Mark Lorenzen Copenhagen Business School

Copyright-based industries constitute 11% of Danish firms and employment, 16% of turnover, 17% of value creation Turnover and value creation growing more than average Danish industry Value creation per employee is above that of Greece, Ireland, Portugal and Spain, but below that of USA, Canada, UK, Sweden, Netherlands, and Belgium

Why such heterogeneity? Its not only about IP, its about how it is used: Agreements and supporting institutions set up by industry and associations Business models used by industry Response by consumers

IPR regime Industrial dynamics Consumer behavior Infringement (competitors): Imitation of copyrighted or patented products, brands, etc. Piracy (consumers): Illegally obtaining copyrighted material (e.g. through copying of digital content) Infringement (competitors): Imitation of copyrighted or patented products, brands, etc. Piracy (consumers): Illegally obtaining copyrighted material (e.g. through copying of digital content) Invention and innovation Invention and innovation Rents Market value Market value Financial rewards may not be distributed so as to give incentive for future Invention (creative people) Innovation and better business models (firms) Financial rewards may not be distributed so as to give incentive for future Invention (creative people) Innovation and better business models (firms) Inefficient business models Appro- priation Incen- tives Business models

Business models in cultural industries Rarely focus primarily on IP problems May, in an IP perspective, appear inefficient, because they need to trade off solutions to problems of content creation, cost, uncertainty, and IP

Creativity in context: Examples of how creativity, cost, chance and collection shape business models in the film industry Mark Lorenzen Copenhagen Business School

Creativity in the film industry Need for constant creation of new content Business model (all industries): Projects Need for creation of more varied content Business model (all industries): Move from in-house project teams to project networks on market

Cost in the film industry Transaction costs in projects. Business model (all industries): Use network brokers, operate inside ecologies, rely on small world information networks Rising production costs Business model (all industries): Outsourcing, seek regional funds Business model (niche industries): Compete for public funds

Chance in the film industry Uncertainty on consumer markets Business model (mass market segment): Use stars (collusion of networks), make sequels and flagpoles (horizontal integration of production: fewer and bigger films). Business model (niche segments): Compete for reviews, festivals Business model (mass market segment): Fewer films with bigger marketing budgets (horizontal integration of marketing), big marketing firms also finance and own flagpole films (vertical integration of marketing and production) Business model (niche market segment): Alliances to mass market firms, compete for public funds Business model (mass market segment): Build scale in distribution, big distributors are the same as the big marketing firms that also finance and own films (vertical integration of distribution, marketing, and production) Business model (niche market segment): Digital distribution

Collection in the film industry Scale economies in collection of IP Business model (mass market segment): Publishing houses (own collection and re-use of IP) Business model (niche market segment): Rely upon collection agencies Scope economies in use of IP Business model (mass market segment): Cross- industry integration for use of IP (for auxiliary rents, also gives protection against imitation). Business model (niche segment): Strategic alliances

Conclusion: Creativity in context Film industry examples suggest that many other concerns in cultural industries than IP May help us to understand why cultural firms are so seemingly inefficient in their response to IP issues When we study cultural industries, industry context is very important. Examples discussed here at Birkbeck include: Demand uncertainty varies between industries – and between market segments within industries As technologies, product traits, and consumer traits are not similar, the scope for user innovation is not the same in all industries Which traits – if any -- can be generalized across cultural industries? Which IP problems and solutions – if any – can be generalized across cultural industries?

Interdisciplinary. The dynamics of industries and innovation. Informed by, and contributes in turn to, advancing the theoretical frontier within economics, organization theory, management, and economic geography. Vol. 16, 6 annual issues, published by Routledge