The Berlin Creative Industries

Dieter Puchta, Friedrich Schneider, Stefan Haigner, Florian Wakolbinger, Stefan Jenewein The Berlin Creative Industries

GABLER RESEARCH

Dieter Puchta, Friedrich Schneider, Stefan Haigner, Florian Wakolbinger, Stefan Jenewein

The Berlin Creative Industries An Empirical Analysis of Future Key Industries

RESEARCH

Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

1st Edition 2010 All rights reserved © Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2010 Editorial Office: Stefanie Brich Gabler Verlag is a brand of Springer Fachmedien. Springer Fachmedien is part of Springer Science+Business Media. www.gabler.de No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder. Registered and/or industrial names, trade names, trade descriptions etc. cited in this publication are part of the law for trade-mark protection and may not be used free in any form or by any means even if this is not specifically marked. Umschlaggestaltung: KünkelLopka Medienentwicklung, Heidelberg Printed on acid-free paper Printed in Germany ISBN 978-3-8349-2311-0

Preface

The Creative Industries have recently come into the focus of urban development strategies and economic policy. The driving force behind that was, amongst others, Richard Florida with his bestseller “The rise of the creative class and how it’s transforming work, leisure, community, and everyday life”. The Creative Industries are increasingly dynamic and growing three times faster than the economy in total. With respect to the economic value added, the Creative Industries in Germany are absolutely comparable to the automotive industry.1 Nonetheless, for entrepreneurs it is often still easier to find financing opportunities for property, real estate and assets than for ideas and intangible assets. Thus, Investitionsbank Berlin has been researching possibilities to finance the Creative Economy since several years. Many who are engaged in spurring the development of cities and regions, however, come across various different definitions of the term “Creative Industries” and several approaches which cannot be exactly distinguished from one another. This might cause confusion. It is thus a primary aim of this study to pick up and survey the different approaches and to offer a thorough classification and a clear definition of the term “Creative Economy”. A second aim is to work out the implications of the different approaches and definitions for those who are engaged in spurring the Creative Branches. Creative Enterprises have very specific business concepts and might thus need alternative financing models. This poses a challenge to both economic policy as well as funding bodies, which they have to accept. Moreover, since metropolitan areas are considerably attractive for creative people, the study specifically features the Berlin creative market and gives a quantitative impression of it. It would be a great pleasure for us if this study could contribute to an increasingly efficient, effective and target-oriented furtherance of the Creative Industries, which ultimately are of great importance for the economic and social development. Creative Industries have to be fostered and financed creatively! Prof. Dr. Dieter Puchta

1

See, for example, Puchta, D. (2009). Kreative Finanzierung – Innovative Finanzierungslösungen für die Kreativwirtschaft. In: Grüner, H., Kleine, H., Puchta, D., Schulze, K. (Hg.). Kreative gründen anders! Existenzgründungen in der Kulturwirtschaft. Transcript Verlag, Bielefeld 2009, pp. 40.

Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

List of Figures/List of Focus Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

Part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

2

The Notion of Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

2.1 2.1.1 2.1.2 2.2 2.3 2.4 2.5 2.6

Anglo-American and Continental-European Approach . . . . . . . . . . . . Anglo-American Approach following R. Florida . . . . . . . . . . . . . . . . . Continental-European Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Horizontal and Vertical Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technological Sectors as Part of the Creative Industries . . . . . . . . . . . . Creative Class or Creative Industries? . . . . . . . . . . . . . . . . . . . . . . . . . A Variety of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24 24 25 26 27 27 28 29

3

On the Theory of Creative Industries . . . . . . . . . . . . . . . . . . . . . . . .

31

3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.1.5 3.1.6 3.1.7 3.1.8 3.2 3.2.1 3.2.2 3.2.3

Characteristics of the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . Uncertain Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Creativity as a Value in Itself . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Mix of Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Differentiability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Differentiation of Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time is a Critical Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Differences between Creative and Traditional Industries . . . . . . . . . . . The Degree of Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Type of Actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types of Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 31 32 32 33 33 33 33 34 34 34 35 35

1

8

Contents

3.2.4 3.2.5 3.2.6 3.2.7 3.2.8

The Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Creative Industries as a Cross-Sectional Area . . . . . . . . . . . . . . . . Investment Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Labor Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Innovation as a Driving Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35 36 36 36 37

4

An International Overview on the Creative Industries . . . . . . . . . .

