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Communications of the IBIMA
Volume 2010
(2010),
Article ID 498727,
Communications of the IBIMA, 14 pages.
DOI: 10.5171/2010.498727
Perspectives on Digital Content Markets: A Literature Review of Trends
in Technologies, Business and Consumer Behaviour
Veikko
Halttunen, Markus Makkonen, Lauri Frank and Pasi Tyrväinen
Department
of Computer Science and Information Systems,
University of Jyväskylä, Jyväskylä, Finland
Volume 2010
(2010),
Article ID 498727,
Communications of the IBIMA, 14 pages.
DOI: 10.5171/2010.498727
Copyright
© 2010 Veikko Halttunen, Markus Makkonen, Lauri Frank and Pasi
Tyrväinen. This is
an open access
article distributed under the Creative Commons Attribution License
unported
3.0, which permits unrestricted use, distribution, and reproduction in
any
medium, provided that original work is properly cited.
Abstract
In
this paper, we focus on digital content markets (DCMs), which have
typically been seen as an offspring of technological and business
innovations. However, recent trends indicate that these two
perspectives are not enough when attempting to understand how DCMs
actually work. Technology is obviously a prerequisite for business
innovations, which in turn provide new possibilities for consumers.
Nevertheless, consumer behaviour is not only a result of technological
and business innovations, but by itself a crucial factor of DCMs. In
this paper, we attempt to clarify the general view of DCMs by carrying
out a literature study that is based on the above mentioned three
perspectives: technology, business and consumer behaviour. As a result
of our study, we present critical issues for both doing further
research and improving the ways of trading and distributing digital
content. Especially, we highlight the crucial role of societal
transformations for the development of DCMs.
Keywords:
digital
content markets, technology, business, consumer behaviour
Introduction
The
general view of digital content markets (DCMs) requires clarification.
During the ongoing decade, digital content, such as documents, images,
music and videos, has become an important source of new business (Stahl
& Maass 2006). However, companies that base their business on
digital content have also faced the ill side of the trend, i.e. the
severe problem of illegal copying and usage of digital products, also
known as digital piracy (Haber et al. 2003). Digital piracy can be seen
as a result of the easiness by which copying and sharing files on the
Internet can be done (Frattolillo & Landolfi 2008). The
emergence
of peer-to-peer (P2P) networks at the beginning of the millennium has
led to the rapid development of illegal file sharing, especially in the
area of music, and later on also in the area of videos (Einhorn
&
Rosenblatt 2005).
Although the actual impacts of digital piracy
on the content industries are controversial (e.g. Oberholzer-Gee
&
Strumpf 2007; Liebowitz 2008), it is obvious that piracy is an issue
that requires much attention in the future. One way to fight against
piracy are digital rights management (DRM) technologies, but so far
their success in this has been quite limited (Jamkhedkar &
Heileman
2004). Nevertheless, DRM can be seen as a necessary addition to the
arsenal of managing the distribution and usage of digital content.
However, besides technologies, also other solutions are needed. These
may include, for example, business models that better accommodate
consumers’ expectations (Amberg & Schröder 2007). For this
purpose,
a better understanding of online consumers is required.
Consumers
who utilise digital content over the Internet are typically young
people. Their ways of thinking and acting can differ remarkably from
those of earlier generations. There may be differences in ethical and
moral values, social relationships and behaviour as well as in the ways
of using different technologies. A more thorough understanding of
online consumers is a prerequisite for digital content products and
services that meet consumer expectations, and at the same time, form a
basis for competitive and sustainable business. Social networking with
its many applications (Facebook, MySpace, etc.) has already
dramatically changed the ways in which communication technologies are
utilised. It is obvious that in the future, virtual communities will
have a significant role in consumers’ everyday life (Constantinides
& Fountain 2008).
To analyse DCMs, we carried out a
literature study that focused on several aspects of the market
evolution. To systematise our data collection and analysis, we
developed a simple model that describes three perspectives on DCMs and
their interrelationships. The model is described in chapter 2. In
chapter 3, we analyse each perspective of the model on the basis of our
literature study. In chapter 4, we provide implications of the analysis
on the model and on further research. In chapter 5, we briefly
summarise our study.
