Copyright term

By Eric Crampton 08/08/2015


The recent leaked TPP copyright section has a few options for copyright duration. All of them act only to increase rents paid to existing rights-holders rather than to encourage new creation.

A simple illustration.

Suppose that you create a piece of IP that provides royalties of $1 million per year. We can work out the present value of that flow of earnings under different potential copyright terms. All of them are framed as life of the artist plus some amount. Let us suppose that the artist has another 20 years’ life expectancy and can issue bonds, today, based on the future revenue flow so he can consume today royalties that come after his death. David Bowie did this – it isn’t impossible. What is the present value of that $1 million per year revenue flow?

If the term of copyright is life plus 20 years (40 years total under our assumption of 20 years’ remaining life) and the interest rate is 5%, the bonds are worth $17.16 million.

If the term is life plus 50 (70 years total), the bonds are worth $19.3 million.

If the term is life plus 70 (90 years total), the bonds are worth $19.7 million.

If the term is life plus 100 (120 years total), the bonds are worth $19.9 million.

To get any term above 50 years, you have to believe that enough new creation will be generated by an extra 3% return to warrant the extra 20 or 50 years’ exclusivity.

Does it seem plausible that enough new creation is generated by the promise of an extra 3% total return to outweigh the loss in new production in the future? Not really.