Private copying remuneration – new study highlights positive impact

The study authored by Lorenzo, Padilla and Requejo, economists at Compass Lexecon ("Compass Lexecon” study) undertakes an economic analysis of “The welfare effects of private copying levies” and shows that the claims about the welfare impact and other implications of removing the private copying remuneration system do not stand up to scrutiny.

Compass Lexecon had been requested by a group of rightholders organisations to analyse and provide an economic opinion on a previous study commissioned by Nokia and issued by Oxera in April 2011. The “Compass Lexecon” study reveals that the Oxera study was based on wrong assumptions and underlines that the removal of private copying remuneration would neither produce the alleged benefits, nor result in a win-win situation as argued by Oxera.
The key findings of the “Compass Lexecon” study with regard to the consequences of removing private copying schemes are as follows:
- Rightholders would clearly be worse off, since they would lose the revenues generated by the levy and their incentive to create new high quality content would decrease. In addition, rightholders would not benefit from the supposed increase in sales of recording devices resulting from the elimination of the remuneration.

- The hardware manufacturers’ revenues might decrease in the long term. As the rightholders’ incentive to invest in new content and the availability of creative content would fall following the removal of private copying remuneration, this would consequently reduce the appeal of copying devices.
- Consumers would be worse off in the long term as the removal of remuneration would lead to less investment in content and hence reduce the availability and quality of content.

Compass Lexecon’s analysis indicates that Oxera’s assumptions are incorrect and that their conclusion as regards the win-win nature of a policy that eliminates private copying remuneration is flawed.

Moreover, data presented in Oxera’s own study as well as calculations made by Compass Lexecon show that the level of copyright remuneration has a strong influence on content creation, but no real impact on – and therefore does not hinder – the state of development of the digital market. The development of digital music sales is actually linked (i.e. strongly correlated in statistical terms) to other factors such as GDP growth rate per capita, number of internet users and/or development and penetration of Internet broadband access within the population of the various Member States.

The study therefore proves that there is an economic justification of and welfare benefits from private copying remuneration. The legal justification of this remuneration has long been recognised by EU law and by recent judgments of the Court of Justice of the European Union.

Note to the editors:
About ‘private copying’:
Private copying refers to the reproduction of audio, visual or audio-visual material for non-commercial, private use. Article 5(2)(b) of the 2001 EU Copyright Directive provides that Member States are free to introduce or maintain in their national legislation exceptions for private copying. The Directive adds that this exception must be accompanied by fair compensation for the right holders. The payment of fair compensation to copyright holders is an essential requirement for the legitimacy of the implementation of private copying exceptions and its indispensable character was recently acknowledged by the Court of Justice of the European Union in the Padawan (C-467/08) and Opus (C-462/09) judgments. The majority of Member States of the European Union have introduced a private copying remuneration system applicable to devices and/or media that allow copying of protected works.
About Compass Lexecon:
Compass Lexecon is internationally recognised as a leading economic consulting firm with preeminent competition, finance and energy practices. For the past seven years, Compass Lexecon has been ranked as one of the leading antitrust economics firms in the world by the Global Competition Review.
The practices of Compass Lexecon are led by some of the most recognised and respected economic thinkers in the world including six former chief economists of the Department of Justice Antitrust Division. It maintains relationships with numerous high-profile academic affiliates, including Nobel Prize winners.
To learn more about Compass Lexecon, please visit www.compasslexecon.com