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What the Release of Star Wars: The Force Awakens Teaches Us About Copyright Policy: Part II

· December 23, 2015

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The latest installment of the Star Wars saga broke box office records this past weekend, grossing $247 million in ticket sales in North America. This exceeds by $30 million the previous opening weekend record set this past June by Jurassic World. The Force Awakens also generated $280 million overseas, not including China, where the film will be released in January. The film’s enormous success teaches us numerous lessons about copyright policy. Yesterday’s post discussed how the Star Wars saga demonstrates the degree to which creative works rely on pre-existing works, thereby highlighting the importance of limitations and exceptions in copyright law. This post will focus on how the film’s huge revenues undermine entertainment industry claims that online infringement causes significant harm necessitating legislative reform.

1. The film’s domestic ticket sales undermine the narrative that infringement facilitated by digital networks is causing serious harm to the entertainment industry generally, and the film industry in particular. As recently as the listening tour sessions the House Judiciary Committee held last month in Silicon Valley and Hollywood last month as part of its copyright review, entertainment industry representatives called for legislative reform to strengthen enforcement tools against online infringement. The success of The Force Awakens, like that of Jurassic World earlier this year, calls into question the necessity of items on the entertainment industry wish-list, such as replacing the Digital Millennium Copyright Act’s “notice and takedown” with “notice and staydown.” This is particularly the case given the collateral damage website blocking can have on Internet architecture and freedom of expression.

As I pointed out in DisCo earlier this year, film executives, as opposed to their representatives in Washington, really don’t believe the narrative that Internet-based infringement poses an existential threat. Variety interviewed 22 industry leaders about the most pressing problems confronting the movie and television business. Nineteen of the 22 made no mention whatsoever of copyright infringement, and two mentioned infringement only in passing. (Neutral equity research reports on firms in copyright intensive industries likewise did not identify copyright infringement as a possible risk factor.) Instead, the film executives focused on cord-cutting and competition from other forms of entertainment.

Indeed, if Disney truly feared the potential impact of infringement, it would not have invested $4 billion in the purchase of the Star Wars franchise from George Lucas in 2012. Nor would it have spent $350 million to produce and market The Force Awakens.

Moreover, firms in copyright intensive industries remain highly profitable. In fact, they are more profitable than firms in other leading industries.

Of course, with the low cost distribution afforded by the Internet, creators no longer need media companies to reach their audiences. Thus, the profitability of media companies is not a proxy for the health of content creation and dissemination—the goals of the copyright system. In fact, more content is being created and distributed now than ever before. Although blockbuster films such as The Force Awakens are increasingly expensive to produce, the declining cost of digital video production and distribution via streaming has resulted in a dramatic increase in the number of films being produced around the world. Nonetheless, the record ticket sales of The Force Awakens shows that the market remains strong for the traditional theatrical release of big-budget movies, and strengthening the Copyright Act’s enforcement provisions remains unnecessary.

2. The overseas box office receipts of The Force Awakens erode the narrative that foreign IP laws are inadequate. As I discussed in DisCo in June after the release of Jurassic World, low levels of IP protection in the Asia-Pacific region were the justification for injecting IP into the Trans Pacific Partnership Agreement. USTR asserted that “in TPP, we are working to advance strong, state-of-the-art, and balanced rules that will protect and promote U.S. exports of IP-intensive products and services throughout the Asia-Pacific region….” I argued that the strong performance of Jurassic World throughout the Asia-Pacific region, in TPP and non-TPP countries alike, refuted the position that the copyright protection in the region was insufficient to ensure the safety of U.S. works. This past weekend’s success of The Force Awakens overseas underscores the point that foreign copyrights laws do not need to be strengthened via trade agreements.

3. To the extent that infringement might marginally depress ticket sales of The Force Awakens and the five other Star Wars films it intends to produce, Disney has found piracy-proof ways to mitigate those losses. Disney expects to sell over $5 billion in Star Wars merchandise. Furthermore, it is developing new Star Wars attractions for its theme parks.

The Jedi Knights are always seeking to bring balance to the Force. Overly strong enforcement measures, both at home and abroad, will disturb the balance in copyright law, to the detriment of creators and consumers alike.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.