A Guide for Students and Teachers
Edited by Richard Watt
Chapter 7: Fair remuneration for copyright holders and the Shapley value
Much of the economic theory of copyright licensing is based on the premise of either profit maximisation, or bargaining. However, there is also scope for license setting based on the concept of fairness. In particular, in many countries radio broadcasts of music are seen to be a service of significant social value, and it is thought that a profit maximising license fee set by copyright holders in the music might endanger the socially optimal level of radio broadcasting. Mainly, this fear exists because the copyright holders both supply an absolutely essential input to the radio business and also they are normally organised into a single bargaining unit (a copyright collective). Both of these aspects would tend to suggest that the copyright holders can demand a monopoly fee. For that reason, for example, in most countries the rate paid by radio stations for the right to broadcast music is set by a regulatory authority, rather than relying on a process of negotiation between the parties. The main objective of the regulator when setting the rate is that it be fair and equitable to both the copyright holders and the radio stations. That is, the rate should provide a fair compensation to the former, and yet still constitute a fair expense for the latter given the earnings that will be achieved by using the copyright holders’ input.
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