3.1 The Challenges and Opportunities of New Digital Platforms

Business models in cultural industries are changing rapidly due to the growing consumption of content via the Internet. Advertising, promotion, and marketing are increasingly being pushed online, meaning that the traditional source of revenue for many cultural industries is undergoing a substantial transition.

Conventional TV broadcasters, for instance, faced significant declines in advertising in critical product categories when the automotive and financial services, among other sectors, retrenched massively in the current recession. While much of this advertising may well return, marketers will most likely continue to move to newer platforms. The repercussions ripple through the TV production sector in the form of reduced commitments to new projects (“greenlighting”), and lower programming license fees offered to producers by broadcasters domestically and abroad.

The same advertising declines affect print media which also have to compete with digital versions of traditional revenue sources, such as classifieds (e.g. free online listing services like Craigslist), or by editorial content from electronic versions of other foreign and domestic editions. Newspapers and magazines are being forced online. They have to operate with reduced staff and budgets. Subscription revenues are not substantial enough to support the print industry on their own, so newspapers and magazines have to explore alternative business models.¹⁵

Furthermore, cultural producers in music, movies, and books who sell their product have either been impacted by illegal electronic access, or have seen erosion of their market value. Besides the well-known travails of the music recording industry (though not necessarily the music industry itself), online versions even when acquired legally are sold at lower cost than their physical product. Thus, it has been argued that such “all-you-can-eat” online access to cultural content is effectively debasing the value of all content.

Games developers are more impervious to new platforms in one way because they are built on electronic interactivity inherent in the major console platforms. Yet, the growth area in games is on-line, or via handheld applications, linked to other players via wired and wireless broadband networks.

Content distributors must now compete with free versions of what seem like similar product. Also, the presumption that digital versions of cultural content are somehow cheaper to make poses a challenge for some creative industries. For example, books available in electronic form are typically priced at $9.99, well below physical book prices, even though they bear similar levels of development, editing and marketing costs. These new challenges force adaptation in production, marketing, and distribution.

Because audiences now consume media electronically, there is a growing expectation that all content should be cross-platform and available on-demand from the cable digital box, online broadband, or via mobile which operate at increasingly higher data rates. Cable companies, broadcasters, magazines, and content producers are painfully aware that in order to retain their existing customer bases and draw in new users, they must reinvent their existing business models. That means delivering value-added services, such as superior quality content and convenience (in competition to what is available through illegal downloading). They have to devise new business models for a consumer base that has grown accustomed to free content readily available online for downloading or streaming.

A national digital strategy should take these challenges into account and find ways to stimulate Canadian content for the new digital distribution platforms. A strategy that is just focused on opening up broadband service to everyone, or capitalizing on the growth of the digital infrastructure, misses the corresponding link to content and the need to create incentives for Canadian content developers.