The Authors Guild, Inc. et al v. Hathitrust et al
Filing
119
DECLARATION of Joel Waldfogel, Ph.D. (redacted) in Support re: 100 MOTION for Summary Judgment.. Document filed by Hathitrust. (Petersen, Joseph)
KILPATRICK TOWNSEND & STOCKTON LLP
Joseph Petersen (JP 9071)
Robert Potter (RP 5757)
1114 Avenue of the Americas
New York, NY 10036
Telephone: (212) 775-8700
Facsimile: (212) 775-8800
Email: jpetersen@kilpatricktownsend.com
Joseph M. Beck (admitted pro hac vice)
W. Andrew Pequignot (admitted pro hac vice)
Allison Scott Roach (admitted pro hac vice)
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Telephone: (404) 815-6500
Facsimile: (404) 815-6555
Email: jbeck@kilpatricktownsend.com
Attorneys for Defendants
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
THE AUTHORS GUILD, INC., ET AL.,
Case No. 11 Civ. 6351 (HB)
Plaintiffs,
v.
FILED UNDER SEAL
HATHITRUST, ET AL.,
Defendants.
DECLARATION OF PROFESSOR JOEL WALDFOGEL, PH.D,
IN SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
I, Joel Waldfogel, pursuant to 28 U.S.C. § 1746, hereby declare as follows:
I
1.
QUALIFICATIONS AND STATEMENT OF ASSIGNMENT
I am the Frederick R. Kappel Chair in Applied Economics at the Carlson School of
the University of Minnesota and a Research Associate at the National Bureau of
Economic Research. I received a Ph.D. in Economics from Stanford University in
1990. Prior to joining the faculty of the Carlson School, I was a professor at the
Wharton School of the University of Pennsylvania, where I was the Joel S.
Ehrenkranz Family Professor of Business and Public Policy. From 1990 to 1997 I
was an assistant professor and later an associate professor of economics at Yale
University. I have authored and/or edited four books and published over 40 articles
in economics journals. My main areas of research are industrial economics and law
and economics. Within industrial economics I have published articles on many
aspects of media industries, including music, movies, radio, television, newspapers,
and the Internet. Much of my research involves studying the development of new
types of online services that make use of existing products or services, and assessing
their impact on the market for those existing products.
2.
I have twice served as a consultant to the Federal Communications Commission on
issues related to media ownership, from 2001 through 2003 and again from 2010 to
2011. I have also written on economic issues for popular audiences, as the Dismal
Scientist columnist for Slate Magazine from 2006 until 2009 and as the author of
Scroogenomics (Princeton University Press, 2009).
3.
My curriculum vitae is attached as Appendix A. A list of cases in which I have
testified in the past four years is listed in Appendix B.
4.
I have been asked by Counsel for the HathiTrust and the defendant libraries to
determine whether certain services provided by the HathiTrust—specifically the
ability to search digitized books—could be undertaken as a viable and licensed
commercial enterprise. I have not analyzed whether a different type of offering,
providing different or additional services, would be commercially viable, and have
limited my inquiry only to the viability of a service like the HathiTrust. To answer
this question I first compare the costs that a commercial entity providing similar
services would incur against the potential revenues that such an entity could expect to
2
earn. Second, I compare the economic role of such a hypothetical service to existing,
analogous services, in light of economic research on the relationship between the
availability of information through search services and the demand for the underlying
indexed works.
5.
This report and the opinions expressed herein are based on my analysis of the
materials reviewed to date, together with my training, education, and experience. The
documents I have reviewed and data I have analyzed in preparing this report are listed
in Appendix C. I reserve the right to supplement my conclusions should additional
documents, testimony, or other materials become available to me.
6.
I am being compensated at my hourly billing rate of $550 per hour for my work in
this matter. Payment is not contingent on my opinion expressed, nor on the outcome
of this case. Part of the work on this matter has been performed under my direction
by economists at The Brattle Group, Inc.
II
SUMMARY OF CONCLUSIONS
7.
Based on my analysis, I have reached the following conclusions:
•
The costs associated with creating and maintaining a service like the HathiTrust
would exceed any potential revenue that such a venture could earn. Thus, I
conclude that the creation and offering of a service with the functionality of the
HathiTrust, but with licensed content, is not a commercially viable endeavor (i.e.,
an endeavor where the revenues could cover the costs).
•
In addition to incurring the direct costs associated with creating and maintaining a
database like the one available through the HathiTrust, an entity creating such a
service, were it to license the use of every copyrighted work, would have to
3
expend tremendously significant resources to secure the rights to works contained
in the HathiTrust.
•
The potential revenues associated with such a venture would not be sufficient to
make a licensed searchable database commercially viable.
•
Research shows that services offering close substitutes for existing works (such as
pirate music or movie sites) cannibalize demand for the underlying works. By
contrast, research shows that services offering incomplete elements of existing
works can stimulate demand for those works. Comparing the HathiTrust’s service
with recent research on the demand impact of piracy and related phenomena, I
conclude that the HathiTrust service is likely to stimulate demand for the works
searchable in it.
III
8.
DATA
To conduct my analysis, I estimate the cost of creating a searchable database similar
to the HathiTrust’s, but with licensed content, and I compare this against an estimate
of the revenue that such a database could generate.
9.
For my analyses I obtained data on advertising revenue at Facebook and Twitter, two
of the most visited websites in the world. I also collected data on web traffic for
those sites as well as for the HathiTrust web site and other book-related websites,
from the website Alexa (www.alexa.com).
4
IV
ANALYSIS
A. Costs Associated with Creating a Licensed Database Like the HathiTrust’s
1. Direct Costs to Scan Works
10.
There are two broad types of costs that a commercial entity would need to incur in
order to establish a searchable database similar to that offered by the HathiTrust.
First, the entity would face the costs of obtaining digital copies of each work in the
database. Creating a database of the size and scope offered by the HathiTrust would
require, in almost every case, both acquiring a print copy of the work and then
literally having it scanned. Second, I understand that Plaintiffs believe that the entity
would also need to incur the costs of obtaining permissions to include certain of the
works in the collection.
11.
For some works, notably those for which a digital file already exists, the cost of
scanning is likely to be low. Most works created in the recent past, or those that will
be created in the future, will already have a digital file that could be imported into the
entity’s database, assuming the entity could gain access to the digital file. However,
for works for which the entity would not be able to access an existing digital work,
the work would have to be scanned. To date, the HathiTrust’s digital collection
contains 10.4 million scanned volumes.1
I have been advised that, because the
overwhelming majority of these volumes are older works that were not “born digital,”
very few of the relevant volumes currently in the HathiTrust’s database would be
1
HathiTrust, http://www hathitrust.org/.
5
available to the entity in electronic form, so my basic calculation assumes that all
works would require scanning. 2
12.
I conducted research on the cost of large-scale scanning. The largest-scale scanning
project that I am aware of is the Google Books project, which has digitized
approximately 20 million books as of March 2012.3 Google estimates its cost simply
to scan a given book, not including other costs associated with the project, to be
approximately $
.4 Google further estimates that it has spent approximately $
million to date for the operational cost to scan a book (including labor and
equipment), maintaining books after being scanned, and technology development.5
Thus, Google estimates its overall average cost has been approximately $
per
book. Because the Google Books project is the largest scanning project that I am
aware of, I will use its estimate of scanning costs in my estimate of scanning costs.
As shown below, it is also the lowest scanning cost of any estimates that I could find.
Using the Google estimate therefore provides a conservative estimate of the scanning
costs.
13.
Another large-scale book scanning project is the Million Book Project, a large-scale
project that, as of December 2007 had scanned more than 1.5 million volumes.6 The
2
As I discuss below, see ¶¶40-44, my conclusions are unaffected by the possibility that some works—or
even all of the works—would not need to be scanned. Even if scanning costs were zero, I find that the
other costs associated with creating a licensed database of this scope exceed any revenues that such a
service could be expected to generate.
3
Jennifer Howard, “Google Begins to Scale Back Its Scanning of Books From University Libraries,” the
Chronicle of Higher Education (March 9, 2012). Available at http://chronicle.com/article/GoogleBegins-to-Scale-Back/131109/ (Accessed June 28, 2012). See also Deposition of Daniel Clancy, June
1, 2012, p. 49:3-8.
4
Deposition of Daniel Clancy, June 1, 2012, p. 50:18-20.
5
Deposition of Daniel Clancy, June 1, 2012, p. 52:10-16.
6
Carnegie Mellon University, “Online Library Gives Readers Access to 1.5 million Books,” available at
http://www.cmu.edu/news/archive/2007/November/nov27_ulib.shtml (accessed June 18, 2012).
6
project was supported by the National Science Foundation, which has provided $3.6
million7 in “funding for equipment.”8 In addition, the Project reports that manpower
provided by India and China “represent[]a twenty-to-one relative contribution … to
this project.”9 This suggests that the Million Book Project has expended resources of
$75.6 million, or approximately $50 per book scanned.
