Music and Positive Externalities

The EU has recently voted to extend copyright on sound recordings from 50-70 years, allowing the music industry to claim intellectual property rights, and therefore royalties, for longer. 

The record music industry has seen a very sharp decline in profits since the advent of the internet and file sharing, illegal downloading, etc. In the past there might have been some positive externalities in the record music industry (eg. CDs could be copied onto cassette disks and distributed), but its current scale is unprecedented.  The prices paid for music no longer come close to reflecting the Social Marginal Benefit as more and more people can enjoy music for free. The Coase Theorem states that the allocation inefficiencies that result from externalities can be eliminated when property rights are clearly defined. Critics of the new law say that it will not benefit the artists themselves but rather their record labels. However, who receives the property rights is irrelevant for efficiency reasons; as long as property rights are assigned, prices should increase towards the SMB.  Still, it remains doubtful if the increased copyright laws are going to truly reduce the industry’s positive production externality since it will only affect legally exchanged music, and not illegally downloaded music which seems to be the biggest culprit in creating this externality anyway.