INTERNET AND DISTRIBUTION IN THE CREATIVE INDUSTRIES

The use of the Internet and other aspects of digital ICT not only affect the costs of producing and consuming creative goods and services, they also affect the costs of dis­seminating and making them available.

7.4.1 Online E-commerce and Cultural Products

E-commerce comes in several variants in the creative industries. For non-reproducible cultural products such as original paintings or performances, e-commerce is mostly limited to retailing. Examples are the services provided by online trading platforms for live performance tickets, such as Ticketmaster, and online auctions for art works, which reduce transaction costs substantially and make markets more efficient (albeit with the risk of the rise of central intermediaries wielding market power). In any case, the impact of ICT is less immediate than in markets for reproducible cultural products.

For reproducible cultural products, such as sound recordings, movies or literary texts, a hybrid version is the sale of physical copies via online shops. The initial service provided by Amazon was to sell physical books via the Internet, for example. The more completely ‘digital’ version of e-commerce is to sell access to streams or downloads via retail outlets online. Sales of e-books and music downloads via Amazon are a case in point. Even better known is the iTunes Store that became the largest e-retailer for music downloads in most major markets after 2004.

The completely ‘digital’ version of e-commerce is associated with debundling and rebundling of former ‘analogue’ products. In the market for music downloads, for example, consumers can purchase almost any individual track rather than entire albums. Debundling has also occurred for news items or academic articles that are often avail­able individually online. At the other end of the spectrum are subscriptions, where users acquire temporary access to a wide variety of works. A typical example is subscriptions to ‘pay TV’ channels (also discussed below). Another case in point is subscriptions to large catalogues of music recordings that have become more popular since 2010. Moreover, in conjunction with some video games, consumers purchase temporary access to virtual gaming environments, which allow for interactions between consumers. As with other aspects of e-commerce, there is no specific standard model by which creative goods and services are distributed and sold online, and that is also the case with pricing models, which are discussed later in this chapter.

It is an open question to what extent a single, standard way of distributing and retail­ing cultural products will emerge, and how much variety will remain. At the moment, traditional means of distribution and retailing still tend to generate the bulk of revenues in the creative industries.

7.4.2 Retailing and Distribution Costs

In the traditional system of selling cultural products, much of the reproduction costs and some distribution costs had to be borne in advance of sales. Suppliers needed to predict demand and the number of copies produced and shipped to retail outlets. This was usually approximated by several runs of reproduction, shipping and restocking. By contrast, downloads are available on demand, which reduces the need to predict sales and thus some of the risks of supplying cultural products (Rochelandet, 2011).

Under competitive pressure, lower risks and costs will usually be associated with lower retail prices. However, as long as traditional marketing remains important, even relatively cheap new ways of distribution and retailing may not reduce total costs as suppliers need to incur the costs associated with each type of distribution. For whatever reason, prices for commercial downloads are at present often not much lower than those for copies on physical media formats. This may also reflect some market power on the supply side.

7.5