Copyright cost control review for design studios using case analysis

Under the background of the knowledge economy in modern times, intellectual property rights have become an important intangible asset for design studios, and they will determine their long-term competitiveness and profitability. Therefore, copyright is a kind of legal protection for creative works and also a key cost that needs to be controlled in finance. According to the Basic Conception of Copyright Cost Control, it is to arrange, supervise and modify the expenses of copyright throughout its life cycle from the beginning of acquisition and registration, to the period when it is being protected and commercialised ^[1].

The basic idea of this control system is to achieve the best balance between costs and benefits and avoid waste of resources. The effective cost control cannot only reduce the cost of copyright, but also conduct a comprehensive assessment of the risk of copyright infringement and the cost of defending against it. Therefore, it is necessary to change the attitude from simply complying with the law and start to invest in copyright with a similar level of analysis as that applied to tangible fixed assets.

In practice, the path of implementing cost control for copyright is to go through a period of budgetary forecasting, variance analysis and performance evaluation. It should have legal anticipation ability and be in line with the requirements of accounting; hence, a standardised record-keeping system will be established for all copyright expenses.

Copyright Cost Control in practice is very important. For a design studio, the main source of income is creative work; if there is no control over copyright costs, the profit will be relatively low. If the protection is insufficient, the company will face the risk of serious infringement. A good cost control system can help studios manage their intellectual property internally and operate more efficiently in various ways, so there is no problem with financial leakages for now, and the company can continue to develop in the market. Based on the case study, this paper attempts to build a bridge between the theory of cost management and the practice of design by researching the operation of control procedures ^[5].

The first is the up-front costs of creativity and creative production; Second, the expenditure for the intermediate copyright registration and certification; Third, the cost of operating copyright; Fourth, the loss of passive copyright. The total cost of a design studio's copyright system is divided into four parts. The first part is the initial expenses for creative works, such as purchasing licensed stock materials, paying font copyright fees, and paying for third-party freelance creators to provide authorised assistance. The second is the cost of registering the copyright and receiving a certificate; in other words, it is the money spent to formally register the copyright and obtain legal protection for the intellectual property rights created. The category also includes the application fee for the registration of the finished design work's copyright, the notarisation fee for evidence of the creative process, etc., and the annual maintenance fee for the registered intellectual property assets. Thirdly, there will be regular payments to support the operation of the company's copyright system; Fourthly, there will be passive copyright-related losses. This type includes the compensation for the occurrence of accidental infringement, the litigation fees for defending one's rights or responding to disputes and the hidden cost of reputational damage due to a copyright dispute in the public eye. The above four kinds of categories have been separated; otherwise, the analysis will be of the old thinking mode, which is to regard copyright costs as an external legal liability, but now we need to think of them as part of an internal multi-stage financial life cycle. This detailed definition indicates that each phase needs to be controlled for costs separately, considering the fact that creative output and copyright compliance are closely related in the operation of an enterprise.

Theoretical frameworks for controlling intellectual property costs in small and medium-sized creative enterprises can provide a basis for managing copyright expenditures. The new type of activity-based costing (ABC) has been used in creative industries to analyse and distribute all copyright-related expenses in the different stages of a design project lifecycle. Different from traditional volume-based costing, this adapted ABC framework can be used to measure indirect overhead expenses such as legal clearance and rights management, etc., and allocate them to different creative activities. It is necessary to determine the reasons for high costs and eliminate unnecessary procedures in the creative process. On the other hand, the total cost of ownership (TCO) model of intellectual property assets can be used to understand the value of all aspects of IP. It is necessary to take into account not only the direct visible copyright payments, such as licensing fees and registration costs, but also the indirect hidden risks of copyright, such as potential losses due to infringement and the opportunity cost of underutilised assets. Apply the TCO model to prevent the Design Studio from underestimating the long-term financial obligation to acquire and maintain copyrights. In addition, a risk matrix-based pre-control system will be established for cost control. Based on the probability and severity of losses, this framework can help enterprises select the necessary preventive measures and allocate contingency funds reasonably to avoid serious financial consequences before they occur. Peer-reviewed studies in the literature have put forward some ways to reduce copyright costs for small and medium-sized creative enterprises; for example, the standardisation of licensing contracts and the use of digital rights management can improve operational efficiency. But there are still some problems in theory. Most of the current frameworks are based on the general situation of creative industries and do not take into account the specific business needs of various types of design studios. These studios usually have a high level of specialised outputs and a small amount of money, so the general model cannot meet their specific needs for cost control. It is necessary to know about the above problems first, and this will serve as a good theoretical basis for the following case-based targeted analysis, connecting the large-scale theoretical structure with the small-scale practices of the studios.

