For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

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Tuesday, 19 March 2013

All roads lead to Rome, as any evidence leads to private copying exception?

Further to last Sunday's Kat post on the "Parody and Pastiche" report released by the UK Intellectual Property Office (IPO), today's the time of the "Private Copying" report, which was drafted by Roberto Camerani, Nicola Grassano, Diego Chavarro and Puay Tang, and was aimed at collecting data on whether and how four copyright industries – music, film, publishing and software – have (or not) adopted private copying measures, and on whether the price of the products in the UK reflect a right to private copying.

As IPKat readers might remember, the UK is currently considering whether to introduce an exception for private copying into the Copyright Designs and Patents Act 1988, as was recommended - among other things - by the Hargreaves Review of Intellectual Property & Growth, and also pursuant to what is already permitted under the laws of most EU Member States (according to BECS, 25 out of 27 Member States have a specific exception for private copying). In any case, as announced by HM Government in its December 2012 Modernising Copyright, the idea is to "introduce a narrow private copying exception, allowing copying of content lawfully owned by an individual (such as a CD) to another medium or device owned by that individual (such as a mobile phone, MP3 player or private online storage), strictly for their own personal use."

By using regression analysis [no, explains Merpel, this does not necessarily involve stealing toys from your 4-year-old nephew], the main findings of the report are the following:


We did not find any evidence in support of a widely-held view that stores are including in their price the permission to copy [cf the data cited by HM Government below]. All digital albums are allowed to be copied for personal use, as opposed to CD albums that cannot be copied. In spite of this, we found that digital music is associated with a lower price compared to a CD . Whether the lower price depends on the store, on the intangible nature of the product, or on the possibility to copy, cannot be determined due to the lack of variability in the explanatory variables. However as private copying for personal use is widespread and allowed in the UK, it is plausible that private copying is already largely or fully priced in the UK market. Consumers and producers of music appear to expect that music will be copied for personal non-commercial use and all downloads are sold on these terms.

Revising for his business school exams,
Titian thought that this was all he needed
to understand regression analysis   


In parallel with traditional films, which come with only one licence (e.g. Blu-Ray and DVD), the film industry has found different ways to allow users to have more than one copy of the films they purchase. Examples can be found in the sales of digital films (which could be copied onto a number devices), by bundling multiple formats in the same package (which may also include a complimentary downloadable digital copy), or through new kinds of licences, such as Ultraviolet. We found a positive relationship between price and film copies. 

In particular, since different types of formats have different impacts on price, we can conclude that film stores charge users not simply to have more copies, but to have the opportunity to choose from a higher variety of available choices.


All the bookstores in the sample allow users to make copies of their eBooks. In particular, the copying terms and conditions are enforced using technologies embedded in the eBooks (DRMs) which are able to limit the number of copies that users is allowed and the kinds of devices in which the eBooks may be read on (e.g. smartphones, tablets, eBook readers). The influence of the number of copies allowed and the number of allowable devices on the price could not be determined because (1) of the lack of variability in the explanatory variables, and (2) to the fact that the large majority of price dissimilarities were captured by the difference between traditional books and eBooks. However, when considering that they are allowed to be copied, eBooks are on average less expensive than physical books (which are not allowed to be copied). This premium for a physical book is of course likely to be explained by manufacturing costs and the value consumers place on physical features, rather than on the number of copies that can be made from it. [this looks like a sensible consideration. Yesterday a friend of this Kat's showed her a fun ad she had never seen before and which might serve to explain what the future is holding for paper]


This market case was used partly as a control case as it would notionally not be affected by a private copying exception. However, it is a sector, which actively tries to price for additional copies. The analysis suggests that software producers charge a price that reflects the possibility of making additional copies. In other words, a higher number of copies is associated with an increase in the price. However, this effect becomes smaller as the number of copies increases.

Explaining what 'evidence' means can have
some evident side-effects on non-economists

So what does all this mean?

Although this Kat does not have an economic background, it would seem that this report is in line with the findings included in the relevant UK IPO Impact Assessment on introducing a specific exception for private copying

However, she wonders whether the findings of the "Private Copying" report are fully in line with the evidence cited by HM Government in its Modernising Copyright paper to support the introduction of a specific exception for private copying into UK copyright, particularly in relation to the music sector.

The data presented therein included (not better specified) market evidence suggesting "that the value to consumers of additional functionality associated with content, including the ability to make private copies, can be, and often is, factored in at the point of sale. When music downloads that could be copied freely for personal non-commercial use were first introduced they were sold at higher prices than the DRM-protected equivalents they were sold alongside, reflecting consumer willingness to pay more for copies that they could use more easily on different types of device. Similar price differences can be observed in relation to other types of content where DRM is still used. Some consumers say they would not buy CDs at all if they were physically unable to format-shift them to their personal media devices. The Government’s own analysis agrees that, to some extent, the value that consumers gain from being able to make personal copies will be factored into the market via positive effects on prices and demand."  

Either way, it seems not only that that "all roads lead to Rome", but also that any evidence leads to the introduction of a private copying exception into UK copyright ... Any comments from readers with an economic background would be much appreciated. 


Anonymous said...

Reading the "private copying" study, I was suprised that the researchers do not tell us what question they are trying to study. As I understand it, private copying is (in most cases) theoretically illegal in the UK. Yet it is widely practiced and probably impossible to prevent. In most EU countries, private copying is legal because these countries have a private copying levy. Before 2001, private copying was NOT restricted in most EU countries - it was a right which consumers have now lost. Surely it would be interesting to compare prices in these three different situations.

SG said...

"Type of software (Operating System, Productivity, Utilities, Design & Publishing,
Photography, Finance, Music & Audio, Other)."

You guys, uh, wanna include maybe "video games" in there? It's a fairly big market these days...

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