This research was
commissioned by the Dutch Ministry of Economic Affairs, Agriculture and
Innovation. A mix of research methods was used: literature review, in-depth
interviews and an online survey of consumers.
The four sectors
differ substantially in terms of digital distribution. The music industry has managed
to offer a comprehensive supply of digital music, consisting of download and streaming
services. The business case for streaming still has to prove successful in the
long run. Apart from the major brands that offer a vast collection of music to
mainstream consumers, there are also niche players that cater to specific
genres. Suppliers of music have to negotiate with numerous parties to clear
copyrights. This is a serious obstacle, but some (large) firms have succeeded.
In the Netherlands 40% of music transactions is digital, but the digital share
in revenues lags behind with 15%. The explanation might be that legal digital music
stands out insufficiently compared to illegal sources and the physical product
on those factors that matter most for consumers when they choose where to
consume music: the convenience of the transaction, the price and the scope of
the library of songs. Put differently, consumption of illegal offerings or
physically distributed music may be preferred.
The supply of audio-visual
content lags behind the music industry and is fragmented and incomplete. This
report concludes that the industry’s strategy of windowing and the trouble of clearing
rights are important determinants of that result. The market for digital AV is
in its infancy, although Video on Demand shows strong growth. As long as the
available libraries are relatively incomplete and slow in including new
releases, this report expects the market for digital AV to lag behind.
Digital distribution
of games does not meet serious obstacles. De digital market is almost as large
as the offline market, and some games or add-ons are exclusively sold
digitally. Consumers sometimes prefer the bricks-and-mortar store for the base
level of a game, due to the large amount of data involved and the low price
advantage of online offerings.
The market for e-books
is almost a mirror image of the market for digital music: the supply of e-books
in the Netherlands is low, while consumers seem to be willing to read electronically
and experience a lack of titles. New releases are increasingly also published
as e-book, albeit with some delay. The backlist – older titles that are not
being marketed anymore – faces serious obstacles in digitization. The
availability of titles from the backlist is poor. An important reason is the
difficulty to find the relevant party to clear copyrights for older titles. The
limited size of the Dutch speaking population is also a relevant obstacle. The digitization
of a Dutch novel from the backlist will be less profitable than the
digitization of a French or English novel.
Digital markets are
dynamic and some of the issues raised in this report may become less important
in the future. The music industry has succeeded in tackling issues that some
years ago were considered as obstacles. Other industries have also managed to
overcome potential problems associated to digital distribution and retailing.
This suggests that the industry will also resolve the issues identified in this
study.
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