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The Business of Creativity: Seeking Value in the Digital Content Ecosystem Part of the Norms and Values in Digital Media Project Series (2012-2014) January 2015 Published by World Economic Forum, Geneva, Switzerland, 2015 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise without the prior permission of the World Economic Forum. The views expressed in this publication are those of selected members of the Global Agenda Council on Climate Change and do not necessarily reflect the views of all the members of the Council or of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0) 22 869 1212 Fax: +41 (0) 22 786 2744 [email protected] www.weforum.org Contents 5 Introduction 6 Chapter 1. The Power of Digital: Three Stories about Creators, Content and Consumers 8 Chapter 2. Copyright in the Digital Age 11 Chapter 3. Needs for the Future 14 Contributors 15 Figures 22 Endnotes The Business of Creativity: Seeking Value in the Digital Content Ecosystem 3 4 The Business of Creativity: Seeking Value in the Digital Content Ecosystem Introduction The way creative content and information diversity, and stakeholders are thus For the purpose of this report, are created, produced, consumed and challenged to ensure that such systems shared has changed dramatically in the continue to invite investment in creative the use of “copyright systems” digital era, presenting both new works. The act of paying to see a movie or and “copyright regimes” strictly challenges and opportunities for copyright to read a book not only provides a refers to laws and policies systems. The Media, Entertainment & sustaining economic foundation for these Information Industries community of the works, but also contributes substantially related to copyright and not to World Economic Forum has taken an to national economies.1 The economic cultural norms and values or in-depth look at copyright issues in the significance of Intellectual Property (IP) digital age over the course of a three-year intensive industries has been highlighted economic realities in which project series, entitled Norms and Values in several recent studies from developed these laws or policies may be in Digital Media. The goal of the project markets. A recent United States (US) series has been to help major Commerce Department study shows that rooted. stakeholders, such as governments, IP-intensive industries account for tens of policy-makers, businesses, civil society millions of jobs and several trillion dollars groups, creators and innovators, to of US gross domestic product alone. engage in a dialogue to better understand Among these, copyright-intensive each other’s interests, and to work industries contributed 5.1 million jobs and together to create economic and social grew by 46.3% between 1990 and 2011, value, to develop a vibrant creative outpacing other IP-intensive industries, as community and to foster ongoing well as non-IP-intensive industries.2 A innovation of the internet. 2013 European Commission study shows that around 39% of total economic activity Throughout 2014, this project explored in the European Union, worth some €4.7 how digital content has introduced trillion annually, is generated by IP- opportunities for creating, sharing and intensive industries, which directly provide distributing, while revealing tensions within approximately 26% of all employment in copyright systems. The final project seeks the region.3 to: The content industry is adapting to the - Illustrate innovations in digital content internet and the advent of digital content. creation and distribution A recent study conducted in the United - Understand how such innovations Kingdom (UK) found that 86% of over 750 impact copyright systems “of the most popular and critically acclaimed films” were legally available - Highlight legal, technical and societal online through new digital models.4 The needs to foster the ongoing innovation media and entertainment industries will of content and the internet. need to continue to innovate and to devise As digital technologies force us to new possibilities for creation and confront and negotiate new realities distribution as digital content expands. around emerging rights and new currencies, stakeholders will need to continue to evolve copyright systems that are agile and elastic enough to adapt to these new realities. Copyright systems support content and distribution industries that have created enormous economic value, employment and cultural The Business of Creativity: Seeking Value in the Digital Content Ecosystem 5 Chapter 1. The Power of Digital: Three Stories about Creators, Content and Consumers Just over 15 years ago, two teenage Viki (Singapore) community where volunteers receive developers, Shawn Fanning and Sean varied tiers of badges depending on the Parker, turned the music industry upside Viki is an online streaming service that quality and volume of their contributions. down with the creation of Napster, a enables users to watch ad-supported, We