14.
A 2006 New York Times article on the Million Book Project reported on the efforts to
scan 30,000 volumes from the Carnegie Mellon University and the Carnegie
Libraries. The initial scanning cost was reported to be $10 per volume.10 This
appears to understate their actual costs, as the project seeks donations and currently
reports an average scanning cost of approximately $20 per book.11
15.
I also conducted a search of commercial services that offer to scan books. Such
services quote prices depending on certain factors, including whether the scan is
destructive or non-destructive (i.e., whether the book is to remain intact after
scanning). Prices advertised on the Internet by services offering scanning run as low
as $6.95, plus 5 cents per page, for a destructive scan.12 The average volume in the
HathiTrust is 350 pages, so to scan it destructively through this service would cost
7
Denise Troll Covey, “Global Cooperation for Global Access: The Million Book Project,” (2004).
Library Research and Publications,. Paper 41, http://repository.cmu.edu/lib_science/41, p. 1.
8
http://www.ulib.org/ULIBAboutUs htm (accessed June 15, 2012).
9
http://www.ulib.org/ULIBAboutUs htm (accessed June 15, 2012).
10
Kevin Kelly, “Scan This Book,” New York Times (May 14, 2006).
11
The Million Book Project’s website reports that a $1,000 contribution “permits the digitization of
about 50 books.” Larger contributions are also reported to permit digitization at approximately $20 per
book. For example, the website notes that a $100,000 donation permits 5,000 books to be digitized.
See http://www.ulib.org/ULIBDonations htm (accessed June 15, 2012).
12
http://boundbookscanning.com/ (accessed June 18, 2012). Bound Book Scanning also offers nondestructive scanning for $8.95, plus 8 cents per page, with restrictions on the size and thickness of the
work. The cost of scanning a 350-page book (the average length of books in the HathiTrust) using the
non-destructive method would cost $36.95. To evaluate the relative benefit of destructive versus nondestructive scanning, one would have to include the cost of the book destroyed through destructive
scanning, assuming that a replacement copy would even be available.
7
$24.45, (plus the cost of obtaining a replacement copy of the work, including
shipping, as well as other administrative costs).13
16.
For the remainder of the report, I will use the Google Books projects cost of $
per work as the estimated cost a commercial entity would incur when scanning
millions of works into a database. The Google Books estimate is the lowest scanning
cost that I have found, and I understand they can be much higher. Using this
estimate, the resulting scanning-only cost of producing a commercial HathiTrust-like
service is 10.4 million x $
, or $
million.
2. Indirect Costs of Securing Copyrights
17.
It is my understanding that Plaintiffs in this case believe that an entity developing a
service similar to that the HathiTrust would have to secure the rights to certain of the
works to make them available for search. Therefore, I have investigated the costs
associated with securing those rights.
I am unaware of systematic quantitative
evidence on the cost of securing such rights, although numerous narrative accounts
exist (see below). These accounts make clear that securing the rights would be a
manual, labor-intensive process that would, in most cases, require contacting each
rights holder individually for permission.
.14
13
The HathiTrust has scanned 10.4 million volumes, for a total of 3.641 billion pages, which averages to
350 pages per volume. See http://www.hathitrust.org/ (accessed June 26, 2012).
14
See Deposition of Frederic L. Haber, June 4, 2012, pp. 19-32.
8
18.
From 2006 through 2008, the United States Congress studied the issue of orphan
works. During the investigation, the U.S. Copyright Office requested comments from
interested parties. Several university libraries submitted comments detailing their
attempts to secure copyright permissions to digitize orphan works. For example,
Carnegie Mellon University submitted a letter to the Copyright Office detailing
attempts to determine the feasibility of identifying copyright holders for works to be
scanned. The letter explained the difficulty in determining the copyright holder of
numerous works. The university could not locate publishers for 22 percent of the
books in its sample. In addition, 36 percent of those publishers that were identified
did not respond to multiple requests by the university to secure permissions. Thus,
Carnegie Mellon did not receive any information from the publishers for half of the
works for which it attempted to secure permissions.15 Overall, Carnegie Mellon
estimated the direct administrative cost of receiving permission was $78 per title for
which permission was granted. Some copyright holders then requested fees ranging
from $50 to $300 to grant such permissions. The Carnegie Mellon letter notes that
these costs are conservative because they do not include costs associated with
consulting the University’s legal counsel, creating a database to track progress of
their efforts to secure permissions, or paying the staff needed to manage the project.16
19.
Cornell University also submitted a letter detailing a project to digitize 343
monographs that were out of print but under copyright. Cornell could not identify the
15
Carnegie Mellon identified publishers for 78 percent (100-22) of works in its sample. It received
responses from 64 percent (100-36) publishers. These figures indicate that the university received
responses for 50 percent (0.78*0.64=0.499) of the works for which it sought permission.
16
Letter from Denise Troll Covey, Carnegie Mellon University to Jule L. Sigall, U.S. Copyright Office,
“Re: Response to Notice of Inquire about Orphan Works, Federal Register (January 26, 2005), Vol. 70,
No. 16: 3739-3743” (March 22, 2005).
9
copyright holders for 198 of these works (58 percent). The university reported that it
spent over $50,000 in staff time and was able to receive permission for only 98
works. Thus, the average cost of securing permission was $510 per work whose
permission was successfully secured.17
20.
Similarly, Brigham Young Law School submitted a letter detailing unsuccessful
efforts to secure rights to use certain works in courses. In one example, in 2000, the
Law School spent “over a dozen hours” working to acquire copyright permission for
a single work. In another instance, in 2001, the Law School spent “upwards of
twenty hours” trying to determine the copyright holder of a work whose author was
deceased and whose publisher was no longer in business.18
21.
In sum, the evidence from the comments submitted to the Copyright Office indicates
that securing rights for individual works is a manual, time-consuming process, and
that the cost of securing those rights appears to be significantly higher than the cost of
scanning the works.
22.
Two things appear clear from the available evidence concerning the challenges
associated with obtaining permissions. First, for works where permissions can even
be obtained, the cost of obtaining such permissions is significant. The estimates
above place this cost between $78 to $510 per work, and this does not include any
licensing fee or royalty that may be demanded by the identified rights holder.
Second, finding the rights holder appears to be entirely infeasible for a large share of
17
Letter from Sarah E. Thomas, Cornell University, to Jule L. Sigall, U.S. Copyright Office, “Re:
Response by the Cornell University Library to the Notice of Inquiry Concerning Orphan Works, 70 FR
3739 January 26, 2005” (March 23, 2005).
18
Letter from Constance K. Lundberg and Laureen C. Urquiaga, Brigham Young University, to Jule L.
Sigall, U.S. Copyright Office, “Re: Orphan Works and Research Libraries and Archives” (March 22,
2005).
10
works, with more than half of all such holders remaining unidentified or unconfirmed
(half or more in the experience of both Carnegie Mellon and Cornell.).
23.
An entity seeking to duplicate the HathiTrust’s database would not need to secure
permissions for all 10.4 million works because some are already in the public domain.
The HathiTrust reports that 3.1 million works in its collection are in the public
domain.19 Therefore, the entity would have to obtain rights for 7.3 million works.20
24.
While it is difficult to translate these findings into simple estimates of cost, a few
calculations are economically relevant. Utilizing the lowest identified estimate as to
the costs of obtaining permissions ($78 per work), and applying this to the estimated
7.3 million copyrighted works in the database, leads to a total “permissions cost” of
$569 million.
(This assumes that the entity could actually identify and obtain
permissions from every rights holder; as noted above, Carnegie Mellon and Cornell
were not even able to identify the majority of relevant rights holders.) Thus, the
overall cost of creating a licensed database like the one offered by the HathiTrust—
including obtaining permissions for all the works for which Plaintiffs claim
permissions are required—comes to a total of $
estimated $
million (this includes both the
million in scanning costs discussed in paragraphs 10 through 16, as
well as the $569 million needed to obtain permissions from rights holders, but does
not include the payment of any royalties or licensing fees to rights holders).
19
See http://www hathitrust.org/ (accessed June 18, 2012).
20
I have been advised that some of these 7.3 million works, published between 1923 and 1963, are likely
already in the public domain, but that making that determination would itself be an intensive and
expensive process. Accordingly, I understand that the HathiTrust treats all of these works as if they
are protected by copyright.
11
25.
Going forward, I will base my calculations on this estimated $
million total cost.
As I will show below, no entity creating and offering such a database could generate
enough revenue to cover these costs. As I explain further below, my conclusions do
not change even if I make a wide range of alternative assumptions about such costs.
B. Potential Revenue Associated with a Searchable Database
26.
As discussed above, an entity creating a service like the HathiTrust would incur $
million in up-front scanning and permissions costs to make the database available for
search.
