This panel discussion followed John Kay’s keynote, “Rent seeking in a digital economy”.
Media industries have always consisted of three main elements: the creative activity, the publishing activity, and the activity of distribution and dissemination. These activities have always involved distinct skills.
The basic economics of all industries are that economic rents – i.e. profits above the level needed to attract necessary resources into the activity – go wherever there is scarcity. The location of scarcity changes according to the nature of the media and the technology of the era. And the beneficiaries of such scarcity use and protect their power by integrating backwards or forwards.
Digitisation reduces, by orders of magnitude, the costs of dissemination. In a technologically related, but distinct development, superficial crowd-based peer review has developed as an alternative mechanism of assessment and selection to expert judgement. These factors change fundamentally the role of publisher as well as the channels of distribution. Potentially they represent a shift of economic power in favour of creators of content.
However media incumbents have powerful incentives to use both existing legislation and their lobbying capabilities to resist changes which marginalise their existing business models. Additionally, the evolution of new business models may be subject to market power arising from pervasive network effects. Content creators, with understandably little interest in the underlying economics, have been widely duped into believing that their interests are aligned with incumbents. Legislation developed for business models rendered redundant by new technology can equally impede the development of models more appropriate to future centuries. We need to approach these issues with the conventional economic tools -structure, conduct and performance – of industrial organisation theory.