even have some of our top subtitlers digital platform that enabled peer-to-peer subtitled TV shows from 100 countries in – our Qualified Contributors – reaching file sharing of music. At its height, Napster 200 languages, free of charge. Thirty out to lawyers and doctors to ensure that possessed 70 million users exchanging million Viki users stream licensed they have translated the more technical 2.7 billion files.5 Reflecting on the “Napster television series every month, 20 million terminology accurately. They are effect,” the music critic Carl Wilson from mobile devices. Viki takes advantage incredibly dedicated and have amassed declared: “It’s less what Napster itself of the existing copyright and licensing strong followings due to the quality of their spawned than what it revealed – that we systems that are primarily nationally contributions.”7 The Viki story reflects a were entering a whole new era in music based, by acquiring rights to stream new phenomenon of fans who have distribution and consumption. I’ve been content to distant territories where it is not turned into marketers, as they participate sad about the near-death of the record yet available. It has aggregated data on in the creative and distribution processes, store, and very concerned about artists’ the most popular viewing languages, the bringing content to audiences who would economic lives, but it’s also been a very titles and genres that succeed in certain not otherwise have legal access. exciting, dynamic time…. The wide-open regions, and the shows fans want for way music is discovered today has future streaming. Viki uses this data to broken down barriers between genres, tailor its offering to fans’ interests. It also WeDemand (Rio de between the ‘commercial’ and the provides this information to rights-owners Janeiro, Brazil) ‘artistic’, between audience niches.”6 who use it to inform content ideation and Streaming platforms such as Spotify and distribution plans. Viki’s predictive WeDemand is a digital crowdfunding and Pandora, and the legitimate sharing of analytics are indicative of the wider promotion platform created by four music content that these platforms engender, potential that data has as a supplemental fans in Rio “who were tired of seeing also illustrate the music industry’s mechanism to create value: a potential artists – both established megastars and dexterity in adapting business models to that the internet has unleashed. more indie, grassroots artists – pass on the evolved consumer preferences that Rio for other markets, when we knew they Viki crowdsources the subtitles of its Napster precipitated. had fans here.”8 Co-Founder Pedro Seiler shows from its users, who have facilitated explains: “The company started with the Fast-forward 15 years, and companies the distribution of content across the Swedish indie band, Miike Snow, who we continue to create new opportunities and globe: bringing Korean television series to knew was going to Argentina. We really conduits of content exchange. The Brazil with Portuguese subtitles, and wanted to get them to come to Rio, so we internet has expanded access to content spreading Mexican novellas across the had our friends each contribute $100 worldwide, enabled new methods of Middle East with Arabic subtitling. This towards the band’s fee and aggressively content discovery through increased crowdsourced subtitling has enabled market the campaign through their social peer-to-peer exchanges, and developed licensed distribution of TV series to networks. We met the fee that we needed vibrant and active online communities audiences that would otherwise never to get Miike Snow to come, and then dedicated to the content that brought have access (or would have only illegal, opened up the floor to admission sales. them together. unlicensed access) because of the We ended up with 1,000 people at the prohibitive cost of localizing shows for show and it was an enormous success. lower-revenue territories. Viki even When we saw all the fans at the concert, licenses the subtitles to original rights- we realized we may have a business holders who use them for their model here.”9 international DVD distribution. According to Co-Founder and Chief Executive Officer, Razmig Hovaghimian: “The Viki community is at the heartbeat of this company. We have created an online 6 The Business of Creativity: Seeking Value in the Digital Content Ecosystem WeDemand allows artists to promote their In addition to empowering artists with new games, I am a creator. I am a performer shows on its platform as well as to ways to reach their fans, the platform that others want to invest time in crowdfund the means to make their reshapes the traditional role of a watching. In some ways, I am also like an concerts happen, receiving a portion of consumer: consumers can now be active actor. People are watching me make the ticket sales or what was raised agents in planning tours and attracting decisions that I narrate as I play.

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