UNDERSTANDING THE EFFECTS OF DIGITALISATION ON VALUE SYSTEMS IN THE CREATIVE INDUSTRIES:

UNDERSTANDING THE EFFECTS OF DIGITALISATION ON

VALUE SYSTEMS IN THE CREATIVE INDUSTRIES:

THE DESIGNER FASHION AND MOTION PICTURE INDUSTRY

A comparative case study

MScBA Master Thesis

Author: Hanna van der Stok

Date: May 2010

Institution: University of Groningen

Faculty: Economics & Business

UNDERSTANDING THE EFFECTS OF DIGITALISATION ON

VALUE SYSTEMS IN THE CREATIVE INDUSTRIES:

THE DESIGNER FASHION AND MOTION PICTURE INDUSTRY

A comparative case study

May 2010

Author: Hanna van der Stok Student number: 1750461

Institution: University of Groningen

PREFACE AND ACKNOWLEDGEMENTS

After finishing my bachelor study in a business related direction, I realised that one of my many interests have been the creative side to business. Innovation, to me, meant the ability to creatively think outside the box. To find novel ways of looking at problems and create solutions that divert from the norm. This led me to the decision of pursuing a study in the direction of strategy and innovation. For my master thesis topic I wanted to delve deeper into the creative industries, because I have always been interested in the creative sector, especially the motion picture industry. By combining a developing innovation namely digitalisation, with business aspects in the creative sector, I was able to find a topic completely new to me and which I really enjoyed doing. Till the very end I was still finding it a learning experience. One of my favourite parts while gathering my research was conducting the interviews. I had the opportunity to meet so many new interesting people.

ABSTRACT

The study investigates the consequences of digitalisation on the value systems of the designer fashion and film industries. An investigation into the consequences allows one to see how industries have changed and the reasons why actors use digitalisation. The theoretical framework lists the most relevant consequences of digitalisation on markets in general which are: vertical integration, cost reduction, entry barriers, demand prediction, customisation, economies of scale, speed to market, productivity and enhanced distribution. The fashion and film industry’s value systems are compared by making use of three levels namely:

TABLE OF CONTENTS

1.

INTRODUCTION ... 7

1.1 RESEARCH QUESTIONS ... 8 1.2 THESIS OUTLINE ... 8

2.

LITERATURE REVIEW ... 9

2.1 DIGITALISATION ... 9 2.2 CONSEQUENCES OF DIGITALISATION ... 10 2.1.1 VERTICAL INTEGRATION ... 11 2.1.2 COST REDUCTION ... 13 2.1.3 ENTRY BARRIERS ... 15 2.1.4 DEMAND PREDICTION ... 16 2.1.5 ECONOMIES OF SCALE ... 18 2.1.6 CUSTOMISATION ... 19 2.1.7 SPEED TO MARKET ... 20 2.1.8 PRODUCTIVITY ... 22 2.1.9 ENHANCED DISTRIBUTION ... 23 2.3 VALUE SYSTEMS ... 25

2.3.1 Film value system ... 27

2.3.2 Fashion value system ... 28

2.4 CONCEPTUAL MODEL ... 30

3.

METHODOLOGY ... 32

3.1 RESEARCH STRATEGY ... 32 3.2 RESEARCH DESIGN ... 32 3.3 DATA COLLECTION ... 32 3.4 DATA ANALYSIS ... 34

4.

RESULTS ... 36

4.1 OVERALL ... 36 4.2 STAGES ... 38

4.2.1 LEVEL 1: Creative and Raw material input ... 38

4.2.2 LEVEL 2: Production ... 47

4.2.3 LEVEL 3: Distribution, marketing and selling ... 57

4.2.3 OTHER SIGNIFICANT FINDINGS ... 66

5.

CONCLUSION AND DISCUSSION ... 68

5.1 CONCLUSION ... 68

5.2.1 THEORETICAL IMPLICATIONS ... 77

5.2.2 MANAGERIAL IMPLICATIONS ... 77

5.3 FUTURE RESEARCH AND LIMITATIONS ... 79

5.3.1 FUTURE RESEARCH AND LIMITATIONS ... 79

5.3.2 FUTURE OUTLOOK ... 80

6.

BIBLIOGRAPHY ... 80

7. APPENDIXES ... 86

List of Tables & Figures

Table 2.1 Literature review – Consequences of digitalisation ... 10

Table 3.1 Interviews conducted to gather empirical data ... 34

Table 4.1 Most and least significant overall impact on film and designer fashion ... 36

Table 4.2 Largest absolute differences of consequences ... 37

Table 4.3 Industry results of the consequences of digitalisation- fashion & film ... 37

Table 4.4 Level 1: Textile suppliers, fashion designers & pre-production – Consequences of digitalisation ... 39

Table 4.5 Level 2: Manufacturing/outsourcing, film production and post-production - Consequences of digitalisation ... 48

Table 4.6 Level 3: Retail, distribution and exhibition – Consequences of digitalisation ... 58

Table 5.1 Most and least significant overall impact on film and designer fashion industry ... 69

Table 5.2 The levels on which the consequences of digitalisation has the strongest impact ... 69

Table 5.3 Factors that affect the degree of adoption of digitalisation ... 70

Figure 2.1 Links in simplistic value chain... 25

Figure 2.2 Value system concept ... 26

Figure 2.3 Film value system ... 28

1. INTRODUCTION

The global economy has changed radically these last few decades. One of the most significant changes is the rapid diffusion of technology such as computers, the Internet and communication technology. It seems that the diffusion of information and communication technology (ICT) is having a broad influence on the modern day economy. Digitalisation seems to be an extension of a wave of technological innovations that is still continuing to change and shape as time goes on (Bomsel & Blanc, 2004); it has also changed the structures of our economy such as the value systems or value chains of industries. It is important to examine the consequences that digitalisation has on value systems as it leads to a better understanding of the consequences on the digital economy. Furthermore, for companies operating in the various stages of value systems, it is relevant to understand and better explain the strategic consequences of digitalisation. For example due to digitalisation a shift of power may occur amongst the actors leading to potential opportunities and sometimes threats. By analysing these consequences the actors can better understand and explain strategic moves such as mergers or integration into other stages. This may also lead to a more accurate estimation of R&D (Research and Development) expenditures. Lastly the study contributes to literature by considering the differences between industries, focusing on industry specific effects to explain the degree of adoption of digitalisation.

