The Potential Demise of Another Natural Monopoly: Rethinking the Collective Administration of Performing Rights

Abstract

In most countries the right to publicly perform music is not administered individually by the copyright holders but rather collectively by Performing Rights Organizations (PROs). The common explanation behind the proliferation of collective administration is that some aspects of copyright administrations are natural monopolies. It is often argued that individual administration is impracticable or at least non-economical. Collective administration is therefore promoted as the most efficient method for licensing, monitoring and enforcing those rights. In addition, since the market is a natural monopoly, regulation, rather than an attempt to foster competition, is thought to be the optimal regulatory response.

This is a first in a series of two articles that critically analyzes this natural monopoly argument. In this article I argue that the case for PROs is not as straightforward as it is assumed to be. I show that many of the underlying cost efficiencies that are attributed to PROs are usually simply assumed, and in many cases could be equally achieved under less restrictive arrangements. The next article will show that technological changes that can facilitate the online licensing of music undermine the natural monopoly framework even further.

This is a pre-copy-editing, author-produced PDF of an article accepted for publication in the Journal of Competition Law and Economics following peer review.

JEL Classification: L12, L41, L43, O33, Z1