Working Paper: CEPR ID: DP8719
Authors: Helen Weeds
Abstract: Technological change is transforming creative media industries. Digitisation lowers recording, storage, reproduction and distribution costs, while computer-based editing facilitates higher quality and special effects. With electronic distribution a vast range of content can be made available to consumers across global markets. The distribution of industry sales appears to be shifting: the late 20th century was the era of the 'hit parade' but attention has now shifted to the 'long tail'. This paper develops a model of differentiated products with endogenous quality and heterogeneous firms to examine the implications of technological change for product variety, quality, and the distribution of firms in media industries.
Keywords: creative industries; digital media; long tail; superstars
JEL Codes: L11; L15; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower distribution costs (D39) | lower consumer prices (D19) |
| lower distribution costs (D39) | no effect on industry structure (L19) |
| lower distribution costs (D39) | no effect on quality investment (G31) |
| lower quality costs (L15) | higher equilibrium quality (L15) |
| lower quality costs (L15) | higher equilibrium price (D41) |
| lower quality costs (L15) | lower number of firms (L19) |
| lower transport costs (L91) | higher equilibrium quality (L15) |
| lower transport costs (L91) | higher equilibrium price (D41) |
| lower transport costs (L91) | lower number of firms (L19) |