There has been little academic research done into the manner in which new technologies; especially digitalisation, were able to impact the value system of creative industries. In today’s ‘knowledge economy’ almost every sub-sector in the creative industry is making use of various forms of technology. However, will more technology be used in the one sector, such as creating a new video game, than for example in a theatre company producing a new play? Of course we would immediately assume that it would, but trying to understand the effect this has on the value system, and how it has changed these industries might lead to new potential linkages between the sub-sectors, to different types of innovations, new business models and ways of appropriating value. Therefore understanding the creative industries in terms of value appropriation, the effect of digitalisation on these sectors might open the door to using the knowledge economy to its full potential. By comparing two single value systems, it will be interesting to see how and to what degree the players adopted digitalisation or are maybe planning to adopt. This will lead to a better understanding of the importance of the ‘digital economy’ and of investment into digital technologies. It can also be a projection of the future and an important tool for aspiring and current companies; entrepreneurs etc. wanting to enter an existing market and compete in a changing digital world where value appropriation is the key to survival.

fashion industry. The research boundary for the fashion industry is limited to the designer/luxury fashion industry. The main focus on the film/motion picture industry is limited to cinematic or theatrical release, therefore excluding release after cinema (such as DVD retail/rental, TV etc.). These two sectors seem to be very different, yet both are classified as creative industries. The question remains: will digitalisation have similar effects on their value systems? This question leads to the main research question which will be discussed below.

1.1 RESEARCH QUESTIONS

This leads to the main research question which is:

‘What are the consequences of digitalisation on value systems in the designer fashion and film industries?’

In view of the main research question, the following sub-questions are formulated:

1. What are the consequences of digitalisation on value systems/markets?

2. To what degree do the players in the designer fashion and film industry adopt digitalisation? 3. What effect does digitalisation have on the success of the stages of the film and fashion industry

with regard to value appropriation?

1.2 THESIS OUTLINE

2. LITERATURE REVIEW

In this chapter an overview of the literature is given in order to answer some elements of the main research question. The main aim of this chapter is to list the most important consequences of digitalisation on markets in general; consequently specifically on creative industries such as the fashion and film industry and their respective value systems. The chapter is structured as followed: first, the concept of digitalisation is defined, followed by the main consequences of digitalisation on markets and creative industries. Third, the concept of value systems in general is discussed; wherein the stages within the fashion and film value systems are addressed. The chapter concludes with the explanation of the conceptual model.

2.1 DIGITALISATION

products (Hesmondhalgh, 2007). Therefore where applicable the use of Internet, as facilitating distribution of digital products, is incorporated in the research.

2.2 CONSEQUENCES OF DIGITALISATION

Several studies in the academic literature aim to explain the consequences of digitalisation on individual organisations, value chains, systems and markets in general. The most relevant effects of digitalisation onvarious industries can be seen in Table 2.1. Among the most important consequences are: customisation, entry barriers, speed to market, productivity, cost reduction, vertical integration, economies of scale, demand prediction and enhanced distribution. Other related consequences are transparency which can also lead to real time visibility, collaborative design for example in the form of user innovation, better information flows and communication within the value system, enhanced marketing tools and an increase in creativity. The term ‘creative industries’ originated in 1998 when it was first defined by the UK Government Department for Culture, Media and Sport (DCMS) as: “those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property” (Flew, 2002).

Table 2.1 Literature review – Consequences of digitalisation

Factors Literature Industries

Vertical integration Mpoyi, 2003; Macinnes et al., 2004; Harrigan, 1985; Aghion et al., 2006; Mol et al., 2005

Book & software

publishing, music industry Cost reduction Macinnes et al., 2004; Majumdar, 1997; Harrison &

Andrusiewicz, 2004

Telecommunication, advertising, software publishing

Entry barriers Hoskins et al., 2004; Holt & Perren, 2009; Clemons et al., 2002

Radio, TV, music, telecommunication, newspaper industries Demand prediction GCI, 2006; Pastuszak, 2005 Telecommunication,

general impact Economies of scale Milton, 1999; Rayport & Sviokla, 1995; Dolfsma,

2000

Postal service, music Customisation Harrison & Andrusiewicz, 2004; Bockstedt et al.,

2006; Cox & Alm, 1998

Advertising, IT & music, general importance Productivity Bomsel & Le Blanc, 2004; Schmidt , 2001 In general

Speed to market Schmidt, 2001; Magretta, 1998; Aldrich, 1998 Manufacturing and IT industries

Enhanced distribution Benjamin and Wigand, 1995; Zhu, 2001; Castro et al., 2009; Bockstedt et al., 2006; Mol et al., 2005

Media, creative industries: video games, music etc. Other consequences:

Aids in increasing creativity

Edmonds et al., 2005; Selker, 2005

The opportunity exists for digital technology to enhance and support creative processes in various industries. Better communication Bomsel & Le Blanc, 2004; Schmidt, 2001

In general Enhanced marketing

tools

2.1.1 VERTICAL INTEGRATION

Here vertical integration is defined in two ways: (a) as the degree to which an organisation already owns its upstream suppliers and its downstream buyers and (b) as the actual activity of integrating upstream or downstream. This type of strategy can be advantageous for the firm for example with regard to decreasing transaction costs and increasing market power in the value system. However these benefits should prevail over other challenges such as managing numerous value system activities within one organisation (Mpoyi, 2003). With the emergence of digitalisation more vertical integration may occur to obtain economies of scale. For example Macinnes et al. (2004) examined digital distribution and its effect on vertical integration. Software publishing had a higher level of vertical integration than book publishing due to an important factor: “the nature of the coordination requirements that exist in the creation process.” Due to digital distribution in the software publishing industry, the publisher has integrated into the developer stage and hired in house developers rather than independent contractors. This has lead to increased market power of publishers over their suppliers (developers). In the music industry digitalisation affected the benefits that could be obtained from economies of scale for major record companies in the areas of production and distribution. Musicians are able to produce/record their own music which gives them more creative freedom and artistic control. However, the new entrants still require certain complimentary assets which in turn limit the success of recorded albums (Mol et al., 2005). Therefore even if digitalisation may lead to the removal of entry barriers it does not automatically guarantee the success of new entrants into the adopted stage. Although being vertically integrated has its advantages, a drawback may be increased exit barriers. Harrigan (1985) stated that exit barriers will be higher for companies that are integrated in many stages of a value system. If products need to be altered regularly or when technology changes quickly, and the company decides to exit the stage or to change input and processes rapidly, the degree of integration may hinder exiting the stage.

decades the major studios integrated into television programming, home video and theme parks. Presently, they are also slowly trying to vertically reintegrate into the exhibition stage, due to a more open-minded stance towards infringements of the ‘Paramount decision’, in the late 1990s (Blackstone & Bowman, 1999). Due to computerised technologies, over the years, masses of small independent production companies emerged creating various niche markets, for example specialised film producers or suppliers. It seems as if digital products might be able to provide small independent producers and/or distributors with the opportunity and potential for vertical integration, however the resources of the major studios might still enable a competitive advantage. The support in producing local cultural-films is rising in many parts of the world which might lead to bigger independent markets with various forms of integration (Scott, 2002).

