Designing fees for music copiright holders in radio services

This paper investigates which is the most desirable payment schedule, from a social wel-fare standpoint, for compensating IPR holders for music broadcast by radio stations. A model of a radio station that acts as a monopoly with respect to listeners and sells ads in a competitive market is presented. Two types of fees, ad valorem and per unit, are examined. Exploiting the similarity between taxes and fees, we extend results from taxation theory in two-sided markets to show that the case where only one side (i.e. advertisers) pays, while the other (the listeners) receives the service for free, differs somewhat from the case thus far considered by the literature, in which both sides pay. The results mildly support the prevailing regulatory approach, based on ad valorem fees.