Research model
There is no doubt that
technology has been one of the driving forces for the development of
modern societies. Over the past twenty–thirty years, information and
communication technologies (ICT) have heavily influenced individual and
social behaviour, the ways of doing business, and the structures of
societies. Thus, technology (ICT) is a main factor in our model (Figure
1).
Fig 1. The
original model
Utilisation
of technologies can be seen as a process through which individuals and
organisations aim to use technologies in a beneficial way. When
considering DCMs, the utilisation of technologies is realised in both
business solutions and consumer behaviour. On one hand, business
solutions and strategies are built taking the technological
opportunities into account, resulting in innovative,
technology-dependent or technology-driven business models. However, on
the other hand, business innovations can be seen as an impetus for new
technological innovations. Respectively, consumers utilise new
technologies in a way that may change their behaviour. This, in turn,
may entail new requirements for technological improvements.
In
the remainder of the paper, the three components of our model are
referred to as technology perspective, business perspective and
consumer perspective. Since the model was developed to purely help to
structure and analyse the overviewed literature, it must not be seen as
exhaustive. However, we find that the high level of abstraction of the
model makes it suitable to be utilised also more generally than just in
this particular study.
Analysis
of digital content markets
Technological
perspective
Digital
products, also referred to as digital content in this paper, are a
natural result of the developments in personal computing and
communication. According to Gartner (2008), the number of PCs exceeded
one billion in June 2008, and this number is expected to double by
2014. The popularity of PCs has not only been guaranteed by their small
size and low price, but also by the fact that with a modern PC, it is
easy and efficient to consume and produce all types of content, such as
text, images, audio and videos. As a result, a great variety of digital
content is currently available to their users. In addition to PCs,
there are nowadays various other devices available for listening to
music or watching videos, such as portable media players (e.g. Apple
iPod) and mobile phones with rich multimedia features (e.g. Nokia
Nseries). Mobile devices have also quickly become an important means of
accessing the Internet (ITU 2009).
From
a communicational perspective, an important development step has been
the emergence of efficient and inexpensive broadband access to the
Internet. Although the early Internet technologies, such as IP
(Internet Protocol), TCP (Transfer Control Protocol) and UDP (User
Datagram Protocol), still form the technological core of the Internet,
it was not until the emergence of WWW (World Wide Web) and its
underlying technologies that the Internet became accessible to wider
audience (Cantoni & Tardini 2006). Later on, various
improvements
concerning the presentation of digital content have followed each
other. The most important ones of these have been the common
representation standards for audio (e.g. MP3, AAC and WMA), video (e.g.
DivX, Xvid and WMV) as well as documents (e.g. XML and PDF). Whereas
digital content typically has been acquired by downloading it as files,
the increasing volume of audio and video content has also began to
shift the focus onto streaming technologies, which enable the content
to be used without having to download it entirely (Alustwani et al.
2008).
During
this decade, a new innovative way to search and share digital content
has emerged: P2P networks. These are networks whose architecture
differs from the earlier client-server architecture in a way that all
the network nodes are equal, i.e. each node can act both as a client
and as a server. Thus, P2P networks are a typical example of
distributed computing (Hawa 2008). The Napster file sharing service can
be seen as an impetus for the numerous P2P networks that have emerged
in this millennium (e.g. Taima 2002; Spitz & Hunter 2005).
Architecturally, P2P networks are complex and difficult to manage due
to their heterogeneity and scalability problems (Kwong & Tsang
2008). From the current P2P technologies, BitTorrent seems to have a
prominent status (Hawa 2008).
Since digital content is nowadays
conveniently accessible for a wide audience, the unauthorised copying
and usage of content has proved to be a complicated problem. The
technological solution to the problem has been the use of DRM, which
may include the description, identification, trading, protection,
monitoring and tracking of the rights over tangible or intangible
assets in various electronic commerce systems (e.g. Ianella 2001;
Tyrväinen 2005), using a variety of technical architectures and models
(e.g. Liu et al. 2003; Ianella 2001). Over the years, several DRM
products have been launched, but without considerable commercial
success (Jamkhedkar & Heileman 2004). This has mainly been due
to
their user experience and interoperability problems, immaturity of
technologies, etc. DRM systems have also been seen as highly complex
and extensive since they should be secure, flexible and manageable, and
also provide a support for a diversity of devices, users, platforms and
media (Michiels et al. 2005). Despite the adversity and failures of DRM
products, new DRM innovations occur all the time (e.g. Sun et al. 2009;
Lee 2009; Samtani 2009).
