Am delighted we’re applying economic theory because (1) the language and ideas appeal to and persuade business-savvy types in the creative industries who actually have the power to change company polices, but also (2) putting economic knowledge and theory into the hands of creatives / artists will hopefully improve their earnings by reducing reliance on exploitative sharks (that said, artists typically prefer others - whether a manager or agent - to handle their finances). And yes, some scoff at links between art and finance but commerce will always be a key driver in cultural distribution. The tricky bit is finding the right balance of exposure and income for cultural producers, especially the more sensitive ones.

Onto the meat: complements and substitutes are powerful notions to illustrate our case studies and basic materials.

From the perspective of a record company (personified by the RIAA / BPI / IFPI) mp3s are very much a substitute for CDs, which has driven their ‘anti-piracy’ campaigns over the last decade. And we may yet reach a point where digital versions of books become substitutes for paper copies. Except for the minority of afficionados prepared to pay for high quality, deluxe versions. Most will be happy with low-grade versions and cos the big guys make their big bucks from ‘most’ people, they’ve got more to lose from ‘free’ distribution…

And these products may not be substitutes from the perspective of the auteur, for whom they may be complements because - as you say - digital versions can drive sales of live and merch. Yet not all artists enjoy live performance or merchandise so may prefer the ‘control’ model to ‘free’ distribution of fixed / recorded works. And although ‘control’ is increasingly difficult, social conventions may yet reduce the scope of ‘free’ in the minority afficionado circles. For example, some albums are never uploaded cos fans respect the wishes of the auteur.

Now, as we go deeper into these concepts and appreciate better the diversity of the creative industry’s ecosystem, a recent post from Andrew Dubber seems relevant. He argues that discussion of business models is a distraction. Creatives would do better by assessing their own particular product strengths as a basis for their own personal model. He’s onto something here.
http://newmusicstrategies.com/2007/11/22/i-like-bruce-warila/