To be commercially viable, the service would have to earn sufficient
revenues to cover those costs. Because the revenues would be earned over time, it is
necessary to account for this by calculating a present discounted value of future
revenues.21 I calculate the present value of revenues using a discount rate of 10
percent per year. This discount rate is approximately equal to the cost of equity for a
firm in a related line of business, Reed Elsevier, an academic publisher that publishes
over 2,500 academic journals that are searchable using its ScienceDirect service.22
Given the $
million cost to scan 10.4 million volumes and obtain the necessary
permissions for those works not in the public domain, any service offering a database
like the HathiTrust’s would need to generate approximately $
million in annual
21
For a discussion of discounting cash flows to calculate a present value, see, e.g., Richard A. Brealey,
Stewart C. Myers, and Franklin Allen, Principles of Corporate Finance (9th Ed.) Boston: McGraw-Hill
Irwin, 2008, Ch. 2.
22
Reed Elesvier is a Dutch firm with American Depositary Receipts that are publicly traded on the New
York Stock Exchange. Bloomberg reports Reed Elsevier’s cost of equity to be between 10.3 and 10.5
percent (Accessed June 27, 2012). As a comparison to an internet search firm, Bloomberg reports
Google’s cost of equity to be 10.8 percent.
12
revenue to cover this cost.23 As I discuss below, a licensed service similar to the
HathiTrust would not be able to generate this level of revenue.24
27.
A commercial entity offering a searchable database like the HathiTrust’s could
potentially generate revenue in two ways: through an ad-supported website and by
making the database available to paid subscribers. My conclusion is that neither of
these methods, whether alone or in combination, would generate sufficient revenue to
make such a database commercially viable.
1. Ad-Supported Site
28.
A HathiTrust-like commercial service might support itself with ad revenue. Given
information on the relationship between site traffic and ad revenue generally, along
with information suggesting the site traffic that a commercial HathiTrust-like site
would realistically attract, it is possible to calculate the ad revenue that a HathiTrustlike site could feasibly generate.
29.
Advertising revenue data for websites is not generally available, but it is possible to
get revenue data for certain specific sites. In 2011, for example, Facebook generated
$3.1 billion in ad revenue, and Twitter generated $140 million.25 Alexa.com collects
information on website traffic, including information on “reach” (a measure of the
23
The present value of earning one dollar every year in the future at a discount rate of r percent is equal
to 1/r. Thus, if r= 10 percent, the present value of earning one dollar every year is $10 (1/0.1=10).
(See Richard A. Brealey, Stewart C. Myers, and Franklin Allen, Principles of Corporate Finance (9th
Ed.) Boston: McGraw-Hill Irwin, 2008, pp. 40-41 for a more detailed discussion.)
24
My conclusions would be unaffected with the use of lower discount rates. For example using a riskfree discount rate of 4.58 percent (as reported by Ibbotson), the service would not cover its costs.
However, it is be incorrect to use a risk-free discount rate because the cash flows associated with the
service would be subject to risk. (See Morningstar, Ibbotson Cost of Capital 2010 Yearbook, Chicago:
Morningstar, Inc. (2010), p. 23.)
25
See Shayndi Raice, “Days of Wild User Growth Appear Over at Facebook,” Wall Street Journal June
11, 2012 (http://online.wsj.com/article/SB10001424052702303296604577454970244896342.html
(accessed June 26, 2012)); “After Strong 2011, Twitter Ad Revenues to Grow 86% to $259 Million in
2012,”
eMarketer
Digital
Intelligence,
January
31,
2012,
http://www.emarketer.com/PressRelease.aspx?R=1008806 (accessed June 20, 2012).
13
number of users)26 and time on site (estimated daily time on site). Hence, Alexa’s 3month reach measure indicates that 44.7 percent of global Internet users visit
Facebook each day, on average, in the last three months. Similarly, Twitter’s 3month reach measure of 9.2 percent indicates that 9.2 percent of users visit Twitter
each day, on average. Based on the time-on-site measure, Facebook users spend an
average of 1,421 seconds on that website each day, averaged over the past 3 months,
while Twitter users spend an average of 429 seconds daily on that site. The product
of reach and time at site provides a measure of overall time spent at the site, added
across Internet users, which I term “reach seconds.” By this measure, Facebook has
636 reach seconds per day (meaning that the average amount of time at the site is 636
seconds per day, averaged across all Internet users, including both those visiting
Facebook and those not visiting Facebook). The analogous measure for Twitter is 40
seconds per day. Dividing annual revenue for Facebook by its reach seconds yields
an estimate of $5 million per year per reach second, while the analogous figure for
Twitter is $4 million.
30.
These estimates of revenue per audience measure provide a way to measure the level
of
advertising
revenue
that
a
HathiTrust-like
website
could
generate.
HathiTrust.org’s reach measure is 0.00155 percent, which is 1/28,000 as large as
Facebook’s reach of 44.7 percent cited above. HathiTrust.org’s time on site averages
292 seconds, so its reach-second measure is 0.00453, which is less than 1/140,000 as
26
According to Alexa.com, “Reach measures the number of users. Reach is typically expressed as the
percentage of all Internet users who visit a given site. So, for example, if a site like yahoo.com has a
reach of 28%, this means that of all global Internet users measured by Alexa, 28% of them visit
yahoo.com. Alexa’s one-week and three-month average reach are measures of daily reach, averaged
over the specified time period. The three-month change is determined by comparing a site's current
reach with its values from three months ago.” See http://www.alexa.com/help/traffic-learn-more
(accessed June 26, 2012).
14
large as Facebook’s reach second measure of 636 seconds cited above. Hence, based
on Facebook’s ad revenue per reach second, I would expect a HathiTrust-like website
to be able to generate 1/140,000 of the $3.1 billion in annual ad revenue that
Facebook generates, so such a site would generate $23,000 in annual revenue.27
HathiTrust.org generates a reach second measure 1/8,700 as high as Twitter’s 40
seconds cited above. Hence, based on Twitter’s revenue per reach second, I would
expect a HathiTrust-like commercial site to be able to generate 1/8,700 as much
revenue as Twitter, or $18,000 in annual ad revenue.28
31.
The existing HathiTrust website is not the only book-oriented site on the Internet, and
so it is instructive to use the above methodology to estimate the ad revenue that other
book-related sites could generate.
For example, the Project Gutenberg site
(gutenberg.org), which distributes public domain books free of charge and has far
more traffic than the HathiTrust site, has a 3-month reach of 0.0228 percent and an
average time on site of 268 seconds. Using the method employed above, I estimate
that a site with this level of traffic could produce annual ad revenue between
$244,000 and $306,000, based on Facebook and Twitter’s revenue per reach second,
respectively.
Using the same approach for other book-related sites—AbeBooks,
JSTOR, and WorldCat—gives respective ranges of $360,000 to $452,000 for
AbeBooks; $267,000 to $335,000 for JSTOR; and $153,000 to $193,000 for
WorldCat. In the interest of making my calculations as conservative as possible, I
adopt the largest of these estimates and therefore conclude that a HathiTrust-like site
27
HathiTrust.org reach (0.00155 percent) multiplied by its time on site (292 seconds) and Facebook’s
estimated $5 million per reach second yields an estimated ad revenue of $22,630.
28
HathiTrust.org reach (0.00155 percent) multiplied by its time on site (292 seconds) and Twitter’s
estimated $4 million per reach second yields an estimated ad revenue of $18,104.
15
could generate no more than $452,000 per year in ad revenue (i.e. the amount earned
by AbeBooks, which has far higher website traffic that the HathiTrust).
32.
The ad revenue that a HathiTrust-like commercial site could generate (no more than
$452,000 per year) falls far short of the annual cost of operating such a site ($
million). I conclude that such a site would not be able to cover its costs with ad
revenue.
2. Subscription Service
33.
A commercial entity could also potentially charge libraries and other users
subscription fees for the ability to search. How much could a private entity earn
selling libraries subscriptions to a searchable database like the one offered by the
HathiTrust? Analysts have identified four major products for digital discovery.29
While none is directly comparable to a hypothetical commercial service resembling
the HathiTrust, one of them is sufficiently similar to support an instructive
comparison. The WorldCat Local product includes a total of 969 million items,
including the very works within the HathiTrust:
674+ million articles with one-click access to full text, 29+ million digital
items from trusted sources like Google Books, OAIster and HathiTrust, 13+
million eBooks from leading aggregators and publishers, 44+ million pieces
of evaluative content (Tables of Contents, cover art, summaries, etc.) included
at no additional charge, 221+ million books in libraries worldwide.30
Of these items, at least 703 million (674 million + 29 million) include some full-text
functionality. For example, 674 million include “one-click access to full text,” while
29
See Judy Luther & Maureen C. Kelly, “The Next Generation of Discovery,” Library Journal, March
15, 2011.
30
See http://www.oclc.org/worldcatlocal/default.htm (accessed June 25, 2012).
16
others (like copyrighted works from the HathiTrust) include full text searchability,
although with no access to full text.
34.
