective administration, is the existing structure of
collecting societies suitable to cover new uses or is there need for reform of either the
organisational structure, or of the system of regulation or even of copyright law itself? The
literature reviewed here presents divergent views on how reform should come about. As seen
above, Merges95 and Snow and Watt96 argue for minimal state intervention, whereas others
see the need for continued or even extended regulation. Einhorn97 suggests additional
intervention in order to promote innovation concerning new business models. Wallis et al 98
and Kretschmer99 argue for continued regulation to safeguard cultural diversity and education.
No side wins the argument downright and this is another issue where it seems necessary to
make full use of and to extend on the existing insights to cover the specific policy issues we
are faced with today. Hopefully, this literature survey will be useful in this process.

*This paper is based on a report to the Fundación Autor published in April 2007. We
are grateful to the Fundación Autor for their permission to use that report as a basis for
this article.

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