Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture

Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture

by Joel Waldfogel
Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture

Digital Renaissance: What Data and Economics Tell Us about the Future of Popular Culture

by Joel Waldfogel

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Overview

How digital technology is upending the traditional creative industries—and why that might be a good thing

The digital revolution poses a mortal threat to the major creative industries—music, publishing, television, and the movies. The ease with which digital files can be copied and distributed has unleashed a wave of piracy with disastrous effects on revenue. Cheap, easy self-publishing is eroding the position of these gatekeepers and guardians of culture. Does this revolution herald the collapse of culture, as some commentators claim? Far from it. In Digital Renaissance, Joel Waldfogel argues that digital technology is enabling a new golden age of popular culture, a veritable digital renaissance.

By reducing the costs of production, distribution, and promotion, digital technology is democratizing access to the cultural marketplace. More books, songs, television shows, and movies are being produced than ever before. Nor does this mean a tidal wave of derivative, poorly produced kitsch; analyzing decades of production and sales data, as well as bestseller and best-of lists, Waldfogel finds that the new digital model is just as successful at producing high-quality, successful work as the old industry model, and in many cases more so. The vaunted gatekeeper role of the creative industries proves to have been largely mythical. The high costs of production have stifled creativity in industries that require ever-bigger blockbusters to cover the losses on ever-more-expensive failures.

Are we drowning in a tide of cultural silt, or living in a golden age for culture? The answers in Digital Renaissance may surprise you.


Product Details

ISBN-13: 9780691185439
Publisher: Princeton University Press
Publication date: 11/13/2018
Sold by: Barnes & Noble
Format: eBook
Pages: 320
File size: 6 MB

About the Author

Joel Waldfogel holds the Frederick R. Kappel Chair at the University of Minnesota’s Carlson School of Management. His previous books include Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays (Princeton). He lives in Minneapolis.

Read an Excerpt

CHAPTER 1

The Creative Industries

RISKY, EXPENSIVE, AND WORTH PRESERVING

Introduction

Think about Breaking Bad and Orange Is the New Black. About the novels of John Grisham, Scott Turow, Mary Higgins Clark, and Jane Smiley. About Taylor Swift, Radiohead, and Mumford & Sons. About the latest in the Jason Bourne and Star Wars franchises. Chances are you've spent many pleasurable hours immersed in their worlds.

Across most of the planet, we spend about a third of our waking hours watching television and movies, listening to music, or reading. Americans spend on average 6.15 hours per day consuming cultural products: film, TV shows, books, and music. Brazilians spend 6 hours, Poles spend 5.7, Germans spend 5.25, and the French spend 5.05. Only sleep, at nearly 8 hours per day, takes up more of Americans' time than the nearly 4 hours spent watching television and reading. Across all Americans, including those without jobs, work clocks in at an average of 3.61 hours per day.

In addition to substantial amounts of both entertainment and great art — Lee Child, Stieg Larsson, and Nora Roberts, but also Yann Martel, Joyce Carol Oates, and Michael Chabon; Britney Spears and Justin Timberlake, but also Bob Dylan, Janis Joplin, Aretha Franklin, and Radiohead. Titanic and Avatar, but also The Godfather and Schindler's List — cultural industries foster enormous economic benefits.

The movie, music, book, and television industries together account for about one-twentieth of the world's income. And not only do the cultural industries generate large amounts of revenue and profit, they also account for a lot of jobs — an estimated 5 percent of workers around the world and 5 million in the United States alone.

The good news: The creative industries — television, books, music, and movies — are among the jewels of the U.S. economy. The possibly distressing news: Digital innovations, including piracy, online streaming, and self-publishing, have turned these industries upside down, threatening both commerce and art in two distinct ways. First, because new technologies deprive the creative industries of revenue, they potentially undermine their ability to invest in new movies, music, and books. Second, perhaps paradoxically, new, inexpensive technologies make it possible for many creators to produce and distribute their work without the curation, permission, nurture, or investment from a traditional gatekeeper, such as a recording label, publishing house, or movie studio. So we face the twin threats of no new investment in products and lots of new products delivered without costly adult supervision, all of which raises the question: Are we living through cultural Dark Ages, as some critics have argued, or through a digital renaissance?

The goal of the book is to answer that question with systematic empirical evidence.

