Published: 21. 6. 2017 in President word

Is digital economy changing our branch of industry? No, perhaps, for sure!

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If the digital transformation changes arts and galleries, it will definitely come fast to your branch.

Article in the magazine "Srpska ekonomija"

When we talk about the digital economy, we often get the answer: "Yes, but not in our industry." We all agree that the bookstores and books are heavily influenced by the digital revolution and that the business models in the industry changed. Sales of electronic books, newspapers and magazines, electronic readers have become big business and generate income. Changes in the music industry are also accepted. Product is digitized and instead of vinyl records, cassettes, CDs or DVDs, users nowadays download or stream digital version of the music they want to listen to a variety of devices, from mobile phones to TV. They accept that the payment model went through different phases of sales, from the physical media with songs, through the sale of digital copies of media, then selling individual songs to the free and chargeable subscription model, where for a certain amount per month users can download or stream an unlimited number of songs including the latest hits. Spotify is a good example of how such a business model is used. Although, initially, the authors and companies that record and promote songs were against it, because they could not understand whether it was possible to make enough revenue and profit in such a model, they quickly changed their minds. Siri and other programs, which use voice and natural language as input, and artificial intelligence in processing, further help the users find songs they want to hear. Analysts claim that using these technologies significantly increases listening to music.

Film and video industry follow the example of music industry, although there is still a difference. The latest movies are not put on the list of Netflix and Amazon Prime so quickly and they cannot be purchased immediately neither through subscription nor as individual products (iTunes, Amazon).

Video games follow the same examples in the introduction of new digital business models and introduce subscription, as well as TV programs usually offered by telecom companies, companies that offer Internet services and cable television providers.

What is it that they changed in their business model? Firstly, the very product is digitized. Instead of a physical carrier, they all offer a digital format that can be easily transmitted via the Internet. As the main channel, they use the Internet. It was a completely new experience for users. Video clubs, record stores, music cassettes, CDs and DVDs have been replaced by websites. Marketing is mainly digital using social networks and popular Internet sites.

All processes are automated so that if you subscribe to Netflix, the entire application process, payment and opening of your account is automatic and immediate and the same goes when selecting and streaming the selected movie or series.

The structure of revenues switched from the sale of the physical medium to, mainly, subscription. Payment is in advance for a certain period, and the use is not restricted. Expenditures are lower due to automation and elimination of many costs in marketing, sales and maintenance.

Partner ecosystem has completely changed in all business activities. In marketing, digital media took over the role of the classic media. In sales, the Internet replaced chain stores and department stores. Maintenance and support is done also through the Internet or through call centers.

Basic resources are related to IT and software performing all processes in the business. There is a great demand for programmers, analysts and other IT personnel.

The market is global and entry into any new country requires minimal costs.

The value of that offer for customers is completely changed, and execution is immediate.

Many companies didn’t adjust to the new business model and simply disappeared. About 50% of bookstores are closed, while the Amazon is one of the most valuable companies in the world. The most famous case is disappearance of the Blockbuster, which didn’t adjust, even though it was a leader in renting movies. Netflix did the opposite. It introduced the digital transformation and now it has a big number of subscribers around the world, and is worth over 70 billion dollars.

Does the digital revolution affect the visual arts or is it far from the reach of the digital economy?
Five years ago, I visited an exhibition of the famous English painter, photographer and set designers, who is one of the most important British artists of the 20th century, David Hockney, named "The Big Picture". He proposes to take one step back in order to comprehend the big picture, or to try to get the big picture from several different perspectives. Although he is known to use a variety of techniques and technologies, and to change the styles, I was a bit surprised when I saw his work, particularly painted landscapes, which were made on the iPad tablet using the Brush 3 program. He prints his works on large printers, but the most interesting part is that besides those prints, there is always an iPad stand with the digital version of that painting.

Brush 3 program allows you to remember and reproduce the whole process of making a picture. Indeed, iPad shows a step by step process of painting just beside the printed image. We can see how and in which order every line, dash or dot was formed, as well as in which order various layers of the painting were made. Through this process, one can understand the process of making a painting in oil on canvas, because each layer has to be well planned and done in a certain order, and a visitor of the exhibition is introduced to a whole new world of illusion of complicity in the art work, or at least a different understanding of how the work was created. The visitor understands a completely different view, which is the philosophy of David Hockney.

Branislav Vujovic

Branislav Vujovic

President New Frontier Group
Strive to become better

Branislav Vujovic is founder and also president of New Frontier Group and has overall responsibility for the New Frontier Group, with special focus on Innovation, M&A strategy, group strategy and investor relationship.

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