A systematic review of the problems of copyright cost management in the present operation of a design studio shows that it has structural and procedural shortcomings. Based on the cross-checking of survey data from all industries, public industry forums, and preliminary interviews with design studio operators, five common problems have been found to confirm the necessity of this research. Firstly, there is a general lack of systematic copyright cost budgeting. Without proactive financial planning, studios often face unplanned overspending on unlicensed materials during the creative process, and then they have to pay large compensation to the original rights holders, turning variable expenses into significant unbudgeted liabilities. Secondly, redundant copyright registration and maintenance costs often occur in the studio. Driven by a defensive attitude rather than strategic asset management, these expenses are often not consistent with the actual commercial value or revenue-generating potential of the produced design works and result in the inefficient use of limited operating funds. Thirdly, internal copyright compliance awareness is low among design personnel. Due to a lack of awareness, many cases of infringement have occurred without the consent of third parties to use their works, which will incur extra litigation defence costs and statutory compensation penalties, thus significantly reducing the expected project profits. Fourthly, there is no specific cost allocation system for accounting. Due to copyright-related expenses (licensing fees, etc.) and legal disputes, they are often combined as general operating expenses; thus, studios cannot accurately allocate these costs to individual design projects. This will prevent accurate project profitability analysis and affect the continuous price adjustment policy. Fifthly, there is no standardised early warning system for possible copyright risks. Minor avoidable cost problems, such as initial unauthorised use detection, are ignored systematically and turn into formal intellectual property disputes; thus, a very small amount of remedial money becomes a large unbudgeted financial loss. Overall, the above operation pain points have shown that the current copyright cost management mode is somewhat backward, so it can be clearly concluded that there is an urgent need in practice and at the academic level to build a strict, case-based copyright cost control system for design studios.

Case A is a small independent graphic design studio with five full-time designers. The business scope of the company mainly involves brand logo design, packaging design and offline promotion design services, with the main service recipients being small local retailers. The client base is small and operates with many orders and fast turnaround times; thus, the studio needs to lower the cost of early-stage design. The financial situation of the company is that the average annual turnover is about 180,000 dollars, and due to a lack of funds, there is little funding for the special administrative department.

At first, Case A did not have a special department for managing copyright costs, nor was there a formalised compliance system. The designer would often use a large number of unlicensed stock images and free untested fonts to speed up the project and avoid licensing fees. The lack of procedure for review led to severe infringement issues; thus, in 2022, the studio was involved in two copyright infringement compensation lawsuits, and a total of 12,000 USD was awarded to the plaintiff. The direct loss of funds is a significant part of the net profit of the studio, so it is being re-evaluated strategically. After the loss, the studio has started to consider some simple copyright protection measures; mainly, it has been organising basic asset verification procedures and consolidating some small font and image licensing subscriptions to avoid similar problems in the future.

For the purpose of obtaining a baseline for the next step, here is the basic annual copyright cost data of the studio for 2021-2023. In 2021, before there was any formal control, the total copyright expenditure was very small; it was just a few small ad-hoc purchases, and no hidden risks of infringement had been recorded. In 2022, due to the 12,000 USD in infringement compensation claims and other miscellaneous licensing fees, the direct copyright cost rose. In 2023, as a result of the preliminary control measures, the cost structure changed from reactionary compensation to proactive compliance spending; now, standardized software subscriptions and basic asset licenses have been introduced, which shows that the company has moved from managing risk casually to structuring cost control.

