Creative Economy: A Feasible Development Option

music sales carry even lower distribution costs, because there isno physical product to ship or store, and thus have the potentialfor increases unit sales, higher profit margins, or both.The possibilities of this style of production and itsrepetition are the reason why the creative economy is organizedpredominantly around charts that rank top-sellingartists. Charts seek both to signal to consumers to buy andto funnel consumption into a small range of alternatives(thereby reducing waste and stockholding). However, chartdrivenmarkets are “winner takes all” in structure; profits areconcentrated among a small set of winners, while others arelucky to cover their initial investment. Indeed, it is widelyrecognized that as many as 80 per cent of films will fall intothis category; of course, it is the 20 per cent that make superprofits and thus subsidize the losses. The nature of the creativeeconomy is such that, as Richard Caves notes later inthis chapter, nobody knows up front which products will besuccessful and which will not.Again, the creative economy has organized itself toadapt to such circumstances. The risks can be offset if one hasa large enough portfolio and a sufficient turnover in any oneyear so that losses can be borne until profits come through.However, this makes it extremely difficult for individual artistsor smaller groups of artists to compete with such a model.The situation is exacerbated by the strong control of access tothe market that a small number of distribution companieshave. While the risk limitation of conventional distributors isunderstandable, it does have a limiting effect on the range ofcreative products that tend towards the norm and towardswhat worked before. With luck, a small producer may strike itrich, but this is unlikely to be a sustainable model.It is noteworthy that this fast turnover of productsrequires continuous innovation to develop new products. Italso means that each product (a CD, for example) has a limitedlife and that it must be on the market in precisely theright window that accords with local taste. This can meanthat several million dollars of development that has taken ayear or more to achieve by a hundred or more people mayturn on whether it reaches the market at precisely the righttime and whether the consumers like it. In computer games,the window can be as narrow as 14 days; if the game doesnot enter the chart within this time, it is withdrawn and aloss is taken. This is a punishing innovation cycle comparedto that of most industries.A further aspect of the rapid innovation cycle is themicro-organizational form adopted by many in the creativeeconomy. The most popular form is not the classical firmbut the project. A project team may be formed from personnelwithin a firm or with an informal network. Members willbe selected to fit with the desired product. For a short time,they work as one in intensive development; after the productis completed, the project team disintegrates and participantsreforms as new teams. Thus firm life can appear to be veryshort; however the resources and expertise are in the labourpool. Film-making is characterized by this format. While insome industries such as advertising project team membersmay be continuously employed by a “holding company”, inmany other industries, all of the participants may be freelanceof self-employed. Thus close attention is needed interms of local strategies, data collection and labour-marketanalysis in the creative economy in these unique characteristicsare to be accurately captured and understood.3.2.3 Locational issuesThe organization and operational peculiarities of thecreative economy lead to a particular locational characteristic:clustering. Although clustering, or at least co-location, occursin many industries, the particular nature of clustering is bothimportant and a defining characteristic of the creative economy.Today, there are two prevalent perspectives on the types ofcreative clusters: (1) a traditional one that focuses on how creativecompanies and branches clusters together with the benefitsfrom locating in the same place; and (2) an occupationalperspective that focuses on how creative individuals benefitfrom choosing the same places to live and work. 2 The factthat creative clusters function as a unified whole calls for collaborationnot only within the clusters but also across bordersbetween creative industries. A survey 3 of employment patternsin 2006 found six cities with creative clusters of morethan 300,000 employees: Barcelona, London, Los Angeles,Milan, New York and Paris. It is not surprising that theselarge cities developed a high degree of specialization inspecific creative industries.In principle, much of what happens in the creativeeconomy can be transmitted in digital form. Hence, onemight expect there would be little spatial pull of particularlocations. However, as noted earlier, clustering is a solution3Analysing the creative economy2 Danish Enterprise and Construction Authority (2010).3 Monitor Group Cluster Database. More information available from http://www.compete.monitor.com.CREATIVE ECONOMY REPORT 201075