The document discusses a modeling methodology for understanding the dynamics of creative industries and the impact of piracy on these sectors. It highlights the changing consumption patterns due to technological advancements and suggests that piracy may not be as detrimental as perceived, instead potentially promoting digital sales. Additionally, it proposes strategies for adapting to a digital environment and emphasizes the need for legal clarity and collaboration between pirates and legal content providers.

1. Abi

2. By:
ABI
DODBIBA

3. ¡ A
modelling
methodology
¡ Helps
in
creating
virtual
representations
of
complex
systems
dominated
by
feedbacks
¡ Systems
are
complex
(non-­‐linear),
closed
and
change
over
time
¡ Most
important
principle
of
SD:
Structure
generates
behaviour!

4. ¡ Actually:
from
Soap
(solid
vs.
liquid)
¡ Another
important
example:
Cameras
(analog
vs.
digital)
¡ However:
there
are
differences
with
the
case
of
digital
distribution
of
creative
work

5.
¡ The
creative
industries
throughout
the
world
are
claiming
that
piracy
is
the
cause
behind
their
loss
in
profit.

7. ¡ Technological
development:
increased
access
to
the
Internet
and
increased
usage
of
personal
devices
¡ Attitudes
towards
consumption
have
changed
¡ In
the
meantime,
the
distributors
of
content
and
legal
institutions
have
not
kept
up
with
the
pace
of
tech
innovation
¡ Lack
of
definition
on
what
piracy
–
where
do
you
draw
the
line
of
legal
vs.
illegal

8. ¡ Young
adults,
mostly
students
and
males
¡ Lower
income
–
could
be
related
to
the
young
age
¡ Usually
assign
to
creative
content
a
lower
value
than
its
retailing
price
¡ Risk
lovers
–regulations
seen
as
a
challenge,
rather
than
an
prohibition
¡ Skilled
internet
users
¡ Tend
to
apply
neutralization
techniques
-­‐
denial
of
responsibility,
denial
of
injury,
denial
of
victim,
“everybody
else
is
doing
it”,
entitlement
¡ Feel
low
magnitude
of
consequences

9. ¡ Piracy
eliminates
the
notion
of
scarcity
à
Supply
is
substantially
increased
¡ Also,
supply
and
demand
are
not
clearly
distinct

10. ¡ 3
main
sections
in
the
model:
§ Content
distribution
–
how
do
people
acquire
content?
§ Revenues
of
the
creative
industries
–
how
does
the
industry
earn
their
income
§ Employment
–
how
many
are
employed
in
the
sector

11. Content
distribution
3
channels
of
distribution
that
make
it
possible
for
consumers
to
get
ownership
of
content
1. Physical
distribution
–
physical
purchase
of
content
in
CD,
DVD,
or
hard
copy
print
format

12. 2. Digital
distribution
–
purchase
of
content
in
digital
format
Content
distribution

13. Content
distribution
3. Pirated
consumption
–
illegal
downloading
of
copyrighted
content

15. ¡ Total
Revenue
=
physical
sales
+
digital
sales
+
streaming
subscriptions
+
alternative
consumption
¡ Streaming
subscription
–
access,
but
no
ownership
¡ Alternative
consumption
–
revenue
coming
from
purchase
of
derivative
products
of
creative
content,
such
as
live
events
and
other
merchandise
¡ +
Sampling
effect
–
purchase
in
digital
format
that
comes
from
piracy:
consumers
test
content
before
deciding
to
purchase

16. ¡ The
part
of
sales
revenue
that
remains
after
covering
production
costs
for
physical
distribution
and
paying
the
Government’s
fees
defines
employment
¡ The
base
of
employees
is
divided
into
core
and
non
core
employees,
with
the
ratio
between
the
two
favouring
core
employees
¡ Core
employees
are
responsible
for
the
creative
process
and
are
paid
more
than
non
core
employees,
who
are
responsible
for
the
production
of
complementary
goods

18. 2:21 AM Sun, Aug 11, 2013
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Page 1
2007.00 2008.50 2010.00 2011.50 2013.00
Years
1:
1:
1:
0
4e+11
8e+11
1: Industry profit
1
1
1
1
¡ Revenue
-­‐
decreasing
prior
to
2013,
because
the
cost
of
physical
production
is
too
high
compared
to
total
sales.
This
leads
to
firing
of
employees
and
slowing
of
production.
¡ Towards
the
end
of
2012,
digital
sales
become
higher
than
physical
sales,
which
leads
to
the
reawakening
of
the
industries.
After
2013,
the
continued
increase
in
digital
sales
drives
up
total
sales,
employment
and
profits.

19. 4:12 AM Sun, Aug 11, 2013
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2007.00 2012.75 2018.50 2024.25 2030.00
Years
1:
1:
1:
0
3e+13
6e+13
1: Industry profit
1 1
1
1
¡ The
fall
in
total
sales
until
2013
leads
to
an
decrease
in
the
number
of
employees
(core
and
non
core)
working
in
the
industries.
¡ Employment
picks
up
after
2013,
when
total
sales
start
increasing.

