Cameron and Bazelon (2013)
|Cameron and Bazelon (2013)|
|Title:||The impact of digitization on business models in copyright driven industries: a review of economic issues|
|Author(s):||Cameron, L, Bazelon, C|
|Citation:||Cameron, L., & Bazelon, C. (2013). The impact of digitization on business models in copyright driven industries: a review of economic issues. Brattle Groupe paper prepared for the US National Research Council, available at: http://sites.nationalacademies.org/cs/groups/pgasite/documents/webpage/pga_063398.pdf.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||The paper analyses three industries and assesses 12 business models suitable for the age of digitisation and internet distribution (6 for music, 3 for movies, 3 for books).|
|Data Type:||Primary and Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
Copyright law can theoretically create property rights but whether digitization and the internet have eliminated the ability of producers to receive adequate compensation for their work under the current system of rights is now a fundamental social and economic question. This paper addresses that question by providing an economic summary of how the markets for music, film and books have changed. Our paper focuses on three industries, music, film and books, where the industry structure evolved under a long-term regime of robust copyright protection. In each industry, we first discuss the stages of the traditional supply chain. Second, we discuss the effects of digitization on that traditional supply chain, focusing on how digitization has radically reduced distribution costs, while simultaneously increasing the potential for piracy of content. Third, we provide a brief history of how new business models for the distribution of content in each industry have fared thus far. Finally, we consider how the intermediaries and the artists are likely to fare under the new regime.
Main Results of the Study
- In all three of these industries, digitization and the internet have led to a precipitous decline in distribution costs, as well as an enormous increase in piracy that has likely diminished the economic rewards afforded by copyright.
- By establishing legal rights to the intellectual content of these works, copyright solves the market failures associated with these public goods. However, this approach works only if producers are able to capture adequate compensation to produce at the socially desirable level.
- If a copyright scheme fails to create enforceable ownership rights, producers of intellectual works will not receive adequate compensation for their initial investment and will therefore face reduced production incentives. This is the situation that digital distribution threatens to create.
- Unless addressed through novel business models, the resultant market failure could require legal innovation (perhaps in the form of compulsory blanket licenses) to ensure that producers have adequate incentive to create original works.
- Each of the three main functions of record companies—finding talent, recording music, and promoting/distributing songs—has been affected by digitization and internet distribution.
- Digitization has had its greatest impact in the post-theatrical release segment of the film industry, which has been dominated by physical DVDs for the past 8 to 10 years. Online distribution of digitized movies has been possible since 1997. Nevertheless, revenues from online distribution have been relatively modest for the past five years due to both low sales volumes and relatively lower prices for online content.
- Online distribution is becoming increasingly important to the industry at the same time that TVs are increasingly integrated with internet connectivity.
Policy Implications as Stated By Author
The authors conclude with a series of research questions that might be pursued to obtain a better understanding of how these different industries will evolve over time. Here some of them:
- Will traditional record companies be able to prosper as content-providers rather than distributors?
- What legal solutions to copyright infringement can the music industry afford to pursue?
- Will traditional film studios be able to remain profitable as their power over the distribution function declines?
- What DRM solutions are available? Which DRMs are most user-friendly?
- To what extent will consumers view e-books as a substitute for traditional books?
- Will consumers continue to demand traditional books, say, through Amazon or bookstores?
Coverage of Study
|Level of aggregation:||Industry|
|Period of material under study:||None stated|
|Level of aggregation:||Business model|
|Period of material under study:||None stated|