Digitization in the Cultural Industries

Twenty-six. Digitization in the cultural industries Joel Waldfogel

The word digitization means many things, but for the cultural industries it reflects two distinct phenomena: piracy (and therefore reduced revenue), and reduction in the costs of production, promotion and distribution (with the potential to offset the effects of piracy). Digitization has therefore also given rise to a third phenomenon which we label unfiltered production: cost reduction enables cultural production without the control of the traditional gatekeeping intermediaries - for example, publishing houses and record labels - and so threatens, if creative activity is not undone by piracy, to overwhelm the consuming public with large amounts of low-quality products.

The goal of this chapter is to briefly describe what has happened to creative output in music, movies, books and television in the wake of digitization. The brief treatment here summarizes longer descriptions in my twenty seventeen Journal of Economic Perspectives article and, especially, my twenty eighteen book, Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture. Readers interested in full lists of references to underlying research are directed to Waldfogel.

TWO FACES OF DIGITIZATION

The arrival of Napster brought the first face of digitization, unpaid consumption via digital piracy, to the cultural industries. Following nineteen ninety-nine, recorded-music industry revenue began a long slide, in which revenue was halved in about a decade. The threat of piracy loomed for other products, but the music industry faced the challenge first. If digitization had brought nothing other than a reduction in revenue, then we would have expected a corresponding decline in cultural production. However, digitization also brought new technologies that reduced the costs of bringing new cultural products to market.

In music, for example, production no longer required an expensive studio but could instead be accomplished with inexpensive hardware and software (an iPhone or a Mac with Garageband). Distribution no longer required physical product and distribution arrangements with record stores, but could instead be achieved by inexpensively making your own songs available on iTunes, YouTube and, later, Spotify. Promotion, while still challenging, no longer required placement on the radio and could instead be accomplished by having some fans discover your music and then communicate their discoveries to friends.

Digitization-induced cost reductions were not limited to recorded music. Around two thousand five, the appearance of low-cost digital cameras capable of cinema-quality recording revolutionized independent film-making. Anyone so inclined could make a movie. Shortly thereafter, with the appearance of streaming platforms such as Amazon and Netflix, the bottleneck of theatrical distribution was broken. The US theatrical distribution system had been able to accommodate just a few hundred movies in broad release annually. When any Internet-connected device became an exhibition venue, many movies that would not have been viable candidates for theatrical distribution could now inexpensively find audiences large enough to cover their modest production costs.

The impact of digitization on the book market has been even more profound. Book publishing has traditionally been controlled by cultural elites at major publishing houses. They sifted through submissions, many from agents, and chose to invest their editorial nurture and marketing budgets in relatively few. With the arrival of Amazon's Kindle device and publishing platform, authors had a way to distribute their work directly to consumers. Gatekeepers could no longer thwart their efforts, although much work would now be able to come to market without the steady guiding hand of editors, or even proofreaders. Cory Doctorow worried about an 'open slush pile' of self-published novels.