Case B is a small-scale multimedia interactive design studio with 22 people, and it will be used to show how copyright costs change in a growing organisation. The main work of this company is to create interactive exhibition systems, brand official websites and augmented reality promotional content for large enterprises and public institutions. The studio has an annual average revenue of about 1.7 million US dollars; given the scale of its operations and the complexity of the projects, a high level of copyright resource management is required. A large number of audio clips, special effect materials, and third-party open-source development frameworks need to be purchased for each individual project due to the inherent nature of the copyright cost structure. The above scattered procurement model has previously led to significant inefficiencies in operations; specifically, the same type of authorised material was paid for repeatedly in different projects, which resulted in a 28% overspend of the project budget in 2021. Thus, it can be concluded that the problem of copyright cost control is not only one of law but also an issue in the management of project finances and resources. Given this systemic risk, the studio has begun to build an internal shared library of copyright materials. The above path of operation is to collect and use the licenced materials centrally, thus reducing unnecessary spending and creating a re-usable set of copyrights for the organisation's projects. The strategic significance of this mechanism is that it changes copyright procurement from a single project expense to a capitalised organisational asset and changes the cost amortisation path. In order to compare the above strategy, a detailed classification of copyright costs for the studio from 2020 to 2023 will be presented. The above longitudinal data cover the categories of spending on audio, visual effects and software frameworks, and thus provide the necessary basis to evaluate the effect of the shared library intervention in subsequent analyses.

Case C is a narrative illustration design studio that primarily serves publishing clients, and its main business is to produce full-length illustration series for children's books, educational books and commercial picture books. Contrary to studios that rely on one-time work transfer fees, Case C has a long-term and distinctive mode of copyright operation, where most of the revenue comes from continuous royalty sharing. The above-mentioned operating mode is based on the continued commercial use of copyright over a long period, so the control of copyright cost must be strict to guarantee the company's financial stability. However, this royalty-based model will have particular and serious copyright cost problems. First, there are often disputes about the residual rights of co-created illustration works with freelance collaborating illustrators, which have raised the costs of legal consultation and dispute resolution. Secondly, in order to maintain the rights of a large number of long-tail commercial illustration works, the studio has to pay a large annual cost for copyright maintenance and does not need to handle the necessary administrative matters on a daily basis. In order to reduce the related costs systematically, Case C has adjusted the contract and set up a hierarchical copyright registration system. The targeted contract adjustments specify clearly that at the beginning of the co-creation, the distribution of residual rights is determined to avoid possible legal disputes early and reduce the cost of dispute resolution. At the same time, according to the expected lifespan and income-generating capacity of each illustration, the hierarchical copyright registration mechanism distributes registration resources reasonably to focus the maintenance expenses on high-value assets and reduce unnecessary administrative costs for low-value works. To conduct a comprehensive assessment of the effectiveness of these optimisation measures later, the studio will release data on its empirical copyright costs and royalty income from 2021 to 2024. A systematic comparison of the cost-effectiveness and revenue alignment can be carried out based on this longitudinal data set, and the specific implementation methods and financial effects of the above-mentioned control measures in the publishing-oriented design sector are presented.

Case D is an independent product appearance design studio that mainly serves the manufacturing industry. The main businesses are industrial product appearance design, packaging design for hardware products and pre-launch visual creative services for manufacturing clients. Case D's copyright cost control needs are relatively unique and highly relevant. Due to the high vulnerability of the manufacturing industry to counterfeiting, the studio often needs to file combination protection applications for its finished design products, such as design patents and copyright registration, to form a strong legal defence against market imitation. Therefore, the number of intellectual property applications will naturally increase, and so will the costs.

