Digitization, Internet and the Economics of Creative Industries

Abstract

The creative industries are increasingly understood to contribute significantly to national Income and economic growth. Made up of the performing, literary and visual arts, museums and heritage and the music, film, video, broadcasting and advertising industries, they are at the confluence of two streams of change: one due to the widespread adoption of digital technologies and the Internet and the other in the economic theories needed to understand their effects. Economics of the arts and culture has long been concerned with the case for state support for the performing arts and heritage organizations; now, though, aspects of their work of their production have been changed by digitization as the Internet enables mass distribution. This calls for a new economic analysis of the creative industries. In this chapter, I argue that industrial economics has adapted to these changes and I discuss them in terms of a paradigmatic shift. I conclude that while the Internet has transformed the distribution and consumption patterns of the arts and culture, the cost of creation of new work is essentially unchanged, with mixed implications for arts organizations and artists. I consider the impact of the recent widespread adoption of digital technologies and the Internet on supply and demand in the creative industries. These industries have also been greatly affected by the lockdown measures due to the Covid-19 pandemic. In some cases, producers have switched to the Internet as a means of accessing audiences and other consumers. Whether that process will outlive the pandemic is a question that needs to be considered in cultural economics. The chapter is organized as follows: Section 7.1 ideals with what I call the paradigms of the new economy, the reorientation towards the production and consumption of intangible, ephemeral goods produced and distributed electronically, which has ushered in the concepts of the knowledge and/or creative economy. These ideas apply especially to the creative industries. Section 7.2 analyzes change in the creative economy. Section 7.3 then discusses the use of ‘old’ economic theories in analyzing the creative industries and ‘new’ business models; the old was concerned largely with the application of welfare economics to the performing arts and heritage sectors, whereas the new business models – for example, subscriptions to large catalogues of music, film and broadcasts – are enabled by the Internet. Section 7.4, on supporting creativity in the digital era, focuses on labor markets for creators and performers, the primary producers of creative goods and services in the creative industries and the role of copyright. It is argued that although they have been able to use the Internet to access markets, technological solutions do not alter the cost of producing the original ‘prototype’. Section 7.5 concludes with some final remarks.