The Death of Culture?

Designing a Sustainable Creative Ecosystem

Too Much information = The Death of Culture?

The major creative industries of music, photography, print, and video have all been disrupted by digital technology. We know this. As Chris Anderson has argued in his book Free, the cost of digital content has been driven towards zero. How could this be a bad thing? Well, TMI (Too Much Information — in this case, Too Much Content) is the curse of the Digital Age. It means creators make no money and audiences can’t find quality content amidst all the noise.

The end result will be a staleness of content and stagnant creative markets, i.e., the slow death of culture. So, how did this happen and what do we do about it?

Is music becoming just a hobby?

The most obvious disruption to creative media has been the decreased production and distribution costs of digital formats. This has changed the capital requirements of the existing “publisher” business model lowering the barriers to entry for independent creators. It has also given rise to a centralized “digital network” distributional model dominated by a winner-take-all battle among major technology companies such as Google, Amazon, Facebook, and Apple (GAFA). The tech oligopoly in content distribution has vexed the traditional publisher industries and also abused content creators by making it virtually impossible to protect intellectual property and copyright (IP).

The digital juggernaut.

But IP protection is not the primary challenge facing the creative industries. The real problem is that the price of content has collapsed at the same time global demand has exploded, creating a new industry dynamic (or, perhaps, we shall see, a return to a very old dynamic). This becomes easier to see if we place these professions and industries in longer historical context rather than merely comparing them to the recent past.

A Brief Economic History of Creative Markets

Creative arts began with cave paintings, primitive dance and song, and oral storytelling. There was no price paid for consuming such art, it was all created, shared, and consumed as communal, or public, goods. Essentially, it was all free for thousands of years.

The arts of writing, painting, sculpture and weaponry were the first to develop as private endeavors with the discovery of physical media. The importance here is that physical media can be excluded in consumption, thereby becoming a private good demanding payment. A painting, a sculpture, or a manuscript can be sequestered away to be enjoyed in private. Remuneration to artists was secured from wealthy patrons who procured art to burnish their “brand” to bolster their political and economic power. Emperors, kings, religious institutions, and rich merchants were the primary sources of artisan incomes. We might refer to this as the “branding” model for creative markets.

The first major technological disruption came with the invention of Gutenberg’s printing press in the mid-15th century. What changed with the printing press was that the written word could be easily and cheaply replicated. This means the supply could increase and the price would fall. The demand for literature led to a blossoming of writing and reading, with print publishers in control of supply and distribution.

It took about 500 more years, in the early 19th to mid 20th century, with the invention of photography, the phonograph, and film/tv, before these industries were able to harness technology to develop replicable physical media.

These innovative early stages for new creative markets were characterized by prohibitive fixed capital costs for production and distribution. The high cost of a printing press, record plant, or film/tv studio, and the physical distribution of content media favored the concentration of control over the creative content markets. (Photography was the notable exception, but equipment was still prohibitively expensive until Kodak came along, and distribution was still tightly controlled.)

These economic factors ushered in the era we refer to as the “publisher” model that has dominated the creative industries through the end of the 20th century. Centralized control and significant barriers to entry meant these publishers could control supply and distribution, setting prices to maximize their economic profits. The vestiges of this era remain with New York publishing houses, Hollywood film/tv studios, and major record companies. “Indies,” or independents, in all of these industries arose to try to circumvent this oligopolistic control.

However, in a few short years, digital media formats and production technologies for photography, music, digital books, and video have completely hollowed out these publishing industries and set the creator professions adrift.

The purpose of relating this history is to illustrate how the underlying economic forces affecting the creative industries and professions suggest that the publishing model may have been effectively broken by digital formats, returning us to the branding model that prevailed for centuries. This possibility seems to be confirmed by the rise of branding value to replace the transaction value of digital content. In other words, creative content is being given away free to promote and secure revenues from ancillary product markets.

