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On Investment Analysts’ Perception of Infringement Risk


As the Daily Dot observed yesterday, it is hard to find truly neutral empirical data and analysis concerning the impact of infringement in the ongoing copyright policy debate.  There is, however, a source of impartial analysis which appears to have been overlooked until now:  investment advisers’ reports concerning publicly traded companies.  These equity research reports make investment recommendations (e.g., buy, hold, or sell) based on the companies’ performance and the risks they face.  Occasional DisCo contributor Jonathan Band and Jonathan Gerafi looked at the equity research reports issued over the past 90 days for eight leading companies in four copyright-intensive industries, and found that 81% of the reports did not mention copyright infringement as a possible risk factor.

Whereas companies’ policy communications will often identify infringement as a potentially catastrophic risk, analysts for the most part do not identify it at all.  For publishers, no reports identified copyright infringement as a risk factor, and only 13% of the reports for Sony, 22% of the reports for Vivendi, 8% of the reports for Viacom and 27% of the reports for Disney mentioned copyright infringement as a potential risk.  It is notable that ostensibly expert, impartial analysts do not generally consider infringement a significant enough threat to the subject companies’ financial health to merit mention to potential investors.

These findings are difficult to reconcile with ‘the sky is falling’ narrative that frequently accompanies demands by some rights-holder constituencies to externalize more enforcement costs on the public (through greater government spending on enforcement) or on other industries like advertising, financial services, the Internet, and telecom.  Instead, these conclusions seems more consistent with the L.A. Times’ recent article that 2013 brought “another all-time high in revenue” for the film industry ($10.9 B).

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.