There is no substantial literature on the effect of digitalisation on vertical integration in the designer fashion industry. The focus seems to be more on IT software for effective supply chain management which aids strategies such as vertical integration and quick response (cutting lead time, increasing speed to market) (Christopher et al., 2004; Bruce et al., 2004; Forza & Vinelli, 1997). However, some authors do focus on the potential for vertical integration by designers or manufacturers into the retail stage due to the emergence of the Internet (Moedas, 2006; Gertner et al., 2001). The opportunity to sell labels online does exist, however bypassing the retailer depends entirely on the establishment of the brand, but according to Gertner et al. (2001) also on the existent degree of integration within the value system. Another issue that affects integration into retail is whether designers already have relationships and contracts with brick-and-mortar/online retailers. For example Levi, at one point, had the opportunity to sell its products online, but its retailers felt that it could negatively affect their sales. Therefore Levi did not integrate into online distribution (Knez & Simester, 1999). Some authors state that vertical integration may lead to less flexibility, if the company becomes larger and more complex. Quickly adjusting to changes in the market is challenging. This might especially occur in volatile environments (D'Aveni & Illinitch, 1992). However others state that in the volatile apparel industry, the most forward integrated companies, particularly those that possess control over manufacturing and retail, can rapidly alter their product offerings, respond to a shift in trends and create new fashion trends (Richardson, 1996).

Fashion industry

Key factors of vertical integration:

more complex, leading to less flexibility in adjusting to changing environments. Vertical integration and entry barriers seem to influence each other, as more integration into a stage increases entry barriers for potential entrants.

2.1.2 COST REDUCTION

Digitalisation has the potential to reduce production and process costs in several industries (Shapiro & Varian, 1999; Majumdar, 1997). In the telecommunication industry digital equipment has become essential due to the increased quality of sound. Although digital systems were first installed commercially in the 1960s, it was only in the 1990s that the price of components decreased, which made the transition to digital systems more feasible. The cost reduction due to digitalisation is more apparent in digital transmission systems which have lower circuit costs for transmission over long distances (Majumdar, 1997). In the advertising industry digitalisation played a pivotal role in cost reduction of signage. The advertising industry spends a vast amount of money every year on the manufacturing, distribution and installation of traditional stationary signage. Conventional signage material is costly with regard to labour and material. Most of the costs are from the production of plastic film and other material that the artwork is put on. The material is distributed by a transportation service and a team of installers must work on replacing and disposing previous signage. This is a slow process which might lead to losing the opportunity for executing an advertising message in a certain time frame (Harrison & Andrusiewicz, 2004). In the software publishing industry digital distribution reduces distribution costs, more promotion was needed as consumers needed to be made aware of their existence (MacInnes et al., 2004).

Film requires upfront the highest investment when compared to other media industries. On average the budget of an independently produced film is usually under $1 million and sometimes it might reap returns of a few hundred percent; however this rarely occurs. The average cost of a major studio produced film (including advertising, duplication and distribution) is under $100 million. In 1985 the average production cost of a feature film was approximately $23 million, therefore in 25 years time; it quadrupled (MPAA, 2005). The overall cost of film production consists mainly of two investment streams: production costs - has to do with creating the final film negative (includes production costs, studio costs and capitalised interest) and print and advertising (P&A) costs – entail the duplication, distribution, promotion, marketing and usually the market development of the movie.

Film industry

1

1

P&A costs exclude exhibition costs.

the total costs. The production and distribution of film prints are expensive (MPAA 2005). Additionally, marginal costs increase as the movie becomes more successful (particularly the longer it is exhibited), as more film prints must be produced and distributed (Husak 2004). Traditional film print of about two hours consists of six reels; the weight of each projection reel is about 40kg, therefore 240kg just to ship one movie copy. To copy one movie at a time, it costs about $800-1200. Therefore the potential cost saving of digitalisation seems to appear in production and distribution but not so much in promotion and exhibition (Hawkins & Vickery, 2008).

In the fashion industry it seems as if the potential for digital products to reduce costs exists more in the production stage, therefore manufacturing and outsourcing, also the textile supplier stage. It has less impact on fashion designers and retail. Textile suppliers have mainly tried to cut costs by mass producing their products. The development costs for traditional screen printed samples are $4,000-$8,000 (USD) per design; the costs vary due to the amount of spot colours

Fashion industry

2

used in a design. The level of mechanisation/computerisation in the apparel manufacturing industry has been directly linked to the cost of labour. In countries where the cost of labour is low, the likelihood of investing in automation has been non-existent. As labour costs rise, automation becomes a method for competing on total product cost. It seems as if cutting by hand is still cheaper than digital cutting in countries such as China, Korea and Vietnam. However, manual cutting and pattern making potentially leads to less precision, which in turn leads to a high quantity of fabric being wasted or discarded, increasing sunk costs. For the fashion designer whether creating designs using CAD (Computer Aided Design) software, or a pen and paper, cost reduction does not seem to be highly impacted. (Fralix, 2006).

Key factors of cost reduction:

Reducing costs within a value system affects all stages as each actor tries to potentially increase its profit by reducing costs. Therefore cost reduction as a consequence of digitalisation links to areas such as economies of scale, vertical integration, productivity, speed to market, enhanced distribution and entry barriers. Types of costs for companies differ depending on the stage and/or industry they are participating in.

2

2.1.3 ENTRY BARRIERS

Barriers to entry are obstacles to enter a certain market by new companies. There are various barriers that might hinder entry such as costs within the industry which might provide a restriction. Large economies of scale could mean that a new entrant cannot reach the high output and sales required to compete successfully. If existing companies have control of scarce resources this also represents a barrier as the initial capital required to buy equipment, product development, building brand image and developing a distribution network might be too much for the entrant to cope with. The effect of digitalisation on lowering entry barriers can be clearly seen in the media industries (Hoskins et al., 2004). Examples of media industries are: journalism and newspaper industry, book publishing, magazines, film, television, music, radio etc. (Holt & Perren, 2009). Clemons et al. (2002) looked at digital technology in the music and newspaper industries and how a change in the capital requirement of resources, be it digital technology or other, may lower entry barriers, creating considerable vulnerability to incumbents that were previously safe from possible entrants. As a result of digitalisation, musicians and artists can now produce and copy their own recordings with digital recording studios and distribute music directly to the consumer online. This is enough to diminish the value of co-specialised assets possessed by record companies. These changes enable groups to enter the music recording industry without labels. Mol et al. (2005) also states that the entry barriers in the music industry have been lowered, therefore the products do sell, but due to a lack of access to complimentary assets, the success of recorded albums occurs to a limited extent.