HathiTrust works thus make up 1.48 percent (10.4 million/703 million) of the works
within WorldCat Local that have some degree of full-text functionality. For the sake
of discussion, if we ignore other offerings in WorldCat Local and, hypothetically,
attribute all of its revenue-generating capability only to the works with full-text
functionality, then we could infer that the HathiTrust works on their own could
generate, at best, 1.48 percent of the total revenue that WorldCat Local generates.
This is an overstatement in that it ignores the value of WorldCat Local’s other
offerings, such as its information on “221+ million books.” It is potentially an
overstatement in a second sense: the calculation presumes that the value of a service
like WorldCat Local is directly proportional to the breadth of its collected works or,
in other words, that two services with half the breadth of WorldCat Local’s collection
would each be half as valuable as WorldCat Local. It is likely that this is not the case,
and that the broader appeal of larger collections would generate disproportionately
more revenue than two smaller ones.
35.
How much does WorldCat Local generate in revenue? According to a published
report, “Prices generally range from $9,000 to $25,000 per year for the subscription
fee, depending on the size of the institution.”31 Calculating the revenue to WorldCat
Local also requires an estimate of its sales penetration. According to an account in
31
Ronda Rowe, “Web-Scale Discovery: A Review of Summon, EBSCO Discovery Service, and
WorldCat Local” The Charleston Advisor, / April 2010 www.charlestonco.com 5.
doi:10.5260/chara.12.1.5 Date of Review: June 10, 2010.
17
Library Journal, World Cat Local is installed in 1,419 libraries worldwide.32
Applying the pricing data cited above (a range of $9,000 to $25,000 per subscription)
across 1,419 subscribers indicates a revenue range of $12,771,000 to $35,475,000 for
a product that includes, as roughly one percent of its total content, all of the works in
the HathiTrust.
36.
We can narrow this revenue estimate somewhat further, however.
The Library
Journal account notes that WorldCat Local’s producer OCLC33 has “over 1200
employees and total revenue of $228 million in FY09/10. Yet only a relatively small
portion of the whole relates to the types of products covered in this report; OCLC’s
most recent annual report indicates only 7.6 percent of revenue, or around $17.3
million …”34 is attributable to services like WorldCat Local.
37.
Accordingly, if OCLC generates $17.3 million in annual subscription revenue for
searchable database products related to WorldCat Local, a commercial entity offering
a database like the HathiTrust’s could generate annually only 1.48 percent of that
revenue, or $256,000. This translates into approximately $180 in revenue from each
subscriber to the HathiTrust-like database, assuming it had the same number of
subscribers as WorldCat Local.
38.
The current number of WorldCat Local subscribers (1,419) may actually understate
the revenue available from future potential subscribers. According to OCLC, the
32
Marshall Breeding, “Automation Marketplace 2011: The New Frontier.” Library Journal, Apr 1, 2011.
33
“OCLC is a nonprofit, membership, computer library service and research organization dedicated to
the public purposes of furthering access to the world’s information and reducing information costs.
More than 72,000 libraries in 170 countries and territories around the world have used OCLC services
to
locate,
acquire,
catalog,
lend
and
preserve
library
materials.”
See
http://www.oclc.org/worldcatlocal/default.htm (accessed June 25, 2012).
34
Marshall Breeding, “Automation Marketplace 2011: The New Frontier.” Library Journal, Apr 1, 2011.
18
entity producing WorldCat Local, their “core market is 4,000 academic and academic
research libraries. These libraries also represent the core market for our publisher
partners.”35 If an entity were to sell a HathiTrust-like services to all 4,000 of these
libraries, at a subscription rate of $180 per year, this would generate $720,000 in total
subscriptions.
There are 3,827 academic library systems in the United States.36
39.
There are an
additional 4,617 administrative units for academic libraries in the enlarged European
Union.37 Thus, there are a total of 7,995 possible adopters in a set of countries that
account for 48 percent of the world’s gross domestic product (GDP).38 Scaling this to
the entire world suggests there are at most 16,656 libraries that might purchase a
subscription to a searchable database like the HathiTrust’s ((1/0.48)*7,995 = 16,656).
Even if every single one of these libraries paid $180/year to subscribe to a searchable
database like the HathiTrust’s, this would produce only $2,998,080 million in total
annual revenue.
C. Conclusion about Costs and Revenues
40.
Above I estimate that the creation of a HathiTrust-like commercial service would cost
$
million ($
million in scanning costs and $569 million in costs for
35
See
http://www.oclc.org/services/brochures/214567bUSF_Publisher_Benefits_of_Platform_Strategy.pdf.
36
See https://www.ala.org/ala/professionalresources/libfactsheets/alalibraryfactsheet01.cfm
June 25, 2012).
37
See David Fuegi Martin Jennings, “International library statistics: trends and commentary based on the
Libecon data. Library services statistics in Europe and beyond,” LIBECON. 30 June, 2004.
The enlarged EU includes: “Austria, Belgium, Denmark, Finland France, Germany, Greece, Ireland,
Italy, Luxembourg, Netherlands Portugal, Spain, Sweden, UK and 10 countries were scheduled to join
on 1st May 2004, namely Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,
Poland, the Slovak Republic, and Slovenia.” See Fuegi and Jennings (2004), page 8.
38
Calculated from http://data.worldbank.org/indicator/NY.GDP.MKTP.CD/countries (accessed June 25,
2012), for 2010.
19
(accessed
permissions). Given a 10 percent discount rate, such a service would need to generate
more than $
million per year in revenue to be commercially viable. I estimate that,
even if deriving revenue from both advertising and subscription services, such a
service could realistically hope to generate no more than roughly $3.5 million in
annual revenue, leaving a $
million shortfall, and so I conclude that such a
service would not even be close to viable.
41.
As discussed above, my conclusion remains unchanged even when applied to a large
range of possible alternative assumptions. For example, as indicated above, it is
possible that an entity undertaking the creation of a licensed HathiTrust-like
commercial service would not need to scan all 10.4 million works. My conclusion is
unaffected by this possibility: even without any scanning costs, the project would still
cost $569 million just for obtaining permissions (not including any actual license fees
or royalties). Based on those costs alone, the service would need to generate roughly
$57 million in annual revenue for viability, which is still significantly far above my
estimates of any realistic revenue expectations.
42.
My conclusion also remains the same even if I were to apply a discounted value of
future revenues lower than the 10 percent rate I used. With a lower discount rate, a
searchable database service would need to generate less annual revenue to meet its
costs. For example, discounting at the inappropriately low risk-free rate of 4.58
percent39 implies that, with an upfront cost of $
viable with $
million, the service could be
million in annual revenue. This, again, far exceeds my estimate of
the revenue the service could earn. Indeed, even if one assumes zero scanning costs
39
Ibbotson reports 4.58 percent to be the long-term Government bond yield as of March 31, 2010. See
Morningstar, Ibbotson Cost of Capital 2010 Yearbook, Chicago: Morningstar, Inc. (2010), p. 23.
20
and an inappropriately low discount rate, the service would still require $26.1 million
in annual revenue for viability. This too far exceeds my estimate of the revenue the
service could generate.
43.
I can examine the robustness of my conclusion in another way. Using the baseline
estimates, the service would require $
million in annual revenue for viability, while
it would earn only $3.4 million. How much higher would revenue need to be for
economic viability? Revenue would cover costs only if it exceeded my estimate by a
factor of
(
/3.5). Even if I calculate costs based on zero scanning costs and an
inappropriately low risk-free discount rate, revenue would still need to be 7.5 times
higher than my estimate (26.1/3.5) for the service to be viable.
44.
For all of the reasons above, and even under a variety of alternative assumptions, I
conclude that an entity seeking to create and market a licensed database like the
HathiTrust’s would not be able to generate revenue sufficient to cover its up-front
costs, and is thus not commercially viable.
D. Substitutes, Complements, and the Economics of Search and Discovery Tools
45.
Since the development of digital technology for copying, many new products and
services related to digitizable content (music, text, video) have emerged. When these
new technologies have first appeared, it has not always been clear whether the new
offerings function as substitutes or complements for existing products. That is, it is
not clear whether they cannibalize or stimulate the demand for existing products. To
take one prominent example, consider how digital technology facilitates the
unauthorized and unpaid use of music files. Most other observers, along with me,
agree that these new products—free and nearly perfect substitutes for music files
21
available for sale—cannibalize the revenue of music files.40 Similarly, my research
shows that unpaid consumption of entire movies (whether copied DVDs or
downloaded files) cannibalizes paid consumption of movies.
46.
Contexts outside of music and movies provide less clear evidence of cannibalization.
For example, the emergence of short video segments at sites such as YouTube
provide an interesting contrast to the availability of free music files. It is intuitive that
short segments of video programming may serve as “teasers” that stimulate interest in
the full-length authorized programming. And my own research finds strong evidence
that while unauthorized file sharing in music cannibalizes demand for the genuine
product, unauthorized distribution of short video segments does not.41 It is perhaps
not surprising, then, that rights holders began streaming their own authorized videos
of their television programming less than a year after YouTube’s emergence in early
2005. Many programs were available late in 2005; the majority of the network
schedules were available online by the start of the 2006-2007 television season.42
47.
