[nwiswell]

This clearly benefits wealthy owners of IP (disney, movie studios, game publishers, etc) over small-time artists (self-published authors, small bands, etc) since the period of time that IP protection remains an economic choice is strongly tied to the value of the IP.

E.g., if you write a book and realize $5,000 in sales per year, then 10 * 2^x=5000 where x is 8.97, so you only enjoy 8 years of revenues ($40,000) and you've paid Σ(1->8) 10 * 2^x = $5,100 for the privilege, for a net $34,900 or 6.98x the yearly royalty value.

If Dreamworks sees $500M a year in Minions merchandising, then 10 * 2^x=500,000,000 where x = 25.56 and so Dreamworks realizes 25 years of revenues ($12,500,000,000) and pays Σ(1->25) 10 * 2^x = $671,088,620 for the privilege, for a net $11,828,911,380 or 23.66x the yearly royalty value.

This is backward, in my opinion.

[nine_k]

Big acts grossing colossal figures can continue that for a longer time. But the growth of the fee is exponential, while sales never grow exponentially for indefinite time. I can agree that the base of 2 may be too low; let's take 4 instead.

Let's assume that Dreamworks are so good that they get $500M a year for a particular IP. For 10 years they enjoy free coverage.

But even if on year 25 of coverage they would still have been making some money on the franchise, next year they go badly into the red.

The code:

  def fee(y): 
    return 0 if y <= 10 else 10 * 4 ** (y - 11)

  def total_fee(y): 
    return sum(fee(yy) for yy in range(1, y + 1))

  def total_revenue(years, yearly_revenue=500_000_000): 
    return yearly_revenue * years

  def balance(y):
    f = total_fee(y) / 1_000_000
    r = total_revenue(y) / 1_000_000
    return "%2d %8.1fM %8.1fM %6.1fM" % (y, f, r, r - f)

  for y in range(21, 27):
    print(balance(y))

Output:

  21     14.0M  10500.0M 10486.0M
  22     55.9M  11000.0M 10944.1M
  23    223.7M  11500.0M 11276.3M
  24    894.8M  12000.0M 11105.2M
  25   3579.1M  12500.0M 8920.9M
  26  14316.6M  13000.0M -1316.6M

As we see, the optimum total revenue is achieved after 23 years of protection, and then it goes down fast, turning negative on year 26.

And this is for a mega-popular franchise, that makes half a billion every year in a row for more than two decades. It's a very rare hit, comparable to Star Wars maybe, or the Mickey Mouse. Most IPs don't stay so staunchly popular for this long.

You can try playing with the parameters and check outcomes for different revenue shapes and fee bases.

[nayuki]

It's not backward. It means that wealthy IP owners pay more tax to society for the privilege of earning more!

[nwiswell]

Small owners of IP get to enjoy less value from their creations due to weaker IP protections. That's backward.

Moreover the amount of tax paid as a fraction of total value realized is actually lower for the large owner of IP because the total tax payment is dominated by the final years, but the total revenue is determined by the number of years. In the example above, we had:

$5,100 / $40,000 = 12.75% tax for the small author, and

$671,088,620 / $12,500,000,000 = 5.37% tax for Dreamworks.

The ratios would be even worse if the small author could've just barely justified the 9th year. Pretty much unconscionable.

The fact that we're collecting tax from IP is not interesting. We have progressive income tax for this purpose.

[tedunangst]

It means big movie studios simply wait for small authors to give up and then release adaptations without royalty payments.