Stan J. Liebowitz

The Fable of the Keys

This paper examines the history of the QWERTY typewriter keyboard, often put forward as the archetypical case of markets choosing the wrong standard. Contrary to the claims made by Paul David and Brian Arthur, we find virtually no evidence to support a view that QWERTY is inferior to DVORAK. Instead, using records of typing experiments, studies by ergonomicists, and examining the historical record of competition among different keyboard designs back when QWERTY first became dominant, we conclude that QWERTY is about as good a design as any alternative.

Copying and Indirect Appropriability: Photocopying of Journals

Creators and owners of intellectual properties are alarmed by the growth of technologies that ease the tasks of copying these properties. This paper, however, shows that the unauthorized copying of intellectual properties need not be harmful and actually may be beneficial. The empirical impact of photocopying on publishers of journals is examined in an attempt to discover if publishers can indirectly appropriate revenues from users who are not original purchasers. The evidence indicates that publishers can indirectly appropriate revenues from users who do not directly purchase journals and that photocopying has not harmed journal publishers. 18 references, 1 table.

Will Mp3 Downloads Annihilate the Record Industry? The Evidence so Far

This paper investigates the impact of unauthorized downloading of MP3 files on the recording industry. Although the no longer extant Napster was the most famous system used for such downloading, its progeny have continued to allow millions of music listeners to download music (and other) files without remuneration to the copyright owners. Using data on the historical sales of prerecorded music I examine in detail the recent decline in record sales and attempt to gauge the importance of various alternative factors that have been put forward to explain this decline. I conclude that the evidence supports a claim that MP3 downloads decrease sales.

Research Note---Testing File Sharing's Impact on Music Album Sales in Cities

Using a data set including album sales, Internet penetration, and various demographic measures for 99 American cities over the period 1998--2003, this paper empirically examines the extent to which file sharing has caused the U.S. decline in sound-recording sales over that period. Also examined is the impact of the Internet on entertainment activities so as to help cleanse the Internet penetration coefficient of that impact. The conclusion from this analysis is that file sharing appears to have caused the entire decline in record sales and appears to have vitiated what otherwise would have been growth in the industry.

Seventeen Famous Economists Weigh in on Copyright: The Role of Theory, Empirics, and Network Effects

The case of Eldred v. Ashcroft, which sought to have the Copyright Term Extension Act (CTEA, aka Sonny Bono Copyright Act) found unconstitutional, was recently argued before the Supreme Court. A remarkable group of seventeen economists including five Noble laureates, representing a wide spectrum of opinion in economics, submitted an amicus curie brief in support of Eldred. The economists condemned CTEA on the grounds that the revenues earned during the extension are so heavily discounted that they have almost no value, while the extended protection of aged works creates immediate monopoly deadweight losses and increases the costs of creating new derivative works. More important, we believe, than the particulars of this case, is the articulation of the economic issues involved in copyright extension. The articulation of those issues is not well framed in the brief. Nor is the case as one sided as the Eldred economists have claimed. First, private ownership of creative works may internalize potentially important externalities with respect to the use of existing works and the creation of derivative works. Second, the Eldred economists neglect the elasticity of the supply of creative works in their analysis, focusing instead solely on the benefits received by authors, leading to potential underestimation of additional creativity that confers benefits immediately. Third, the Eldred economists neglect certain features of copyright law, such as fair use, the distinction between idea and expression, and the parody exemption, which mitigate the costs of copyright. Finally, we present data that counters a common claim that copyright extension so far out in the future can have little effect on creativity. The small fraction of books that have the majority of commercial value when they are new appear to remain valuable for periods of time that are consistent with the expanded term of copyright under CTEA.

How to Best Ensure Remuneration for Creators in the Market for Music? Copyright and its Alternatives

The focus of this essay is to examine the market for copyrighted works with a particular emphasis on the sound recording market. This market is currently in a state of flux, some would say disarray, due to the ability of the Internet to lower transmission costs for both authorized and unauthorized copies, with the latter being, at this time, far more prevalent. In this essay we discuss the intent of copyright, the role of copying and file-sharing, and some alternative production/consumption schemes meant to strengthen or to replace copyright.

Clash of the Titans: Does Internet Use Reduce Television Viewing?

We examine the impact of the Internet on the leading American recreation activity: watching television. We run a panel regression using television viewing, Internet penetration, and socioeconomic variables for a large number of American cities starting before the birth of the Web. We find that the Internets effect on television viewing varies by age group, reducing it by a moderate amount for the youngest Americans but having no impact on the viewing of the oldest Americans. We hypothesize that the overall effect is likely to increase over time as older age groups have more experience with the Internets recreational opportunities.

Testing File-Sharing's Impact by Examining Record Sales in Cities

Although previous forms of copying have been found to often have benign effects on copyright owners the rise in file-sharing has coincided with a steep decline in the sale of sound recordings. This paper attempts to empirically examine the extent, if any, to which file-sharing has caused the decline in record sales. Using a data set for 99 American cities containing information on Internet use, record sales, television viewing, radio listening, and other demographic variables, an econometric analysis is undertaken to examine the relationship between record sales and file-sharing, as proxied by Internet use, from 1998 to 2003. First, we find that the Internet itself reduces time spent on other entertainment activities, but only by a small amount. We then subtract this generic Internet impact from the overall Internet impact and conclude that the decline associated with that component of Internet use that we can attribute to file-sharing indicates that file-sharing has caused the entire decline in record sales and appears to have vitiated what otherwise would have been growth in the industry. Looking at sales in individual musical genres reinforces the primary conclusion since those genres that seem most likely to fall prey to file-sharing have the strongest measured negative impact from Internet usage.

The Impact of Reprography on the Copyright System

This is a report performed for the Canadian government in 1981 on the impact of copying (photocopying) on copyright holders. As far as I know, it was the first theoretical claim that copying might not hurt copyright holders, and might even benefit them, due to the concept of indirect appropriability. Although some of this material later appeared in articles in the JPE and AER, this is a more complete treatment focused on the copying issue. This report proposes a fairly simple model to explain what happens in markets where copying occurs. The key parameters turn out to be the variability in the number of copies made from each original, the degree of substitutability between the original and the copy, and whether or not the copyright holder can engage in price discrimination. Anyone interested in the issue of copying in the Internet era, or who wants to and be able to analyze behavior such as that associated with Napster, will want to read this.

How Reliable is the Oberholzer-Gee and Strumpf Paper on File-Sharing?

This is a lengthy critique of the empirical findings, factual claims, and logic of the empirical examination of file-sharing by Felix Oberholzer-Gee and Koleman Strumpf. It is written for a general audience and provides details of calculations, data, and industry measurements that allow replication by the reader whenever possible. It provides much of the detail for the shorter, more academic version that is also posted.