A lesson emerging from my research in this area is that the free availability of a close
substitute for an authorized product decreases demand, while the availability of only
an element of a product (which is not a close substitute for the entire product) does
40
See, for example, Rafael Rob and Joel Waldfogel, “Piracy on the High C’s: Downloading, Sales, and
Social Welfare in a Sample of College Students,” Journal of Law and Economics XLIX (April 2006),
pp. 29-62; Joel Waldfogel, “Music File Sharing and Sales Displacement in the iTunes Era,”
Information Economics and Policy 22 (2010), pp. 306-314; and Stan J. Liebowitz, “The Metric is the
Message: How Much of the Decline in Sound Recording Sales is Due to File-Sharing?” Unpublished
paper, (December 2011).
41
Joel Waldfogel, “Music File Sharing and Sales Displacement in the iTunes Era,” Information
Economics and Policy 22 (2010), pp. 306-314; and Joel Waldfogel, “Lost on the Web: Does Web
Distribution Stimulate or Depress Television Viewing?” Information Economics and Policy 21 (2009),
p. 158-168.
42
Joel Waldfogel, “Lost on the Web: Does Web Distribution Stimulate or Depress Television
Viewing?” Information Economics and Policy 21 (2009), p. 159.
22
not depress demand. Rights holders in a variety of contexts have acted on these
forces. Music rights holders allow retailers such as Amazon to post short segments of
songs to aid consumers in their search processes.
48.
These findings and facts have relevance to the matter at hand. The mere searchability
of the text inside of a book, without any ability to read that text, is not a close
substitute for access to the book. It is, instead, only a product component—akin to
the short samples of songs that many music retailers make available online—and
allows a potential user to know more about the work prior to using it. Similarly,
many rights holders for written works allow their works to be searchable online. For
example, rights holders are invited to provide Amazon a searchable version of their
works, along with permission to make the search functionality available to
shoppers.43
Interestingly, Amazon does not compensate rights holders for this
service. Instead, rights holders receive indirect compensation in the form of sales
stimulation. Amazon’s own data indicates that participation in their “Search Inside
the Book” program raises sales for participating books by 9 percent.44
When
Amazon launched this program in 2003, 190 publishers had already allowed their
books to be searched, without remuneration, and this number has only grown since
then.45
49.
The sales-stimulating effects of Amazon’s “Search Inside the Book” program, along
with extensive participation from rights holders, makes it clear that, rather than
43
http://www.amazon.com/gp/help/customer/display html?ie=UTF8&nodeId=14061791 (Accessed June
16, 2012).
44
“Amazon.com Announces Sales Impact from New Search Inside the Book Feature,” Business Wire
October 30, 2003.
45
“Amazon.com Announces Sales Impact from New Search Inside the Book Feature,” Business Wire
October 30, 2003.
23
cannibalizing demand,searchability stimula, les demand the booksthat ale
for
searchable.
This findingis verymuch line ~,,vi~ myresearchfindingsthat the free
in
availability of closesubstitutescannibalizes
sal:,,:s, whilethe free availability c,f
incompleteelementsstimala~s demand,
SO. l conclude a serviceofferingsearchability
that
nsi,:le books, the HathiTrust
like
does;,
would likely benefit rights holdersbystimalatilng demand their works.
very
for
I declareunderpenaltyof perjuryunderthe lnwsol the United
States that the foregoing
is
true andcorrect.
Date: 2o12
Suue""
Joel
24
~gel
Appendix A
Curriculum Vitae of Professor Joel Waldfogel
Joel Waldfogel
updated: January 3, 2011
Carlson School of Management
University of Minnesota
Minneapolis, MN 55455
phone: (612) 626-7128
fax: (612) 626-1335
jwaldfog “at” umn.edu
http://www.tc.umn/edu/~jwaldfog
Education
Ph. D. 1990, Economics, Stanford University
B.A. 1984, Economics, Brandeis University, summa cum laude, with Highest Honors
Work Experience
Carlson School of Management and Department of Economics (by courtesy), University
of Minnesota
Frederick R. Kappel Chair in Applied Economics, 2010National Bureau of Economic Research, Cambridge, MA
Research Associate, Industrial Organization and Law and Economics Programs,
2002-present
Faculty Research Fellow, Law and Economics Program, 1993-2002
Member, Board of Advisers, Tango Card, Inc., 2010Member, Board of Advisers, HowMutch, 2010Business and Public Policy Department, The Wharton School, University of
Pennsylvania
Joel S. Ehrenkranz Family Professor, 2003-2010
Department Chair, January 2006 – June 2009
Professor, 2001-2003
Associate Professor, 1997-2001
Associate Vice Dean for the Doctoral Program, The Wharton School, Fall 2000-2005
Dismal Science columnist, Slate Magazine (www.slate.com), May, 2006-2009.
1
Associate Editor, Information Economics and Policy, July 2004-present
Member, Editorial Board, International Review of Law and Economics, Jan. 2004-present
Member, Editorial Board, B.E. Journals in Economic Analysis & Policy, 2005-present
Consultant, The World Bank
Project on criminal conviction and labor market outcomes, 1997
Project on media use in African countries, 2007
Yale University Economics Department
Associate Professor, 1995-1997
Assistant Professor, 1990-1995
John M. Olin Visiting Faculty Fellow, Yale Law School, Spring 1994
Economist, F.W. Dodge/Data Resources, Lexington, MA, 1985-1987
Service
Member, NAS/STEP Committee on the Impact of Copyright Policy on Innovation in the
Digital Era, 2010-2011
(http://sites.nationalacademies.org/PGA/step/copyrightpolicy/index.htm)
Consultant to the FCC Media Ownership Working Group, 2001-2003
Member, NAS/NRC Committee on Improving Research Information and Data on
Firearms, 2001-2004. The panel published a report, Firearms and Violence: A Critical
Review, National Academy Press, Washington, DC, 2004.
Scientific Organizing Committee, Conference on Media Economics (Bologna, 2007;
Zurich, 2008; Siena 2009; New York, 2010)
Co-organizer, 2009 NBER Summer Institute Conference on Industrial Organization
Selection Committee, International Industrial Organization Conference, Media Topics,
2008, 2009, 2010
Distinctions
Journal of Urban Economics, Highly Cited Author Award, 2004-2008
Marc and Sheri Rapaport Undergraduate Core Teaching Award, The Wharton School,
May 2008
2
Journal of Industrial Economics “Best Article of the Year” Prize, 2006
Monroe-Paine Lecture, University of Missouri, October 2008
First Prize, Mexican Law and Economics Association, for “Do Sentencing Guidelines
Raise the Cost of Punishment?” (with Jose Meade), October 1998
Teacher of the Year 1994, Yale Graduate Economics Club
Alfred P. Sloan Dissertation Fellowship, 1989-1990, Stanford University
John M. Olin Fellow, Stanford Law School, Summer 1988
Grants
University of Pennsylvania, Wharton Global Research Initiative, 2009, 2010 (with
Fernando Ferreira, to support research on globalization of recorded music industry)
University of Pennsylvania, Real Estate Center, 2004, 2005 (to support research on chain
restaurants)
University of Pennsylvania, Mack Center, 2007, 2008, 2009 (to support research on video
downloading and the pricing of digital products)
University of Pennsylvania, WebI/Mack Center, 2004, 2005 (to support research on
music downloading and recording industry innovation)
University of Pennsylvania, WebI, 2002 (to support research on information
intermediaries)
University of Pennsylvania, Wharton Electronic Commerce Forum, 2000 (to support
research on the digital divide)
University of Pennsylvania Research Foundation, 1998 (with Kevin Volpp, to support
research on the impacts of New Jersey health care reform)
University of Pennsylvania Research Foundation, 1998 (with Jason Scott Johnston, to
support research on litigation)
Yale Social Science Faculty Research Fund, 1991, 1994 (with Steve Berry)
NSF Law and Social Science grant no. SBR-9310526, a two year grant with Ian Ayres to
support research on race discrimination in Connecticut bail setting, 1993
3
Books
1. Scroogenomics, Princeton University Press, November 2009. (Published translated
into Japanese, Chinese, 2010).
2. The Tyranny of the Market, Harvard University Press, Cambridge, MA, October
2007.
3. Debt, Taxes, and Corporate Restructuring, co-edited with John B. Shoven, Brookings
Institution, Washington, D.C., 1990
4. Firearms and Violence: A Critical Review, National Academy Press, Washington,
DC, 2004 (NRC panel member).
Scholarly Articles in Journals
5. “The Four P’s of Digital Distribution in the Internet Era: Piracy, Pricing, PieSplitting, and Pipe Control.” Review of Economic Research on Copyright Issues,
2010. (keynote lecture, Society for Economic Research on Copyright Issues 2009
World Congress)
6. Guest Editor’s Introduction (with Martin Peitz), Information Economics & Policy,
2010.
