Companies in the media sector are regularly required to innovate in order to adapt to the desires of their viewers, as well as to the advent of new uses associated with the development of the internet and digital technologies. As in most other economic sectors, innovation has therefore become a prerequisite. Yet on the other hand, the media sector has also a few specificities that have a strong impact on how innovation can be promoted in this sector compared to other economic sectors.
Innovation is a very broad concept, both in theoretical terms and in actual policy practice. It concerns the introduction of something new with an element of valorisation (or utilisation) to it, as the OECD puts it in the Frascati Manual. In other words, innovation involves putting an invention into practical use. Media innovation has a few distinctive features.
Distinctive features
First, it is common to distinguish between product and process innovation. In the case of media, product innovation relates to all innovation concerning content and the way it is accessed by customers. Process innovation includes all innovations in the production process of media content, from creation to consumption. It also includes business model innovations. The specificity for media is that at the level of consumption it is difficult to disentangle what relates to product innovation and what relates to process innovation. Thus, the emergence of video on demand (VOD) raises issues as to which format to use, how to share revenues between VOD services and right holders, etcetera. On the other hand it is also an important change in how consumers can access audiovisual content, notably in terms of flexibility. Second, it is important to distinguish between creative and technical innovation. In the media sector, some innovations are mainly, if not exclusively, of a creative nature. Such innovation requires smaller financial investments, allowing even end-users to be involved in the innovation process. In other words, users can have a crucial influence on the way a technical innovation is adopted. As a result, innovation is more likely to stem from the margins, that is to say from small and medium enterprises (SME’s), rather than from major companies. Finally, innovations can be distinguished according to their scale of use, using the concept of the knowledge funnel and its three successive phases. In the first phase, a certain issue comes under scrunity (for example: How to transfer music files from one computer to another?) or creators produce a whole new solution or cultural expression. The innovation has a limited scale as it only concerns a restricted number of people (for example researchers or hardcore fans) and is made by pioneers. In the second phase, one starts transposing research into development. The experimental outcome of the first phase becomes something more accessible, the innovation is more explicit. In the third phase, concrete, replicable new processes or products are developed. The funnel can be applied to the trajectory of famous bands, from the first innovations (ways of composing or performing, image, etcetera) that attracted the few first fans to the adoption of their practices by the mass market (and often a parallel reproduction of past innovations that become mere gimmicks). Of course, not every innovation follows a linear path. However, in general, the early phases are crucial in order to open up innovative op¬portunities and to sustain long-term innovation dynamics, and these phases are known to be more subject to private sector under-investment, and may therefore warrant public intervention.
Promoting media innovation
In general, firms can be expected to innovate when their cost of doing so is lower than the added value that they can expect to appropriate. Typically value is created either when innovating firms can reduce costs through the increase of efficiency in corporate processes and/or when they can affect the behaviour of users through the creation of new markets or the enlargement of existing ones leading to increased revenues. Sometimes however, innovation generates positive externalities, that is to say benefits that are not accounted for by market mechanisms. When it comes to media, these externalities can consist of media content that will become part of a heritage that will still be enjoyed decades after their first release. Think for example of films. Hence, public intervention to promote innovation (subsidies, tax incentives) is needed with such market failures when on the one hand private value is inferior to private costs, while on the other hand social and private values taken together are superior to private and social costs. Beyond, it is possible to identify system failures: failures regarding the relationships between actors such as firms, and institutions such as the regulatory framework. One type of system failure that is particularly relevant to analyze is the reaction of traditional media industries to digital technologies. This is a so-called transitional failure, the inability to adapt to new technological developments. The role of policymakers towards system failures is often suggested to set the framework condi¬tions in which innovation systems can better self-organize. Public intervention may be even more important in the media sector, which has the characteristics of a public good, contributing to cultural diversity and pluralism. Indeed, as innovation keeps industries competitive, supporting innovation with domestic players might strengthen them to face competition from media conglomerates.
Methodological issues
Together with colleagues from the IBBT Digital Society Department (www.ibbt.be/en/departments/p/detail/digital-society), I developed and applied a framework to analyze the government support to innovation in the broadcasting sector in Flanders and the potential impact of modifying the organization of such innovation. Our results were published in Deliverable 2: Desirable and Feasible Scenarios for Collaborative Innovation in the Flemish Media Sector (IBTT-SMIT 2011). This media innovation policy is part of the broader and explicit ambition to make Flanders one of the most innovative and competitive regions in Europe. The analysis was mainly qualitative, with a few quantitative elements, due to the limited availability of data and the difficulties of forecasting. It drew on a number of inputs, including a literature study, document analysis, stakeholder interviews, analysis of practices abroad and a policy analysis.We started our analysis with identifying the problems and in a related way the objectives of the intervention. We then outlined five scenarios for innovation policy in the Flemish broadcast sector, written down in ‘Evaluating Innovation Policies in the Creative Industries: Assessment of the Flemish Media Sector’ (2012, in: Pioneering Minds Worldwide by Giep Hagoort et al. (ed.)). We disentangled every scenario, pointing at their distinguishing characteristics and their likely consequences for innovation in the Flemish media sector. The results of our study were taken into account in the designing of MIX, the Flemish Media Innovation Center launched in January 2012 to ‘support innovation projects for and with the media, and to give a new impulse to the Flemish digital media landscape’. Beyond our policy recommendations, the study also provided results of interest to other governments and researchers looking into the field of media innovation. First, support will change depending on the type of innovation to be promoted. Thus, none of the scenarios would aim to produce content innovation to any significant extent. This does not mean that content innovation is not important, though. From the stakeholder interviews it became clear that public or private television channels compete directly through content. Therefore, they are unlikely to collaborate to innovate in these fields. Direct support to content innovation might therefore be more necessary. It is on the other hand easier to make media companies collaborate within process innovation projects: projects concerning the establishment of standard technical formats or of common online platforms, on which every company will try to differentiate through content.
Finally, there is an underlying conflict between the short-term profit-maximizing interests of the stakeholders of the media industry and what should be the long-term interests of policy makers, although public companies do not necessarily have a more long-term view. This conflict needs to be solved, considering that there are different phases in the innovation process, both short-term and long-term, that complement each other. Only then can Flemish media thoroughly distinguish itself in the field of innovation.
Auteur: Tekst: Heritiana Ranaivoson, is senior researcher at IBBT-SMIT (Studies on Media, Information and Telecom-munication), part of Vrije Universiteit Brussel. His research and teaching fields include media economics, cultural diversity and cultural industries. He got a PhD in economics (hranaivo@vub.ac.be).
