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The Internet and the Cultural Industries

The Internet’s Influence on the Production and Consumption of Culture: Creative Destruction and New Opportunities
October 3, 2014

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The Internet has been a disruptive technology for the arts and media, reshaping industries while introducing new ways to organize production and distribution. The Internet’s influence in the cultural industries depends, first, on the extent to which digital substitutes for analog experience are likely to satisfy consumers. Second, on the extent to which producers must maintain competitive profits. And, third, on the ability of incumbent firms to exploit changes inherent in digital production and distribution.

The Internet has not challenged the basic business models of traditional theaters, ballet companies and orchestras, because such organizations provide a service that requires physical presence in an actual audience. Institutions that exhibit visual arts have also been affected only marginally, although virtual museums may develop a more substantial presence. However, the Internet has had a deeper impact on those cultural industries where the core product —a movie, news story or musical track— can be downloaded and enjoyed in private. This happened quickly with photographs and text and, as transmission speed expanded, music and film. And as it occurred, dominant business models fell in a process of “creative destruction”, destructive because of its harsh impact on existing firms, but creative because of the economic vitality it unleashed.

If we look at statistics on the creative industries in the U.S. we see that not all industries have suffered marked declines and some that have were doing badly before Internet’s arrival. Therefore, we must question the widely held belief that the Internet has marched through the creative industries laying waste on all side on two counts. The creative system as a whole might flourish, even as historically dominant firms and business models face grave challenges.

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Yet, each industry —film, media or music— is somewhat different. The film industry, with its project-based production regime, its efficacy in reaching agreements with online distributors and a product that retains strong social externalities as long as people value the theater experience, has survived the Internet’s arrival with relatively little damage. Although film distribution will change, the position of filmmakers appears relatively stable.

The rise of the illegal downloading; the shift in the market from the sale of packaged albums to track-based online sales; and the rise of streaming services have upended the business models of the major music companies. By contrast, the Internet appears to have increased the availability of live music. At the same time, the new business model is far from certain. Streaming services provide only modest revenues and the new networked musical economy depends on a kind of economic self-exploitation with below-market incomes.

Few industries have declined more dramatically since the rise of the Internet than the newspapers industry. It faces a particularly difficult future, given the reluctance of readers to pay for its product when they can obtain much of it legally from websites and given the rise of online advertising that have made newspaper advertising less attractive. The issue is less whether newspapers will survive than whether they will be able to pay for the quality of reporting that healthy democracies require. Serious observers have suggested that the industry will need philanthropic or government support to survive.

Intellectual property policy has been a highly contested field of struggle. Confronted by downloading, media firms have succeeded in tightening restrictions on downloading and increasing penalties in many countries. Whether such legal changes will be effective, however, is questionable and they only address one part of the media companies troubles. In the longer run, the structure of the Internet itself may change depending on the outcome of debates over the rights and obligations of content providers, online businesses, cable television companies, as well as the regulation of the flow of information and the openness of systems in mobile devices.

Will we benefit from increased cultural diversity thanks to the Internet? The rise of music streaming, the increased tendency of art museums to display some of their holdings online, the ability to view films from many cultures and eras have all increased dramatically the “long tail” of market demand. However, the effect on taste is less certain, for two reasons. First, culture is an experience good: how much one gets out of listening to music, for example, depends on how much experience one has with this kind of art beforehand. Second, psychologists recognize that most people respond poorly to choice, especially in a field in which they are not well versed.

It is unclear how many people the Internet cultural potential will benefit. Indeed, it seems that this expanded supply of art, music and information may be welcomed by a relatively small group of highly educated people. Other users may be unaware of the possibilities or unwilling to take the time to explore new ideas. And the significant minorities who still lack meaningful Internet access will, of course, have no choice. The possibility that the Internet may usher us into a world of even greater cultural and informational inequality poses a challenge to both cultural and political democracy.

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Paul DiMaggio is A. Barton Hepburn Professor of Sociology and Public Affairs at Princeton University, where he also serves as Director of Graduate Studies in the Department of Sociology, Director of the Center for the Study of Social Organization, and is a member of the Executive Committee of the Center for Information Technology Policy. A graduate of Swarthmore College, he earned his PhD in Sociology at Harvard University in 1979. Over the course of his career, he has undertaken research and published papers about such topics as arts institutions, culture and inequality, political polarization, economic networks, and information technology. He has written about the relationship between Internet use and social inequality, and teaches a regular course with a computer science colleague on information and public policy at Princeton’s Woodrow Wilson School of International and Public Affairs. DiMaggio is a member of the American Academy of Arts and Sciences and the American Academy of Political and Social Science.

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