Risky and Expensive

Understanding how the cultural industries have traditionally worked makes clear the threats delivered by new technologies. How do the creative industries generate commercial and sometimes artistic gems? There is no magic formula — the cultural industries are expensive and risky. As musical artists and the record labels, as well as movie studios and book publishers, are quick to point out, the creative industries are investment intensive. According to the International Federation of the Phonographic Industry (IFPI), the biggest investors in musicians are the major record labels, which play important roles around the world in discovering, nurturing, and promoting musical talent. The expensive part: Bringing a new artist's album to market costs about a million dollars, and the recorded music industry invests $4.5 billion per year around the world. The risky part: Most creative products are not commercially successful.

The film industry spends even more money. It costs a major Hollywood studio more than $100 million, on average, to produce a movie intended for widespread theatrical release. The biggest-budget movies cost far more: The Lone Ranger (2013) cost $275 million. Pirates of the Caribbean: At World's End (2007) cost $300 million, as did Spectre (2015), an entry in the James Bond franchise. Star Wars, Episode VII: The Force Awakens (2015) cost $306 million. Avatar, released in 2009, cost $425 million.

But there are no guarantees in Hollywood. It's very hard to predict which films will turn into profitable products or franchises. Avatar earned $2.8 billion at the international box office, and The Force Awakens earned $2.1 billion, far more than their production budgets. Meanwhile, The Lone Ranger earned only about $260 million, worldwide, less than its production costs, and was a big money loser for its studio.

Goldman's Law: "Nobody Knows Anything"

Screenwriter William Goldman (Butch Cassidy and the Sundance Kid, All the President's Men, The Princess Bride) famously wrote that "nobody knows anything" about which movies will find favor with audiences. Investors' inability to predict which products will succeed is not limited to movies; it's a generic feature of all of the cultural industries. Most musical albums fail, as do most books and new television shows. If the creative industries are to keep going, they must generate enough revenue to cover the costs of their successes and their failures.

To bring creative works to market, the commercial patrons of the arts — the record labels, movie studios, book publishers, and television networks — engage in two essential activities. First, they screen potential projects and decide to invest in only a tiny fraction of them. Second, they invest large sums in nurturing artists and the works they produce. Consider the music industry. Because the commercial prospects of most albums and artists are not readily apparent, success often requires patience and long-term vision. Most albums do not break even financially, and those that do take time to do so. Relationships between artists and labels transcend the financial. Rather, labels nurture artists, "allowing them to develop their sound, their craft, and their careers."

Some examples of creative nurture by commercial intermediaries are legendary. An editor at the famous Scribner's publishing house, Maxwell Perkins, discovered F. Scott Fitzgerald and Ernest Hemingway. Perkins is said to have found his greatest editorial challenge in Thomas Wolfe, whose impressive page output was matched by his attachment to all of his sentences. Perkins struggled to get Wolfe to cut almost 100,000 words from Look Homeward, Angel. Bruce Springsteen's patron, Clive Davis of Capitol Records, supported Springsteen through two unsuccessful albums and paid for the fourteen months of studio time that Springsteen needed to deliver his landmark Born to Run album, released in 1975. By May of 2000, the album had sold 6 million copies in the United States.

According to Kensington Publishing president Steven Zacharius, some publishers describe their role as that of a "father-confessor and cheerleader" who can "serve as a sounding board, pep the author up when necessary, and pull him down if the author goes too over the top." Moreover, when the book is ready, "the publisher gets behind it with marketing and publicity efforts, and has already given the book the best cover and cover copy that money can buy. The publisher's money, not the author's."

It's expensive, but the nurture of artists provided by publishing houses, record labels, movie studios, and television networks has been an important aid to the creation of commercially successful products and great art. I'll refer to this role as "adult supervision" throughout the book.

Digitization and the Threat to Revenue

Technological change has taken the cultural industries on a roller-coaster ride over the past few decades. That ride has included horrifying descents and confusing loops.

The last days of the twentieth century saw the recorded music business going strong. A few popular artists dominated the charts. 'N Sync, Britney Spears, and the Backstreet Boys each sold stunning numbers of records. Two Backstreet Boys albums, released in 1997 and 1999, had sold 14 and 13 million copies by 2001. Britney Spears's ... Baby One More Time, released in 1999, ultimately sold 14 million copies. 'N Sync's eponymous effort released in 1998 sold 10 million, and another album released in 2000 (No Strings Attached) sold 11 million. These end-of-the-millennium pop acts joined the ranks of the musical elite. The Beatles, one of the most popular bands in history, had only three albums of original material that outsold them. Sgt. Pepper's Lonely Hearts Club Band, released in 1967, eventually sold 11 million copies in the United States; The Beatles, released in 1968, eventually sold 19 million; Abbey Road, released in 1969, eventually sold 12 million.