Business
perspective
The
first B2C digital content markets emerged in the mid-1990s around
books, newspapers, journals, magazines and some small pieces of
software, which were easily and efficiently distributable even over
slow Internet connections. However, as the speed of Internet
connections increased, so did the size of products, and gradually the
markets extended to cover more complex content products, such as games,
music and films.
This
emergence of DCMs and the transition from physical distribution to
digital distribution has opened up many opportunities for the actors
operating in the content industries. The most significant opportunity
derives from the cost savings in distribution, of which Prekumar (2003)
provides a good example from the music industry. Other opportunities
include increased spatial and temporal freedom, faster deliveries,
better service and wider selections, which are especially important
from the consumer perspective. From the content creator perspective,
the most important opportunity lays in the more direct and personal
interaction with the consumers of their creations.
Besides
opportunities, the emergence of DCMs also poses some serious threats to
the actors operating in the content industries (Clemons et al. 2002).
The most serious of these is probably digital piracy, which severely
undermines the possibilities to operate profitable business based on
digital content products. Another potential threat arises from the
redistribution of bargaining power among the industry actors, which is
driven by the recent transformations in the content industry value
networks and business models.
A
value network is a collection of upstream suppliers, downstream
channels to market, and ancillary providers that support a common
business model within an industry (Christensen 1997). The transition
from physical distribution to digital distribution has initiated some
radical transformations in the content industry value networks (Clemons
et al. 2002; Graham et al. 2004; Bockstedt et al. 2006;
Swatman
et al. 2006). First, the value networks have gone through considerable
disintermediation and reintermediation. Second, as the barriers to
entry have become lower due to the new digital distribution channels,
many specialist actors from other industries, such as Internet service
providers and telephone companies, have started to enter the content
industries. This has remarkably increased the volume and variety of
actors available, and opened up opportunities for novel alliances and
partnerships. Third, the new digital distribution channels have also
severely undermined the dominant positions of the industry incumbents
in the value networks and started to diffuse their bargaining power
more equally among all the industry actors. Because all the
distribution channels are no longer controlled by any single actor or
group of actors, there are fewer opportunities for significant
economies of scale or scope, which has opened up opportunities for the
smaller actors, specialised in the niches of the “long tail” market
(Anderson 2004), and decreased the incentives for vertical integration.
All the actors have been forced to concentrate more and more on their
own core competences and form strategic partnerships and alliances with
other actors to support these activities, causing the value networks to
become more complex, flexible and dynamic.
A business model is a
representation of a company’s underlying core logic and strategic
choices for creating and capturing value within a value network (Shafer
et al. 2005). Because a company’s business model is always more or less
customised for the value network in which the company operates, there
is a strong interdependency between these two concepts. Therefore, not
only the value networks, but also the business models of the companies
operating in the content industries have gone through some significant
transformations over the recent years. Because of this, great
heterogeneity can be seen in the business models currently found in
DCMs. To illustrate this heterogeneity, we will next present an
overview of the best-known business models found in the online music
markets, concentrating mainly on their pricing and revenue logic.
Although the overview mainly concentrates on the online music markets,
similar models can also be found in many other online content markets.
In
the pay-per-transaction (or à la carte) model, users pay a separate fee
for every song or album they download or listen. If the fee is charged
for every download, the model is often referred to as the
pay-per-download model, and if the fee is charged for every listening,
the model can be referred to as the pay-per-listen model.
(Dubosson-Torbay et al. 2004) Pay-per-listen services are typically
streaming based services to prevent users from storing the music for
later use and listening to it free of charge. In pay-per-download
services, the music can usually be freely stored, but there may be some
other restrictions, e.g. limiting the period of time a song can be
listened to or the number of times it can be burned to a CD. (Amberg
& Schröder 2007) The best-known example of pay-per-download
services is Apple’s iTunes Store.