Numerous filmmakers need financing from the major movie studios to be able to cover the high capital requirements for producing a movie. It is for that reason that the whole motion picture industry is mostly grouped around a few major movie studios that are able to finance film projects. In turn this forms barriers for new filmmakers, mostly independent, to enter the industry. It seems that due to digitalisation the capital requirements for movies have been lowered and independent filmmakers are now capable of financing their own movies (Zhu, 2005). In 1960, 28% of US movies were made by independent filmmakers, while 66% were produced with the contribution of major studios. By 1980, independent filmmakers produced 58% of movies while majors assisted in only 31% (Amin, 1994). Film industry

Therefore before the emergence of digitalisation, independent movies already increased. However the increase of independent movies in the last decade can be potentially linked to filmmakers being capable of producing and editing their own movies. For example in 2000 the largest US film festival ‘Sundance’ had just over 2000 independent entries, while in 2010 this increased to over 10,000.2

fashion industry creating a competitive advantage is complicated and challenging to maintain. In the apparel industry competition mainly lies in the arena of price and quality which became ever more important in the last few decades (Richardson, 1996). In general barriers to entry in the apparel industry are low due to global sourcing; only product and implementation could be a company’s competitive advantage (Ross, 2001). The Internet and communication technologies create the opportunity for fashion designers to more easily launch their brands to create awareness and credibility; Barriers to entry are generally low for most garment factories as they are largely low tech and labour intensive, which makes this stage particularly vulnerable to low wage competition. The introduction of digital technologies and other advancements in technology are likely to increase the entry barriers (Gereffi & Memodovic, 2003; Datta & Christofferesen, 2005).

Key factors of entry barriers:

Entry barriers relate to the cost of co-specialised or complementary assets within a stage in the value system. If the worth of co-specialised assets is reduced or is somehow more easily acquired, the economic control it previously represented might diminish, therefore lowering barriers for new entrants. Generating economies of scale or scope are strategies to deter entry into a market.

2.1.4 DEMAND PREDICTION

Uncertainty about demand in the film industry is a well known fact (Basuroy, Chatterjee, & Ravid, 2003; De Vany & Walls, 1999) but being able to forecast demand is very important, for marketers in the billion dollar film industry. For example the major Hollywood studios will easily spend on average around $100 million to produce and market a film, although every year only a very small number of movies will be profitable or just break even (MPAA, 2007). In the movie industry sometimes movies with huge budgets such as ‘Alexander’ generate terrible box office returns, while other movies that are initially lesser known such a ‘Slumdog Millionaire’ unpredictably become a favourite with the audience (Foutz & Jank, 2009). Various methods have been developed to try and predict demand in the motion picture industry such as stock markets’ simulations (Dahan & Hauser 2002). The Hollywood Stock Exchange (HSX,

Film industry

www.hsx.com) has aided in predicting demand. Studies showed that data acquired using HSX, can be put into a conventional regression model which leads to a more accurate prediction of opening weekend demand (Spann & Skiera, 2003). The reason for this occurrence has to do with the fact that audiences are influenced by others' (friends, critics, acquaintances, opinion leaders etc.) opinions and preferences (Eliashberg et al., 2006).

It seems as if demand for fashion products cannot be easily predicted (Christopher et al., 2004). However strategies can be developed to create, manufacture and deliver products on the basis of ‘real-time’ demand which lead to the emergence of the agile supply chain (Christopher & Towill, 2001) and quick response (QR) strategies (Lowson et al., 1999). A conventional supply chain is extensive and has long lead times making it forecast driven and inventory based, whereas responsive supply chains are short and are demand driven and information based. Although information technology has therefore played a huge role in aiding supply chain management in the fashion industry, digitalisation seems to create the opportunity, via the Internet and communication technologies, to more easily share information based on demand (Christopher et al., 2004).

Fashion industry

Key factors for demand prediction:

2.1.5 ECONOMIES OF SCALE

When a company is able to produce more products on a much larger scale than before, with less average costs, the company has realised economies of scale. The division of labour and specialisation is an important factor to attain a higher return on production. Other inputs that play an important role are: lower input costs, more costly inputs that reap higher efficiency and specialised inputs. Generally the production of new high technological products results in large economies of scale, due to high start up costs (Liebowitz, 2002). Digital technology increases economies of scale due to issues such as transmission, replication and storage of content. Interestingly monopolies have been diluted with the introduction of digital media, not reinforced (Milton, 1999). For example the economies of scale that record companies in the music industry benefited from for several decades are diminishing due to artists’ accessibility of recording equipment and digital distribution directly to consumers (Dolfsma, 2000). Another issue is the use of the Internet in redefining economies of scale for many businesses. For example although the US postal service might have enjoyed building a post office in every person’s home, this was obviously not feasible. But with the introduction of FedEx, individuals who have access to the Internet can track their packages and view the distribution history via Internet. Therefore one or millions of people can make use of this service (Rayport & Sviokla, 1995).

Canterbery and Marvasti (2001) explained that economies of scale, to an extent, play a role in the motion picture industry as increasing returns or economies of scale are needed to rationalise the high production costs including those of stars and promotion activities. However, as studios or independent filmmakers only produce the master print, increasing returns to scale in the physical production of the film is non-existent. Yet, economies of scale have the potential to occur in the exhibition stage. Cinemas are able to create economies of scale for the studios and themselves by selling more seats and prolonging the period of movie exhibition. This can be done by building bigger cinema complexes, therefore attracting more visitors or showing the movie on several screens at the same cinema. The cost per unit stays the same, but costs can be reduced by attracting more people. Therefore the output is determined by the amount of admissions rather than how many copies of the master film have been made.

Film industry

selling her products all over the world. Some high end designers are also creating less expensive ‘luxury’ products for the mainstream market. The reason for this relates a lot to the benefits of economies of scale and the huge profit attached to it (Design Council Magazine, Issue 4, 2008). It seems as if digitalisation has the potential to influence economies of scale in the textile and manufacturing stage. Manufacturers have always relied on economies of scale due to advancement in automated machinery and low labour costs in emerging markets (EMCC, 2004).

Key factors of economies of scale:

Economies of scale are realised when an increase in production leads to lower per unit costs. Therefore digital technology can lead to economies of scale due to either the fixed input costs being very costly, or the input costs being very economical and accessible and lastly the technological input costs being specialised. All of this may lead to either vertical integration or disintegration, entry barriers increasing/decreasing depending on the product category.

2.1.6 CUSTOMISATION

Film production was once based on a system of mass production known as the studio system. This occurred during the ‘golden age’, from the 1920s to 1950. Standard methods and mostly similar actors were used, until a Supreme Court ruling, in 1948 (Paramount decision), made the industry environment more uncertain and volatile. This resulted in the end of the studio system. Today the variety of films is huge, suiting almost every taste. Therefore mass customisation, to some extent, is now much more apparent than in the ‘golden age’; however the actual production, distribution etc. seem as if they cannot be classified as customised processes (Pine & Davis, 1993).

