INTRODUCTION
Cultural economics is concerned with the supply, demand and markets for creative goods and services.1 As suppliers of information goods and services, the arts, heritage organizations and cultural industries are greatly involved in the changes accompanying the diffusion of ever-new Internet-based services and digitization.
Much Internet traffic consists of reproducible cultural works, such as music recordings and movies. Moreover, the Internet has had an impact on cultural services that require ‘live’ participation. Accordingly, this chapter addresses changes in the production, consumption and distribution of the output of the cultural sector due to the Internet.Cultural economics is relevant to the Internet era for another reason: this literature has long discussed a combination of market characteristics that are present online and, more generally, in the contemporary IT sector. The cultural sector exhibits: radical uncertainty and unpredictable changes in demand; challenges with incentivizing investments in the supply of goods and services that have external benefits and public good characteristics; superstar effects and highly skewed earnings; as well as informal and flexible employment of creative workers. Nevertheless, there is little work in cultural economics on digital ICT and the Internet in the creative economy, and only a few cultural economists have done research on the economics of copyright.2
Therefore, this chapter addresses two fundamental issues. First, it points out a number of longstanding and inspirational insights in cultural economics (on topics such as the pricing of information goods and services, or intrinsic motivation), and discusses how the concepts and practice of cultural economics could inform the study of the economics of the Internet. Second, this chapter highlights gaps and unfulfilled potential for research on technological change in cultural economics.
The chapter has seven further sections. Section 7.2 gives an overview of the realm of cultural economics. Section 7.3 considers the impact of the Internet on the production and consumption of cultural goods and services. Section 7.4 deals with the Internet’s impact on the distribution of cultural goods and services. The Internet and the industrial structure of the creative economy are addressed in section 7.5. Section 7.6 reviews pricing models for the distribution of cultural goods and services on the Internet. Section 7.7 is about the supply of professional and user-generated content on the Internet, and section 7.8 offers some conclusions.
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7.2