But just after the turn of the millennium, music-industry revenues began to fall. In 2000, after rising almost every year in recorded history, U.S. sales of recorded music fell by 3 percent. In 2001, sales fell again, by another 6 percent. When sales fell yet again in 2002, it became clear that something was amiss.

That "something" had a name: Napster. In 1999, Shawn Fanning, a student at Northeastern University, developed the Napster software to allow peer-to-peer sharing of music files. In effect, Napster permitted users to obtain digital music files without paying for them. Fans no longer needed to go to a record store to buy a CD or an LP. Instead, they chose a song, pressed a few keys, and watched the song arrive on their computer. Napster quickly went viral. At its 2001 peak, 80 million Napster users were stealing large quantities of music.

Many people felt little compunction stealing from the major record labels (such as Sony, Warner, or Universal). The retail price of a music CD had risen to almost $20 in the late 1990s, and lots of fans felt that a typical CD bundled ten lousy songs with two good ones. Stealing seemed to be a justifiable way to avoid paying for potentially disappointing CDs. When they could get music for free, it's hardly surprising that many people stopped paying for it.

The recording industry sued and obtained an injunction, shutting Napster down in 2002. But the plunge in sales continued. By 2005, U.S. music sales were 25 percent below their 1999 peak. By 2012, real U.S. sales had fallen by more than half from their 1999 peak. International sales were off by a similar fraction. Researchers still ponder the causes of the sales drop, but a sober assessment clearly implicates file sharing.

With the launch of the iTunes Music Store in 2003, sales began to recover, or at least slow their decline, as music lovers migrated away from physical albums and toward digital singles. These digital sales grew quickly, to $1.1 billion by 2005 and to $3.3 billion by 2012 in real 2016 dollars. In 2012, the growth in digital sales roughly offset the decline in CD sales. By then, a year without a decline in recorded music revenue was something to celebrate. Industry professionals began to hope that the transition to digital sales would restore revenue to its pre-Napster peak. But the roller coaster was poised for another steep descent, this time due to the new streaming services.

Starting around 2010, fans could listen to almost any song on YouTube for the small price of watching an ad. In July 2011, Spotify launched in the United States, giving people access to essentially any song they wanted to hear without paying anything, at least on the ad-supported version of the service. As streaming grew quickly, sales resumed their rapid descent. From 2012 to 2017, the value of U.S. digital downloads fell from $3.3 billion to $1.3 billion (in 2016 dollars).

Unlike peer-to-peer file "sharing" via Napster, Spotify streaming is not stealing. YouTube, Pandora, and Spotify pay artists and record companies for the right to stream music. But many artists believe that the payments are too small to support continued music making. In 2013, David Lowery, founder of Camper Van Beethoven and cofounder of Cracker, blogged that his song "Low" was streamed a million times on Pandora, and all he "got was $16.89," less than what he makes from a "single t-shirt sale." The year also saw Radiohead's Thom Yorke likening Spotify to "the last desperate fart of a dying corpse."

Maybe these artists are paranoid, but that wouldn't make them wrong; the past two decades have been calamitous for the recorded music business. Technology has repeatedly posed an existential threat to the music industry and even to the creation of new music. The net effect of all this new technology has been terrible for music-industry revenue. Even taking into account the new potential bright spots — digital downloads and streaming — recorded music revenue was down by more than half in real terms between 2000 and 2016.

Digitization and the Threat to Adult Supervision

Amid all the bad news from technological change was the good news of cost reduction. Digital technologies have reduced the costs of producing music, movies, TV shows, and books. For example, inexpensive digital cameras allow video production at a fraction of the former cost. Computers and widely available software make it possible to record music inexpensively. A writer can now produce an e-book with no more equipment than a computer. Moreover, digital distribution — that is, the delivery of audio, video, and text files directly over the Internet rather than through stores or theaters — reduces distribution costs significantly. Finally, new channels for information sharing sharply reduce marketing and promotion costs.

