WORKING PARTY ON THE INFORMATION ECONOMY
DIGITAL BROADBAND CONTENT PANEL AND GOVERNMENT SESSION, 3 JUNE 2004
SUMMARY AND CONCLUSIONS
The panel was designed to analyse and discuss changing digital broadband
content value chains and business models and help identify new challenges
and issues facing the development and delivery of digital content. Three
sectors presenting different dynamic characteristics of digital content
development and delivery were presented and discussed in detail: scientific,
technical and medical publishing, music, and online computer and video
games [see document DSTI/ICCP/IE(2004)7, Table 1 for a list of these characteristics].
The summary and conclusions draw out the generic themes coming from the
panel and afternoon government presentations. Summaries from the individual
sector panel sessions are at the beginning of each section below at pages
9, 13, 17 and 22. The government session was designed to provide an initial
overview of policy issues and developments in OECD countries. Short versions
of the six government presentations are presented in the subsequent section.
Broadband content: Changing value chains and business models
Rapid change and high potential. The generic themes of the panel were:
- Network convergence and rapid diffusion
of high-speed broadband has shifted attention towards broadband content
and applications (new demand for the digital economy) that promise new
business opportunities, growth and employment. The potential for digital
content growth is very high and growth is only just beginning. Technologies
to assure the diffusion of content and content products are increasingly
R&D-intensive (faster networks, new platforms, softwareintensive products,
virtual reality applications, data-base management, etc.).
- Demand for content from consumers and
intermediaries exploiting the potential of multiple content delivery
channels is extending and supplanting infrastructure push as a major
- Disruptive technologies, and broadband
in particular, are challenging established business models while creating
important development opportunities in all three sectors. Mobile content
and applications received particular attention and are potentially major
drivers of mobile telecommunication service and content industry revenues
in OECD countries.
- The relationships between content originators
and final users are changing, intermediaries are being created or replaced,
and attitudes to content ownership and acquisition are changing. However
complete disintermediation and direct contact between content creators
and content users has not so far developed to a significant extent in
the three sectors.
These developments are being felt
by the digital content industry in five ways:
- Users are challenging established ownership
and distribution arrangements, whether through P2P networks or open
access/open archive publishing conventions, or through new mass distribution
and inter-community trading. Network availability and broadband applications
create possibilities for new forms of expression by users (“users as
content creators”). Each of the sectors is restructuring value chains
and developing different business models to meet these challenges. Responses
differ in the different sectors, with digitisation and digital delivery
very high in scientific and technical publishing and business models
developing in the brand new on-line games sector which satisfactorily
deals with intellectual property and copying issues.
- New pricing models and segmentation of
value chains has put pressure on the digital content industry, but the
currently successful models continue to be new versions of subscription,
pay per view and access charges. Positive revenue feedback cycles are
generated when growing numbers of paying users foster the development
and distribution of online content and services, which in turn draw
more paying users.
- Challenges for the digital content industries
include: development of innovative content adapted to broadband; co-operation
and changing roles among value chain players (in particular between
content owners, network operators, Internet service providers, hardware
and consumer electronics suppliers); extending broadband access; digital
piracy and the role of file-sharing; digital rights management and customer
authentication; and efficient payment methods (especially for micro-payments);
content standards (e.g. digital object identifier and metadata standards
in scientific publishing) and interoperability.
- Major concerns are the role of intellectual
property in protecting ownership in both products and services, the
future development of copyright in a digital world, enforcing these
rights, defining fair use and the boundaries of legitimate use, and
the interaction between competition law and copyright. There are important
issues in providing content for new platforms; licensing negotiations
can be lengthy and complicated due to differing legal regimes across
platforms and countries.
- Compatibility and interoperability issues,
oligopolistic content markets with a strong role of publishers, exclusive
access to content or networks (network access gatekeepers) that could
slow deployment of broadband applications and content, are all issues
meriting further attention.
|Challenges. In each
of the sectors it was clear that existing and new commercial players can
overcome perceived difficulties and migrate to being network content providers.
