Wednesday, May 11, 2011

World Copyright Summit: 3 Questions to David Touve (Washington and Lee University)

By Emmanuel Legrand

David Touve is an interesting character. He is Assistant Professor of Business at the Washington and Lee University in the US. He is one of these academics who tries to put some sense into the digital maelstrom that has hit the creative industries over the past decade.

His thinking is unconventional, yet he has not embraced the 'copyleft' mantra that is affecting so many of his peers in the academic world. Probably because he is an economist, he understands that trends are difficult to identify and that beyond the surface of things there are more complex forces at work.

David Touve at the World Copyright Summit in 2009
Recently, he went into predictive mode when he suggested on Twitter that recorded music would bottom up in 2011. Well the year is not over yet, but judging on the frenzy surrounding the music business at the moment, there are obviously a few people (Russian billionaires among them!) who believe that there is still life in this business. And digital sales seem to be growing. So he may be correct in the end.  

I have been in touch with David for over a year now to discuss a possible presentation from him at the World Copyright Summit. Discussing issues affecting the creative industries with David is always stimulating. He takes his cue from different angles to create some interesting and thought-provoking theories. Two years ago, at the World Copyright Summit in Washington, DC he partnered with PRS for Music chief economist Will Page to explore a touchy subject: "Should rights societies pursue equity?". It was witty and entertaining.

This year, he will make a special presentation about new ways to capture value in a digital eco-system on Tuesday June 7, 2011 at the World Copyright Summit in Brussels. In line with the slogan of the Summit ("Creating value in the digital economy -- Create - Connect - Respect"), we asked him to think off the cuff and come up with a few ideas about how could the creative industries capture some of the revenue streams that for the moment seem to elude them. With just a few weeks to go before the event, David is putting the last touches to his presentation and we asked him what he would be focusing on.

Q: What are the main issues that you wish to address in your presentation?
David Touve: The main ideas I would like to address would be:
(a) Where do we see evidence of the "value" of creative works online?
(b) How are people paying for this value? Whether that payment is direct or indirect, passed through to rights owners or not passed through.
(c) Where might we go from here? Not through some crystal ball answer, but by analysing data (from the past) to try to understand what works or doesn't work, while looking for stones that have yet to be turned.

Q: Do you think that the creative industries can develop viable ecosystems in the digital economy?
David Touve: Absolutely. Far too many people equate "digital economy" with the sort of loss of control to which the creative industries cannot adapt. Yet, these industries have historically adapted and survived without having truly strict control over the distribution, performance, and at times even the business models employed in the experience of creative works. However, I am not going to claim the industry will grow by 100% if it follows some three-step process outlined in last month's edition of Harvard Business Review. Looking to the future, certain sectors of the creative industries may not be as grand (in monetary terms) as previously experienced or conjectured. In fact, a sort of deflating has already occurred for the recorded music industry, by way of downward pressure on prices, unbundling of albums, and slow leaks through piracy. To be clear, a smaller industry is not—de facto—an unviable industry.

Q: You said a couple of years ago that the decline of the recorded music industry will bottom up in 2011... Do you still think it will?
David Touve: Let me begin by admitting that I broke my own rule by producing a prediction. However, I reckon there are a number of reasons to believe that the bottom in recorded music revenues could occur this year (or at least sooner rather than later). Stated in more "researchy" terms, there are a number of reasons to believe that the likelihood of an upcoming incline may be overwhelming the likelihood of further decline.
First, the so-called "Happy Doomsday" scenario. Frankly. if 2011 is the bottom it may still be a rather hairy one, with revenues significantly below those of 2010. Yet as the industry falls further, the likelihood of a subsequent rebound can increase—in the same way that the depreciation of assets in a stock market crash can provide the fuel for a subsequent and solid rally.
Second, recorded music (or any recorded creative work) is neither a buggy whip nor a floppy disk. Music is still in high demand and shall remain in-demand. Therefore, the recorded music industry will not likely die. Instead, the industry will adapt to the market as that market operates.
Third, I believe that experimentation is subtly overwhelming maximisation as the dominant market posture, placing the industry on the verge of discovering and also accepting, for lack of a better term, "carrotsticks." Don't think too hard about that metaphor or, like most metaphors, it will implode. Simply put, however, carrotsticks are not sticks disguised as carrots. Rather these are carrots prepared in a way that makes them more palpable, portable and easily enjoyed.
Experimentation, rather than maximisation, is absolutely necessary at this point given (a) how difficult it is to predict the success or failure of emerging services and (b) how quickly and emphatically these services, if successful, can grow.
Finally, I do feel that this industry is moving beyond the ideological stalemate over how music (or any creative work) "should" be purchased or enjoyed. Hopefully, the industry will now be able to now tap into the larger pool of services, whether now licensed or unlicensed, through which creative works could be and are already being enjoyed.
To the extent that the industry does not follow through on expanding experimentation, however, instead choosing to bake maximization into contracts and renew stalemates, post-2011 could very well offer just a repeat of the prior decades downward sloping income experience.

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