Andrew D. Todd

Copyright and the Used Book Market

(May 15, 2000)

The most basic economic facts about books are 1) that they are durable, and 2) that the reader makes an (imperfect) copy of any given book inside his head, diminishing his need for the book (of course the effectiveness of this copying varies with the type of the book). Consequently, books do not stay sold: some copies inevitably wind up in used bookstores. The publisher is forced to cut his prices to compete with used copies, but this only means that the used book market becomes flooded with reduced-price copies at still-lower prices. The end result is that the price of a book drifts down to the cost of printing and economical distribution-- or less. Historically, this process has taken ten years or less. For the overwhelming majority of books, it has taken ten years or less for the price to drop down to a level which owes nothing to copyright.

In the 1950's, the copyright office did a study of copyright renewals after twenty-eight years, and found that only 9.5% of copyrights were renewed (about 6% exclusive of films and phonograph records, which were renewed at approximately a 45% rate, Kaplan and Brown, Cases on Copyright, 1978, p. 302). Obviously, the renewal rate for books must have included significant numbers of trustees and corporate officers with a positive legal obligation to renew all possible copyrights, regardless of economic merit, or be charged with malfeasance. So the actual percentage of book copyrights thought viable after twenty-eight years must have been much lower. From the point of view of a book author, the copyright law has long been in a state of overkill.

However, in our own time, the used book trade is beginning to computerize. My estimate is that about five percent of books in used bookstores are electronically listed at present, but the figure is growing rapidly. A practical implication is that the rate of downward price drift will increase dramatically. In most cases, the price collapse will occur within a year or two of publication. The final stage will be when the publisher chooses to post the book in its entirety on a website in order to secure a modest advertising revenue.

Furthermore, the most fundamental core of advertising value consists in using the book to advertise its author. After the first year or two, the financial interest of a great many authors lies in using free copies as a kind of advertising circular to advance their careers. The extreme case is academic tenure, where a book is a key element in gaining tenure. Tenure, of course, is worth at least a quarter of a million dollars, and the various professional and scholarly societies are fighting a steadily losing battle to contain the growth of pure-and-simple vanity publishing. If the aspirant can privately print his book and give a copy to anyone who might possible be inclined to read it, while still preserving a facade of respectability, that is the economically rational thing to do.

The copyright duration required to protect the realistic interests of a book author is only about ten years, save in very extraordinary cases.

The film and music industries represent a special case, simply because for many years, they have been able to largely avoid selling durable copies to end-users. Phonograph records were delicate and liable to scratching. Music CD's have only been on the market for a few years, and there has not been time for a disk-glut to build up. Used CD-stores are beginning to appear on the internet, but they are still rudimentary compared to used bookstores. Photographic film in general is chemically unstable, and cannot be expected to survive for decades without the attentions of a trained archivist, and this applies still more forcibly to motion picture film. VHS videotapes are not mechanically reliable enough to count as durable media, even apart from the fact that they have, so far, been for the most part sold at "library prices" of thirty dollars or more to video rental stores, etc. Once audio-visual material is distributed on durable media, such as DVD, priced for sale to end-users, it will accumulate and begin to compete with itself.

Another factor propping up copyright in movies has been the expensive character of moviemaking. The costs of entry into the moviemaking business are formidable. Motion pictures can usefully be thought of as a "pseudo-distribution" industry. Scripts and scenarios are a dime a dozen. The expense of moviemaking is in actors, sets, costumes, properties, special effects, and the like. The central technological weakness of moviemaking is that it requires that ideas be acted out-- with a cast of thousands-- in order to put them on film. A dramatic film is not a recording of reality, but a product of the imagination realized by grossly inefficient methods. For example, a stage set begins as a drawing, which a carpenter is employed to build, and a gaffer to set up. Multiple cameras are then used to record the set from different angles, and sections of the resulting film are finally spliced together. Only a handful of movies are made, and the industry is dominated by a few big firms, which tend to reach tacit agreement about market control.

Animation, of course, does not require acting out, but the labor cost of animation technique has been historically prohibitive. However, the moviemaking industry is about to be fundamentally transformed by computer animation, based on the fast new computers which are becoming available. It is going to become feasible to make a polished feature film with several thousand hours of labor, and negligible out-of-pocket expenses. In short, moviemaking is going to become more or less like writing or painting, and thousands of people are going to start making movies with a "professional" level of spectacle. The movie market will be just as chronically glutted as the literary marketplace. It will be impossible to impose any common policies upon such a multitude, and inevitably, someone will start selling copies of his movie for a modest mark-up over the actual cost of reproduction. Once price reductions start, they will spread, and the big studios will be obliged to defend themselves by programmatically selling large numbers of copies of their "backlist," at reduced prices.

When this happens, there will cease to be a sizable power bloc with a vested interest in extended copyright. What is needed is a workable formula for disposing of the unremunerative copyright. Let us suppose that the current modest copyright filing fee were only to confer ten years of protection. After ten years, the copyright holder would be required to pay fifty dollars a year; after twenty years, a hundred dollars a year; and so on up to five hundred dollars a year after a hundred years. There might be a reasonable schedule of volume discounts for multiple works by a single author, held by a single proprietor. The copyright office would accept money on deposit at any time during the life of the copyright, pay interest on it, write annuities on the lifespans of copyright holders, refund the unexpended portion on demand, etc., so that there would be little risk of inadvertently lapsing a copyright. Most copyright holders would overfund their copyrights at the beginning, and then later draw money out as the market limits became apparent. It would be comparatively easy to ascertain from the copyright office whether a particular work was still in copyright. In most cases, it would suffice to establish that the copyright's account was overdrawn. This system would effectively draw a line between remunerative and unremunerative copyrights. Preexisting copyrights will in practice have to be allowed some dispensations. On the basis of a copyright with ninety-five years still to run, I find by spreadsheet analysis that a payment of about $1500 would completely compensate the copyright holder for converting to the new system. This is based on the assumption that it would have been economically rational for the copyright holder to pay the additional fees if the new regime had been in effect at the time of filing. Fifteen hundred dollars is enough to buy off the most stringent "takings" claim. Of course, many copyright holders will prefer to surrender their copyrights of highly dubious value, and spend the fifteen hundred dollars instead. One could of course apply an "actual copyright earnings test," but on balance, I think that from the point of view of the nation, a few billion dollars of one-time overpayments (ie. bribes) are a small price to pay for the substantial removal of nonremunerative copyrights, and the radical expansion of the public-domain internet.

Reforms of this type inevitably involve some kind of backsheesh. For example, in the 1940's the English Labor government under Clement Atlee bought railroads and coal mines at unrealistically high valuations in order to quiet the outrage of the rentier class; and in the 1980's the Thatcher government sold state assets (including railroads and coal mines) at unrealistically low valuations in order to sell them to politically deserving lower-middle-class recipients, who would then experience a guaranteed capital gain. Both Clement Atlee and Margaret Thatcher were realists. I assume that we are also realists.

Andrew D. Todd
1249 Pineview Dr., Apt 4
Morgantown, WV 26505 (formerly  U46A8@WVNVM.WVNET.EDU)

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assuming 5% interest

years| present value

to |

run |


28 $530

56 $1198

75 $1434

95 $1562