Against Intellectual Monopoly

rights, whereas the former would be able to only pay $90
and break even. Conclusion: the old spy story will remain out of print. To
put it bluntly, after kidnapping, with the help of Congress and the Supreme
Court, all the artistic creations of the past fifty years, the monopolistic
kidnappers may well set the ransom too high for us, the public, to get them
released. Talk about promoting the progress of science and useful arts!

The Economics of Music
    The RIAA produces propaganda ranging from white papers to videos arguing that technological change makes it necessary for the government to
intervene to prevent the "piracy" that is killing the industry. Certainly
musicians should profit from their creations. But in the current system,
does the money from the copyright monopoly go to the musicians, or to the
seven major producers that act as intermediary and gatekeeper? Courtney
Love, a musician, reports the following:
    This story is about a bidding-war band that gets a huge deal with a 20 percent
royalty rate and a million-dollar advance. (No bidding-war band ever got a 20 percent royalty, but whatever.) ... They spend half a million to record their album.
That leaves the band with $500,000. They pay $100,000 to their manager for 20 percent commission. They pay $25,000 each to their lawyer and business manager.
That leaves $350,000 for the four band members to split. After $170,000 in taxes,
there's $180,000 left. That comes out to $45,000 per person. That's $45,000 to live
on for a year until the record gets released. The record is a big hit and sells a million
copies. So, this band releases two singles and makes two videos. The two videos
cost a million dollars to make and 50 percent of the video production costs are
recouped out of the band's royalties. The band gets $200,000 in tour support, which
is 100 percent recoupable. The record company spends $300,000 on independent
radio promotion ... which are charged to the band. Since the original million-dollar
advance is also recoupable, the band owes $2 million to the record company. If all
of the million records are sold at full price with no discounts or record clubs, the
band earns $2 million in royalties, since their 20 percent royalty works out to $2 a
record.9
    The stylized story told here is important. With modern Internet distribution
and laptop computer "recording studios," the cost of producing music is
quite low. So, the allegedly large fixed cost to be recouped via monopoly
profits is not due to the actual economic cost of producing and distributing the music, which modern technology has cut to a fraction of what it used
to be. The large fixed cost that needs to be recouped via monopoly profits
seems to be due to the very existence of the system of copyright and the
large monopolies thriving on it. From there come the legal, agency, and
marketing costs contemporary monopolized music faces, and passes on to
consumers.

    There is a second important fact buried in this story, indeed a fact most
of us already know but that is often forgotten: in this case, the "successful,,
professional musicians are earning only about $45,000 per year from their
CD sales, that is to say: from that portion of their activity that is protected
by intellectual monopoly. Most likely they are earning about the same or
more from live concerts, which are not protected by intellectual monopoly
and do not benefit from it either. When creative effort takes place and yet
the reward it collects via the "intellectual property" system is minor, the case
for intellectual monopoly is weak. Evidently rock musicians do not need
the prospect of multimillion dollar contracts to perform and record their
music. Further, because they are satisfied with expected gross incomes from
recording in the range of $100,000 to $150,000 thousand a year, evidently
their opportunity cost of recording, as opposed to doing something else, is
not all that high. Again, this substantially weakens the case for intellectual
monopoly.
    Indeed, with modern computers there are a great many creative innovators - lacking perhaps the physical skills and training to play an instrument,
or even to read sheet music - who could modify, edit, and create great
new music on their home computers at trivial cost. The greatest bar to this
outpouring of wonderful new innovative music - if you haven't guessed
already - is the copyright system itself. We cannot create great new music
by