Copyright as Entry Policy: The Case of Digital Distribution

The point of entry of a new product or new service is especially important for a successful economy. Entry creates the possibility of fresh competition with existing products. At least as important, we know that new products have been a critical source—if not the critical source—of new value, for both consumers and shareholders. In this paper, I want to consider how copyright law influences entry in digital distribution of music and video. The subject encompasses past and current successes in distribution—cable TV and the VCR—current and recent controversies—Napster and the pending cases addressing its successors—as well as possible next steps in distribution, such as web radio, interactive music services and the digital video recorder. Much of the relevant distribution entry policy is set through copyright law. With some frequency, copyright law has important competition consequences, but the relevant inquiries in copyright may not track the issues that are of interest to competition law. Copyright law entry policy reflects an amalgam of statutory interventions—as part of the restructuring of the copyright statute in 1976 and then subsequently in a series of quite context-specific tailored statutes—and judge-made copyright law addressing third-party liability for copyright infringement and the doctrine of copyright misuse. The copyright statutes reflect substantial path dependence, as well as the play of powerful interests. Fluke exclusions, such as that for sound recordings, result in the Digital Performance Right in