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Dominic McGonigal Headshot

The Sky is Rising...But for Whom?

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There is something missing from the title of this upbeat report. The Sky Is Rising catalogues the explosion in creativity across almost every sector. More albums are being released. More books published. More films made. More photographs taken.

It goes on to trumpet the growth in consumption. We are all listening to more music, watching more films and TV, reading more books, looking at more photos. Or at least we are downloading and streaming more content.

None of this is a surprise.

For a few hundred dollars, you can buy a laptop and some software which has more power and functionality than the mixing desks in Abbey Road Studios, the Leicas of David Hockney or the typewriters of Tolkein only a few decades ago. The barriers of production and distribution have come tumbling down. It is much cheaper to produce and it is cheaper still to distribute, or rather make available to a theoretical audience of billions.

What may surprise readers is the growth in revenues from all this activity.

Books, magazines, newspapers, film, TV, music and other entertainment have made money. More than ever. $745bn - thanks to the internet.

The Sky Is Rising then jumps to conclusions. 'Content creators...are more able to make money off of their content than ever before,' it says. The report assumes all that money, or a large part of it, goes to those who have produced this creative explosion.

It doesn't. Any artist could have told you that.

The new money has gone to the new intermediaries, not the artists and not to those, new and old, who invest in them.

This report's figure for total value of entertainment is similar to the estimate by AT Kearney of the internet economy. They calculated the global internet for consumers at $732bn. They noted that, although quality content is a major driver of the internet, a typical household 'will spend most of its internet budget on the access device and the access connection.' Filesharing, both legal and illegal generates over half of all internet traffic but accounts for only 2% of revenues.

So who gets this new-found wealth? Not the creators who produce it. The main beneficiaries are those providing access and devices.

The internet has brought about a transfer of wealth to the new intermediaries. Under the 'rules' of the internet it is now possible to build a business based on other people's content without paying anything for that content. It is even possible to profit from the widespread availability of free illegal content, through advertising based on the traffic generated. In fact, the normal 'rules' of business are yet to be established online.

It is hardly surprising then that the biggest companies on the internet are those based on things that are harder to steal online, such as hardware and eyeballs - Google, Apple and Amazon. At a national level, the ISPs are often the largest internet business as a result of their broadband access revenues. These companies have created very successful businesses, but in a fully competitive market, with an established value chain, you would expect those revenues to be distributed to all who create value.

Yes. The sky is rising - for the ISPs, the hardware manufacturers and the search engine(s). But for the artists and their producers and investors, the golden age has been eclipsed by planet free.