Law , Movie Production , and Video Pricing : the European Rental Directive

∗ National University of Singapore. Corresponding author: Ivan Png, Dept of Information Systems, National University of Singapore, 3 Science Drive 2, Singapore 117543, Tel: +65 6516-6807, http://www.comp.nus.edu.sg/~ipng/. We thank participants at ... seminars at the Hong Kong University of Science and Technology, Oxford University, ... for helpful advice. Ivan Png thanks Nuffield College for kind hospitality in Michaelmas Term, 2007, during which part of this paper was written. In November 1992, the European Economic Community issued Directive 92/100/EEC (the “Rental Directive”) to harmonize copyright laws with regard to rights of rental and lending, and the neighboring rights of performers, music and film producers, and broadcasters. Member countries of the European Economic Area were required to comply with the Directive with effect from July 1994. We studied the impact of the Rental Directive on the production of movies in 17 European countries during the period 1993-2005. We found that the Rental Directive was associated with an increase in movie production ranging between 2.46% (±1.55%) and 4.43% (±2.76%). Importantly, the increase was higher in countries where piracy was lower. These findings were robust to various specifications, including the measure of compliance with the Rental Directive and the measure of piracy, changes in government funding, other significant changes in copyright law, and exclusion of a possible outlier country. The Rental Directive enabled movie producers to directly discriminate between video tapes for sale vis-à-vis rental. It was associated with retail rental revenues being 0.85% higher and retail sale revenues being 1.81% higher.