7. “Music for a Song: An Empirical Look at Uniform Song Prices and its Alternatives.”
(with Ben Shiller), forthcoming, Journal of Industrial Economics (revised version of
NBER Working Paper 15390, October 2009).
8. “File Sharing and Sales Displacement in the iTunes Era.” Information Economics &
Policy. 2010.
9. “Lost on the Web: Does Web Distribution Stimulate or Depress Television
Viewing?” Information Economics & Policy, 2009, (revised version of NBER
Working Paper 13497, October 2007)
10. “Product Quality and Market Size (with Steve Berry), Journal of Industrial
Economics, 2010 (revised version of NBER Working Paper 9675)
11. “Media Markets and Localism: Does Local News en Español Boost Hispanic Voter
Turnout? (with Felix Oberholzer-Gee), American Economic Review, 2009 (revised
version of NBER Working Paper 12317, June 2006).
4
12. “Social Learning and Coordination in High-Stakes Games: Evidence from Friend or
Foe” (with Felix Oberholzer-Gee and Matthew White), 2010, Review of Economics
and Statistics.
13. “Close to You? Bias and Precision in Patent-Based Measures of Technological
Proximity” (with Mary Benner), Research Policy, 2008 (revised version of NBER
Working Paper 13322, August 2007).
14. Guest Editor’s Introduction to Special Issue on the Economics of the Media,
Information Economics and Policy, October 2007.
15. “The Median Voter and the Median Consumer: Local Private Goods and Residential
Sorting,” March 2008, Journal of Urban Economics (revised version of NBER
Working Paper 11972, January 2006).
16. “Piracy on the Silver Screen” (with Rafael Rob), Journal of Industrial Economics
Sept. 2007, (revised version of NBER Working Paper 12010, February 2006).
17. “Measuring the Effect of Multimarket Contact on Competition: Evidence from Radio
Broadcast Ownership Deregulation.” (with Julie Wulf), Contributions to Economic
Analysis and Policy, 2006
18. “Does Information Undermine Brand? Information Intermediary Use and Preference
for Branded Web Retailers.” (with Lu Chen), Journal of Industrial Economics,
December 2006
Recipient of Journal of Industrial Economics “Best Article of the Year” Prize,
2006
19. “The New York Times and the Market for Local Newspapers.” (with Lisa George),
American Economic Review, 2006.
20. “Piracy on the High C’s: Music Downloading, Sales Displacement, and Social
Welfare.” (with Rafael Rob), April 2006, Journal of Law & Economics (revised
version of NBER Working Paper 10874, November 2004).
21. “Strength in Numbers: Group Size and Political Mobilization” (with Felix Oberholzer
Gee), October 2005, Journal of Law & Economics (revised version of NBER Working Paper
8252, April 2001; old title: “Electoral Acceleration: The Effect of Minority Population on Minority
Voter Turnout”).
22. “Do Low-Income Housing Subsidies Increase Housing Consumption?” (with Todd
Sinai), Journal of Public Economics, December 2005 (revised version of NBER
Working Paper 8709, January 2002).
23. “Does Consumer Irrationality Trump Consumer Sovereignty?” The Review of
Economics and Statistics, November 2005.
5
24. “Who Benefits Whom in Local Television Markets?”, Brookings-Wharton Papers on
Urban Affairs 2003
25. “Geography and the Internet: Is the Internet a Substitute or a Complement for
Cities?” (with Todd Sinai), Journal of Urban Economics, July 2004 (revised version
of NBER Working Paper 10028, October 2003).
Recipient of Journal of Urban Economics Highly Cited Author Award, 20042008.
26. “Market Reform in New Jersey and the Effect on Mortality from Acute Myocardial
Infarction.” (with Kevin Volpp, Sankey Williams, Jeffrey Silber J. Sanford Schwartz,
and Mark Pauly) Health Services Research, April 2003. (revised version of “Competition
and the Quality of Hospital Care: Heart Attack Mortality after the Onset of Price Competition in New
Jersey,” (with Kevin Volpp), mimeo, The Wharton School, July 1998)
27. “Preference Externalities: An Empirical Study of Who Benefits Whom in
Differentiated Product Markets” RAND Journal of Economics, 2003 (revised version
of NBER Working Paper 7391, October 1999)
28. “Who Affects Whom in Daily Newspaper Markets?” (with Lisa George), Journal of
Political Economy, 2003 (revised version of NBER Working Paper 7944, October
2000)
29. “Does Repeat Play Elicit Cooperation? Evidence from Federal Civil Litigation,”
(with Jason Johnston), Journal of Legal Studies, 2002
30. “Gifts, Cash, and Stigma,” Economic Inquiry, 2002
31. “Race and Radio: Preference Externalities, Minority Ownership, and the Provision of
Programming to Minorities” (with Peter Siegelman), Advances in Applied
Microeconomics, volume 10, 2001
32. “Do Mergers Increase Product Variety? Evidence from Radio Broadcasting,” (with
Steven Berry), Quarterly Journal of Economics, 2001, (revision of April 1999 NBER
Working Paper 7080 entitled “Mergers, Entry, and Programming Variety in Radio
Broadcasting”)
33. “The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart,”
(with Jeffrey Milyo) American Economic Review, 1999, (revision of March 1998
NBER Working Paper 6488)
Reprinted in Kyle Bagwell, ed., The Economics of Advertising, in Edward
Elgar series, The International Library of Critical Writings in Economics,
Mark Blaug, ed.
6
34. “Free Entry and Social Inefficiency in Radio Broadcasting,” (with Steven Berry),
RAND Journal of Economics, 1999, (revision of April 1996 NBER Working Paper
5528)
To be reprinted in Paul Joskow and Michael Waterson, eds., Empirical
Industrial Organization, in Edward Elgar series, The International Library of
Critical Writings in Economics, Mark Blaug, ed.
35. “Public Radio in the U.S.: Does it Correct Market Failure or Cannibalize
Commercial Stations,” (with Steven Berry), Journal of Public Economics, 1999,
(revision of June 1997 NBER working paper 6057)
36. “Toward a Taxonomy of Disputes: New Evidence through the Prism of the
Priest/Klein Model,” (with Peter Siegelman), The Journal of Legal Studies, January
1999
37. “The Deadweight Loss of Christmas: Reply,” American Economic Review,
December 1998
Reprinted in Problèmes Économiques, December 22, 1999
38. “Reconciling Asymmetric Information and Divergent Expectations Theories of
Litigation,” Journal of Law and Economics, October 1998 (revision of February 1998
NBER Working Paper 6409)
39. “Are Empirically Based Sentencing Guidelines Justified by Inter-Judge Disparity?,”
International Review of Law and Economics, September 1998
40. “The Effect of Conviction on Income through the Life Cycle,” (with Daniel Nagin),
International Review of Law and Economics, March 1998
41. “The Best Business Schools: A Market Based Approach,” (with Joseph Tracy),
Journal of Business, January 1997
42. “The Deadweight Loss of Christmas: Reply,” American Economic Review,
December 1996
43. “Sentencing Policy, Implied Demographic Welfare Weights, and the Theory of
Sentencing Reform,” Journal of Public Economics, 1996
44. “The Administrative and Compliance Cost of Manual Highway Toll Collection:
Evidence from Massachusetts and New Jersey,” (with David A. Friedman), National
Tax Journal, June 1995
45. “The Selection Hypothesis and the Relationship between Trial and Plaintiff Victory,”
Journal of Political Economy, April 1995
7
To be reprinted in Chris William Sanchirico, ed., Economics of Evidence,
Procedure, and Litigation, in Edward Elgar series, Economic Approaches to
Law, Richard Posner and Francesco Parisi, series eds.
46. “Are Fine and Prison Terms Used Efficiently?: Evidence on Federal Fraud
Offenders,” Journal of Law and Economics, April 1995
To be reprinted in Isaac Ehrlich and Zhiqiang, eds., The Economics of Crime,
in Edward Elgar series, The International Library of Critical Writings in
Economics, Mark Blaug, ed.
47. “The Effects of Criminality and Conviction on the Labor Market Status of Young
British Offenders,” (with Daniel Nagin) International Review of Law and Economics,
1995
48. “Measuring the Effects of Restructuring on Corporate Performance: The Case of
Management Buyouts,” (with Scott Smart), Review of Economics and Statistics, 1994
49. “A Market Test for Race Discrimination in Bail Setting,” (with Ian Ayres), Stanford
Law Review, May 1994
Reprinted in Ian Ayres, Pervasive Prejudice?, Univ. of Chicago Press, 2001
50. “Does Conviction Have A Persistent Effect on Income and Employment?,”
International Review of Law and Economics, March 1994
51. “The Effect of Criminal Conviction on Income and the 'Trust Reposed in the
Workmen',” Journal of Human Resources, Winter 1994
52. “The Deadweight Loss of Christmas,” American Economic Review, December 1993
Reprinted in Caroline Kennedy, A Family Christmas, Hyperion Books, 2007.
