Entertainment and
Media: Markets
and Economics
 Intellectual property: Definition, types, rights
 Economic foundation for valuation
 Fair and unfair use
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Intellectual Property
The Right?
The Valuation?
The Mechanism?
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Intellectual Property
 Tangible property: Usually dealing with
minerals and natural resources
 Intellectual property: Output of creative
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Copyright: Writing
Patents: Invention and design
Trademark: Marketing symbols
Secrecy and contract: “Know how” (e.g., Coca
Cola, KFC seasoning formula, business secrets)
Intellectual Property
Property Right
 Property: After transformation, a stream of “rents”
 Right
 Ownership of the stream of rents generated by the property
 Control over usage
 Establishment of property rights
 Foundational function of a government
 Provision of a court system in which to assert, defend and
contest property rights
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Intellectual Property
Rent for Creative Works
 Persist Through Time
 Nonperishable, e.g., sculpture
 Works of art – resale
 Vary Across Space
 Different markets – U.S. & Int’l films
 Spinoffs and licensing - The Lion King
 Take Different Forms
 Wyeth’s Helga paintings;
 Resale of the paintings, catalog,
 Museum exhibition
 Jackson Pollock’s paintings: Which ones are fakes?
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Intellectual Property
Tangible Property Rights
 Tangible property
 Exhaustible resources
 Consumption is private and exclusionary
 Motivation for the rights
 Conserve and manage resources
 Avoid the tragedy of the commons (e.g., American vs.
Australian lobster industry)
 Creates a social good: Conservation
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Intellectual Property
Intellectual Property Rights
 Intellectual property
 Consumption is nonexclusionary (public good)
 Production is often input to further innovation
 Motivations
 Reward producers
 Ensure others access (mainly for patents) Exchange
for Secrecy: Reduction of costs that results from
reinvention or rediscovery.
 Incentivize creative, beneficial activity. Profit
incentive: Profit motive calls forth desirable innovation
that might not occur otherwise. (Not everyone believes
this – there have always been creators of music and
literature before and without property rights.)
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Intellectual Property
Views of Intellectual Property
 Creates a social bad: Monopoly
 Social point of view – monopoly
 Private: Strategy? Coca Cola and KFC. Patent does not pass cost
benefit test.
 Creates a social good by incentivizing creative effort
 Merely establishes a property right to a piece of capital (like real estate)
 Conflict: The Sonny Bono law – did nothing to spur creative activity;
merely extended the life of a stream of rents (to Mickey Mouse).
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Intellectual Property
Monopoly in Intellectual Property
The counterpoint is the competitive form of the same market with P=MC and no
deadweight loss. Compared to no market, the monopoly is unambiguously better.
This is a recurrent theme in the discussion of “property” and royalties. What would a
market look like without the “monopoly” in the right? See, e.g., Capital Cities.
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Intellectual Property
Ownership and Valuation
Property right = ownership claim to the long lived
stream of rents.
Year 2
Year 3
Year 4
Year 5
Life of the right
95 years (Sonny Bono’s Mickey Mouse new law)
20 years (17 previously)
Trademark: As long as the trademark continues to be both used
and productive (PTO classifies as “DEAD or ALIVE”)
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Intellectual Property
Property Valuation
General Result
Y ears in th e rig h t
t 1
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N et b en efits (ren ts, p ro fits)
(1  in terest rate) t
Intellectual Property
The value of a
corporation is the
discounted present value
of the stream of profits.
Prozac (Eli Lilly):
Scheduled to expire 2003
Generic by Barr Labs –
successful patent
challenge – due out in
2000. Lilly stock fell from
109 to 76 the day of the
ruling. Barr Labs rose
from 46 to 77 the same
A huge transfer of wealth
from Lilly owners to Barr
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Intellectual Property
Valuing Happy Birthday
By the time its copyright runs out in 2030, Happy Birthday should have made nearly 55
million pounds.
American sisters Patty and Mildred Hill wrote the lyrics in 1893 It is now among the top
three most popular songs in the English language, along with Auld Lang Syne and For He's
A Jolly Good Fellow.