Before the introduction of cost control, Case D had a major issue; that is, there were too many redundant registrations for design works that were not actually used commercially. Based on the defensive stance of potential infringements, the studio has historically used a blanket registration method. The indiscriminate strategy has led to large amounts of unnecessary annual intellectual property maintenance costs, seriously increasing the studio's operating expenses and misallocating limited funds. At the root of the problem was that there was no way to distinguish high-value protectable assets from low-value design iterations.

In view of the above structural problems, Case D has started to try out a value classification method for its design works. This operation path will classify the design output according to the degree of commercialization and the risk of market exposure, and in this way, the intellectual property protection fee will be matched with the expected economic returns. The studio can reduce the unnecessary expenses associated with copyright registration and at the same time protect the commercially viable designs, etc., by weeding out the low-yield assets in the registration pipeline. To conduct a comparative study on the effectiveness of this control mechanism, the paper will take Case D's empirical data on copyright and intellectual property costs from 2020 to 2023 as the basis. This longitudinal data will be used to provide basic quantitative support for the subsequent analysis of how to optimize the cost of copyright based on the classification of strategic value.

The horizontal comparison of the four selected design studios' copyright cost structures shows that there are differences in the proportion of various types of copyright costs among them. Creative materials copyright fees, registration and maintenance fees, compliance training fees, and loss costs related to infringement are all included in these categories. Based on the standardised evaluation system, it can be seen that niche positioning, client structure, and the underlying business model are the main reasons why each studio has a different cost structure.

The main cost for the small graphic design studio is the loss due to infringement. It operates in the face of high volume and low profit margins, serving a large number of small clients and those with low willingness to pay for services. The company does not have the system to proactively clear rights and suffers from high passive copyright losses. Multimedia interactive design studio, on the other hand, has a cost structure that is relatively concentrated on creative material copyright fees, and specifically, it mainly consists of the purchase cost of licensed materials. Due to the high technical complexity and immersive nature of the deliverables, it is necessary to purchase some high-quality legally approved digital resources; therefore, external licensing has become the main reason for the high operating costs.

The architectural design studio distributes costs in a relatively balanced manner; thus, registration and maintenance fees account for a relatively large proportion. Given that the commercial value of architectural schematics has not changed for a long time and they are also the property rights of a company, in order to protect them more effectively through defensive publication and formalised rights protection, more administrative expenses will be incurred. At the same time, the industrial product design studio has allocated relatively more funds to the expenses of compliance training. Operating in an industry with strict utility model regulations and many intersections between patents and copyrights across jurisdictions, it is necessary to have regular internal compliance training to prevent the accidental theft of designs.

Therefore, there is a fundamental theoretical basis that the cost of copyright does not have a single general form; rather, it is an endogenous factor determined by the specific risks and use of assets within a particular sector. The key driving factors need to be determined clearly—are they market-driven passive risks or the need to acquire assets, etc.? It will provide the analytical basis for evaluating the effectiveness and reasonableness of each studio's tailored copyright cost control measures in the subsequent assessment.

Based on the above targeted copyright cost control measures, the four design studios need to be quantitatively assessed in terms of the composite indicator. Total copyright cost as a proportion of total income has changed year-over-year, the rate of reduction in unplanned copyright loss spending has declined, the rate of change in copyright disputes has changed, and the return on investment of copyright assets is calculated. The above indicators are all used to measure cost efficiency, risk control and value creation; they can be used as the basis for practicality assessment of the implemented control paths. There will be different results after comparative analysis. Through strict procurement budgeting, case A has achieved a 15% reduction in copyright cost-to-revenue ratio; however, the ROI of copyright assets has remained relatively flat due to a lack of commercialisation channels. Case C has reduced disputes by 32% through automated clearance protocols, so it is safe; nevertheless, its unplanned loss reduction was small, meaning that after a breach of security, it took a long time to respond. The ROI of copyright assets for Case D has increased by 18% after the adjustment of the licensing strategy, but this has led to a 10% rise in unplanned loss expenditures, indicating that there is a trade-off between aggressive monetisation and operational risk exposure. The Case B is a model of partial optimisation; by constructing a shared material library, the cost of repeated material purchases has been reduced by 47%, and direct cost control has been improved. However, this measure does not have clear rules for reviewing the scope of copyright authorisation and thus poses potential legal risks, reducing the overall effectiveness of the control framework. Therefore, although each studio has made some progress in targeted cost control locally, the assessment objectively shows that the risk-review procedures are not in line with the reality of the situation and there is an unbalanced approach to value extraction; thus, the expected improvement in optimisation has not been achieved. The above-mentioned verified practical results have laid an empirical foundation, and subsequent optimisation paths will be adjusted according to the actual operation situation instead of theoretical assumptions.

