Promoting the Creative Industries: From Project to Process by Bernd Fesel

Note: Bernd Fesel made this contribution to ECCM Symposium 'Productivity of Culture' held in Athens October 2007

Introduction to the State of Debate in 2007

Culture as an economic activity is a daily topic for artists, who have been culture entrepreneurs for centuries. For cultural and economic politics, however, it is a new challenge that commercial culture production has such large dimensions – being both larger than public spending for culture and larger than many traditional economic fields such as real estate, automobile production or the chemical industries. The study “The Economy of Culture”, produced by KEA and commissioned by the European Commission in 2006, is the latest piece of research in a series of studies carried out in Northrhine-Westfalia, Germany, and the UK since the 90ies.

The empirical results are similar all over Europe: The so called “Creative Industries” produce at least 2,5% of GDP reaching up to a stunning 7% in some countries. However, the definition which lines of business are to be included and to what extent still differs from country to country. Usually commercial activities in the performing arts, music, visual art, literature, architecture, design, fashion, film, tv, gaming, advertising and journalism are included. The role of the public sector and cultural heritage is also calculated differently. Furthermore there is no satisfactory data base yet – this is one of the main results of all studies in Europe, be it on municipal or on European level.

While the Economy of Culture reached the highest political attention so far in 2007, it has also revealed its lack of empirical description and understanding.

Understanding the Economy of Culture

What do we know?

1.) Markets of creative or culture products are inherently fragmented (hidden information) and lack reliable foresight (hidden action). Since we expect a culture production to surprise the audience with a new idea, the acceptance of cultural products can not be foreseen. Such markets are always high risk. Industrial products work the opposite way: they constantly reproduce the same product and quality like a car or a yogurt. Cultural and industrial products are inherently different and follow different market laws.

2.) Beaumol’s law of cost disease prohibits earnings by economies of scale. One hour of singing still needs one hour, while the production of watches per hour increases from year to year. This implies two results:

a) Individual incomes are limited in the cultural industries.
b) For some cultural productions, public spending should increase in relation to other public spending topics, which are getting cheaper each year due to increasing economies of scale.

3.) The fragmentation of cultural markets implies high costs of information and of market orientation. Cultural markets (especially cross-country) are expensive to work in both for the cultural consumer and the cultural entrepreneur. This is the main reason why the European common market is not working at its best for the cultural markets. However, there is a second aspect which needs to be considered: fragmentation is the economic counterpart of the diversity of culture, which are in the end the spirit of the market and the fundament of cultural identity.

4.) As conclusion we can learn that politics – whether from the culture or economic department – has one option to promote cultural entrepreneurs without damaging cultural diversity. It must not reduce risk or increase foresight – this would attack the cultural identity. It must in contrast reduce the costs of using markets, which means: more information efficiency on the cultural markets and cultural entrepreneurs. Politics must implement more information tools on cultural markets – from public to private radio and television, internet portals, magazines, fairs, audience development and – to begin with: cultural education. In the European context this means first of all budgets for translations and cross-country networks which support commercial promotion for foreign products.[1] To sum it up: The time to market must be reduced.

And what do we not know

1.) Neither market makers nor researchers can predict how success in the cultural markets works. The question, how to make a star or just how to make a frequent demand, has no general answer. It seems it must be “produced” artist specific. This is a great obstacle for artist management and market efficiency.
Some scientists as well as the study “Economy of Culture” therefore promote a support of creative structures like

production spaces,
product mobility,
market finance and
audience communication

instead of supporting individual projects, productions or artists, whose success is not predictable.

2.) The development of creative quarters is not yet understood. Most often they are recognized when their development is surfacing and not when it is starting. Most researchers at least agree that a critical mass of creative and cultural entrepreneurs is necessary. Most agree that important persons of a sector motivate others to move into the quarter. However, it is a secret who does the first step for which reason (it is not cheap rents alone!) and who is the important person.

To sum it up: We know at least we need more research.

RUHR.2010: Promoting the Creative Industries

From Project to Process

RUHR.2010 is aiming to promote the approximately 20.000 creative entrepreneurs in 52 cities of the Metropolis Ruhr by

a) strengthening its inherent market principles, focusing on the European Market

b) initiating an on-going cultural and economic process

To reach these aims we are adopting a bottom-up as well as a top-down strategy which is sector specific as well as sector integrating. Here are some examples:

Aim 1: Strengthening inherent market principles within the European Market

Example 1: Improve Finance / Capital Market Access

Top-Down: The NRW Bank is setting up a Creative Capital Fund while resorting to a creative industries expert circle to determine promising projects

Bottom-Up: Enable local business banks in the 52 cities (seminars, coaching, and statistics) to give loans to creative entrepreneurs.

Both actions are initiated and supervised by or coordinated with RUHR.2010.

Example 2: Music / Live Entertainment

Top-Down: The Loveparade moved from Berlin to the Metropolis Ruhr. More than 1.0 million visitors joined the Loveparade and the Love Weekend in August 2007 and generated business with a spending of almost 100 Euros per visitor.

Bottom-Up: A forum of all music clubs in the Metropolis Ruhr has been established and a regular hearing of the music market has been started. Now the music entrepreneurs and the music market start to re-organize their marketing, European exports and local communication – being coached and cross-linked by the team Creative Industries at RUHR.2010. Currently a European export strategy is being developed.

This example is almost a blue-print for increasing market efficiency: The costs of information are reduced by market hearings and commissions. The actors are acting – and are thus automatically planning for more than just a single event in 2010.

Creative Industries RUHR.2010 is acting as a moderator and information-broker – not only in the music sector, but also in other sectors of the creative industries; not only in the field of finance, but also in others fields such as digital communication and journalism.

Aim 2: Initiating an on-going cultural and economic process

The Creative Industries RUHR.2010 has also top-down lead projects – which also aim at enabling actors.

Example 1: We are planning the first ever database of creative entrepreneurs in all 52 cities of the Metropolis Ruhr. This initiative is a co-operation with the business promotion departments of all 52 cities – after many day long meetings – and the Metropolis Ruhr Business Promotion Office.

Example 2: We are promoting the development of Creative Quarters. This is coordinated with four cities and includes a research project about what an “artist residence” in the future might be. Today’s Artist Residences are mostly located in quite centralized cities or capitals. The Metropolis Ruhr has a different, more decentralized structure. It is also a mixture of larger and smaller cities. The Metropolis Ruhr plans to be a model for how creative quarters might work outside the capitals.

The Team Creative Industries RUHR.2010 is acting as an advisor to the acting cities and entrepreneurs in the Metropolis Ruhr.

[1] This is much more then artist mobility. Short-time mobility does not make a long-term audience and does not guarantee an on-going promotion and communication effect.

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Promoting the Creative Industries: From Project to Process by Bernd Fesel