Online news aggregation and neighbouring rights for news publishers – copyright economy

The civil law tradition seeks to obtain remuneration for all digital reproductions that are publicly available, subject to some exceptions that are justified by transaction costs. Lawyers and courts are struggling to bring these new technologies in line with that right or design extensions and modifications of copyright law to bring them into the fold of that remuneration right.

The civil law approach can be contrasted with the common law view on copyright that is more aligned with the economic view (for instance in Landes & Posner, 1989). The economic view sees copyright as an economic policy instrument to stimulate innovation for the benefit of society as a whole, not only for authors or private rights holders. The civil law and common law view coincide in the argument that, without copyright protection, authors would have no incentive to invest in the production of artwork because everybody else could benefit from that investment by paying only the cost of a copy. That externality creates a market failure because it would stop production.

The common and civil law views split ways when it comes to the economic interpretation of copyright as an exclusive monopoly right granted to the authors to decide who can use a copyright protected work, under which conditions and at what price. For economists, monopoly rights are by definition inefficient because they cause deadweight losses: potential benefits that cannot be realized in society. However, these short-term or static losses in copyright protection are compensated by longer-term dynamic gains because it produces a steady stream of innovative artwork.

Contrary to the Continental European civil law view that emphasizes the rights of authors, at the expense of rights of consumers or society, the common law and the economic view seek a balance between the rights of authors and the overall welfare of society. For that reason, copyright is limited in time and scope. Exceptions to copyright protection determine circumstances where no payment to the author is due.

In the Continental view, these exceptions should be limited to circumstances where transaction costs exceed the benefits of licensing for the rights holders (Charles River Associates, 2014). In the economic view, exceptions can go further in order to ensure an appropriate balance between the static losses and dynamic gains of copyright protection and promote wider dissemination of the benefits of innovation in society.

Digital technologies create new means to reproduce and communicate copyright protected works to the public. The civil law approach would seek to extend authors’ rights to claim remuneration for all these new uses. The common law or economic view on copyright would not automatically grant an extension of authors’ rights to remuneration for uses under these new technologies. Extending copyright protection to all forms of digital reproduction may defy the purpose of copyright as an instrument to promote innovation, not necessarily to maximize revenue of the rights holders.

Copying news items is widely practiced in the digital age by all news media, including legacy newspapers publishers, radio and TV news channels. At least half of online dissemination is copy-and-paste and does not follow rules for citing and crediting. Information is costly to produce but cheap to reproduce. Copyright law does not protect facts, only the particular expression of facts by an author in a news article. Some re-writing, reduction to short excerpts or an appropriate reference to the original publisher might go a long way to satisfy the law though it may not change the information content of the article. Automated online aggregators do not re-write articles; that creates conflict with copyright law.

Legislators have introduced a right to remuneration for news publishers for the re-use of their news content by online platforms. That main benefit of these legal initiatives is to create a level playing field between news publishers and other media industries that already benefited from this right. Re-routing some of the money earned by news aggregation platforms to news publishers by means of an extension of the scope of copyright may seem like a good way of achieving that goal.

The German and Spanish cases show that the law can create a right but market forces have valued this right at a zero price. Explanations may be found in the economics of platforms or multi-sided markets. Platforms benefit from network effects and data aggregation across many users. This results in wider reach and lower transactions costs that individual newspaper websites cannot match. Advertisers pay for the platform.

Publishers receive a share in ad revenue in return for contributing their content. Consumers receive free content in return for sharing some personal data on their news reading preferences. This puts many newspapers in a weak position to leverage the value of their content. Only top-end papers may be able to charge a price for premium content.