MEDIA ECONOMICS
CREATIVE INDUSTRIES
Daria Kuchařová
Culture and Mass Media Economy 1
Content
I. Media economics
i. Cinema and motion pictures
ii. Music business
iii. Internet culture
II. Creative industries
Culture and Mass Media Economy 2
CINEMA AND MOTION
PICTURES
Culture and Mass Media Economy 3
Economic features of cinema
industry
 Intrinsically heterogeneous (no two alike films)
 Complex consumption
o Can’t be adequately modelled with standard utility
maximizing models
o Time allocation + product characteristics (actors,
music, plot) + people you attend with + surroundings,
quality of the theatre
o Opportunity costs of time and additional costs added
to ticket price (e.g. baby sitters)
Culture and Mass Media Economy 4
Economic features of cinema
industry
 First week of release – strong predictor of
success/failure => decision of whether or not
to pull the film from circulation
 Price:
◦ Low price flexibility – failing cinema theatre or movie
doesn’t reduce price
Culture and Mass Media Economy 5
Economic features of cinema
industry
 Main substitutes:
◦ Television
◦ Mass spectator sports
◦ Pop music
◦ Computer games
◦ Videos and DVDs
◦ Time spent on DIY (Do ItYourself)
 Impact is difficult to measure
Culture and Mass Media Economy 6
Economic features of cinema
industry
 Monopolistic competition:
◦ small network of major exhibitors who have close
links with distributors
◦ independent cinemas – almost died off
 Entry barriers into industry
 Weak position of film makers outside the USA
=> cultural hegemony
Culture and Mass Media Economy 7
Economic features of cinema
industry
 High costs of production
 Large length of production – small number of
films per year
 High costs of promotion
 Extreme degree of riskiness
◦ firms are large,
◦ diversify through differentiation of products
Culture and Mass Media Economy 8
MUSIC BUSINESS
Culture and Mass Media Economy 9
Music business
 Music business industry:
◦ Creative artists sector
◦ Record companies sector
◦ Retail record stores sector
Culture and Mass Media Economy 10
Creative artists sector
 High concentration
 High turbulence
◦ Highly dynamic
◦ High levels of entry and exit
◦ Changes in artists ranking (changing market share =
movements in top 100 singles, album charts)
Culture and Mass Media Economy 11
Record company market
 High concentration
 Low turbulence
◦ Low levels of entry and exit
◦ Dominant firms – Majors
◦ + many turbulent completive firms that operate with
min profits
 Why?
Culture and Mass Media Economy 12
Record company market
 Economies of scale in:
◦ manufacturing
◦ distribution
◦ marketing
◦ financial costs (large firms are able to reduce
exposure to risk by diversification)
◦ penetrating markets (need penetrate many markets at
the same time, due to short product life)
 Reputation
Culture and Mass Media Economy 13
Cannibalization in music business
 Not generate much profit from hiring additional
artists
◦ Old artist – low costs, high profits
◦ New artists – high costs, profits?
 Result:
◦ Large companies can’t bid all creative artists=> space
for smaller companies
◦ Large companies sign artists without
commercialization of their music (underspending on
album, videos, marketing)
Culture and Mass Media Economy 14
New technologies (Internet) and
music business
 Reduction of entry barriers
◦ Artists start own record companies
◦ Outsource finance and marketing
 Deconcentration => price competition
◦ No, if large companies vertically integrate with online
music stores
Culture and Mass Media Economy 15
New technologies (Internet) and
music business
 Diversity?
◦ Small minority of creative artists dominate market at
a point of time
 Why?
◦ customer search costs (radio and television)
 Result: skewed demand for particular artists (have consumer
appeal, talent?)