Film industry

Although customisation in the clothing industry has been around for a while, it seems that since the emergence of the Internet this has really opened new niche market possibilities. For example Cox and Alm (1999) explained how buying clothing in shops might come in many styles and colours; however the sizes do not always represent a perfect fit. In the late 1990s some private labels started selling clothing over the Internet. The customers would state their hip, leg and other measurements etc. and the garments would be produced to the precise specifications. Levi Strauss & Co was a pioneer in offering mass customisation in the apparel industry in the late 1990s. Customers could obtain customised jeans by selecting styles, fabrics, inseam lengths etc. The salesperson would take individual measurements and the jeans were produced and shipped directly to the customer. However in 2004 this method of customisation stopped as Levi’s closed down the last of its domestic factories (Cornell University 2009)3. Presently, the opportunity to utilise digital technologies to create unique textile designs or pattern designs, does exist (Georgia, 2000).

Fashion industry

Key factors of customisation:

Customisation can be personalised or individually tailored or mass customised by efficiently utilising technologies and cost strategies. User innovation can also be seen as a form of customisation, where the consumer plays a direct role in the design and production process. Economies of scale and customisation can be linked to move away from mass production to mass customisation.

2.1.7 SPEED TO MARKET

can add value for both companies and end consumers. The most important value lies with offering more time, for example, trying to reduce inventory. This is more plausible if stock is digital, which has the possibility to reduce the quantity of inventory and also to reduce the duration of production cycles. On the one hand it has an effect on the design and production processes and on the other hand it enhances the value of information sharing. For example due to the Internet and communication technologies, the company Dell, is able to share design databases and methods with its suppliers much faster and easier than before (Magretta, 1998). However with present technology and digitalisation distance is dissolving. Virilio (1990) and Armitage (2000) note that whatever moves quickly with speed, dominates other things that is slower. So it starts dominating territory by movement. Everything occur faster, communication increases, products are developed faster, but what does society lose in those spaces of time especially with regard to creative thought processes.

In the post-production stage when working with traditional print, the process has always been done in a sequential manner. “The negative is processed; selected shots are shipped to a post-production house for assemblage: individual sequences are physically spliced together, special effects are added, film undergoes colour timing, and the soundtrack is included. All pieces are turned into a first cut of the original, one long reel, which in turn is used to create prints.” Therefore the time taken to complete the whole post-production process is dependent on the speed of the individual processes. One process cannot be completed before another, which prolongs the whole development especially if a bottleneck occurs (Eliashberg et al., 2006). The time it takes to reach the cinemas varies. It usually takes anything between one to four months until it leaves the cinema circuit to be released on DVD a few months later. Release on pay-per-view channels occurs about 45 to 60 days after DVD release. About ten years ago, the movie would be released to DVD about six months after its theatrical debut. However the major Hollywood studios have slowly decreased the time period for DVD release to 16 weeks, in order to reach non theatre going consumers faster (Reuters & Showcase, 2010)4. Independent movies, in the last few years, have been steadily trying to close the gap between theatre and DVD release, and are now trying to get rid of it altogether with the introduction of day-and-date release, by releasing the movie in cinema and on DVD at the same time (Silver & Alpert, 2003).

Film industry

2009). In the textile supplier stage, when using traditional rotary screen-printers, if other colours are required, the colours have to be changed and then premixed. Another issue regarding traditional textile printing is the time taken to develop the screens3 and strike offs4, which may take approximately 2 to 5 weeks. Therefore the actual printing onto fabric is not that slow, but the preparation for being able to print using screen printers is a time-consuming process5.

Key factors of speed to market:

By implementing strategies to push the product faster to market, the time to develop is reduced. This may have the potential to lead to reduced costs and higher productivity.

2.1.8 PRODUCTIVITY

Productivity is usually defined as an efficiency assessment: “the ratio of outputs over inputs in monetary value”. It can also be largely defined as any process or activity that enables the company to function at an improved level, therefore including: “efficiency, effectiveness, revenue, absenteeism, innovation” etc. (Pritchard, 1995). Digitalisation has aided in the rapid growth of today’s markets and the output produced. The advancement of computers, the development of telecom networks all caused a huge increase in demand, which in turn lead to a transformation of computers, software, routers etc. into millions of mass produced products. “This lead to high economies of scale and to the origin of the extraordinary growth in productivity opened up by digitalisation.” (Bomsel & Le Blanc, 2004) Schmidt (2001) also pointed out that in the digital economy the productivity rate increased ten times more than in the industrialisation period. This usually constitutes a transformation, at an increased rate, of the value system, which ultimately results in a higher growth rate in productivity.

Digitalisation creates an opportunity for an increase in productivity in the production and post-production stages, with a lesser effect on distribution and exhibition stages. “Production costs must be controlled and human resources utilized to the utmost.” It is difficult to estimate if real cost savings occur due to the differences and complex processes of films, however in terms of time saving the productivity has the potential to increase. The new technology creates the opportunity for filmmakers to have more control over the production and delivering processes.6

Film industry

3

“In screen printing a pattern is printed onto fabric through a stencil held in place by a screen. Each screen prints one part of the design in one colour. After printing the dyestuff must be fixed using steam or dry heat.”

4

Strike off: “ is a small run of fabric printed with screens for the first time after the screens are made, or fabric which is printed in new colours or on new grounds with existing screens.”

When comparing the apparel industry with the textile industry, the latter has experienced considerable advancement in technology, resulting in increased productivity and a decreased workforce (Datta & Christoffersen, 2005). It seems as if digital technology has influenced the textile stage the most, although the potential for using these technologies is not optimal. Lloyd (1997) talked about the effect of CAD (Computer Aided Design) systems, how the training times have been decreased and existing skill enhanced while increasing productivity, permitting retailers to be more demanding of manufacturers because of ‘the speeding up of pre-assembly’. Another issue is the quick response (QR) strategy introduced in the late 1990’s, defined as the “compression of response times by different actors in the value system, by means of collaborative vision exchanging information about sales, orders and inventory.” This strategy has increased the overall productivity level in the value system (Forza & Vinelli, 1997).

Fashion industry

Key factors of productivity:

With an increase in productivity usually the output-input ratio improves. This may also, but not necessarily (depends on what is termed as ‘input’ i.e. time, labour etc.), exist in areas such as economies of scale, speed to market and cost reduction.

2.1.9 ENHANCED DISTRIBUTION

experience and pricing, (4) physical supply chain and “brick-and-mortar infrastructure” becomes less significant, (5) “value added information and information processing tasks” become more important (Castro et al., 2009).

The opportunity exists for digitalisation to enhance distribution for both major movie studios and independent filmmakers; but the competition for attention is high. Various distribution channels exist; movies are most likely distributed to cinemas worldwide if it is a major studio produced movie. The degree of distribution of major studio produced movies is huge. For example there are 6,040 theatre chains which consist of over 40,000 screens in the US and over 150,000 screens worldwide. Of course some of these cinemas exhibit independent films alongside main stream films, others exhibit exclusively independent films. The majority of cinemas exhibit main stream movies (MPAA, 2009). Henning- Thurau (2006) stated that when to distribute is just as important as which channel to use as releasing a movie in the summer or in a holiday period seems to reach a wider audience (Elisashberg et al., 2006).

