Diminished Creative Industry Growth in Australia in the Digital Age

The Australian Productivity Commission (Commission) in its recent final report on its “Inquiry into Australia’s Intellectual Property Arrangements” (“Inquiry Report”) claims that “Copyright is broader in scope and longer in duration than needed,” commenting that “The scope and term of copyright protection in Australia . is now skewed too far in favour of copyright holders. ” On this basis the Commission recommends a number of reforms to weaken copyright law. The Commission explicitly admits it adopts a bias in support of weaker copyright law commenting: “the Commission considers it is appropriate to ‘err on the side of caution’ . and consciously set weaker parameters in the way that rights are assigned, used or enforced. ” In this report, we show that the Commission’s analysis is not only biased, but also fundamentally flawed. To illustrate the biased and flawed analysis the Commission relies on, we review a key hypothesis advanced by the Commission to support the case for weaker copyright law: that digital technologies have had significant positive effects on copyright industries, enhancing the incentive to invest in creativity, and implying that copyright protection can be weakened commensurately, without harm to the Australian community in the future. This hypothesis can be described as a “peak” hypothesis that assumes developments in digital technologies since the beginning of the new millennium have enabled a new “peak” in creative industries reliant on copyright. In this paper, we seek to test the Productivity Commission’s peak hypothesis by analysing data on trends in economic contribution (value add), employment, and investment in the creative sector reliant on copyright, using reliable data collected for this purpose by the Australian Bureau of Statistics (ABS), including Australian National Accounts statistics. The evidence refutes the Commission’s hypothesis that digital technologies have facilitated a dramatic increase in fortunes for the creative sector reliant on copyright. To the contrary, analysis of this data shows that: • Copyright industries’ value add growth in Australia failed to keep up with economy-wide growth, amounting to a nearly $170 billion cumulative shortfall in value add for core copyright industries between 2000 and 2014; the estimated shortfall is even higher, $332 billion, when compared against earlier copyright industry value add growth rates; • Copyright industries’ employment growth in Australia also failed to maintain pre-2000 levels, resulting in a shortfall of around 260,000 industry jobs by 2011; The estimated shortfall in Film and Video Production and Post Production value add compared to GDP growth was $1.5 billion as of 2011-2012, the latest year available, with employment similarly failing to keep pace; and • Gross fixed capital formation in artistic originals as a percentage of GDP would have been 36% higher had it maintained its 1992-2001 growth rate. A more balanced analysis of objective data points readily available should thus have yielded more balanced recommendations by the Commission. The data suggests that any weakening of copyright protection as proposed by the Commission risks further reducing incentives to create, and further harming the Australian community over time.