Creative Economy: A Feasible Development Option

3.2 Organization of the creative economy3Analysing the creative economyA key question usually raised concerning the creativeeconomy is whether it is substantively the same as the rest ofthe economy. There are two reasons for raising this issue.First, traditionally, matters relating to culture and arts havebeen dealt with as special cases, given their peculiar forms ofproduction and the specific characteristics of their markets.Historically, cultural policy is considered as exceptional or afield with special needs based upon a welfare-economics conceptionof market failure balanced against cultural values.Second, many have argued that the creative economy is sufficientlydifferent from the mainstream economy; therefore,specific rather than generic policymaking might be appropriate.This chapter develops this second line of argument. Thestarting point is to identify how and why the creative economyis different and in what ways it is necessary to do finetuningwith generic analyses and policies.Thus, this section is subdivided into three parts correspondingto identifiable dimensions of the creative economythat distinguish it as different or at least sufficientlyunusual to merit the development or refinement of conservativeanalytical tools. Attention is drawn to three criticalaspects of the creative economy for policymaking. Initially,the basic organizational structure of the creative economy isexamined, then the characteristics of its day-to-day operations,and finally some of the locational consequences.In general, the creative economy is dealt with as a singleset of activities. Nevertheless, there are significant differencesbetween individual creative industries associated withmarkets, products, technologies and distribution systems. Infact, the debate about “convergence” highlights this point,seeking innovative possibilities to deal with these interactions.For the purpose of this report, however, it is sufficientto begin with a set of policies and analysis of the creativeeconomy in general. Clearly, there is scope for specific adaptationto particular industries and regulatory norms. Thepoint to be stressed is that the creative economy is bothinternally coherent and sufficiently different from the “restof the economy” to merit separate attention. In many ways,this conclusion is accepted since it retains the possibility offormulating creative economy policies that both attend toeconomic specificities while they may be open to incorporatingspecial concerns that are critical to local and regional culturalidentity.3.2.1 Organizational structuresThe main characteristic of the creative economy is, in organizationalterms, its “missing middle”. This refers to the factthat there is a preponderance of a small number of very largefirms working internationally, counterbalanced by a verylarge number of essentially local, micro enterprises, many ofwhich are simply single persons. Despite the common image,the creative economy is not “one big machine” resonant of“Hollywood” in the early 20 th century. There is very littleclassical vertical integration of the kind most commonlyassociated with transnational corporations in other sectors.There is strong integration, horizontal and vertical, of partsof the creative economy; however, this does not extend to themicroenterprises and individual creative entrepreneurs.While a research scientist may work for a big pharmaceuticallaboratory, a musician is unlikely to be an employee of alarge music corporation such as Sony or EMI. The contractualrelationship will exist, but it will be associated with thedistribution of the final product and a proportion of theintellectual property rights. Accordingly, there are a considerablenumber of artists working with large companies. Akey role is played by a small number of separate intermediaries— usually referred to as agents — who broker dealsbetween “creatives” and corporations. As will be furtherexamined later in this chapter, the creative economy hasevolved in this way in order to manage the large amount ofrisk involved in cultural business. This risk is not simplylinked to the nature of the creative product and audiencepreparation, but it is also associated with the timing ofreaching markets.3.2.2 Operational mattersIn part, the organizational structure of the creativeeconomy is a response to the possibilities of massiveeconomies of scale through the mass production of creativeproducts. The case of a music CD illustrates this point.Limited costs may be involved in the composition andrecording of content; however, the potential to sell a millionor more CDs within a short period can yield considerablereturns for all concerned. Profits increase with each additionalsale because, aside from marginal distribution andmarketing costs, the initial investment is a one-off. Online74 CREATIVE ECONOMY REPORT 2010