53. “Sentences as Endogenous Taxes: Are they 'Just' or 'Efficient'?,” Journal of Law and
Economics, April 1993
54. “Real Interest Rates and the Savings and Loan Crisis: The Moral Hazard Premium,”
(with John Shoven and Scott Smart), Spring 1992, Journal of Economic Perspectives
Other Publications (Chapters, etc.)
55. “Who Benefits Whom in the Neighborhood? Demographics and Retail Product
Geography” in Edward Glaeser, Agglomeration Economics, University of Chicago
Press, 2010.
8
56. “National Media and Local Political Participation: The Case of the New York Times”
(with Lisa George), in Information and Public Choice: From Media Markets to
Policymaking, The World Bank.
57. “Minority-Targeted Local Media and Voter Turnout: A Summary.” in Information
and Public Choice: From Media Markets to Policymaking, The World Bank.
58. “Should We Regulate Media Ownership?” in Media Diversity and Localism:
Meaning and Metrics, 2006.
59. “The Selection of Cases for Trial,” The New Palgrave Dictionary of Economics and
the Law, May 1998
60. “Tax Policy, Saving, and Pension Funding,” in Pensions, Savings, and Capital
Markets, U.S. Dept. of Labor, 1996.
61. “Criminal Sentences: Are they Just or Efficient?,” Economic Times, Spring 1995
62. “Which Flowers Will Bloom? Reactions to the USSC Research Conference,” Federal
Sentencing Reporter, July/August 1993.
63. “Guest Editor's Observations: Narrow Questions, Overstated Answers,” Federal
Sentencing Reporter, Nov./Dec. 1992./
64. “Aggregate Inter-Judge Disparity in Federal Sentencing: Evidence from Three
Districts,” Federal Sentencing Reporter, Nov./Dec. 1991
Active Working Papers
65. “Bye, Bye, Miss American Pie: The Supply of New Recorded Music Since Napster.”
The Carlson School, University of Minnesota, January 3, 2011.
66. “File Sharing in Music and Movies: Empirics” to be a chapter in the Oxford
Handbook of the Digital Economy, Martin Peitz and Joel Waldfogel, eds. The
Carlson School, University of Minnesota, September 2010.
67. “Pop Internationalism: Has A Half Century of World Music Trade Displaced Local
Culture?” (with Fernando Ferreira), NBER Working Paper 15964, May 2010.
68. “Movie Piracy and Sales Displacement in a Sample of Chinese College Students.”
(with Jie Bai), The Wharton School, June 2009.
9
69. “Public Monopoly and Social Efficiency: Evidence from the Pennsylvania Liquor
Control Board’s Entry Decisions.”(with Katja Seim), NBER Working paper 16258,
August 2010.
70. “The Challenge of Revenue Sharing with Bundled Song Pricing.” (with Ben Shiller),
The Wharton School, September 2008.
Inactive Working Papers
71. “Does Misery Love Company? Evidence from Pharmaceutical Markets before and
After the Orphan Drug Act” (with Frank Lichtenberg). Mimeo. The Wharton School,
July 2002.
72. “The Long Run Effect of Price Advertising on Prices” (with Jeff Milyo), mimeo, The
Wharton School, January 2001
73. “Do Noncommercial Hospitals Cannibalize Commercial Hospitals or Serve the
Medically Needy?” (with Douglas Leslie), mimeo, The Wharton School, February
1998
74. “Do Sentencing Guidelines Raise the Cost of Punishment?” (with Jose Meade),
NBER Working Paper 6361, January 1998
75. “A Citation-Based Test for Discrimination at Economics and Finance Journals,”
(with Scott Smart), NBER working paper 5460, February 1996
76. “Bargaining in the Shadow of the Judge,” (with Orley Ashenfelter), mimeo,
Princeton University, February 1993
Reports
77. “Consumer Substitution among Media” (Washington, DC: FCC Media Ownership
Working Group), October 2002
78. “Conviction and Labor Market Outcomes: the Existing Literature and its Possible
Relevance to Developing Countries,” prepared for The World Bank, October, 1997
Doctoral Students Advised
10
Wharton
Member, Ben Shiller
Chair, Brett Danaher, Wellesley College.
Member, David Song
Member, Leslie Schafer, PricewaterhouseCoopers.
Member, Ted Goodman, University of Arizona
Member, Gilbert Gimm, Mathematica
Member, Hart Posen, University of Michigan
Chair, Mike Gessner. Economic Analysis LLC.
Member, Ted Buckley, McKinsey
Member, Mike Furukawa, Arizona State Univ..
Member, Gus DeFranco, 2004, Univ. of Toronto, Accounting
Chair, Lisa George, 2001, Hunter College
Member, Phanish Puranam, 2001, London Business School
Member, Kate Bundorf, 2000, Stanford Medical School
Member, Kevin Volpp, 1998, Penn Medical School
Member, Linda Bornyaz, 1998
Yale
Chair, Jose Meade, 1997, ITAM
Chair, Doug Leslie, 1997, Veteran’s Administration
Member, Jessica Holmes, 1998, Middlebury College
Member, Kristin Mancini, 1997,
Member, David Popp, 1997, Syracuse University
Member, Peter Siegelman, 1991, University of Connecticut Law School
Member, Emmanuel Thorne, 1992
Recent Seminars
2010/2011
Technology Policy Institute Aspen Forum, Aspen Colorado, August 2010
NYU Stern Economics Group, October 2010
Economics of Media Conference, Hunter College, October 2010
University of Wisconsin-Madison, Department of Economics, November 2010
FCC, December 2010
Curb Center, Washington DC, December 2010
Keynote speaker, WISE 2010, St Louis, December 2010
2009/2010
University of Illinois, September 2009
University of Texas, McCombs, October 2009
Ohio State Economics, December 2009
London Business School, December 2009
London School of Economics (public talk), December 2009
Royal Society for the Arts (public talk), London, December 2009
11
University of Minnesota, Carlson School, January 2010
Carnegie Mellon, Heinz College, February 2010
NBER Winter IO Meetings, Palo Alto, February 2010
Invited Speaker, Society for Economic Research on Copyright Issues (SERCI)
Congress, Cartagena, Colombia, July 2010
2008/2009
LSE, June 2009
Invited Speaker, TILEC (Tilburg) conference on law and economics of media, June
2009
TPRC, Washington DC, September 2008
INFORMS, Washington DC, October 2008
QME, New York, October 2008
Ohio State University, October 2008
University of Michigan, November 2008
Kellogg, Northwestern, December 2008
2007/2008
Conference on Media Economics, Bologna, October 2007
Keynote Speaker, Economics Network for Competition and Regulation (ENCORE),
May 2008, Hilversum, the Netherlands
Invited Speaker, Economics of Information and Communication Technologies, ZEW,
July 2008, Mannheim, Germany
Symposium on Statistical Challenges in Electronic Commerce, NYU, May 2008.
NBER Summer Institute IO, July 2008.
2005/2006
NBER Summer Institute IO (discussant)
NYU IO Day
Fundacion Ramon Areces (Madrid)
University of Chicago GSB
AEA Meetings, Boston (Presenter: Urban Economics, Internet and Entertainment
Industries; Discussant: Innovation)
St. Johns Law School, Media Diversity Conference
Wharton, Mack Center Mini-Conference, Discussant
2004/2005 Seminars
Yale University Econ/SOM
USDA Product Differentiation Conference
Harvard Business School Strategy Group
Cornell Economics
Berkeley/Haas
NBER Urban Economics Conference
Jan 2005 AEA Meetings (discussant)
12
European Center for Advanced Research in Economics and Statistics, Belgium
ENST, France
2003/2004 Seminars
NYU IO day
Syracuse
Dartmouth/Tuck
Brookings Institution
Wharton Decision Processes seminar
Stanford Graduate School of Business (Econ & Political Economy Seminars)
Wharton Management Department, Evolution of Organizations and Industries
Seminar
Ford Foundation Media Conference at Fordham Univ.
Wharton Marketing Seminar
NBER IO Winter Meetings (discussant)
University of Toronto, Rotman School
Kellogg
Wharton Management Strategy and the Business Environment, discussant
Columbia University media ownership conference
Wharton Summer Applied Economics Seminar
NBER Law & Econ Summer Institute (scheduled)
NBER Innovation Summer Institute (discussant, scheduled)
NBER IO Summer Institute (discussant, scheduled)
2002/2003 Seminars
Speaker at University of Pennsylvania Economics Day
Panel Member, Mediatank Public Forum on Media Ownership in Philadelphia with
FCC Commissioner Michael J. Copps (May 7th, 2003)
Wharton Summer Applied Economics Seminar
Virginia Econ
Carnegie Mellon University Strategy Seminar
MIT Econ
NBER Winter Industrial Organization Meetings, Stanford
2001/2002 Seminars
Harvard University Econ
George Mason University
Rutgers University Econ
NYU (Stern)
University of Pennsylvania (Wharton)
Dartmouth (Tuck and Econ)
NBER Innovation Summer Institute
2000/2001 Seminars
13
28th Annual Telecommunications Policy Research Conference
University of Wisconsin, Madison, Economics Department
Stanford GSB
Duke Fuqua
Washington Univ (Olin)
Michigan State Univ Econ Dept.
