EXTRACT: What Price a Creative Economy?

The ‘creative industries’ idea has gained world-wide purchase in contemporary policy and industry debate. Its proponents seek to reshape relations between old and new media and the cultural sector; and to reposition media, communications and culture as a driver, rather than a passenger, in the knowledge economy. They propose that the creative industries are set apart in the economy by the fact that ‘creativity’ is their primary source of value, something that is becoming increasingly important for growth in post-industrial, knowledge-based societies. In other words, the creative industries approach aims to foreground the sector’s economic potential and make these industries the ‘sparkplugs’ of next generation, post-industrial growth.

What are some of the key emergent cultural practices in the twenty-first century? What is likely to gain ground and drive innovation? Consumption drives post-industrial economies more and more, and its nature is changing. More and more consumer activity around media and culture involves do-it-yourself, user-generated content. User-led innovations, such as SMS, have changed the business model for mobile devices, one of the most dynamic growth-sectors of the economy, leading to successful MMS (picture cameras) uptake and heavy R&D and investment in mobile content, which in turn has led to expanding opportunities for creatives.

There is Wikipedia for knowledge production, Meetup and MySpace for civic formation, OhMyNews for citizen journalism, Orion’s Arm—an online science-fiction, world-building project for identity formation—and Amazon and eBay Web Services for independent market advice. There’s Flash, the animation software which is virtually ubiquitous on networked computers. And there’s Current TV. This is not much like in mainstream TV—at least, not yet! A quarter of its airtime is user-generated and it publishes some of the best DIY production guides for viewers.

Of course, we might get carried away with user-led innovation. Is it not just another of those new media ‘moments’ which always seem to promise revolution? But when, in his 2005 address to the American Society of Newspaper Editors, Rupert Murdoch starts talking about digital ‘natives’ and ‘immigrants’ and acknowledges that News Corp has underestimated the impact of Internet-based news sourcing and the social logic of peer-to-peer communication, then, as Eric Beecher surmised recently, ‘Something seismic is going on. Seismic, but unpredictable.’ Reputedly, Murdoch was scared into this position by data such as those presented by the Carnegie Foundation, demonstrating that ‘new forms of newsgathering and distribution, grassroots or citizen journalism and blogging sites are changing the very nature of who produces news’ and that the 18—34 demographic is creating this inexorable momentum.

What are the implications of this new take on culture?

First, it disrupts the linear value chain of professional modes of production. Secondly, the innovations are as much about distribution as production.

In contrast to the static reallocation model of cultural economics, an economics which captures the dimensions and trends in the creative economy needs to be dynamic, focusing on sources of novelty and change and on both the way industries grow (rather than their size at any particular moment) and what drives them to grow. This novelty and change may increasingly be found in the area of demand rather than supply and analysis may be redirected towards the ways in which the creative industries function as a bellwether for structural change in modern economies.

Scratch illustration

Thanks to Scratch

Over the last ten years a new, ‘evolutionary’ approach to economic analysis has taken shape, which places particular focus on the dynamics of the economic system under conditions of variety generation, enterprise competition and selection and self-organisation. Most of the work so far undertaken has focused on manufacturing and high technology sectors, as have most analyses of the sources of innovation in contemporary economies. Unfortunately, little attempt has yet been made to apply this new framework to the economic analysis of creative industries, although interesting work has been done on the broader question of innovation in services. Importantly, the evolutionary approach might lead to creative industries being understood as an emergent, innovative part of the services sector of the economy, rather than an exception to mainstream industries.

Evolutionary economics may therefore hope to provide a new basis for assessing the significance of the creative industries by focusing analytic attention on how the industry is dynamically structured and how it changes. This may furnish us with a clearer view of how it feeds variety into the economic system that other industries and sectors can further exploit. We shall be particularly interested to see how the creative industries integrate and transform new technologies into new services and how variety in the economy is regenerated by the continuous flows of novelty (in content or design, for example) into all parts of the economy.