The lyrics were copyrighted in 1935, 11 years before Patty's death, and the ownership has
swapped hands in multi-million pound deals ever since.
The song generated royalties of 625,000 pounds per year for Warner Communications,
who bought the rights to the simple tune for more than 15 million pounds ($28,000,000) in
Currently owned by Summy-Birchard Music (AOL-TW). Current royalties about
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Intellectual Property
An Active Market for Property Rights
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Intellectual Property
Online auction finds the market’s highest valuation of the future stream of
rents (royalties).
Outright purchase of the entire stream or a share of the stream.
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Intellectual Property
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Intellectual Property
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Intellectual Property
Copyright Lifetimes
Pre Bono: Life of the author + 50 years or 75 years for a work for hire
Post Bono: Life of the author + 70 years or 120 years for a work for hire. Works made for hire from
1923 to 1998 (such as Mickey Mouse) do not enter the public domain until 2019 (instead of 1999).
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Intellectual Property
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Intellectual Property
Advances Against Royalties: Retain Rights
A Bank
Conventional banks don’t
like the uncertainty (risk)
and don’t understand the
workings of the market.
Accepts risk
Advance will heavily
discount against the
uncertain royalty stream.
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Intellectual Property
Technological Change and Uncertainty
Will Affect Property Valuation
AA Milne-Winnie the Pooh  Shirley Slesinger Lasswell
held then sold the rights in the 1930s
Disney, 1961, obtained rights for merchandising (more
lucrative than the mouse)
Videocassettes? DVDs? Could not have been foreseen
in the 1930s. Who’s entitled, Shirley or Walt?
The value of the rights in the 1960s-1990s looked very different
in 1990 than they did in 1960.
What rights were obtained in 1961? For uses and forms that
did not yet exist in 1961 but did in 1991?
Laswell’s court case was dismissed after 13 years, 3/29/04.
Walt Disney won.
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Intellectual Property
Fair Use
The concept of fair use: Use of parts of
copyrighted material for certain purposes.
 Relevance: Commercial value of posted
videos to YouTube even if not to the
person who posts the material
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Intellectual Property
Fair use by Professor William Greene
(1) Small part of the website; change of form moved to course
notes, added material
(2) Not using in an attempt to earn money
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Intellectual Property
Not Fair Use
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Intellectual Property
The Pirate Bay has been involved in a number of lawsuits,
both as the plaintiff and as the defendant. On April 17,
2009 Peter Sunde, Fredrik Neig, Gottfrid Svartholm and
Carl Lundstrom were found guilty of assistance to
copyright infringement and sentenced to one year in
prison and payment of a fine of 30 million SEK (app.
3,620,000 USD; 2,385,000 GBP; or 2,684,000 euro), after
a trial of nine days. After appeal, the verdict was upheld.
The entire operation was disbanded in 2010.
It has reformed (zombie like). Exists now in the Seychelles.
Proxy servers exist worldwide.
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Intellectual Property
2015, under
ISPs that
help Pirate
Bay are not
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Intellectual Property
The Anti-Pirate Bay
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Intellectual Property
Definitely Not Fair Use
University of
All 827 pages
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Intellectual Property
Called into
what was
meant by
fair use
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Intellectual Property
Application: Who Owns Fame?
The Right of Publicity
 Who owns the value of a public figure?
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The public figure who is famous?
The public who make them famous?
The paparazzi as agents of the public?
Intellectual Property
Alison Chang vs. Virgin Mobile USA
(Diss in Australia)
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Intellectual Property
Alison v. Flickr
and Virgin
Alison Chang, a 16-year-old Texan
teen girl, sued Virgin Mobile phone
company for stealing her photo which
was taken by her youth counselor
Justin Ho-Wee Wong during a
Christian camp in Australia.
Chang's family filed a lawsuit late
Wednesday (September 19, 2007) in
state district court in Dallas against
Virgin Mobile USA LLC, its Australian
counterpart, and Creative Commons
Corp., a Massachusetts nonprofit that
licenses sharing of Flickr photos.
