Creative Economy: A Feasible Development Option

3Analysing the creative economyissued as toys. Where the author has assigned the copyrightcompletely to the publisher for a one-time payment, his/herparticipation in the profits is excluded from its embodimentin the subsequent different forms. Moreover, rights to modifyand adapt the creative work pass to the new right owneras does the right to not distribute the work. The bargainingpower of artists early in their career is weak, whereas that ofBox 3.5Properties of creative industriesconsistently successful ones is very high (the A list/B listproperty and winner-takes-all markets). Market intermediariestend to favour known artists with a track record, anddistribution firms, regardless of their nationality, distributecreative products that have commercial appeal; otherwisethey could not stay in business.Nobody knows: Demand uncertainty exists because consumer reactions to a product are neither known beforehand nor easily understood afterwards.Art for art’s sake: Workers care about originality, technical professional skill, harmony, etc., of creative goods and are willing to settle for lower wagesthan those offered by “humdrum” jobs.Motley crew principle: For relatively complex creative products (e.g., films), the production requires diversely skilled inputs. Each skilled input must bepresent and perform at some minimum level to produce a valuable outcome.Infinite variety: Products are horizontally differentiated by quality and by uniqueness: each product is a distinct combination of inputs leading to infinitevariety options.A list/B list: Skills are vertically differentiated. Artists are ranked on their skills, originality and proficiency in creative processes and/or products. Smalldifferences in skills and talent can yield huge differences in (financial) success generating hit-based, winner-takes-all markets.Time flies: When coordinating complex projects with diversely skilled inputs, time is of the essence.Ars longa: creative products have durability aspects that invoke copyright protection, allowing a creator or performer to collect rents.Source: Caves (2000).The advent of digitization and the Internet has broughtchanges to the distribution landscape, perhaps the most significantbeing the introduction of new formats for product deliveryto consumers. Whether or not these changes will alter thelevels of concentration and dilute the power of distributors infavour of creators is not certain. The rise of the digital andInternet economy does not alter the challenges of transformingcreative ideas into goods or services and introducing new genresinto the world market for creative goods and services. Thesechallenges mean that the complementary services provided bymarketers and distributor are still necessary. What is more, newtechnologies have tended to inspire creative adaptation ratherthan destruction (Acheson and Maule, 2006). In their researchinto the impact of e-commerce on the structure of retail andsimilar industries, Emre et al. (2006) find that greater e-commerceactivity in the book and travel industries is associatedwith losses for the smallest industry firms but no noticeablenegative impact and perhaps even a positive impact for thelargest firms. Overall, the current trend is towards greater concentration,including by way of vertical integration in distributionand retail as a response to increased competition. Box 3.6illustrates the most common commercial practices for the marketingand distribution of audiovisual products.The distributor’s willingness to supply new Internetretailers is constrained by their reliance on traditional outlets.The distributors are hence not immune to pressure fromtheir traditional retail partners (Gallaugher, 2002). Forinstance, it was widely reported in the United States in 2006that Wal-Mart (the largest world retailer) and Target threatenedretaliation against studios that offered movies on iTunes(Apple’s online store) because they were worried about theirown sales. It was said that Wal-Mart sent “cases and cases”of DVDs back to Disney after the production companyannounced that it would offer episodes of its hit shows,“Lost” and “Desperate Housewives”, on iTunes. Wal-Martdenied these claims and subsequently opened its own videodownloads store in 2007, essentially matching iTunes prices.Distributors are concerned not only about disappointingtheir traditional partners but also about the loss of revenueswhere online retailers practice deep discounting.23 See, for example, Fox News (2006), Taipei Times (2007) and The New York Times (2007).90 CREATIVE ECONOMY REPORT 2010