This study critically analyzes the dual impact of digital innovation on cultural and creative industries, emphasizing both opportunities and challenges. It investigates how digital media platforms, such as TikTok and the Palace Museum, drive market expansion, enhance cultural sustainability, and democratize information sharing. These innovations foster public engagement and cultural tourism, thereby contributing to economic growth and cultural development. Nevertheless, the study highlights ethical challenges such as misinformation, algorithmic bias, gender inequality, and racial discrimination, which hinder the potential benefits of digital platforms. Using a qualitative methodology that integrates case studies and secondary data analysis, this research identifies mechanisms driving these dual effects and evaluates strategies to mitigate negative consequences. The findings underscore the need for ethical frameworks and governance mechanisms to guide digital innovation toward sustainable development, ensuring alignment with inclusivity and social responsibility.