In the subscription (or
buffet) model, users pay a periodic flat fee and receive the right to
download or listen to music either limitedly or unlimitedly for a
certain period of time. Because the usage costs are more or less
unrelated to the amount of usage, subscription services are especially
attractive for so called “heavy users”. However, compared to
pay-per-transaction services, their success is much more dependent on
the width of their music selection and the amount of additional
services and information offered because a subscription typically for
at least 30 days is a much bigger purchase barrier than a one-time
transaction fee. (Amberg & Schröder 2007) One of the best-known
examples subscription services is RealNetworks’s Rhapsody.
Many
of the recently launched online music services are advertising
supported services, which run entirely or at least partly on
advertising revenues. Because of this, they are basically free of
charge, but many of them also include some premium features, which are
liable to charge. At the time, the two best-known advertising supported
services are Last.fm and Spotify, although these both also include
features from the pay-per-transaction and subscription models.
The
redistribution model resembles the pay-per-download model in the sense
that users pay a separate fee for every song or album they download.
However, instead of just receiving the right to store and listen to the
music, users also receive the right to resell it to other users. If
they succeed in this, they are typically rewarded with a commission of
the sales. The redistribution models have been studied quite actively
over the recent years (e.g. Grimm & Nützel 2002; Nützel
& Grimm
2003; Tyrväinen et al. 2004), but there are only few actual services
utilising them (e.g. PotatoSystem).
Consumer
perspective
The
transition from non-digital products to digital products has changed
both the attitudes and the behaviour of consumers. For instance,
consumers have become more resistant to traditional forms of
advertising, whereas alternative strategies, such as viral marketing,
have gained ground (Leskovec et al. 2007). In viral marketing, existing
social networks are utilised in sharing information about the products.
Virtual communities on the Internet provide potential channels for this
kind of word-of-mouth marketing.
Huang (2005) has studied
consumer behaviour in the context of music file sharing. He noted that
a new consumer subculture has emerged, which questions certain
motivations and principles of traditional utilitarian behaviour. The
production and consumption of digital content, a great proportion of
which are hedonic and experience goods, are in many ways intertwined
processes, which may require reconsidering the notion of a “pure”
consumer.
Consumer ethics is a good example of the areas
affected by the transition from traditional products to digital
products. What is legal and what is illegal has become fuzzier to many
consumers because illegal digital content is easy to find on the
Internet, and many users both use and produce digital content. P2P
networks and file sharing have provided consumers a convenient access
to their favourite content, but at the same time, they have caused the
severe problem of digital piracy (Cronan & Al-Rafee 2007). In
general, there seems to be quite a low level of guilt toward digital
piracy (Chiang & Assane 2007).
Soopramanien, Fildes and
Robertson (2007) have found that consumers’ willingness to shop online
depends on the product in question. When consumers want to physically
inspect the product before purchasing it, traditional purchasing
channels are preferred. However, in the case of digital products, such
as music and videos, also online purchasing channels are potential
alternatives. In addition, Burkart (2008) suggests that in the case of
music, consumers should be divided into two groups: ordinary music
listeners and music fanatics. The latter group may still have good
reasons for owning the physical products.
Since the Internet has
become a potential alternative for consumers to acquire products and
services, it would be interesting to know what are the actual
motivators and barriers to online shopping. In a study by Chiang and
Assane (2007), the main motivators for file sharing were costs, time
and the access to content that was hard to find otherwise. In another
study by Ahuja, Gupta and Raman (2003), convenience, time saving and
better prices were found to be the most important motivators while
security and privacy concerns seemed to be the biggest barriers. The
barriers should be taken seriously since perceived risks play an
important part in consumers’ decision-making and behaviour, and
consumers also tend to perceive higher levels of risk in online
shopping compared to traditional shopping (Kunze & Mai 2007).
Music
is one of the most popular content types delivered over the Internet. A
study by INDICARE (Dufft et al. 2005) polled the preferences of music
consumers. It found that consumers prefer music files to be
transferable between different devices as well as sharable with family
and friends. In general, consumers seemed to dislike different kinds of
restrictions in relation to music consumption. In regard to DRM, 55 %
of the respondents thought that DRM helps in compensating the artists,
whereas 62 % of the respondents thought that DRM only helps the music
industry to increase their profits. Altogether, these findings can be
interpreted in a way that consumers are more against DRM than for DRM,
i.e. they see it serving the interests of the intermediaries instead of
those of the artists and other content creators. Thus, it is not a
surprise that some studies (e.g. Haber et al. 2003) suggest that DRM is
not the sole solution to the severe problem of digital piracy.
