Does any copyrighted work have substitutes in the market?
For example, the story of the Gray Album (remixing the vocals from Jay-Z's “The Black Album” and the Beatles' “White Album” without permission) by the DJ Dangermouse presents the following question: can the Beatles' recording be replaced by others? Some say no, Beatles is Beatles, no substitutes. Others say yes, you can make a remixed work using other albums in the 60's.
If every work has substitutability, we can expect competition regarding license terms. If EMI refuses to license the derivative right while others do, DJ Dangermouse can use other songs and pay money to “better goods” in the market. Then EMI might think they should license the derivative right, too, to remain competitive in the market. But if we think that each work is unique and thus has at least some limits on looking for substitutability, how can the market work to push EMI to release Beatles’ recordings for derivative use?
Or, we can reframe the question in this way: Do we want to have a derivative work for the benefit of the society? In most cases, of course it’s desirable to have diversity of works. But if copyright holders refuse to grant a license, will market take care of this unwillingness by making other works popular?
If we think each work is unique and thus there is no substitutability in the market, we cannot expect the market to solve the problem. Then, the next question is, whether we should leave it as it is to respect the copyright owner’s power of control or desire to maintain “integrity” of the work. Or, should we encourage diverse creation of works by taking some actions (e.g. giving incentives for copyright holders to join collecting society to grant licenses, etc)? This is a hard question, and involves policy decisions to be discussed more.