20. Unique pieces
Marketable pieces
Pieces for digital use
Creation rate
Core employeesCreative Coefficient
+
+
+
Pirated distribution
+
Market multiplier
Commercialization
rate
+ +
Physical
distribution rate
Yearly physical sales
Yearly digital sales
Number of streaming or
preview subscriptions
Alternative
consumption
Avg physical price
Avg digital price
+
Sales Revenue
+
+
+
+
Avg streaming
subscription yearly
price
Avg price of alt
consumption
Streaming revenue
Revenue from alt
consumption
+
+
+
+
+
+
Industry profit
Industry costs
+
-
-
Digital
distribution rate
+
+
-
Employment cost
Production cost
+
+
Sampling effect
+
+
Discard rate
Extinction rate
-
-
Cost per core employee
Cost per non core
employee
Non core employees
+ ++
Wage worth
Max new number
of hirings
Core hiring
Core firing
Non core hiring non core firing
+
-
+ -
+
+
Gov's revenue
+
Gov's rev fraction
+
Propensity for
physical purchase
+
Effect of price gap
on distribution
-
+
Propensity for
digital purchase
+
Trend of spending
disposable income over
time
-
Avg shelf time
Digitalization trend
Avg extinction time
+
-
-
Reproduction rate
Reproduction factor
+
+
+
+
Piracy multiplier
Technical dexterity
Propensity to pirate
Effect of average
price on piracy
Effect of release
time delay
Forgone revenue
+
+ + +
-
+
Total reach
+
+
+
+
+
<Physical
distribution rate>
+
+
+
Avg unitary cost
+
Effect of HBC
+
<Effect of HBC>+
Total employment
capacity
+
-
<Production cost>
-
-
<Avg digital price>
Total new
employment needs
+
+
-
-
20

21. ¡ Model
construction
was
focused
on
distribution
¡ The
structure
for
the
creative
process,
employment
and
cost
are
simplistic
¡ It
is
not
possible
to
distinguish
between
the
various
smaller
markets
within
the
model
(music,
film,
book,
and
software
market
respectively)
¡ Prices
stay
constant
even
though
they
can
be
a
mechanisms
to
offset
the
negative
impacts
of
piracy
¡ No
capacity
limitations,
which
causes
the
model
to
grow
exponentially
in
the
long
run
21

22. ¡ Fragmented
body
of
definitions
¡ Difficulty
in
obtaining
data
à
some
had
to
be
“guesstimated”
¡ Some
variables
were
conceptually
derived
from
the
readings,
and
their
values
are
based
on
the
reported
trends,
but
there
are
no
exact
estimates,
mostly
perceptions
of
magnitude
¡ Piracy
is
not
confined
by
national
borders
à
hard
to
track
pirates
down
and
understand
where
they
operate
from
22

23. 6:02 AM Mon, Aug 12, 2013
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2007.00 2012.75 2018.50 2024.25 2030.00
Years
1:
1:
1:
0
1e+14
2e+14
Industry profit: 1 - 2 - 3 -
1 1
1
1
2 2
2
2
3 3
3
3
¡ Scenario
1:
stop
physical
production
after
2020
§ Rationale:
eliminate
production
costs
§ Method:
production
is
stopped
in
2020,
but
the
stock
physical
content
is
drained
a
little
later.
Digital
production
is
increased.
§ Result:
Profits
substantially
improve
compared
to
the
base
future
run
23

24. ¡ Scenario
2:
Pirate
and
legal
partnership
for
providing
dual-­‐valuation
copies
of
creative
content.
§ Rationale:
Foster
the
collaboration
of
pirates
and
legal
creators,
taking
advantage
of
their
best
assets
§ Method:
using
the
pirates’
platforms
for
downloading
to
sell
content
legally;
offering
two
purchasing
options
with
different
valuation
–
a
higher
priced
and
higher
quality
version
of
content
+
extras,
and
a
lower
priced,
lower
quality
copy
24

25. ¡ Young,
tech-­‐savvy
consumers
with
a
tendency
to
pirate
are
entering
the
market,
whereas
mature,
paying
consumers
are
exiting
it
¡ The
goal
of
pirates
is
not
profit
¡ Need
for
unified,
international
legislation
¡ Advertising
as
a
source
of
revenue
since
the
advent
of
free
alternatives
(such
as
unpaid
streaming)

26. ¡ Piracy
à
not
as
detrimental
to
the
creative
industries
as
it
is
claimed
–
in
fact,
it
might
even
be
a
positive
factor
in
promoting
digital
sales
(sampling)
and
alternative
consumption,
thus
expanding
the
customers
base
¡ Survival
in
the
market
is
dependent
upon
the
realization
that
companies
need
to
embrace
the
digital
aspect
of
business
¡ Successful
business
models
for
the
digital
world
are
still
in
the
making
¡ Companies
with
higher
adaptability
to
change
are
better
suited
to
the
new
digital
environment,
therefore
start
ups
and
new
comers
in
the
market
are
more
likely
to
succeed
¡ Incumbent
companies
need
to
learn
to
partner
up
with
new
comers
26

27.
Feel
free
to
ask
questions!