Implications
This
chapter is divided into two sections. In the first section, we consider
our research model on the basis of the reviewed literature and rebuild
the model. In the latter section, we provide a list of crucial issues
for further studies.
Reconsideration
of the model
In
this section, we consider the linkages between the three components of
our model and, as a result of the analysis, redraw our model.
Technology–Business.
When considering DCMs from the technological perspective, P2P
technologies seem to be the most challenging ones. They provide both
outstanding opportunities and substantial threats. P2P networks are not
just technological networks, but also social networks, which are part
and parcel of peoples’ everyday life. Whereas earlier online business
models might have been technology-dependent or technology-driven, in
new business models, consumers’ ways of utilising the networks as well
as their attitudes toward technologies should be more carefully taken
into account. For example, when trying to deal with the piracy problems
of P2P networks, DRM does not seem to be the right solution since most
consumers are against any restrictive technologies. Thus, if
technologies, such as DRM, are utilised, it must happen in a way that
can be seen beneficial from consumers’ point of view.
Online
businesses will also face the convergence of information and
communication technologies. Computer and mobile networks as well as
television will most likely evolve to have a common base. This is a
crucial factor when developing sustainable solutions for DCMs.
Technology–Consumer.
For a consumer, the above mentioned P2P networks may appear as an
unlimited and unrestricted resource. They will provide an easy and
efficient way of proliferating digital content with few restrictions.
As acquisition channels, they are often superior to other alternatives.
It is well-known that two factors are especially important when IT
users form their attitudes toward technologies. Thesefactors are the
perceived ease of use, and perceived usefulness (Davis 1989). When both
of these factors are in place, it is likely that the technology will be
well received. Concerning the technologies reviewed in this paper, P2P
technologies seem to be widely accepted by consumers, while DRM is
strongly resisted.
Business–Customer.
From the analysis of the two linkages above, we can conclude that
consumers’ attitudes and behaviour should form the basis when
developing new business models. Although this finding is not
surprising, it must be remarked that previous business models seem to
have been based more on efficient utilisation of technologies rather
than on thorough understanding of consumers’ expectations. New user
generations of ICT are not plain users – they are also active creators
of the environment they use. Thus, in the future, it can be very
difficult to make a clear distinction between creators and consumers of
digital content. We believe that this phenomenon reflects wider changes
in the societies. Thus, it deserves attention not only as part of
business environment but also as part of the whole society.
Enhancing
the model with ‘Society’. Regarding DCMs, technologies, businesses and
consumers form a complex whole that is in a continuous evolution.
Changes in one component also affect the other two as described in the
brief analysis above. In the context of building new information
systems, technology and business aspects tend to have a dominant role.
However, as Spitz and Hunter (2005) and Boczkowski (2004) point out,
especially with the recent ICT innovations technological
transformations should be considered as social processes. Without
underestimating the importance of technological and business
innovations, it must be remarked that all innovations take place in
their societal context. With respect to new media this is even more
important.
Technologies, businesses and consumers are all
included in, and parts of the surrounding society. Like Spitz and
Hunter (2005) note in their analysis of Napster, technologies do not
spring from void, but they must have a favourable cultural ground. The
values and practices of the members of a society have a crucial role in
the adoption of new innovations (Rogers 2003). For example, Wikipedia
is a well-known, free-to-anyone application that is widely used by a
large number of people. Hansen et al. (2009) have defined Wikipedia as
an emancipatory system. One could argue that the success of Wikipedia
just originates from the emancipatory tendencies in modern societies.
Society
is not only a fruitful ground for new innovations. It is also a pivotal
factor in preventing the unwanted consequences of new technological and
business innovations. Different parties have different motives and
aims. All of them should be considered at the level of the
whole
society. Regarding current DCMs, digital piracy seems to be the major
problem. The problem reflects inconsistencies in the values and actions
of the different actors. Since unilateral measures like restrictive
legislation or technologies cannot alone resolve the problem, there is
a need for a comprehensive societal planning of the future. An in-depth
understanding of all the important factors of DCMs is
necessary.