Film industry

The various distribution channels in the designer fashion industry are: brick and mortar retail, wholesale and licensee distribution. Retail distribution usually entails products being distributed to flagship stores, regular price retail stores, department store concessions, and designer outlet/factory stores. Wholesale distribution is mainly controlled by a company or by agents representing the brand; products may go to department stores, speciality fashion and duty free stores. Last is licensee distribution (Moore & Birtwistle, 2004). The opportunity also exists for clothing to be sold via the Internet in online retail/web stores by making use of online catalogues, online streaming audio catwalk shows or virtual ‘avatar’ mannequins, which also act as promotional tools. Although the opportunity does exist, the competition for the consumer’s attention on the Web is very high (Fralix, 2006). Bruce and Hines (2001) stated that about ten years ago approximately 70% of US consumers would browse the Internet for clothing which they would later buy in store. In 2007 about 10% of all clothing sales in the US were done online, however 7% of online buyers return items to the shop9.

Fashion industry

Key factors of enhanced distribution:

2.3 VALUE SYSTEMS

A value chain consists of all the activities/processes required to bring a product/service from the initial idea/design, through the various stages of production and distribution to the end consumer. A simplistic value chain (Kaplinsky & Morris, 2001) example, showing four stages, can be seen in Figure 2.1. It is important to note that for example in production, there are a number of other value adding links. A ‘real world’ chain is much more complex, it is more likely to consist of many more intra-chain links, also flowing in various directions (Kaplinksky & Morris, 2001). Within each stage there are a range of activities/inputs that are added, such as the product flows from the design stage to production, marketing and finally to consumption. The arrows indicate a flow of information and two way communication between stages. For example, in the design stage, the product concept is developed, a two way flow of information and communication occurs between the design and production as both influence the nature of the production process. The product is physically created in the production stage and various physical and service inputs are added. In order to market the product effectively, information has to flow between the design, production and marketing stages. Finally at the consumption stage, information flows back to the design stage in order to modify, expand, discontinue the product.

Figure 2.1 Links in simplistic value chain

Figure 2.2 Value system concept

Perspective of firm value chain

(Adapted from Porter and Miller, Jul-Aug 1985, HBR, p. 151)

Connections therefore exist not only within the firm’s value chain, but also between the various value chains in the system. It can be seen as a set of vertically aligned markets and each stage has its own set of relevant selectors. At each stage these dominant selectors might measure the created value differently and might try to persuade the selectors of the final product (Mol et al., 2005). In Figure 2.2 the perspective of the firm value chain is taken, for example the value of firm X and the value of its upstream and downstream connections. Hamel and Pralahad (1994) talk about ‘upgrading activities’ with regard to core competencies and Teece and Pisano (1994) refer to dynamic capabilities. These competencies should create value for the end consumer, be fairly unique, should only be owned by some competitors and be complicated to imitate. Being profitable in the long run can only be achieved by the development of dynamic capabilities: ‘internal processes’ therefore learning, changing past behaviour and its ‘position’ having access to certain competences. The challenge for some organisations is ‘when’ to acquire certain complementary assets. “During the period before a standard is established, potential adopters face the risk of opting for the wrong standard, the uncertainty can have a crippling effect on diffusion” (Stoneman & Diederen, 1994).

Kaplinksky & Readman (2000) explain four potential forms of ‘upgrading activities’ within the value system:

1) Development in processes within a company or due to linkages with other companies – such as introducing new technology, e-commerce competences, changing logistics and supply chain learning. This may result in lower costs, improved quality, and increased speed to market.

2) Development in existing or new products – such as extension of design department, collaboration with suppliers and end consumers in product development.

3) Integrating by changing or adding activities within the chain or between value chains – taking over higher value added roles and/or outsourcing lesser value added activities resulting in higher productivity, skills and profit.

4) Exiting a value chain and entering into a new value chain –existing production in one chain and adding functions in a new chain, higher profit potentially coming from different product categories.

2.3.1 Film value system

The general motion picture value system consists of five stages, excluding the consumer stage: (Zhu, 2001; OECD, 2008). Figure 2.3 shows a representation of the value system.

 Pre-production – Acquisition and contracts are negotiated, financial means acquired from investors. Research, preparation and final screenplay and storyboards are set up, cast and crew are selected.

 Production – Designing and setup of sets, sound, music and locations. Shooting of live performances takes place.

 Post-production – Processing of negatives and creation of special effects are included. Picture editing occurs before sound and music editing (Voice-overs, music are produced etc.). Usually duplication is outsourced; thousands of copies are made for distribution.

 Distribution – Acquiring film rights, then prints are distributed, advertising mix is implemented.

 Exhibition – Main stream or independent cinema (or chains) are shown in the cinemas.

Major studios & Independent filmmakers

Figure 2.3 Film value system

Fully digitised

Partially digitised

2.3.2 Fashion value system

A general fashion designer value system consists of four stages, excluding the end consumer stage: (Moore & Birtwistle, 2004; Pundir, 2007; Savioli, 2002; Davis Burns & Bryant, 2007).

Figure 2.4 shows a representation of the designer fashion value system.

 Textile suppliers & fabric designers – Materials such as textile, leather, wool etc. are sourced from specialised suppliers, locally or international suppliers. Fabric designers work in house at textile companies or private designing bureaus.

 Fashion designer –Designing products from clothing to accessories. Types of fashion styles: haute couture, ready-to-wear/designer, diffusion, bridge and mass market.

 Manufacturing & outsourcing bureaus – Some production phases are done in house (cutting, pattern making etc.) others are outsourced (sewing, assembly, pattern making, grading etc.).

Fashion designers

Figure 2.4 Designer fashion value system

Partial digitisation capabilities No process is fully digitised

2.4 CONCEPTUAL MODEL

3. METHODOLOGY

3.1 RESEARCH STRATEGY

This research adopts a qualitative and quantitative approach. Qualitative research studies individuals’ experiences by analysing their words and actions in a narrative manner (Maykut & Morehouse, 1999). Due to the qualitative nature of this particular research, it is based on an interpretative position (Patton, 1991). Little academic effort has been done to determine in which manner new technologies; especially digitalisation has and is able to influence the value system of the designer fashion industry. Research has been done on the recent development of digital cinema, but no comparison between these two creative industries exists. Some research (Macinnes et al., 2004) has compared the effect of digitalisation on the book and software publishing industries, however finding research that compares stages of the same industry (by making use of similar criteria) is challenging. Therefore a comparative design will be used by approaching the research in an inductive manner (Bryman & Bell, 2003).

