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The Siren Song of Efficiency in Music Licensing

Somehow over the years music ownership, and hence its licensing, has become perhaps the most complicated area of all copyright. Whether because of a lack of an authoritative database of copyrighted works in the U.S. for potential licensors to check, or that from the outset music is a bundle of several property rights, the bottom line is that sometimes music is not made available to consumers as efficiently or as easily as some might wish.

And there are those who would take advantage of the confusion to forward selfish agendas by arguing that music could be more easily accessed if the U.S. codified more fair use exceptions to property rights. They are simply looking to both limit copyrights and the free market.  

Sadly, that is where most discussions on the issue end up, but at the Consumer Electronics Show last week there was a much more balanced panel discussion. 

Participants generally acknowledged that licensing confusion has consequences for how quickly new and interesting services can get to market, and whether they can scale quickly enough to attract capital to keep operating and innovating. But to take this idea too far is a mistake: Efficiency is a virtue, but protecting intellectual property rights is a basic principle. 

Property rights are fundamental for a number of reasons, not least of which is they are guaranteed in the Constitution. They are also a critical building block of our economy. Over the last 200 years we have built an economy that depends on the protection of intellectual property, and so changes in its structure have economic consequences.  

But while property rights are guaranteed, there is no guaranteed right to interact with an efficient business or industry. In other words, in a free market business owners have the right to craft their business models, and to achieve success or failure. Individuals create and invest with this understanding. 

Think of it this way: Property development could be more efficient if they did not need to worry about whose property they wanted to build on. They could identify the very best place for their development and break ground. But most of us understand how damaging such an approach would be to property rights, and hence to the economy. Intellectual property is no different. 

Yes, music licensing could be more efficient, and the music industry sees the potential for greater value if it were, which should lead to greater efficiency. However, creating some new fair use exception to intellectual property protection is not the answer. As in every other area of the economy, it is markets that will lead to greater efficiency in music licensing, but weakening property rights will destroy those same markets.