Highlighting the crucial role of societal development, we redraw our
model as depicted in Figure 2.

Fig
2. The redrawn model
Implications
for further studies
As
already discussed in this paper, online businesses based on digital
content, such as music and videos, face several problems that are not
relevant to traditional business – not even to online business based on
traditional goods. The main problem of digital content is the easiness
of consuming it illegally. In a short term, this can be seen as a
problem of content providers, but in a longer term, the question is
more general by nature: Who actually pays for the content, and who will
care about creating and producing high quality content, if the creators
and producers of the content are not fairly compensated?
Actually,
the problem is not only about the illegal copying and usage of digital
content, i.e. digital piracy, but it is also about the changes in
consumer behaviour, and furthermore, about the overall changes in
society. For older generations, the Internet is either a distant thing
or a useful tool for getting information or getting some everyday tasks
done, whereas for younger generations it is a means to make friends,
communicate and share experiences, and as part of this, also to share
digital contents. We have already discussed how a simple moral
question, what is right and what is wrong, may be responded differently
by different generations. Thus, also the problem of digital piracy may
be seen differently by people of different ages. When trying to predict
the future, we must above all concentrate on the younger generations
since their ways of thinking and acting are pivotal when building new
sustainable solutions for both businesses and the societies.
In
our literature survey, we found that most of the studies on DCMs have
so far been positioned in the technology and business domains of our
model, and therefore future studies should concentrate more on actual
consumer behaviour and its interdependencies with technological and
business issues. These issues can be summarised as follows:
First,
since the younger generations will be the “heavy users” of digital
content in the future, what are their attitudes toward digital content
as a product? What do they think about online services and distribution
channels, how willing are they to pay for the products, what would they
consider a fair compensation mechanism and how effective would
different business models and marketing mixes prove to be? Furthermore,
how do different consumer segments (e.g. ordinary music listeners vs.
music fanatics) differ from each other in relation to their motivations
and behaviour, and is there any variation in these issues between
different content categories (e.g. music and videos)? Who are the
opinion leaders when it comes to digital content?
Second, if
consumers are not willing to pay for digital content, what are the
reasons for this? Are the products not providing them with enough
benefits and value, or is there something wrong in their pricing? Or
are there perhaps other barriers, such as privacy concerns (e.g. misuse
of private information) or security concerns (e.g. security of payment
systems), that might influence their behaviour? What could be done to
solve these issues? Moreover, if consumers are not willing to pay for
digital content at all, how should their production be organised?
Should we resort on market mechanisms, or on alternate solutions such
as Internet or ISP levies already suggested in New Zealand (NZ Herald
2008) and Canada (CBC.ca 2009).
Third, since there are many
different technologies, devices and distribution channels available
(e.g. the Internet, television, mobile phones and other mobile
devices), what pros and cons do consumers perceive in each technology,
and in which contexts do consumers prefer each technology? Are there
differences between consumers in relation to these perceptions and
preferences? What are the implications of technological convergence to
all this?
Summary
We
summarise our study as follows. First, the technological solutions that
have enabled the new online business based on the distribution of
digital content have also enabled the illegal copying and usage of that
content in a way that is difficult or even impossible to deal with
purely technological or legislative means, such as DRM or copyright
laws. In future business models, new online consumer subcultures should
more carefully be taken into account. These subcultures, which are
heavily based on social networking and virtual communities, have a
strong impact on the ways consumers both think and act. It is not a
surprise that DRM, for example, has raised strong resistance among
consumers. DRM, which basically aims at limiting the illegal copying
and usage of copyright protected content, has little chances to be
successful if consumers consider it just as another restriction that
lowers the value of the content.
In brief, consumer expectations
and their ways of thinking and acting as well as societal changes
throughout the society should be understood more thoroughly. This
understanding should form the basis for building successful and
sustainable solutions for digital content distribution. Since the
intentions to behave in a certain way in certain situations are an
appropriate surrogate for the actual consumer behaviour, further
studies could focus on building consumer behaviour models that, on one
hand, utilise the previously proven theories and models, but on the
other hand, take the specific features of online consumption and
digital content into account. In addition, there is a need to study
further the actual consumer behaviour itself. In this way, it is
possible to gather information that could be used to improve the
applicability and accuracy of the before mentioned intention-based
models.
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