Creative Economy: A Feasible Development Option

IPR rights that may be “re-purposed” (or reused) from onemedium to another (for example, a cartoon character in acomputer game, a film, a book, a toy or on a piece of clothing).This multiplies the possibilities of exploitation of intellectualproperty from a single investment in addition to thetraditional monopoly profits possible in the medium.Digitization creates a number of new possibilities fordistribution. With analogue distribution systems, reproductionleads to degradation of the product; hence it is less thanthe original and declines further with the number reproduced.With digital formats, reproduction is free of degradation andincurs no extra cost per item. This opens up the possibilitiesfor infinite expansion of markets and reduces or eliminatesthe need to warehouse or store products. One dilemma thatcreative producers face is how to deal with the uncertainties ofdemand and the need to maximize economies of scale by concentratingproduction in as few items as possible so as toreduce stockholding and excess production costs. These functionsmust commonly be combined with the physical transferand exchange of goods, i.e., distribution. For obvious reasons,distributors seek to manage their stock by restricting choice tothe best sellers. Many mechanisms are used to achieve this, butcharts are a common way to organize and focus consumers. Ina digital age, however, it is potentially possible for producersand consumers to be in direct contact, thereby bypassing thecontrol of the gatekeepers of the distribution system, whichare economically powerful.Because stockholding costs are minimal for digital products,maximum choice is available; this is called the “long tail”hypothesis. In the long term, however, the potential formonopoly profits are reduced, hence posing a threat to the currentmedia structure but opening up significant possibilities forsmall producers. Under a system of direct micro-payments, forexample, profits may be spread thinly and hence little traditionalbenefit from the creative economy will be realized.Clearly, this is a huge area for future debate. New businessmodels are emerging to exploit these new possibilities (e.g.,with respect to music) and it has been suggested that there maybe a variety of models — e.g., free music — offering possibilitiesfor making money from different aspects of the business.The real issue is the challenge that these activities (which arenot understood or regulated) pose to governance and to howintellectual property is to be used and regulated, since thisrequires an enormous investment in infrastructure.Increased access to information gives global breadthand depth to the mapping of suppliers, buyers and outsourcingpossibilities. Therefore, ICTs may play a major role inthis transformation process, reducing costs, improving productivityin the value chain and making companies more visiblein the global market. This contribution is more evidentin those creative industries depending on technology at theirvery core (software, games, multimedia content). However,even in the more traditional, less technology-driven industriessuch as handicrafts, ICTs open new ranges of trade forservices previously not traded, inaugurating distributionchannels and generating innovative production forms.7Technology, connectivity and the creative economyBox 7.1When ICTs give rise to new business modelsFor every action, there is an equal and opposite reaction. ICTs and the creative economy seem to form the perfect ground for the validity of Newton’sthird law. The more concentrated the audiovisual and music markets become in the hands of a few transnational conglomerates, the more alternativebusiness models emerge. Back in 2000, the music sector was revolutionized by peer-to-peer file-sharing programmes such as KaZaA and Napster, whichby 2001 had conquered no less than 3.5 million users.As creativity seems to reinvent itself, a similar business model was created with Skype. Sold to eBay for $2 billion in 2005, it is now being applied toJoost Internet TV, with a promise to disrupt the oligopoly of the television industry.By the same token, a myriad of open-source initiatives mushroom in other creative-economy markets, presenting more humble turnovers but provokinga shift in mindset on all continents. In Mexico, Tortillería Editorial is an association of authors, professionals and beginners who decided they would nothave much control over their books if they were to follow the usual publishing-house circuit. As a reaction, they created a mix of database, software andsite where they share their books and writings, allowing any user to generate, print and sell them. In 2007, it reached more than 4,000 texts and hundredsof authors.In Brazil, where internet use is comparatively high, Web 2.0 is facilitating the spread of open-source software. Overmundo, a Government-funded project,was commissioned to ensure the alternative cultural coverage, mainly outside the São Paulo-Rio de Janeiro axis. Incorporating strong communityparticipation, users are responsible for its content and design. Overmundo has become a globally recognized cultural database of Brazilian culture withmore than 700,000 references via Google. Not surprisingly, it won the Prix Arts Electronica International Competition for CyberArts in 2007.CREATIVE ECONOMY REPORT 2010199