The case vs. Creative Commons
was dropped in November, 2007. The
case against Virgin was dismissed for
lack of jurisdiction in 2009.
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Intellectual Property
Right of Publicity?
BOSTON (AP) – A Red Sox fan angry that Johnny Damon defected to
the New York Yankees has fought off an attempt by his high-powered
agent to stop her from selling baby bibs with a very grown-up insult.
Tucked among the "I Love My Mommy" bibs and "Pregnant Princess"
maternity clothes, Ann Sylvia also offers bibs and onesies adorned
with the ballpark epithet "Damon Sucks." Last month, eBay pulled the
listings after the Scott Boras Corp. complained that they violated
Damon's right of publicity, a legal claim that allows celebrities to
control the products they endorse. (hmmm… is this the “right?”)
On the “Right of Publicity:” http://www.law.cornell.edu/wex/Publicity
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Intellectual Property
(The end of that story…)
Sylvia hadn't sold any of the Damon items at the time, but the complaint
threatened to blemish her eBay rating and jeopardize her PowerSeller status.
"I'm just a stay-at-home mom. I just want to raise my children, sell my stuff,"
said Sylvia, who works part-time at The Standard-Times of New Bedford, which
first reported on her struggle. "It's all a little nerve-wracking, a little scary."
If so, she didn't show it in her negotiations with Boras' staff. During an hourlong
phone call, she pointed out to attorney Ryan Lubner that there are other baseball
players named "Damon"; how did he know, after all, that she wasn't the world's
biggest critic of Tampa Bay's Damon Hollins?
"Then I knew I had him," she gloated. "So I said, 'Let's make a compromise."'
Lubner agreed to lift his objection -- and clear her eBay record -- if Sylvia agreed
not to use "Johnny," "Boston," "Red Sox," "New York," or "Yankees" in the listing.
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Intellectual Property
Ryan Hart vs. Electronic Arts
Right of Publicity vs. First Amendment Right of
Free Speech. Right of Publicity wins … so far.
Ryan Hart is one of the most famous quarterbacks in the recent history of Rutgers football. He led the 2005
Scarlet Knights to the Insight Bowl, the first bowl game that Rutgers had played in decades.
Four years later, Hart took on another leading role, this time as the named plaintiff in a class action lawsuit
against Electronic Arts. Hart's legal team claims that EA has infringed Hart's "right of publicity". Hart also
claims EA infringed the rights of other college players by including their information and statistics in EA's
college football games without authorization.
Specifically, Hart's complaint is about a nameless quarterback that appears on the Rutgers team in EA's
2004, 2005, and 2006 games. The player wears jersey number 13, is six feet and two inches tall, weighs 197
pounds, wears a wristband on his left wrist, and hails from Florida. Not coincidentally, that is all true of Ryan
Hart. Since the EA games additionally have allowed players to fill in names on team rosters, many people play
the nameless Ryan Hart under the name Ryan Hart. Downloadable and accurate rosters of all the featured
college teams are currently shared online.
Last fall, a federal district court dismissed Hart's case, explaining that the free speech rights of Electronic
Arts trumped Hart's right of publicity claims. Hart appealed and now is arguing his case before a federal
appellate court in Philadelphia.
Hart won his appeal before a 3 judge panel of the Federal Appeals Court in Philadelphia (May, 2013)
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Intellectual Property
Who owns the numbers the day after the game?
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Intellectual Property
The Fantasy Sports Market
300+ Operators of fantasy sports leagues: Subscriptions, prizes; NFL, MLB, NBA
At least $1.5 billion
Input data source: Yesterday’s newspapers
Content Purchase: License arrangements with Major League Baseball
CBC Distributing and Marketing (St. Louis) – 9% of gross = royalty paid to MLB.
2005 CBC application for license renewal is denied. MLB wants to (greatly) restrict the
number of licenses. (The foreclosure)
CBC sues, claiming it doesn’t need a license
Not a copyright dispute
Ownership of the persona of the players
First amendment
Control of the valuable resource – the fame of the players. Who has the right to exploit that fame?
The case began in court September 5 and ended in August 2006.
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Intellectual Property

Intellectual Property