What are consumers willing to pay for digital services and how should we measure the value of digital culture?
The digital economy has myriad examples of commercial online platforms streaming high-quality content to engaged users. In such cases, the value to consumers can be measured by the difference between what consumers are willing to pay for the service and the price they actually pay, or what economists call consumer surplus. This difference benefits consumers, as it represents the amount of money they save by purchasing a service at a lower price than they are willing to pay. Platforms like Netflix and Spotify generate huge consumer surplus because their services are attractive: hundreds of millions of people are willing to pay more than they actually do. In the case of platforms offering free cultural services, like Art UK, the price consumers pay is zero, so the consumer surplus is simply their willingness to pay. If we can estimate this willingness to pay, we have an estimate of the value created for consumers.
Cultural institutions face challenges in measuring their value to the public when the services they produce are not captured in market prices. Such is the case with museums and galleries in the UK, where entry is in many cases free of charge. As a consequence, the benefits of investing in cultural institutions may be implicitly valued at zero in Social Cost Benefit Analysis (SCBA), leading to suboptimal investment. This is why the Department for Culture, Media and Sport’s (DCMS) Culture and Heritage Capital (CHC) Programme aims to place public investment in culture and heritage assets on a more rigorous footing by ensuring decisions are based explicitly on the economic, social and cultural contribution they make to society (Sagger et. al., 2021).
One way of doing this is by using non-market valuation techniques, like ’contingent valuation’ to measure the welfare benefits of cultural and heritage services. This aims to reveal the shadow price of services by asking consumers what they would be willing to pay were these services traded in a hypothetical market. These can be used to produce value estimates which can be used in SCBA.
While a rapidly growing evidence base attempts to estimate the willingness to pay for a range of cultural services using contingent valuation techniques, the quantitative evidence base on the value of digital cultural services remains thin. The DCMS and Arts and Humanities Research Council (which funds the Creative PEC) have made the valuation of digital cultural and heritage assets a priority within the CHC Programme, recognising that digital technologies are transforming the way the public engages with culture and heritage and the way organisations are changing their delivery models (Kaszynska et. al., 2022). In our study published today, we undertake a contingent valuation survey of UK-resident users of the Art UK platform.
Art UK brings together artworks from every public collection of art in the UK. The charity’s mission is to open up the UK’s national collection of art for enjoyment, learning and research. Almost 3,500 collection venues (including museums, universities, libraries and national organisations, such as the National Trust) are represented on the website. The vast majority of these institutions could not show their art collections online on their own, with an estimated 90% of the art across these collections being in storage or not easily publicly accessible. The Art UK platform is rich in story content, learning resources, public engagement offerings as well as opportunities to buy merchandise and prints on demand from the participating collections through the Art UK shop. There are currently over 300,000 artworks by 54,000 artists on the platform. In 2023, the total number of users visiting Art UK was 5.3 million (of which 2.3 million were UK users), showing growth of 13% year-on-year. Not quite as high as Netflix, but nonetheless impressive figures!
We found that 51.3% of Art UK users said that they were either or maybe willing to pay a monthly subscription fee to ensure Art UK could continue to operate and offer its services in the face of hypothetical funding cuts. They were asked to think only about what Art UK meant to them (‘use value’) when answering the question. The mean average willingness to pay for users was £3.69 per month. This average value may strike readers as low when compared with, say, the typical subscription fees charged by commercial providers of cultural services, however it is calculated on the basis that the 48.7% of Art UK users – who recall currently enjoy a free service – who said they were not willing to pay had a WTP of £0. In fact, the 51.3% of users who said they were willing to pay had a mean average WTP of £7.19.
Of the Art UK users willing to pay a monthly subscription, 24.9% said they would be willing to pay in addition an annual donation to support Art UK’s educational, research, community, and cultural tourism services (‘non-use’ value). The mean average contribution was £8.92 per year. This average value is again computed on the basis that the 39.1% of users who were willing to pay a monthly subscription but not an additional annual donation had a WTP donation of £0. The 24.9% who said they were willing to make an annual donation had a mean average value of £22.95.
For Art UK non-users, the question was focused on the willingness to pay an increase in annual council tax to support the continued existence of Art UK (‘non-use’ value). Among this group, over half said they were willing or maybe willing to pay the increased tax, which suggests a very significant part of the general public appreciates the wider societal value that a digital culture resource like the Art UK platform brings. Non-users had a mean average willingness to pay of £5.67 per year, again computed on the basis that the 45.1% of the population not willing to pay the increased tax had a willingness to pay of £0. The 54.9% of non-users who said they were willing to pay had a mean average of £10.33.
These WTP estimates can be scaled up by the relevant population to give aggregate welfare values for the non-market benefits of the Art UK platform. This is easier to do in the case of users where we have good data on the numbers visiting the website; in contrast, it is less clear what population to use for aggregating the non-use value for non-users. We present an indicative estimate of £71.4 million for the use value per year enjoyed by Art UK’s UK-based users. Note even this does not capture the whole use value of Art UK: only those elements the contingent valuation is designed to capture.
Stated preference exercises such as the contingent valuation surveys we use are beset with possible biases. As well as deploying best practice survey design measures to mitigate against these, we undertook steps to clean the data by removing from the sample ‘inconsistent’ responses. These consistency checks reduced significantly the sample sizes for both users and non-users, and may have introduced some selection biases, but resulted in a higher quality dataset. As is standard, we used multivariate regression analysis of factors known from other studies to influence willingness to pay such as income, demographic variables and measures of individuals’ cultural habits and experiences to confirm that our results are consistent with priors.
All in all, our results add to the small but growing evidence base that through careful sampling strategy and questionnaire design, contingent valuation techniques can be used to estimate the economic value of digital cultural services, and that – in the case of Art UK, with its large, engaged user base – this estimate is evidently significant in magnitude. Applying these valuation techniques to free high quality digital cultural services is especially important, otherwise it’s easy for funders to forget just how much value they create.
Measuring the Economic Value of Digital Culture: A Case Study of the Art UK Platform can be read here.
Image credit: Steve Johnson, Unsplash
