3.1.1 Content industries
Commercial exploitation through active licensing of intellectual property rights (copyright) is the trading framework that underpins much of the content sector. The subjective value and project-based nature of content products are characteristics that distinguish it from more traditional manufactured products. There is a high degree of uncertainty surrounding which products will achieve market success, so investment decisions can be perceived as high risk. Consequently, film, TV, music and computer games companies in particular will attempt to spread the risk, by working concurrently on a number of projects on the basis that market success of one will mitigate the costs of the less successful. The historic approach in the television world, for example, has been for production companies to get forward commitment from the broadcaster, distributor or publisher, to secure finance in advance of production, relinquishing rights to future license income in return. In music, recording artists receive advances on signing to record labels that may never be recouped - often leaving the artist permanently in debt to their label. It has been standard practice for a long time for major record companies to charge the artist for making their recordings and then to retain the rights in those recording copyrights.
Different approaches are taken in different sub-sectors to maximise the return on investment. Release of the content, for example in the film business, has historically been tightly managed through a series of windows to maximise return potential, typically starting with theatrical release, moving to subscription TV, DVD, DVD rental, Pay to View TV and finally Free to Air.
The extent to which the ideas originators have been able to retain ownership of the value in their IP, in negotiations with the larger organisations (traditionally the route to market), has long been a source of contention. Clearly, digitisation of content and the Internet are opening up new possibilities and distribution opportunities, challenging the traditional model and potentially levelling the playing field for participants. Within the independent production sector, for example in TV, film and to some extent computer games, the business models have only recently started to allow producers to retain global rights in the content they created. The democratisation of access to distribution is enabling a new range of market strategies. This in turn is shifting more power to the producer and the content originators.
Perhaps partly in response to this rapidly changing environment, in recent years there has been steady consolidation within the industry resulting in the emergence of large media multinationals with broad interests across a number of media sectors, for example Sony (Games, Music and Films); Universal (Music and Films); NewsCorp (Publishing, TV, Film, Interactive Media and Film).
3.1.2 Services and artefacts industries
By contrast with the content industries, the services and artefacts sectors (e.g. architecture, advertising, fashion design, arts and crafts) have traditionally operated on a contract basis (delivering a one-off service against a specific client brief, relinquishing future rights to the IP) or as a designer maker (both designing and producing individual or low volume runs of a single design for sale). Increasingly, designers are exploring new business models that involve retaining ownership of IP to derive income beyond the initial design project e.g. product design companies earning income from royalty on sales.