41

4.1 4.2 4.3 4.4 4.5 4.6 4.6.1 4.6.2 4.6.3 4.6.4 4.6.5 4.6.6 4.6.7 4.7 4.7.1 4.7.2 4.7.3 4.8

The United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North Rhine Westphalia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schleswig-Holstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hessen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Saxony-Anhalt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hamburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Berlin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cologne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UNESCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WIPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41 42 43 44 44 45 46 47 48 48 48 49 49 50 50 51 51 52

Part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53

5

From Theory to Empirics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55

5.1 5.2

Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Mapping of Economic Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57 57

6

The Berlin Creative Industries at a Glance . . . . . . . . . . . . . . . . . . . .

59

7

The Creative Industries in Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63

7.1 7.1.1 7.1.2 7.1.3 7.1.4 7.1.5

Details of the Cultural Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Film industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Broadcasting Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Music, Visual- and Performing Arts . . . . . . . . . . . . . . . . . . . . . . . . . . . Journalists and News Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

63 63 65 68 70 74

9

Contents

7.1.6 7.1.7 7.1.8 7.1.9 7.2 7.2.1 7.2.2 7.3

Museum Shops and Art Exhibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . Retailing of Cultural Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Design Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Details of the Creative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Software- and Games Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75 76 78 80 81 81 82 84

8

Excursus: Differences among Research Results . . . . . . . . . . . . . . . .

87

8.1 8.2

Possible Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Working off the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Part 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91

9

Value Added and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93

9.1 9.2 9.3 9.4 9.4.1 9.4.2 9.5 9.5.1 9.5.2

The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simulation Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simulation Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regional GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Targeted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regional GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93 96 97 98 98 100 101 102 103

10

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Part 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 11

Instruments to Foster the Creative Industries . . . . . . . . . . . . . . . . . 109

11.1 11.1.1 11.1.2 11.2 11.2.1 11.2.2 11.2.3 11.2.4 11.2.5 11.2.6

Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monetary Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-monetary Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specifics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Low Capital Endowment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lack of Debt Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Low Funding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Uncertainty of Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ideas Instead of Machines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pre- and Interim Financing, Sustainability . . . . . . . . . . . . . . . . . . . . . .

110 110 111 112 113 113 113 114 114 115

10

Contents

11.2.7 11.2.8 11.3 11.3.1 11.3.2 11.3.3 11.4

Lack of Knowledge on Funding Possibilities . . . . . . . . . . . . . . . . . . . . Lack of Commercial Comprehension . . . . . . . . . . . . . . . . . . . . . . . . . . Types of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mezzanine-Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Venture Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115 116 116 117 118 119 123

12

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

12.1 12.2 12.3

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Results of this Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Appendix A – Economic Sectors in Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Appendix B – Differences in Research Results . . . . . . . . . . . . . . . . . . . . . . . . 140 Appendix C – Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

List of Figures

Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8:

The 3-Sector Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Creative Economy in the Form of a Matrix . . . . . . . . . . . . . . . . . Creative Industries, their Branches and Economic Sectors . . . . . . . . . The Berlin Creative Industries – Enterprises, OPEs and Employees . The Berlin Creative Industries – Enterprises and Revenues [mn. “] . Berlin Economic Simulation Tool BEST – Flow Chart . . . . . . . . . . . Share of Additional Jobs for the Different Economic Sectors . . . . . . The Creative Economy in the Form of a Matrix . . . . . . . . . . . . . . . . .

26 28 57 84 85 93 101 128

List of Focus Boxes Focus box 1: Focus box 2: Focus box 3: Focus box 4: Focus box 5: Focus box 6:

Reversed Causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Berlinale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXHome – A Completely new Service-Channel . . . . . . . . . . . . . Month of Photography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aedes, the First Architectural Gallery in Europe . . . . . . . . . . . . . LETS – Local Exchange Trading Systems . . . . . . . . . . . . . . . . . .

