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Tuesday, 10 July 2012

Starstruck with the Audio Visual Treaty

Prompted by this tweet from @IPKat, your Katonomist asks, how will the new Audio Visual Treaty affect regular performers? The treaty extends the rights of actors and harmonises this protection internationally. Will it only benefit the stars?

Sadly, pastry forks require opposable thumbs
A potential answer can be found in this slightly foreboding statement on the U.S. State Department’s website: “The successful outcome demonstrates how the multilateral system can be harnessed to benefit American workers and businesses. The U.S. audiovisual performances industry employs more than 150,000 professional actors and is a source of strength for American exports.” Readers may recall previous posts (and here) on development aspects of IP. American dominance of creative outputs, particularly in film, means that the treaty may convey large benefits to American performers. Is this a case of to the victor go the spoils?

A more complete answer is that the extension of IP protection on audio visual works will benefit successful performers most. The reasoning is fairly straightforward – IP protection does not magically convey value. To use a tasty analogy, IP protection does not increase the size of the pie but it might increase a performer’s share of that pie. A successful performer will work on bigger pies where the slices are naturally larger.  (For an accessible look at financial structure of Hollywood, try the Hollywood Economist.)

The creative industries have an A list/B list structure for performers. A slight difference in talent or appeal translates into huge differences in earnings. Being a star on the A list means being disproportionately better rewarded (financially) than B list. (It also explains why Lindsay Lohan’s PR representative works so hard to keep her on a list.)  The average American actor earns US$51,000 annually.  Tom Cruise earned US$75 million last year. This structure means that an extension of IP rights in the Creative Industries will, in most cases, only benefit the select few.

As British-based German researcher Kretschmer has noted, the creative industries has a skewed income distribution. He and his co-authors calculate that, “The top 7% of visual creators earn about 40% of total income (they earn at least £50,000, with £120,000 per annum being the norm) while the remaining 93 per cent earn 60% of the total income, giving a Gini Coefficient of 0.59, compared to a Gini Coefficient of 0.36 for the UK working population.”  Similar distributions are true for other creative sectors and footballers.

The Gini coefficient is a handy measurement of income distribution often used in economics. It measures how income is distributed throughout a population. A Gini coefficient of zero implies perfectly equal distribution where everyone earns the same. A Gini coefficient of one means that all income is held by a single entity. There is no consensus on the ideal Gini coefficient but either extreme (zero or one) is generally not desirable. This internet poll suggests that below 0.4 is preferred and this paper by Chinese economist Zuguang argues for a value of 0.33. The 0.59 value for visual creators is considered high.

We're all mad here
As an economic policy, the extension of audio visual IP protection has ambiguous results. If IP is a policy to encourage innovation, then how does increasing the income of a minority of performers (the stars) impact innovation? Will this IPR encourage potential performers to seek the limelight? At the same time, having different rights for different types of performers is confusing and potentially inefficient. Unclear policy is less effective and harmonisation of rights may better encourage innovation.

On a personal note, this Kat is very disappointed that this treaty only came into force now. Her school performance of the Cheshire Cat was legendary and she dreamed of making it big in China. Alas, the lack of protection meant that her celebrated interpretation has been limited to dusty VHS tapes. Would the Audio Visual Treaty have changed things?

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