House of cards (V)

This is an issue that affects us all. If you are a leader in the motion-picture industry, the music industry, or the publishing industry, you may wonder how these changes will affect your business, and how your company can respond. If you are a policy maker, you may wonder how these changes will affect society, and how government can ensure the continued vitality of these culturally important industries.

If you are a consumer of entertainment, you may wonder how technology will change what content is produced in the market and how you will access that content. This series and subsequent ones provide answers to all these questions. Drawing on our access to market data and our knowledge of the entertainment industries, it integrates our findings and sums up ten years of research. It analyzes how technology is changing the market for creative content, and why – right now, in fundamental ways – these changes threaten the business models that have governed the entertainment industries for 100 years. And they propose practical ways in which major publishers, music labels, and studios can respond.

We hope you caught the end of that last sentence. Many pundits argue, sometimes with glee, that content creators and markets for entertainment are doomed because of how technology is changing the nature of scarcity in entertainment. We strongly disagree. On the basis of our research, we are optimistic about the future health of markets for creative content. Information technology makes some business models less profitable, of course; but it also makes possible new degrees of personalization, customization, variety, and convenience, and in doing so it introduces new ways to deliver value to consumers, and new ways to profit from delivering this value.

But you can’t effectively pursue these new opportunities unless you understand the historical sources of market power and economic profit in the entertainment industries. In the next series we’ll address two foundational questions: Why do markets for creative content look the way they do? What factors have allowed a small number of firms to dominate these industries?