◦ Internet – free listening to music samples => lower
search costs
 Result: demand may be more skewed for talented artists
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INTERNET CULTURE
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Internet culture
 Free supply
 Barrier – and cost-free flows of information
 Commercial cultural sites remain difficult to promote
=> search for business modes
Culture and Mass Media Economy 18
Internet culture
 Internet was supposed to bypass entry barriers into
cultural industry
 However, without promotion, a cultural good, even free,
have difficulties to find an audience
 Most likely scenario – emergence of new intermediaries
 Total self-regulation would lead to dominance of large
firms in the Internet
Culture and Mass Media Economy 19
CREATIVE INDUSTRIES
Culture and Mass Media Economy 20
Definition of creative industries
 National definitions
◦ The UK
◦ France
 International definitions
◦ UNESCO
◦ World International Property Organization (WIPO)
◦ OECD
◦ KEA European Affairs for the European Commission
Culture and Mass Media Economy 21
The UK – “creative industries”
 Department of Culture, Media and Sport
(DCMS), 1990s
 “Those industries which have their origin in individual
creativity, skill and talent and which have a potential for
wealth and job creation through the generation and
exploitation of intellectual property”
 Criteria:
◦ “Creativity” as a central input to the production
process
◦ Intellectual property (and not only copyright) as a
characteristic their outputs
Culture and Mass Media Economy 22
DCMS 13 industries
 advertising,
 architecture,
 the arts and antique
market,
 crafts,
 design,
 designer fashion,
 film and video,
 interactive leisure
software,
 music,
 performing arts,
 publishing,
 software and
computer services,
 radio and television
Culture and Mass Media Economy 23
France – cultural industries
 “A set of economic activities that ally conception, creation,
and production functions to more industrial functions of
manufacturing and commercialising at large scale, through
the use of material supports or communication
technologies”
 Criteria:
◦ Outputs aimed at massive reproduction
◦ Outputs are characterised by copyright (and not
intellectual property)
Culture and Mass Media Economy 24
France – cultural industries
 Publishing (book, newspapers, magazines and periodicals, music)
as well as trade in books, sound recordings and press
 Audiovisual activities (production of films for television,
institutional and advertising films, and theatrical films, technical
activities related to cinema and television, theatrical film
distribution, video publishing and distribution, theatrical film
exhibition, radio, production ofTV programmes,TV channels
editing, distribution of radio and TV satellite package programmes)
 Directly related activities (press agencies, multimedia,
advertising)
Culture and Mass Media Economy 25
UNESCO –Framework of Cultural
Statistics
 “Cultural industries” – industries producing and
distributing cultural goods or services
 “Cultural activities, goods and services” – those
activities, goods and services, which at the time they are
considered as a specific attribute, use or purpose, embody or
convey cultural expressions, irrespective of the commercial
value they may have.
Culture and Mass Media Economy 26
UNESCO –Framework of Cultural
Statistics
 9 categories:
1. cultural heritage;
2. printed matter and
literature;
3. music;
4. performing arts;
5. audio media;
6. audiovisual media;
7. socio-cultural activities;
8. sports and games, and
9. environmentand nature.
 5 cross-cutting
“processes of
cultural production”:
1. creation,
2. production,
3. distribution,
4. consumption
5. preservation.
Culture and Mass Media Economy 27
WIPO – “copyright industries”
 “Those industries that are engaged in the creation,
production and manufacturing, performance,
broadcast, communication and exhibition, or
distribution and sales of works and other protected
subject matter”
 Criteria:
◦ Copyright is a characteristic of their outputs
Culture and Mass Media Economy 28
WIPO – “copyright industries”
 press and literature,
 music,
 theatrical productions,
 operas,
 radio and television,
 photography,
 software and databases,
 visual and graphic arts,
 advertising services,
 copyright and collective management societies.
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OECD – “content industries”
 “content industries” describes the
industries which produce “information
content products”, whether or not digital.
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OECD – “content industries”
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KEA European Affairs for the
European Commission
Culture and Mass Media Economy 32
KEA European Affairs for the
European Commission
 In the “creative sector”, culture becomes a “creative”
input in the production of non-cultural goods.
◦ Video games
◦ Design
◦ Heritage
◦ Advertising
◦ Architecture
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Creative industries
 https://www.youtube.com/watch?v=qtd4y
_XPskA
Culture and Mass Media Economy 34
Sources
 A handbook of cultural economics. Edited by Ruth Towse. Cheltenham:
Edward Elgar, 2003.
 The Economy of Culture in Europe. KEA European Affairs for European
Commission, 2006.
Culture and Mass Media Economy 35
THANKYOU FOR
ATTENTION!
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