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Sound Recording Feedback: Efficiency Noise

In my prior post, I argued that the limited nature of the sound recording copyright has had adverse effects on the scope of protection for other copyrights.1 The copyright act defines a sound recording in terms of the process of fixation, not in terms of substantive expression.2 In response, courts developed bright-line rules towards copying sound recordings.3 I argued that these sound recording rules have bled into the jurisprudence of musical work cases.4 For example, courts have been more willing to extend copyright protection to musical elements previously viewed as non-copyrightable, such as a song’s groove.5 I will refer to this phenomenon as an “increased protectability standard.” The pressing question then is: what is the effect of this ever-growing protectabiltiy standard on the music industry?

U.S. copyright law is designed to promote social progress by fostering innovation.6 This policy implies several competing interests, such as providing economic incentives both for businesses to invest and for authors to create.7 Likewise, copyright policy balances these economic interests with society’s interest to consume, use, and freely expand upon prior authors’ expression.8 Further, the boundaries between each of these groups often blur together: consumers may very well be authors and vice versa. In fact, as noted in my prior post, this blurring is the basis for the copy-expression cycle.9 By balancing these competing interests, U.S. copyright law sets the legal foundation for which intellectual property rights can flourish. In other words, U.S. copyright law is designed with a capitalistic market in mind. Thus, I will evaluate the sound recording feedback effect on the market for musical works through the lens of each of these three private actors: businesses (music publishers), authors (songwriters), and consumers (recording artists and the general public). Ultimately, the Copyright Act’s limited definition of sound recordings and its impact on musical work jurisprudence has elicited a fundamentally inefficient market.

This increased protectability standard has some positive effects on music publishers’ incentives. When a publisher’s catalogue suddenly has a broader scope of protection, that publisher has an increased incentive to invest in new expression (songs). One could argue that, in a narrow sense, these increased standards are Pareto superior to the prior allocation of rights.10 Because the scope of protection is expanding, no one is made worse off and at least one publisher is made better off. True, publishers did not “own” the rights to, say, a song’s groove prior to this increased protectability standard. However, other publishers were still free to use these musical elements – concepts that were, in effect, public domain, factual musical resources. Thus, the effect of this increased protectability standard on the total market for publishers is a wash. The property rights that publisher A receives is increased proportionally to the decrease in publisher B’s ability to use. Thus, this increased protectability standard is not Pareto superior because at least some publishers are harmed; at best, this increased protectability standard is Kaldor-Hicks efficient.11 Assuming that publisher A is receiving enough new wealth to both theoretically compensate publisher B for their loss and still have some overage, there are still other actors at play. Therefore, in order to determine whether these increased standards are Kaldor-Hicks efficient, we need to analyze the increased protectability standard’s effect on the other groups in the music industry: authors and consumers.

Whereas the increase in value to publishers is roughly a wash, songwriters experience a discrete negative utility. The instability of intellectual property rules (at least in the short term) and the handicap placed on previously allowed copying (especially in the long term) severely affects songwriters’ ability to act within the confines of copyright law’s legal framework. These increased standards are effectively increasing the price on songwriters to enter into the copy-expression cycle. This increase in price would shift songwriter’s supply curve left for such activity (i.e. creation) and, as a result, decrease their quantity supplied. In other words, as a result of these increased standards, we would expect less innovation and, in turn, more homogeneity in songs. For the most part, scholarship has confirmed this prediction.12

Consumers are similarly situated as authors, albeit at a lesser extreme. Because songwriters are innovating and creating less, there are fewer new songs for recording artists to record. Likewise, the general public has less varied music to consume and, as a result, less opportunity to freely expand upon prior songs. Thus, consumers also experience a loss in utility. Moreover, these two factors feedback into businesses and authors: with less consumption, music publishers license less music and thus lose revenue. The plague of lost music revenue in recent years is no secret.13 Similarly, songwriters have fewer varied songs to copy, transform, and ultimately turn into their own expression (the copy-expression cycle). This shortage of innovation amplifies the glut of musical homogeneity predicted above.14

Therefore, under the assumption that the policy underlying copyright law is to promote social progress via economic incentives to create and consume, these increased standards have had a wholly negative impact on social welfare.

The question at hand is whether the increased protectability standards are efficient. More specifically, does the increased utility in the publisher As of the copyright world surpass the negative utility on publisher Bs, songwriters, and consumers (recording artists and the general public). This is exceedingly unlikely. Whatever gains publisher As receive are likely only proportional to the loss of publisher Bs. Thus, the negative utility imposed on songwriters and consumers bars Kaldor-Hicks efficiency. Further, from this efficiency story, we would expect to see a decline in music revenue as well as an increase in musical homogeneity because of the decrease in innovation – both predictions which are a reality.15 Therefore, the Copyright Act’s limited definition of sound recordings and its impact on musical work jurisprudence has elicited a fundamentally inefficient market.

So what?16 Certainly, efficiency isn’t the only consideration at play. Moreover, even if these were objectively “bad” rules, what remedial steps would correct these inefficient standards? Stay tuned for the next volume of the sound recording feedback.

  1. Gabriel Godoy-Dalmau, Sound Recording Feedback: Bright-Line Rules and Blurred-Lines Jurisprudence, Mich. Bus. & Entrepreneurial L. Rev. (Oct. 26, 2015), 

  2. See 17 U.S.C. § 101 (defining sound recording as a work “that results from the fixation of . . . sounds” while defining copyrights like audiovisual works as “works that consist of a series of related images”) (emphasis added). 

  3. See Bridgeport Music v. Dimension Films, 410 F.3d 792, 801 (6th Circ. 2005) (“Get a license or do not sample.”). 

  4. Godoy-Dalmau, supra note 1. 

  5. See Williams v. Bridgeport Music, 2015 WL 4479500 (C.D. Cal. July 14, 2015). 

  6. See U.S. Const. art. 1, § 8, cl. 8 (“[t]o promote the Progress of Science and useful Arts”). 

  7. See Howard B. Abrams, Law of Copyright § 1:3 (Thompson Reuters 2015). 

  8. See id. 

  9. Godoy-Dalmau, supra note 1. 

  10. See Richard A. Posner, Economic Analysis of Law 14 (9th ed. 2014) (defining Pareto superiority as a transaction that “makes at least one person better off and no one worse off”). 

  11. See id. (defining Kaldor-Hicks efficiency as “potential Pareto superiority: The winners could compensate the losers”). 

  12. Joan Serrá et al., Measuring the Evolution of Contemporary Western Popular Music : Scientific Reports, Nature (July 26, 2012), (measuring an increased similarity between new and old popular music tending toward homogeneity). 

  13. David Goldman, Music’s Lost Decade: Sales Cut In Half in 2000s, CNN (Feb. 3, 2010), (noting 43% drop of sales and licensing revenue between 1999 and 2009). 

  14. See Serrá, supra note 10. 

  15. See Goldman, supra note 11; see also Serrá, supra note 10. 

  16. MilesDavisVEVO, Miles Davis – So What, YouTube (Oct. 19, 2010), 

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Gabriel Godoy-Dalmau