The value of such novelty or variety is negligible in a static analysis, but from the dynamic perspective it is grist to the mill of economic growth and evolution. To properly understand their role, the creative industries need to be evaluated in terms of the way in which they both induce and facilitate the ongoing process of economic transformation. For the discipline of economics, this is where their true value might lie, not in appeals ‘beyond the market’ to notions of un-revealed preferences or cultural value.

If we accept that creative industries may benefit from being positioned less in the realm of cultural policy and more towards the idea of creativity as an input into the broader economy, a raft of policy domains and programs comes into play. There are implications for education and R&D policy, innovation policy, including export, tax, intellectual property as well as cultural policy. It is a great challenge for governments and industry to deliver joined-up initiatives to support holistic or systemic approaches.

Many policy recommendations have been made recently and many elements of an innovation and industry-development system are in place. We have a very large education and training sector producing skilled graduates and trainees. We have large market organisers and industry players, both in the public sector (broadcasters, funding agencies, and cultural institutions such as museums and galleries) and in the private sector (commercial broadcasters, publishing houses, telecommunications firms, and advertising). There is strong and growing demand for such a system, both in retail consumer demand and in the role of digital content as an enabler across a growing range of industries, particularly in the services and manufacturing sector.

However, the quality of linkages and the lack of clear public policy signals and frameworks, mark the innovation system as, at best, embryonic. Public policy needs to address the shifts required to capture the innovation potential of digital content industries by moving, for example, from established cultural and higher education policies to a more dynamic mix of coordinated program initiatives.

Several strategies exist to improve the situation. A Digital Content Industry Action Agenda has been developed to establish a framework for alignment of existing policy regimes with digital content industries. Its primary focus is on aligning cultural policies with industry development and R&D policies. What are needed now are nationally-funded centres of research to promote university and industry linkages that will establish tripartite interfaces between cultural institutions, universities and content industries. Such an initiative would create incentives for, and legitimise the role of, cultural institutions in research collaborations. It could invite a levy from participating industry sectors to fund innovation, which would then trigger government funding. This is the model adopted by many established R&D boards for primary industries. The industry levy might apply to broadcasters, publishers and distributors, and could be limited to firms with turnover above a floor level, to exempt emerging small- and medium-sized enterprises.

Equally necessary is a suite of reforms to research, and higher education policies to accommodate digital content and the creative industries; including campaigns targeting young people with the message that knowledge entrepreneurship — a ‘creative career’ — is a viable and attractive option. Supporting and promoting export is important as the way to sustainable growth. Equally important is the fact that only hard evidence of sustainability and scalability will make the sector attractive to private investors and break the vicious cycle of underinvestment.

The role of broadcasting and broadband is crucial, as the gateway between established and emergent content creation and industry structure. Understanding the interaction between the potent legacy of broadcasting and the potential of convergent broadband media is the key, if content creation is to remain close to the mainstream of popular cultural consumption and not be siphoned off into science or art alone.

Major technology-related reforms such as national investment in content and metadata standards and supporting systems, and tax credits for R&D investment in technology infrastructure in emerging content areas, are more crucial pieces in the jigsaw. Such public support would reduce the burden of the huge transaction costs created for both producers and users by the current ‘bottom up’ approach to standards.

Open content repositories, or public domain digital content, are the content industries’ equivalent of open source software. They selectively address barriers to production and unintended cultural outcomes of prevailing copyright and intellectual property regimes through an alternative opt-in model which can operate in parallel with existing regimes. As such they can be a powerful structural mechanism to support a rich ‘digital sand pit’ for creative content producers.

In short, an innovation systems approach to the creative industries opens up central policy territory which, until now, has been the preserve of science, engineering and technology. It seeks to connect culture to active government involvement in industry-shaping by moving it into mainstream policy.

This is an edited extract from Platform Papers 9, What Price a Creative Economy? by Stuart Cunningham, Currency House, July 2006

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