Wednesday, June 01, 2005

Brazil, Gilberto, and Intellectual Property

Two recent items caught my interest in the economics of culture--especially the music business--and show how decentralized, digital music distribution is part of a larger global fight against overly aggressive intellectual property protection. The NPR program Marketplace recently featured a short piece on Brazil's multi-front defense of its national interest against international IP laws. (You can listen to the report through the Marketplace Archives.) In the 1990s Brazil threated to produce its own generic versions of anti-AIDS drugs if pharmaceutical companies didn't lower their prices. The drug makers caved in, and now Brazil has a much more extensive effort to develop alternatives to the intellectual property rights regime favored by such would-be international hegemons like the US and Microsoft.

Brazilian President Luiz Inacio Lula da Silva has switched government computer systems from Microsoft Windows to license-free Linux operating systems and open-source software packages. Programs are also in places to help home computer users obtain open-source software, and to open free open-source computer centers available to the poor. The United Nations will soon consider a Brazilian proposal to limit international copyright laws that, Brazil says, work to funnel money from poorer, developing nations, to the developed world.

The Bush administration protested the UN decision, and in April gave Brazil an ultimatum to either crackdown on copyright infringement in the country or lose US most-favored-nation status, which makes exporting products to the US much easier. Spokesmen for trade groups representing corporations like Microsoft say Brazil's open-source policies will be more costly in the long run, because open-source software is harder to use and requires more customer support. (Oh, if only everything were as user-friendly as Windows!) What usually happens, they contend, is that computer users soon abandon open-source software for bootleg copies of proprietary programs. In their view Brazil's policies are mostly rhetoric, obscuring the fact that Brazil is one of the world's worst violators of international copyright laws.

But computer software and pharmaceuticals are not the only areas where Brazil is encouraging consumers to adopt the open-source model. The Minister of Culture, Gilberto Gil--yes, the musician of 'Girl from Ipenema' fame--is promoting digital music downloading as a way for artists to reach directly to their fans, avoiding involvement with large music companies. Gilberto says that music downloading helps his music spread to new audiences, and he recoups money with his concert appearances. He and other artists are part of a international movement to promote 'Digital Culture.' (For more on Gilberto and Brazil's open-source policies, see this November 2004 feature in Wired, and this January item from Common Dreams.)

This brings me to a fascinating look at the economics of the music industry in a paper by Marie Connolly and Alan B. Krueger of the National Bureau of Economic Research. The paper, titled 'Rockonomics,' is (appropriately) available for download from the NBER website. I first learned of it through a post on Barry Ritholtz's web log The Big Picture. Ritholtz is Chief Market Strategist for money management firm and he posts regularly on the music biz, in addition to other economics topics. I highly recommend his blog, and if you visit be sure to check out some of his less serious 'essays and effluvia' on rock music.

Whether or not the American music industry's current ails are due to file sharing, it's clear from the Rockonomics paper that bands that sign with major labels are pretty much screwed unless they sell millions of records and/or go on tour and sell a lot of t-shirts at their concerts. The paper does not address the advent of low-cost consumer electronics and software that allow for high-quality home recording and independent distribution, but it seems to me that the economics of large-label record production make any way around the established industry very attractive.

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