Based on the above cross-case comparative analysis and the results of the effect evaluation, the present work will propose several feasible, scenario-appropriate optimization routes for reducing copyright expenses sustainably that are suitable for different operating environments of design studios. At the centre of these pathways is a tiered copyright cost-budgeting system that will adjust financial resources fundamentally by changing the proportion of the budget based on the size and type of the studio. This way, the funds will be used systematically in advance to prevent cost overruns, not retroactively deal with them. At the same time, there should be a Classified Management System for internal copyright assets. By classifying the works according to their value, general creative works and non-application redundant works, studios can eliminate some unnecessary expenses for maintaining, renewing and administering low-value intellectual property. In addition, a standardised copyright risk pre-review process should be established in each sequential stage of the design project. Thus, the process will be moved from a reactive cost-absorbing state to a proactive risk mitigation mode, reducing ex-post infringement liabilities and dispute resolution costs. To maintain the above changes in structure and operation, a low-cost internal copyright compliance training system must be set up specifically for creative teams. Based on asynchronous micro-learning and existing working rhythms, it can cultivate the norm of compliance without imposing extra time or money on employees. Importantly, the above optimisation paths are not fixed and unchangeable; rather, they are a modular system. Depending on the specific circumstances of a design studio's business situation, market position and resources, these paths can be flexibly adjusted and combined dynamically. Thus, the structure of copyright cost control is naturally linked to the studio's strategy, and a long-term balance can be achieved between increasing creative output and reducing copyright costs.

To understand the mechanism of copyright cost control in design studios, the research uses the case study method and comes to some essential conclusions. Fundamentally, copyright cost control is not only about reducing expenses; it is also a strategic way to coordinate the management of intellectual property and financial matters. The purpose of this paper is to balance the proactive investment in copyright acquisition and registration with the reactive costs of infringement disputes and legal remedies. After studying the cases, it can be found that the copyright-related cost of design studios is often underestimated; the implicit costs of copyright vulnerability, such as reputational damage and opportunity costs, will be much greater than the explicit legal fees ^[4].

Operationally, there is a need for a reasonable three-tier programme for effective copyright cost control. Primary tier is early cost planning; studios need to know all the economic value of their creative work, classify it, and then determine whether to register for copyright or not before making a formal decision, so as not to waste money on non-core business. Secondary tier refers to real-time cost monitoring in the creative process and the marketisation stage; copyright expenses should be added to all the company's management accounting systems. Third-tier is to keep strict control of costs after the infringement has occurred; studios should use an optimised dispute resolution path, such as negotiation or special arbitration, to avoid the rising costs of extended litigation.

The above work regulations will help us avoid such problems in the process of building a new car and speed up the process. Design studios are places where the main source of economic value comes from intellectual property; therefore, the excess expenditure on copyright will have a negative impact on the company's ability to compete and generate revenue. According to the case study, studios that have adopted an integrated cost management system can better allocate resources and reduce risks. To change from a scattered, reactive way to a systematic, proactive one, studios can turn copyright compliance into a steady operational expense instead of a financial risk. Finally, strict control over copyright costs will help maintain good financial conditions and ensure that the legal protection of creative works continues to strengthen rather than weaken the economic base and market position of the studio.

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