38 68 70 73 79 111

List of Tables

Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Table 31: Table 32: Table 33: Table 34: Table 35: Table 36:

An International Overview of the Creative Industries . . . . . . . . . . . . Creative Industries at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Creative Industries at a Glance – Enterprises and Revenues . . . . . . . Creative Industries at a Glance – Employees . . . . . . . . . . . . . . . . . . . Publishing – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Publishing – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . . Publishing – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Film Industries – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Film Industries – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . Film Industries – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Broadcasting Industries – Classification . . . . . . . . . . . . . . . . Private Broadcasting Industries – Enterprises and Revenues . . . . . . . Private Broadcasting Industries – Employees . . . . . . . . . . . . . . . . . . . Music, Visual and Performing Arts . . . . . . . . . . . . . . . . . . . . . . . . . . Music, Visual and Performing Arts – Enterprises and Revenues . . . . Music, Visual and Performing Arts – Employees . . . . . . . . . . . . . . . . Journalists and News Agencies – Classification . . . . . . . . . . . . . . . . Journalists and News Agencies – Enterprises and Revenues . . . . . . . Journalists and News Agencies – Employees . . . . . . . . . . . . . . . . . . . Museum Shops and Art Exhibitions – Classification . . . . . . . . . . . . . Museum Shops and Art Exhibitions – Employees . . . . . . . . . . . . . . . Retailing of Cultural Goods – Classifications . . . . . . . . . . . . . . . . . . Retailing of Cultural Goods – Enterprises and Revenues . . . . . . . . . . Retailing of Cultural Goods – Employees . . . . . . . . . . . . . . . . . . . . . Architecture – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Architecture – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . Architecture – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Design Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Design Industries – Enterprises and Revenues . . . . . . . . . . . . . . . . . . Design Industries – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . Advertising – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Software and Games Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Software and Games Industries – Enterprises and Revenues . . . . . . . Software and Games Industries – Employees . . . . . . . . . . . . . . . . . . .

52 59 60 61 63 64 64 66 66 67 68 69 69 70 71 72 74 74 74 75 76 76 77 78 78 79 79 80 80 80 81 82 82 82 83 83

14 Table 37: Table 38: Table 39: Table 40: Table 41: Table 42: Table 43: Table 44: Table 45: Table 46: Table 47: Table 48: Table 49: Table 50: Table 51: Table 52: Table 53: Table 54: Table 55: Table 56: Table 57: Table 58: Table 59: Table 60: Table 61: Table 62: Table 63: Table 64: Table 65: Table 66: Table 67: Table 68: Table 69: Table 70: Table 71: Table 72:

List of Tables

SenWTF – Creative Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . This Study – Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working off the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview – Revenues and Employees . . . . . . . . . . . . . . . . . . . . . . . . Weights of Technologies and Economic Sectors . . . . . . . . . . . . . . . . Scenario 1 – Assumed Investment Amounts . . . . . . . . . . . . . . . . . . . . Scenario 2 – Assumed Investment Amounts . . . . . . . . . . . . . . . . . . . . Scenario 1 – Additional Regional GDP in the years 2008 until 2012 Scenario 2 – Additional Regional GDP in the years 2008 until 2012 . Scenario 1 – Additional Jobs in the years 2008 until 2012 . . . . . . . . . Scenario 2 – Additional Jobs in the years 2008 until 2012 . . . . . . . . . Targeted Investment – Scenario 1 – Additional Regional GDP . . . . . Targeted Investment – Scenario 2 – Additional Regional GDP . . . . . Targeted Investment – Scenario 1 – Additional Employment . . . . . . . Targeted Investment – Scenario 2 – Additional Employment . . . . . . . Additional Regional GDP and Additional Employment . . . . . . . . . . . Segmenting the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . Properties of Mezzanine-Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . Difficulties in the Access to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Instruments and their Attributes . . . . . . . . . . . . . . . . . . . . . Enterprises, Revenues and Employees in the Berlin Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Range of Revenues and Number of Employees in the Berlin Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment, Additional Employees and Additional Berlin Regional GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segmenting the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . Economic Sectors of the Branches of the Berlin Creative Industries . Different Treatment of Economic Sectors . . . . . . . . . . . . . . . . . . . . . Sensitivity Analysis 1 – More Weight to the Production Sector . . . . . Sensitivity Analysis 1 – Scenario 1 – Additional Berlin Regional GDP Sensitivity Analysis 1 – Scenario 2 – Additional Berlin Regional GDP Sensitivity Analysis 1 – Scenario 1 – Additional Jobs . . . . . . . . . . . . Sensitivity Analysis 1 – Scenario 2 – Additional Jobs . . . . . . . . . . . . Sensitivity Analysis 2 – More Weight to the Service Sector . . . . . . . . Sensitivity Analysis 2 – Scenario 1 – Additional Berlin Regional GDP Sensitivity Analysis 2 – Scenario 2 – Additional Berlin Regional GDP Sensitivity Analysis 2 – Scenario 1 – Additional Jobs . . . . . . . . . . . . Sensitivity Analysis 2 – Scenario 2 – Additional Jobs . . . . . . . . . . . .