Univ of Illinois Econ Dept.
Brandeis University Economics Dept.
Cal – Berkeley (Haas)
Other Professional Activities
Referee, American Economic Review; American Journal of Political Science; Journal of
Law and Economics; International Review of Law and Economics; National Tax
Journal; Journal of Political Economy; Quarterly Journal of Economics; Journal of Law,
Economics, and Organization; Journal of Industrial Economics; Management Science;
Journal of Labor Economics; Journal of Economic Education; Journal of Policy Analysis
and Management; RAND Journal of Economics.
Personal
Married to Mary J. Benner; two children (born 12/93 and 2/96)
University of Pennsylvania Service
2008/2009
Member, Planning Committee, Penn Program on Democracy, Citizenship, and
Constitutionalism
Member, Wharton School Publishing Editorial Board
Member, Wharton School Committee of Faculty Attraction and Retention
Chair, Business and Public Policy Search Committee
2007/2008
Chair, Marketing Department Quinquennial Review Committee
Member, Wharton School Faculty Survey Steering Committee
Member, Planning Committee, Penn Program on Democracy, Citizenship, and
Constitutionalism
2004/2005
Chair, Wharton Undergraduate Curriculum Review Committee
University of Pennsylvania, Council of Graduate Faculties, member
Wharton Doctoral Executive Committee, member
Co-Organizer, Wharton Scholars Undergraduate Research Program
2003/2004
Wharton Applied Economics Seminar, co-organizer
14
Chair, Business and Public Policy Doctoral Admissions Committee
Member, BPUB Q-Review Committee
Business and Public Policy Search Committee, Chair
University of Pennsylvania, Council of Graduate Faculties, member
Wharton Doctoral Executive Committee, member
Co-Organizer, Wharton Scholars Undergraduate Research Program
2002/2003
Wharton Personnel Committee, member
Wharton Doctoral Executive Committee, member
Wharton Applied Economics Seminar, organizer
Business and Public Policy Doctoral Coordinator
Business and Public Policy Search Committee, Chair
University of Pennsylvania, Council of Graduate Faculties, member
University of Pennsylvania, Committee on Doctoral Degree Requirements, Rules and
Regulations, member
2001/2002
Wharton Personnel Committee, member
Wharton Doctoral Executive Committee, member
Wharton Applied Economics Seminar, co-organizer
Business and Public Policy Doctoral Coordinator
University of Pennsylvania, Council of Graduate Faculties, member
University of Pennsylvania, Strategic Planning Committee (Doctoral Education)
1999/2000
Wharton Research Policy Committee, member
Wharton Applied Economics Seminar, co-organizer
Public Policy and Management Ph.D. Program Committee
Wharton Ad Hoc Committee on the Doctoral Program, chair
Wharton Summer Applied Economics Seminar, founder and organizer
1998/1999
Wharton MBA Curriculum Review Committee, member
Wharton Research Policy Committee, member
Wharton Applied Economics Seminar, co-organizer
Public Policy and Management Ph.D. Program Committee
Wharton Summer Applied Economics Seminar, founder and organizer
1997/1998
Wharton MBA Curriculum Review Committee, member
Public Policy and Management Ph.D. Program Committee
Wharton Summer Applied Economics Seminar, founder and organizer
15
Appendix B
Cases in which I’ve provided testimony in the past four years
Distribution of the 2004 and 2005 Cable Royalty Funds (Docket No. 2007-3 CRB CD 20042005)
Appendix C
Materials Relied Upon
Documents Cited
Legal Documents
Deposition of Daniel Clancy, June 1, 2012.
Deposition of Frederic L. Haber, June 4, 2012.
Public Documents
“After Strong 2011, Twitter Ad Revenues to Grow 86% to $259 Million in 2012,” eMarketer Digital
Intelligence, January 31, 2012, available at http://www.emarketer.com/PressRelease.aspx?R=1008806
(accessed June 20, 2012).
“Amazon.com Announces Sales Impact from New Search Inside the Book Feature,” Business Wire
October 30, 2003.
Bloomberg LP.
Carnegie Mellon University, “Online Library Gives Readers Access to 1.5 million Books,” available at
http://www.cmu.edu/news/archive/2007/November/nov27_ulib.shtml (accessed June 18, 2012).
David Fuegi Martin Jennings, “International library statistics: trends and commentary based on the
Libecon data. Library services statistics in Europe and beyond,” LIBECON. 30 June, 2004.
Denise Troll Covey, “Global Cooperation for Global Access: The Million Book Project,” (2004). Library
Research and Publications,. Paper 41, http://repository.cmu.edu/lib_science/41.
Jennifer Howard, “Google Begins to Scale Back Its Scanning of Books From University Libraries,” the
Chronicle of Higher Education (March 9, 2012). Available at http://chronicle.com/article/Google-Beginsto-Scale-Back/131109/.
Jeremy York, "HathiTrust Overview," MichALL Spring Meeting, May 18, 2012.
Joel Waldfogel, “Lost on the Web: Does Web Distribution Stimulate or Depress Television Viewing?”
Information Economics and Policy 21 (2009).
Joel Waldfogel, “Music File Sharing and Sales Displacement in the iTunes Era,” Information Economics
and Policy 22 (2010).
Judy Luther & Maureen C. Kelly, “The Next Generation of Discovery,” Library Journal, March 15,
2011.
Kevin Kelly, “Scan This Book,” New York Times (May 14, 2006).
C-1
Letter from Constance K. Lundberg and Laureen C. Urquiaga, Brigham Young University, to Jule L.
Sigall, U.S. Copyright Office, “Re: Orphan Works and Research Libraries and Archives” (March 22,
2005).
Letter from Denise Troll Covey, Carnegie Mellon University to Jule L. Sigall, U.S. Copyright Office,
“Re: Response to Notice of Inquire about Orphan Works, Federal Register (January 26, 2005), Vol. 70,
No. 16: 3739-3743” (March 22, 2005).
Letter from Sarah E. Thomas, Cornell University, to Jule L. Sigall, U.S. Copyright Office, “Re: Response
by the Cornell University Library to the Notice of Inquiry Concerning Orphan Works, 70 FR 3739
January 26, 2005” (March 23, 2005).
Marshall Breeding, “Automation Marketplace 2011: The New Frontier.” Library Journal, Apr 1, 2011.
Morningstar, Ibbotson Cost of Capital 2010 Yearbook, Chicago: Morningstar, Inc. (2010).
OCLC, “The Benefits of OCLC’s Platform Strategy for Publishers and Content Providers,” available at
http://www.oclc.org/services/brochures/214567bUSF_Publisher_Benefits_of_Platform_Strategy.pdf.
Richard A. Brealey, Stewart C. Myers, and Franklin Allen, Principles of Corporate Finance (9th Ed.)
Boston: McGraw-Hill Irwin, 2008.
Rafael Rob and Joel Waldfogel, “Piracy on the High C’s: Downloading, Sales, and Social Welfare in a
Sample of College Students,” Journal of Law and Economics XLIX (April 2006).
Ronda Rowe. “Web-Scale Discovery: A Review of Summon ,EBSCO Discovery Service, and WorldCat
Local” The Charleston Advisor, / April 2010 www.charlestonco.com 5. doi:10.5260/chara.12.1.5 Date of
Review: June 10, 2010.
Shayndi Raice, “Days of Wild User Growth Appear Over at Facebook,” The Wall Street Journal, June 11,
2012, available at
http://online.wsj.com/article/SB10001424052702303296604577454970244896342.html (accessed June
26, 2012).
Stan J. Liebowitz, “The Metric is the Message: How Much of the Decline in Sound Recording Sales is
Due to File-Sharing?” Unpublished paper, (December 2011).
Websites
ALA Library Fact Sheet 1,
https://www.ala.org/ala/professionalresources/libfactsheets/alalibraryfactsheet01.cfm.
Alexa, http://www.alexa.com/.
Alexa, About Alexa Traffic Rankings, http://www.alexa.com/help/traffic-learn-more.
Amazon, Look Inside the Book Program,
http://www.amazon.com/gp/help/customer/display.html?ie=UTF8&nodeId=14061791.
C-2
Bound Book Scanning, http://boundbookscanning.com/.
HathiTrust, http://www.hathitrust.org/.
OCLC, WorldCat Local, http://www.oclc.org/worldcatlocal/default.htm.
Project Gutenberg, http://www.gutenberg.org/.
The World Bank, Data, GDP, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD/countries.
Universal Library, About Us, http://www.ulib.org/ULIBAboutUs.htm.
Universal Library, Donations, http://www.ulib.org/ULIBDonations.htm.
C-3
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