Creative Economy: A Feasible Development Option

Finally, the possibility of delivering services onlinerather than through a physical presence allows developingcountries to benefit from their comparative advantage insome labour-intensive services that make use of ICTs. Thereare various ways in which governments can promote greateruse of ICTs by companies, especially SMEs, that lag in termsof ICT uptake. SMEs represent the backbone of the creativesector and employ a large majority of creative workers inboth developed and developing countries. Despite recentprogress in the area of connectivity, there are still many bottlenecksthat prevent creative entrepreneurs and small firmsfrom using ICTs efficiently. Their use is often limited by lowlevels of ICT literacy, slow connection speeds, lack of localcontent and high costs of use. Moreover, in rural areas ofmany developing countries, even basic connectivity remains achallenge.77.7 Impact across the production chainTechnology, connectivity and the creative economyThe use of ICTs can potentially have significantimpact on all steps of the production chain: conception, production,distribution, access to audiences, and engagement infeedback from the audience/market. The specificities are differentfor each production activity in the creative economy.The aim of this section is to provide some illustrative examplesof impact across the production chain. New ways ofmaking money or developing audiences are possible with digitizationand new business models, but the future direction isuncertain. All cultural producers face potential instability inthe years ahead as well as huge potential growth. The new systemscould undermine what have become, in the last 50 yearsor so, the normal ways to organize, say, music or film productionand distribution. Understandably, those corporationsthat currently occupy key positions in such a system will seekto defend the “old ways”.Recent shifts in the music industry illustrate the challengesthat creative producers are likely to face in adoptingnew ways of doing business. The old model of the musicindustry has production and distribution at the centre, withthe objective of promoting and selling huge numbers of asmall range of music. This channels monopoly profits intomusic companies and ensures very high intellectual propertyreturns (for a small number of bands). This process reducesstockholding costs and increases profitability although it isrisky when it is unclear whether a hit is likely to be achievedfrom any one recording (although marketing can influencethis situation enormously). This is why in music, as in film,companies expect a large percentage of failure to be discountedby a small number of super successes. Thus, in this system,intellectual property is a key means by which artists canmake money through recording and by which music companiescan target their production, distribution and sales asmuch as possible.This model is based on a world of physical products;the new model is based on virtual products where storagecosts of digital files are practically zero and a potentially infiniterange of music can be available to the consumer. In fact,the role of the music companies to promote and focus consumerscould be bypassed altogether if artists were to selldirectly to their audience. Of course, by exploiting the “longtail” of products, any one artist is likely to make smallreturns from intellectual property and the same is true for themusic companies. For the latter, the old economics of theextra administrative costs of managing a large number ofartists and the costs of recording, etc. will be an incentive tocreate a “short tail” or limited range of products. In such asituation, it may be logical for artists to focus on activitiesthat make money, that is, live performances and the merchandisingopportunities that these afford. In this way, they canearn a modest income. Moreover, since they are not relyingprimarily on income from intellectual property, it is logicalthat they reduce the price of their product, or give it away, inorder to generate demand and attendance at concerts. Ofcourse, they would still want to copyright the work to sell itdirectly to the public.This example is instructive in that it shows how thesignificance of intellectual property may change from its roleas income generator to one of simple protection and moralright under different conditions of production. The balanceof power might shift from large companies to independent200 CREATIVE ECONOMY REPORT 2010