WIPO Seminar: Digitisation Boosts Production Of New Music, Movies, Books

The latest instalment of the World Intellectual Property Organization seminar series, “The Economics of Intellectual Property,” set out to answer the question of whether the process of digitisation has affected the supply of new creative works.

Whilst it is widely accepted that digitisation has reduced the creative industries’ ability to generate revenue from their products, the discussion focused on a less discussed phenomenon of digitisation: whether it has caused a corresponding reduction in the quality and quantity of new creative content.

Carsten Fink, chief economist of WIPO, said the talk would consider “how creativity is affected by digitisation” in his introduction.

Applying an economic analysis to this question led to the conclusion that the supply of new quality creative works has not diminished. Rather, as digitisation has reduced the cost of production and allowed artists to experiment more, there has been growth in the number of successful creative works produced.

The WIPO seminar took place on 15 October.

Joel Waldfogel, a professor of applied economics and entrepreneurship at the Carlson School of Management, University of Minnesota, Minneapolis, started the discussion by reflecting on the fact that many researchers tend to focus on the “bad news” that digitisation and piracy has significantly reduced “the ability of firms to generate revenue from products.” They thereby miss the reduction in costs “on the supply side” caused by the digital revolution.

“While piracy is interesting, we should focus more research energy on whether the supply of new products remains robust,” he said.

Waldfogel affirmed that it is important to gather evidence on this aspect of digitisation, as it provides an answer to whether copyright is “adequately fulfilling its function.” He expanded this point by stating that “while revenue reduction is important for producers, it is not the only question relevant to considering whether copyright is working…. We should worry about consumers as well as producers.”

As the legal monopoly created by copyright is justified on the grounds that it incentivises the production of new works, Waldfogel argued that we must examine the evidence of this relationship and how it has been affected by digitisation. He explained that the cost of producing creative works has significantly diminished, as writers can publish their books themselves through tools such as Amazon’s “Kindle Direct Publishing”, and film makers can make high quality movies with a “Canon camera worth 2,000 dollars.”

This reduction in cost has enabled artists to experiment more freely and “see whether people will like” their products by bringing them to market more quickly, Waldfogel said. This leads to an increase in the number of creative products being released, despite there being a “collapse in revenue.”

The reduction in cost allows producers to discover more artists that will be successful and add value to their businesses, he suggested, without having to bear the high costs associated with bringing a product to market through traditional means.

Waldfogel highlighted how the process of digital disintermediation, where consumers are given direct access to products that would otherwise go through a middleman, has enabled more “alternative” artists who would not have been given access to the market in the past, to achieve commercial success.

“The indies account for a growing share of commercially successful artists,” he said, and “independent movies have a growing revenue in box office and also DVD sales.” He emphasised that digital disintermediation allows for “more things to be brought to the market, and leads to the discovery of more good” products. A lot of these products “which wouldn’t have made it past traditional intermediaries,” now make up a large and “growing share of what’s successful.”

In his response to a question posed by a member of the audience on whether copyright only “works” for large distributors rather than for the creators themselves, Waldfogel stated that we must consider what “it really means for copyright to be working.”

He asserted that even if creators are somewhat unhappy with the options available for monetising their digital works, but are still consistently producing new works and thereby keeping consumers happy, copyright is arguably still “working.” He emphasised that seeing works being produced and consumed is a good way of determining that “things are working.”

Prior to concluding his presentation, Waldfogel raised the controversial question of whether as the cost of producing creative works has fallen, we might not “need as much IP protection as we would if the cost of production was higher. Maybe weaker IP protection is enough” in the digital age.

He concluded by reinforcing the finding that whilst “digital technology has brought threats to the creative industries, it has also brought opportunities through other aspects of digitisation.” Although the revenue in the creative industries have been “falling radically, there is no crisis in creative activity.”

Marianna Drake is an intern at Intellectual Property Watch and DiploFoundation. She has an LLB Honours in Law from King’s College London where she developed an interest in information technology law, Internet governance and Internet related intellectual property issues.