3.2 RESEARCH DESIGN

A comparative design is employed when two or more cases are compared in order to expand or explain existing theory or as a result of comparing cases. This type of design also entails that the research will be carried out using similar methods to collect and analyse the relevant data. The two cases being studied are similar in many respects, which aid the comparison process, but also differ in other aspects. As the value systems are both positioned within the creative industry, creativity and expression of an art form are similar motivations; however the monetary gain from selling their products is also a huge stimulus to create products. The degree of these motivations of course differs across the respective value systems. A comparative design can be compared to a cross-sectional design, as it can also be conducted at roughly a similar point in time (Bryman and Bell, 2003).

3.3 DATA COLLECTION

but also of stages up and down stream in the value system. The interviews were semi-structured including open-ended questions to encourage two-way communication. If a question would lead to another interesting related concept, further questioning was pursued, before returning to the semi-structured interview questions. However, when the interviewees were asked to complete the questionnaire, it was clearly stated that it should be answered according to the impact of digitalisation on their particular stage. The interviews were all conducted face-to-face in Auckland, New Zealand.

Fashion – The interviewees in the textile supplier stage were found because of the recommendation of several fashion designers previously interviewed. A mixture of up and coming designers and more established designers was selected in order to have a more reliable result. The New Zealand fashion week was attended where all the designers interviewed showed their collections. They were announced as being up and coming or more established international designers. Although manufacturers of clothing are mostly located in emerging markets such as China and Korea, some experts in the field of manufacturing and fashion were interviewed instead in Auckland.

Selection criteria

Film – When initially trying to find suitable interviewees in the pre-production and production stages, local government and film agencies were contacted to find well known companies or individuals. Mostly independent filmmakers were interviewed, although some of them had previously contributed to feature films. For the post-production criteria small independent and more high-end companies were targeted. Distribution companies were either part of the major Hollywood studios or independent online distributors. In the exhibition stage, interviews were conducted both in the independent and main stream cinema sectors. On average the interviews lasted between thirty minutes and one hour. Table 3.1 presents a summary of the individuals interviewed for this research.

Yin (2003) states that certain tests can be used to determine the eminence of empirical research such as: validity, reliability and external validity. Measures have been taken to improve the validity and reliability of the findings, in order to ensure that if the interviews were conducted again, the findings would be similar. It was explained upfront to the interviewees what the purpose of the study was and the concept ‘digitalisation’ was explained clearly. The interviewees were also tested on whether they understood the questions by asking for explanations/examples to ensure no misunderstandings would occur. To further enhance reliability the executed processes were documented, by making use of a ‘case study protocol’ while conducting the study. A case study protocol can be found in Appendix 1. It was used as a general guideline for the semi-structured interviews. External validity - As the scope of the research is focused on the designer fashion and film industry and the sample is limited to New Zealand, any generalisations to other countries and industries should be made with caution. Generalisations are more likely to be made towards similar creative industries.

Table 3.1 Interviews conducted to gather empirical data

NAME POSITION ORGANISATION INDUSTRY STAGE

Left out due to confidentiality. Fashion Textile suppliers

Fashion Fashion designer Fashion Fashion designer Fashion Fashion designer Fashion Fashion designer Fashion Manufacture Fashion Manufacture Fashion Retail Fashion Retail Film Distribution Film Distribution Film Exhibition Film Production Film Exhibition Film Post-production Film DVD distribution Film Distribution Film Pre-production Film Production Film Post-production

3.4 DATA ANALYSIS

All twenty interviews have been analysed as part of the report. However when examining the statistical analysis only eighteen results were used, nine in both industries, in order to simplify the statistical analysis. The qualitative data was collected by digitally recording, then transcribing the interviews.

After the interviews were all transcribed, a method called ‘coding’ was implemented in order to analyse the qualitative data. The coding starts by asking questions and providing temporary answers about categories and their links. By producing differences between codes, categories and sub-categories are created. Strauss (1987) and Strauss and Corbin (1990) state: “It represents the operations by which data are broken down, conceptualised, and put back together in new ways.” Qualitative analysis

takes place where the data is rearranged. With axial coding connections are recognised between open codes that are interconnected (or overlap) in order to create core codes (Straus & Corbin, 1990). (3) Selective coding entails main core codes, the central phenomenon that surfaced from the axial coding. All other codes drawn from the axial coding must be connected, directly or indirectly, to the central core code. Therefore a theoretical framework of interconnected concepts can be created, showing relationships between the focal concepts. It has to be stated that there are two initial methods of coding, either by labelling of actual words or phrases of the transcript, or research constructed codes, a code that best represents a depiction of a phenomenon as it is seen in the textual data. Thus the core codes or concepts are defined first, after which the open and axial coding starts. Consequently it is then connected to the predefined core concepts. Both of these methods were employed.

(See Appendix 2).

All the questions pertaining to the questionnaires were five-point scales, except for one question which was a seven-point scale. This measurement scale is that of ordinal variables, because the items can be ranked according to which has the least and which has the most quality represented by the variable. Scale variables are also classified sometimes as being interval. As two independent groups are being compared, fashion and film, the corresponding tests used for scale variables are either an independent Quantitative analysis

4. RESULTS

The chapter starts with focusing on the overall results regarding the impact of digitalisation on the designer fashion and film industry. The focus then shifts to the results of the various stages within each industry’s value system concerning the consequences of digitalisation. There are five stages in the film value system and four stages in the fashion value system. In order to compare these two industries they were grouped into three levels/groups representing their main tasks/roles in the value system. These three levels are: (1) Creative input and raw material input, (2) Production, (3) Marketing, distribution and selling. Therefore the findings of both industries are compared to show the similarities and differences.

4.1 OVERALL

The overall impact of the nine consequences of digitalisation on the fashion and film industry can be seen in Table 4.3. Both the independent t-test and the Mann-Whitney test were conducted and the results in bold red signify the largest differences between the two industries, consequently the other findings indicate a closer similarity. The overall results regarding the statistical part focused on eighteen questionnaires, which were divided equally, nine for each industry. This was combined with twenty in depth interviews, nine in the fashion industry and eleven in the film industry.

Overview: The importance of the consequences of digitalisation on the stages differed between the film and fashion industry for four of the nine consequences they are: vertical integration, cost reduction, customisation and enhanced distribution (Table 4.3). From these four consequences, digitalisation impacted the film industry the most except for customisation which had a bigger impact on the fashion industry. Table 4.1 summarises the overall findings showing the most significant and least significant impact in each industry. The highest overall impact for the designer fashion industry was on customisation and productivity and least impact was on enhanced distribution. In the film industry the highest impact was on cost reduction and speed to market. The lowest impact was on customisation.

Table 4.1 Most and least significant overall impact on film and designer fashion

Film x Fashion x Most significant impact Cost reduction Speed to market 4,00 Customisation Productivity 4,00 4,00 4,00 Least significant

Table 4.2 Largest absolute differences of consequences Table 4.2 summarises the differences

between the means of the four consequences that impacted these industries in a significantly different manner.