87 88 89 90 96 97 98 99 99 100 100 102 102 103 103 105 116 119 124 125 129 130 131 132 137 141 145 146 146 147 147 148 148 148 149 149

List of Abbreviations

BEST

Berlin Economic Simulation Tool

DCMS

Department for Culture, Media and Sports

DFFF

Deutscher Filmförderfonds (German Film Fund)

ERDF

European Regional Development Fund

ES

Economic Sector

GDP

Gross domestic product

IBB

Investitionsbank Berlin

ICT

Information- and Communications Technology

NACE

Nomenclature générale des activités Économiques dans les Communautés Européennes

OPE

One-person enterprise

SenWTF

Senatsverwaltung für Wirtschaft, Technologie und Frauen (Senate office for Economy, Technology and Women)

SME

Small and medium-sized enterprises

VC

venture capital

WIPO

World Intellectual Property Organization

About six million people have been employed in the European Union Creative Industries by 2003. The Creative Industries realized total revenues of “ 650 bn. and accounted for ca. 2.6% of the European Gross Domestic Product (GDP). Both labor market as well as economic growth has been above average (KEA, 2006).

1

Introduction

It has been a widely accepted consensus that arts and culture follow, due to, amongst other reasons, their public good properties, and other regularities than traditional profitoriented economic branches. Subsidies and promotion have been justified most frequently by pointing at the meritorious character of the products and services provided by arts and culture. As such, the cultural branches have been given access to public funding due to them being viewed as qualified for such subsidies by social- and cultural policy makers. Moreover, it has been widely accepted that measurement criteria for market economies cannot be applied to arts and culture. These circumstances lead to a somewhat stepmotherly treatment of arts and culture in economic policy debates. In the recent past however, the economic potential of arts and culture has been discovered and recognized which made both branches a considerable subject of economic policy. In the course of these discussions, the central criterion of creativity has been identified as the defining feature of those two branches. However, since creativity is an important input to other, more traditional branches too, the branches of arts and culture have been extended by those traditional branches which place creativity in a dominant role. As such, it is common practice nowadays to allude to the “Creative Industries”. These industries encompass all the branches to which creativity is an important input factor. Caution is advised, however, with respect to integrating various branches and sectors into the Creative Industries, since the classic cultural branches should not be relegated to the fringe in course of the integration (Söndermann, 2007). This is a central concern in the scientific discussion, and it is a clear challenge for economic policy makers to assure that within the Creative Industries some branches are supported at the cost of other sectors. In its first part this study discusses the term “Creative Industries”, and systematically presents its scope and the different approaches towards defining the term. In the following, the study turns towards the economic theory of Creative Industries. Uncertain demand, input- as well as product differentiation and creativity as a value in itself are essential questions this study discusses at length. Moreover, we investigate the issues of the relevant types of actors, market types as well as optimal investment patterns.