These cost reductions have two potential consequences. First, they allow traditional players in the creative industries (record labels, book publishers, movie studios, television networks) to adopt new strategies for offsetting reduced revenue that could improve the bottom line. Second, they allow would-be artists to create new works and make them available to consumers without the go-aheads and nurturing investments traditionally provided by the gatekeeping elites. In other words, digitization allows a democratization in which creative dilettantes, or maybe even barbarians, can storm the gates.

The prospect of a surfeit of books, music, and movies created without adult supervision may be more scary than exhilarating. Technology entrepreneur Andrew Keen caused a stir in 2007 with The Cult of the Amateur. Like Keen's other writings, The Cult of the Amateur raised the concern that "traditional media," which critics denounce as "elitist," are "being destroyed by digital technologies":

Newspapers are in freefall. Network television, the modern equivalent of the dinosaur, is being shaken by TiVo's overnight annihilation of the 30-second commercial. The iPod is undermining the multibillion-dollar music industry. Meanwhile, digital piracy, enabled by Silicon Valley hardware and justified by Silicon Valley intellectual property communists such as Larry Lessig, is draining revenue from established artists, movie studios, newspapers, record labels, and songwriters.

The end result is potentially calamitous. As Keen puts it, the "purpose of our media and culture industries — beyond the obvious need to make money and entertain people — is to discover, nurture, and reward elite talent." Without the traditional setup, we will be awash in mediocrity. As Keen argues, if "you democratize media, then you end up democratizing talent." Keen continues, "The unintended consequence of all this democratization is cultural 'flattening.' No more Hitchcocks, Bonos, or Sebalds." Instead, "All we have is the great seduction of citizen media, democratized content, and authentic online communities. And blogs, of course. Millions and millions of blogs." In short, democratization puts the inmates in charge of the asylum.

His point is credible on its face. The major Hollywood studios spend an average of more than $100 million to bring a movie to market, and the recording industry invests $4.5 billion per year. The global film industry invested $22 billion in 2010; the United States alone accounted for $9.2 billion. New technologies that allow almost anyone to produce books, movies, or music effectively democratize artistic production. But democratization that undermines the established institutions of these industries is a threat to a substantial chunk of gross domestic product and a lot of jobs. It threatens the creation of great art as well.

Would the new democratization ultimately be good or bad for the creation of new cultural products? One possibility is a cultural Stone Age. Without enough revenue to cover costs of production, the movie, music, book, and television industries might grind to a halt and stop releasing new products. Writers and musicians might go back to school and learn how to write code rather than create art. Consumers might have to make do with oldies on the radio and television reruns.

(Continues…)


Excerpted from "Digital Renaissance"
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Copyright © 2018 Princeton University Press.
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Table of Contents

Acknowledgments ix

1 The Creative Industries: Risky, Expensive, and Worth Preserving 1

Part I A Tour of Some Major Cultural Industries: Music, Movies, Television Shows, Books, and Photography 29

2 Digitization in Music: Rock On? 31

3 Digitization in Movies: Hollywood Ending? 73

4 Digitization in Television: Has the Vast Wasteland Blossomed? 106

5 Digitization in Books: Fifty Shades of Dreck? 121

6 Digitization Further Afield: Photography, Travel Agents, and Beyond 151

7 The Value of the Digital Renaissance: The Long Tail and a Whole Lot More 163

Part II Coming Attractions: Farm Teams, Bundling, Pirates, Vikings, and Trolls 175

8 The Digital Farm System, and the Promise of Bundling 177

9 A Tale of Two Intellectual Property Regimes: Lessons from Hollywood and Bollywood 208

10 Digitization, the French, and the Return of the Vikings 219

11 Bridge Trolls: The Possible Threat of Technological Gatekeepers 246

12 Crisis or Renaissance? 252

Notes 259

References 275

Index 297

What People are Saying About This

From the Publisher

Digital Renaissance should be consulted by any regulator or legislator being solicited by a forlorn media mogul looking to protect a traditional business from disruptive market forces.”—Jonathan A. Knee, New York Times

“Compelling. . . . Waldfogel’s book offers reassurance to those who fear that the new regime of ones and zeros is undermining cultural production. But his assessment will be far less comforting to denizens of the traditional cultural-industrial complex.”—Daniel Akst, Strategy+Business

“[Waldfogel] argues that we not only have more reading, viewing and listening material than ever before, but it’s better. And he’s got data to back that up.”—Amanda Gomez, Reuters Breakingviews

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