Some sectors have successfully launched new business models (online games)
while others are still experimenting with new approaches. In all cases the
required levels of innovation are high. In particular, participants noted
- Access points, mobility, portability and
delivery media are all changing.
- There are no readily established business
models to simply pick up and use. Old business models do not automatically
apply to emerging markets. On the other hand, investment in digital
content and digital delivery has to be sustained by margins derived
from traditional market models until successful new models emerge, are
tested by commercial operators and accepted by users.
- Productivity gains are vital to reduce
prices for users, but in many cases these gains require structural change
in content creation and delivery industries. On the supply side the
new generations of ICTs are leading to changes in the market structure
of telecommunications, information services and content firms. Essentially,
all the players must reinvent themselves. Network operators need to
generate revenue to support investment in next-generation networks and
replace loss of traditional business. For intermediaries, existing players
are reinventing themselves, some are superseded and new ones emerge.
- New content value chains are creating
new sets of activities which different or new players in the value chain
can assume: content production, marketing of publishing offers, rights
acquisition / management, packaging and distributing content, content
protection, management of emerging publishing services, sale of advertisement
space, profiling users, billing management, payment management, customer
relation management, security/control, access management and other activities.
Single suppliers or providers manage few of these multiple roles; they
are often joint or separate activities of content providers, network
operators, intermediaries, etc. There are new roles for content providers
and content aggregators, network operators and intermediaries (including
revenue sharing among them), which involve a high degree of co-ordination
as well as competition along value chains, all of which have impacts
on market structures.
Broadband provides the potential to accelerate developments and capitalise
on new market opportunities that have impacts on growth and employment.
Government roles include:
- Public policy needs to acknowledge these
changes and adjust policy and the regulatory environment to dovetail
with them (adapting existing frameworks to take account of digital content
development and new digital transactions and related policy issues described
- Recognition that the speed and structure
of change has to be measured and economic consequences for networked
and traditional businesses in content sectors analysed.
- Recognition of the role of governments
as content creators and users, and the role of government procurement
and the establishment of best practice guidelines.
- Some industries have been able to deal
with the emerging challenges more rapidly and there are many lessons
to be learnt through horizontal analysis and international dialogue.
|Many of these issues were
also covered in the government presentations in the afternoon session (see
Issues related to digital content development and delivery identified
from the government presentations and initial case study analysis
Innovation and technology
- R&D and innovation in content, networks,
software and hardware.
- An environment conducive to content production.
- Venture capital and other financing.
- Skills and human resources development.
|Value chain and business
- Framework conditions for creation of new
business models and spread of best practices.
- Convergence issues and associated regulatory
challenges across different value chains and industries (content, communications,
and electronic equipment industries).
- Technology neutrality. Digital content
treatment consistent across different platforms.
- Competition and co-ordination issues along
value chains. New distribution and revenue sharing models (network services,
content providers, intermediaries etc.).
- Broadband policies to ensure coverage
and access to infrastructure and applications.
- Technological issues related to digital
content delivery – standards, interoperability (including DRM), etc.
- Technical protection issues including
digital rights management and watermarking.
- Infrastructure for payment and micro-payment
systems, electronic signatures, authentication.
|Business and regulatory
- Adapting established regulatory frameworks
to digital content value chains and business models.
- Protection of intellectual property rights:
Counteracting piracy, DRM as enabler of business models, clarification
of use rights along content creation and delivery value chains, digital
rights clearing systems.
- Taxation issues specific to digital content
– tax neutrality for digital content.
|Public / government
content (public sector information) and applications
- Government as model user in putting government
- Digitising public content (meteorological
data, archives, etc.) and providing access to education, cultural and
public information resources. Availability, access and pricing questions.
- Public demand: Digital content in education,
health, etc. Multi-device access (e.g. mobiles, PDA, TV, PC, consoles)
to education and cultural public resources.
|OECD work is focusing on
the following activities:
- Sector analysis, benchmarking, and review
of analytical and policy issues.
- Policy forum on specific issues.
- Organisation of panels, workshops and
ad hoc activities to address specific policy issues.
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