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This should not be as shocking as it sounds. Broadcast television content has always been free to the consumer, supported by the advertiser revenue model. Many of the new digital distribution models also seek to duplicate the advertiser model. But the problem is that today’s decentralized nature of content creation and distribution weakens the market focus of advertisers, reducing the value of their advertising. Social media networks are one attempt to address this weakness, but, as we have seen with Facebook, social media presents drawbacks of its own.

A Framework for a Sustainable Ecosystem

W e should now see that the critical disruption to the creative industries is the new radical zero price threshold. How do creators survive with the economics of Free? There are several important characteristics of the creative media markets that can help us answer this question.

1. The explosion of supply has created an effective ceiling on the price of digital content. Amazon pushes a $2.99-$9.99 price range for eBooks while Apple imposes a $0.99 price point for music singles.

2. This price ceiling means there is less revenue share available to services that connect creators with consumers. This means there’s no more lucre to pay for publishing, promotion, marketing, and distribution services beyond added value.

3. Publishers and distributors used to provide risk capital to creators but the price squeeze has eliminated most investment in innovation.

4. Thankfully, technology has also reduced the capital investments needed to produce and bring content to market.

5. The hollowing out of promotion and marketing means content is adrift on a sea of noise. There is too much content out there and the gatekeepers that used to regulate the flow have disappeared.

6. From a macro perspective, creative markets have evolved from local niche markets initially, to mass national markets during the publisher distribution era, to global niche markets today. The problem with global niche markets is that it is costly for creators to find audience/consumers and vice-versa, meaning the potential market is seriously underserved.

These six characteristics identify the pain points for the new digital creative markets and imply certain needs for designing a sustainable business model:

1. In an era of low-priced content, creators need to find ancillary sources of income through branding and monetizing their data. An important source of relevant data is generated through peer (i.e., fan or follower) networks.

2. Data value is a function of the number of nodes, the volume of information flow, and the quality of that information/content. With their sales algorithms, the tech oligopolies mostly ignore this qualitative value.

3. Curation that differentiates the quality of subjective creative content is a necessary element of a sustainable creative ecosystem. Curation will allow price differentiation among content, rewarding creators and curators for producing and sharing higher quality content. Machine learning algorithms are powerful curation tools, but tend to commoditize content and equate product value with sales metrics, rather than differentiate aesthetic quality. This feeds the winner-take-all network effect.

4. Consumers need to be able to sift through the noise to quickly and easily find and access the content they want. Consumers can follow content creators they like, while standardized content profiles can sort content to be pulled by the consumer. Serendipity in discovery is facilitated by real time sharing through peer networks. Peer-to-peer file sharing can manage transactions and payments.

5. Curation needs to be rewarded according to the value it adds to creator markets. The subjective quality of content and the fact that “nobody knows anything” means curation should ideally be paid for on the back end, after results. Blockchain technology offers the promise of being able to backtrack shares and transactions to establish realized promotion values.

In sum, the two main goals are:

1. To expand the global niche markets by facilitating connections between creators and their audiences through the ongoing efforts of curators. This goal addresses the problem of too much content and white noise in the markets; and

2. To empower the build out and control over user peer networks to augment transaction values with data monetization. This goal addresses declining sales revenues and licensing fees for content.

There are countless efforts underway to solve the current disruption of creative markets, far too many to keep track. Most either focus on the defense of IP at a time when the prices of IP for creative media are collapsing, while others focus on promotion platforms that seek payments upfront from content creators who have no resources until they achieve sales. Thus, creators face a Catch-22: can’t get sales without promotion and can’t afford promotion without prior sales.

Many creators have either withdrawn, ceasing to treat artistic creation as a profession, or dedicating a major share of their creative energy to promotion.

The way out of this vicious circle is to create a platform with tools so that promotional efforts are additive and multiplicative over time. Creators need to build audiences they can retain and augment over time as they create new product. The technology solution is a network platform that supports the build out and user management of distributed peer networks. This is the logic of blockchain and the promise of Web 3.0.