Copyright collecting societies and cable operators - assessment of copyright value
This paper shows a problem of proper assessment of copyright value based on the example of copyright fees paid by cable operators to copyright collecting societies. There are the following methods of valuing copyright:
- market comparison;
- income approach
- cost approach.
The income approach is based on the valuation of assets for their ability to generate future income. Most popular is the Discounted Cash Flow method (DCF), based on the forecasting of free cash flow generated by the assets. This approach is difficult to use for the valuation of collecting societies’ royalties, because of problems with preparing a proper model and the high risks related to the quality of financial forecasts. There is no known scientific research related to using the income approach for valuation of copyrights.
The cost approach is based on the valuation of assets, based on the cost of their creation. This approach is not useful for the problem, because in the case of copyrights there is limited correlation between the cost of asset creation and the level of income generated by the assets.
The market comparison assumes that in a free market supply and demand forces will create the so-called equilibrium price. In the case of valuing copyright, methods based on income and market comparison are preferred, however we should take into consideration that there exists only a limited market in the case of dealing with collecting societies.
There is no scientific research related to calculation of copyright fees based on the market comparison. This is mainly due to the problem of collecting proper data in different countries. In our research we apply market comparison methodology supported by taxonomic measures. This approach consists of three steps:
- synthetic measures of development for these markets are based on the fundamental parameters characterizing the markets,
- the markets are beeing sorted in terms of their level of development, and
- we adapt the copyright rules observed in the most developed market to the valuation of the copyright rules in Poland.