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Thursday, January 12, 2012

Copyright Industries and their Importance to Economy

It's not unusual for intellectual property rights to be treated in cavalier fashion. I even see it when teaching MBA students, many of whom, upon entering my class, fail to grasp the importance of IP protections in the broader economy, and see few problems in personally subverting intellectual property through, for example, illegal downloading of their favorite music.

The attitude is summed up in assorted questions. Why get so hung up on protecting intellectual property? How do IP protections actually and substantively translate into the real-world economy? And isn't this all about big businesses that will prosper no matter what?

To help communicate and/or reinforce how important intellectual property is to the U.S. economy, consider the key findings in the 2011 edition of the "Copyright Industries in the U.S. Economy," prepared by Economists Incorporated for the International Intellectual Property Alliance, and released this past November.

In 2010, total copyright industries contributed significantly to the overall economy, with added value equal to 11.1% of GDP.

For good measure, during recent tough economic times, copyright industries grew at a much faster pace than the broader economy. From 2007-10, total copyright industries grew at an average annual rate of 1.47%, compared to 0.05% for the overall economy.

As for employment, total copyright industries accounted for 9.9% of private sector employment in 2010. In addition, average annual compensation in total copyright industries topped the U.S. average by 15%, with compensation in "core" copyright industries beating the national average by 27%.

Those are significant economic contributions and differences brought about by copyright industries.

As for this all being a "big business" issue, it pays to look at the breakdown of key copyright industries. In the IIPA study, core copyright industries are defined as "those industries whose primary purpose is to create, produce, distribute or exhibit copyright materials. These industries include newspapers and periodicals, motion pictures, recorded music, radio and television broadcasting, and computer software."

Based on Census Bureau data (2008 most recent), consider the make up of key parts of these core copyright industries:

• In terms of newspaper, periodical, book, and directory publishers, 83% had fewer than 20 employees.

• As for software publishers, 70% had less than 20 workers.

• In the motion picture and sound recording industries, it's 93% with less than 20 employees.

• And in the radio and television broadcasting business, 76% of firms had less than 20 workers.

So, copyright industries are both critical to the economy, and are overwhelmingly about small businesses. The data show a very different reality than what is widely presumed about intellectual property. In the end, protecting IP rights enhances economic opportunity, entrepreneurship and jobs.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

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