The team is joined by Guest Kats Rosie Burbidge, Stephen Jones, Mathilde Pavis, and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Hayleigh Bosher, Tian Lu and Cecilia Sbrolli.

Thursday, 15 June 2017

A Tale of Stability - Business Models in the Creative Industries

In the digital era, the phrase on on the lips of everyone in the creative industry has been, "business models." Touted as a panacea for the potential copyright ills of the internet, business models were a fundamental part of the Hargreaves 2011 inquiry into copyright in the digital era. Does the digital era mean that copyright should change? Or is it business models that should adapt? The conclusion was that parts of copyright law were, in my favourite trendy phrase, not fit-for-purpose, and that a new copyright regime, both accompanied by and supporting business model change, could enable economic growth. Cue a number of changes to update UK copyright law and a continuing emphasis on business models. It is now more than 5 years since the Hargreaves report. What, exactly, in business models has changed?

A very creative cat
Sphynx the Moon Cat, by ScorpiiLupi
The answer: very little. 

Yes, as my meta-analysis for CREATe suggests, while the creative industries have lobbied against changes to copyright, very little has changed by way of business models. Looking at 80 case studies of business models in the creative industries, I found that the vast majority of business models are still based on products - in which these industries sells goods and services to consumers. Not much has changed.

There are, of course, caveats to my findings. One caveat is that there is some evidence of change in the very end of the value chain in the music industry. Spotify is the shining unicorn example of how the relationship between consumers and sellers of music is allowing a more customisable experience. However, other services such as iTunes are still very much in the old model of selling goods to consumers, albeit now in a digital format. Adequately sampling the Creative Industries is challenging, as, while there are a large number of firms, a handful of firms account for the lion's share of revenue. Further up the value chain, at the level of creators or the level of smaller organisation, business models remain stable.

Kickin' it old skool - the business model canvas
Another caveat is the limited consensus as to what business models actually are. How do you measure a new business model? I adopted a recent framework by Charles Baden-Fuller which distills business models into four categories: product, service, multi-sided and matchmaking. (However, even adopting a different categorisation, business models in the creative industries are largely stable.) The is the danger that the academic, relatively narrow definition of business models is not well aligned with the colloquial, ambiguous definition. Yet, for the purpose of analysis, a structured framework must be adopted. Taking a wider look, my analysis finds no core changes in business models, but innovation in other aspects of business strategy. Firms are playing with pricing mechanisms (such as freemium, pay-as-you go) and value propositions (e.g. Spotify's delivery mechanism and offering of streaming a vast library.) 

Based on this research, it is questionable whether the Hargreaves review should have focused so much on business models. A more general "innovation" approach might have been more fitting. It also poses a question as to the role of copyright in business models as a whole. I found no evidence that copyright is a primary influence on business models. Firms are much more concerned about attracting customers and maintaining cash flows - copyright challenges are fairly far down the list of priorities.

Given that my earlier work in this area concluded that business models were changing, the results of this work are indeed surprising. My research is currently in 'working paper' form, and I'll be updating it with an expanded sample size. Comments most welcome!

Kat Hayleigh's coverage of the related CREATe event here.

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