Similarities: Both the designer fashion and film industry were affected similarly concerning the effect on demand prediction, with only a 0,11 difference between the means. Differences: There was also a difference with regard to entry barriers, where it slightly increased barriers for the fashion industry and decreased barriers for the film industry (7-point scale). The consequence economies of scale had a bigger effect on the fashion industry; consequently “speed to market” had a bigger effect on the film industry.

Table 4.3 Industry results of the consequences of digitalisation- fashion & film

Independent t-test

Mann-Whitney test

Consequences Film and

fashion N Mean Std. Dev. T Sig. (2-tailed) Mean rank

Vertical integration Fashion 9 2,78 1,093 -2,085 ,053 6,94

Film 9 3,89 1,167 12,06

Cost reduction Fashion 9 2,67 1,000 -2,530 ,022* 6,83

Film 9 4,00 1,225 12,17

Entry barriers Fashion 9 4,11 1,691 ,379 ,865 10,72

Film 9 3,44 1,424 8,28

Demand prediction Fashion 9 2,22 ,833 ,248 ,807 9,89

Film 9 2,11 1,054 9,11

Economies of scale Fashion 9 2,55 1,013 1,778 ,094 11,44

Film 9 1,78 ,833 7,56 Customisation Fashion 9 4,00 ,866 5,500 ,000** 13,50 Film 9 1,56 1,014 5,50 Productivity Fashion 9 4,00 ,707 1,414 ,128 11,00 Film 9 3,33 1,224 8,00

Speed to market Fashion 9 3,33 ,707 -1,789 ,093 7,28

Film 9 4,00 ,866 11,72 Enhanced distribution Fashion 9 1,89 ,782 -2,982 ,009** 6,56 Film 9 3,33 1,225 12,44

Notes: (* P value<0, 05; ** P value <0, 01)

Consequences Largest absolute differences M film – M fashion Customisation 1,56 – 4,00 = - 2,44

Enhanced distribution 3,33 – 1,89 = + 1,44

Cost reduction 4,00 – 2,67 = + 1,33

4.2 STAGES

It is important to view the results of each stage in the value system separately as the overall results do not constitute the degree of impact on each stage. Therefore the means of each stage might differ slightly with the above results. As mentioned earlier both the designer fashion and film industry’s stages within their respective value systems were grouped into three levels. The findings pertaining to these levels can be seen in Tables 4.4 to 4.6 which represent the findings from the coded interviews procedure outlined in the methodology and showed in detail in Appendix 2. In each table the fashion and film industry is compared by looking at the nine consequences of digitalisation and the effect it has on that stage in the value system, the end consumer, the next stage and/or previous stage. Therefore the consequences of digitalisation are viewed from the perspective of the actor in that particular stage. For example, when looking at cost savings or speed to market, it is viewed from the perspective of the actor and the stage that it is working in. The effects are presented as positive (+) or negative (-) according to the interviewees. A dotted line (----) separates the present from the future impact. Quotes from respondents are used to help in understanding certain findings. Although the role of the fashion designer is restricted mostly to the creative part, the consequences of digitalisation can also indirectly influence designers via other stages, in a similar vein, designers can also have an influence on both the end consumer and possibly also other stages. For example if the designer wants to create a complicated garment or fabric design, then the manufacturers should be able to produce it. The actors are therefore not isolated, but are connected and changes in activities and processes within these stages may have a direct/indirect effect on upstream/downstream actors.

Table terminology Vertical integration Cost reduction Entry barriers Demand prediction Economies of Scale

Customisation Productivity Speed to market Enhanced Distribution VERT INTG COST RDTN ENTR BARR DMD PRTN ECO of SCA CUSTN PROD SPD to MKT ENHD DISTN

N = Number of people interviewed

4.2.1 LEVEL 1: Creative and Raw material input

Table 4.4 Level 1: Textile suppliers, fashion designers & pre-production – Consequences of digitalisation

LEVEL 1

FASHION : Fashion designer (creative input) FASHION : Suppliers (raw material input) FILM: Pre-production (creative & raw mat input)

Cons Consequences to stage Consequences for end

consumer

Consequences to stage Consequences for previous stage: fashion designers

Consequences to stage Consequences for end

consumer VERT

INTG

+ Downward integration into tasks of fabric designers & digital pattern making bureaus (Into textile supplier/fabric designer stage) + Downward integration into retail

+ Uniqueness

+ Fabric design bureaus are competing with tasks of manufacturer by also printing fabric for designers

(See customisation consequence)

+ Downward integration into production, more plausible for independent film due to high capital needed

+ Choice

COST RDTN

- Digital print & laser cutting processes are expensive and increases costs.

+ Human error reduced with digital pattern software, decreasing costs

+ Online retail /web store impacts costs for designers

+ Uniqueness + Quality

+ Convenience, accessibility

- Digital printing machinery is expensive increasing costs for fabric design bureaus & textile suppliers

- Increasing costs ( For fashion designers digital printing is a costly process)

+ Uniqueness ( Unique selling point for fashion designers)

+ Decreasing operational costs

No effect

ENTR BARR

+ Slightly increase barriers as more skills, experience are needed to use digital tools (positive for existing designers due to less competition)

+ Choice

+ Barriers increased due to digital equipment being capital intensive & higher skills , knowledge & expertise needed

No effect

+ Barriers lowered for independent film makers as Internet aids in awareness, creating an audience before production starts, acquiring capital may be easier

+ Choice

- Information overload

DMD PRTN

+ Internet is used as a tool to predict trends No effect No effect No effect No effect No effect

ECO of

SCA No effect No effect No effect No effect No effect No effect

CUSTN

+ 3D body scanning software used to customise personal fit & increases accuracy in sizing surveys

+ Possibility of collaboration with consumer regarding fabric print designs

- Price (Increase price of products)

+ Customisation + User innovation

+ Collaboration with designers in producing fabric designs & now also printing it for them

+ Uniqueness (Unique selling point)

+ User innovation (Designers being the users)

No effect No effect

PROD

+ Digital laser cutting increases precision + Digital pattern software increases maximum usage of fabric, reducing waste -/+ Digital fabric printing is a slow process, but enhances colour intensity & variety, efficient tool for development/sampling

+ Uniqueness + Choice

No effect No effect

- Overload of input from too many rewrites, as a result of too much feedback due to the ease of communication. This may potentially impact the focus of the original script, creativity can be lost in the process

+/- Quality (Visual quality has increased, but quality of the content may decrease)

SPD to MKT

+ Digital size scaling increase accuracy & turnaround time, faster than manual process ---

+ Future: Virtual garments can be created in 3D,converted to 2D at manufacturing stage, increasing turnaround time & supply chain

+ Quality & choice (Better fit & faster turnaround time means more assortment) --- + Choice

+ By using digital software to communicate ideas for feedback & sampling of fabric designs, the product development is exhilarated

+ Faster turnaround time No effect No effect

ENHD DISTN