18

1 Introduction

Part 1 of this study is closed by an overview on the existing literature and the European dimensions of the Creative Industries. We will assert in this context that there is no generally binding definition of the Creative Industries, which considerably limits the international comparability of Creative Industries bulletins (cf. Chapter 8.) In the recent past though, we observe, both on national as well as supranational level (especially by the European Union and UNESCO), some attempts and endeavor to find consensus on the definition and scope of the Creative Industries. The authors of this study go along with that endeavor and categorize the Berlin Creative Industries into nine cultural and two creative Branches. Building on the results of part 1, part 2 features the quantitative dimensions of the Berlin Creative Industries. With respect to the size of its enterprises, we will show that the structure of the Berlin Creative Industries is comparable to other German cities. The Berlin Creative Industries feature a high number of one-person enterprises. Of more than 20,000 people being employed in the Creative Industries, about three quarters have one-person enterprises. They realize a total turnover of “ 1.4 bn., which is 20% of the total Creative Industries’ turnover. With a share of more than 14% of the total revenue of all Berlin enterprises, the Creative Industries are a truly important economic factor in the capital city. Another way to document their economic significance is to compare employment statistics. Almost 80,000 are employed in the Creative Industries. In the course of this study we give, in addition to documenting the detailed statistics for the cultural and creative branches, a separate estimation of the scope of clandestine employment within the Creative Industries. In part 3 we employ the regional macroeconometric model BEST, developed by Kollmann et al. (2006), which models the Berlin economy in a multi-equational approach, to simulate the effects of economic policy measures in the Creative Industries’ environment on economic growth and employment. To be more specific, we investigate which targeted subsidies for and promotion of the Creative Industries would trigger with respect to the Regional Gross Domestic Product and employment. We do so by using the venture capital Fund “VC Fonds Kreativwirtschaft Berlin” of Investitionsbank Berlin as an example for an instrument targeted at fostering the Creative Industries. The money this fund provides for investment is the starting point of the further simulations. Since it is the goal that the funds provided by Investitionsbank Berlin are supplemented by private investment money of at least the same amount, we develop two different scenarios in order to appropriately consider this approach. Part 4, the last part of this study, discusses the possibilities of monetary furtherance, which could support creative enterprises in their development and boost their economic potential. In this context we specifically dwell on the issues of borrowed capital in general as well as small- and micro credits. Moreover, we go into the issues of mezzanine-capital and venture capital. On the one hand, we discuss these issues recognizing the special role and basic differences between the Creative Industries and more traditional branches.

1 Introduction

19

On the other hand we dwell on the specific circumstances and difficulties faced by Creative Industries enterprises. The most frequently observed of those difficulties are thin capitalization, lack of securities, relatively little borrowing requirements and the difficulties in ex ante evaluating the expected success of artistic and cultural projects. Moreover, we discuss the scope and importance of non-monetary furtherance as well as the challenges which sponsors and supporters are likely to face. We ultimately discuss and present some appropriate approaches towards finding solutions to the problems raised above and in part 4. Considering its growing economic relevance, the potentials of economic growth and notable effects on the economic value added we conclude that it is rewarding to supply the Creative Industries with creative furtherance.

Part 1

2

The Notion of Creative Industries

The scientific literature uses various different concepts of Creative Industries. Thus, a generally and widely accepted definition is unavailable, and studies on creative industries make use of several different approaches towards the topic. Which approach is used depends on the historical context, the object of investigation or the specific questions to be answered. Eventually, the borders set by the availability of data and measurability in general might play a role as well. Below we present an overview on the different approaches and definitions of the creative industries the international literature uses. We do so by arranging the different concepts into an encompassing system. Systematizing is non-trivial since we face a variety of interpretations for the different concepts. Furthermore, a multitude of other terms come quite close to the concept of creative industries. Thus, considerable overlapping among the terms is inevitable. The scientific and non-scientific literature most frequently use the following terms (Wiesand, 2006 and own amendments): 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

Cultural Industries Cultural Industries Cluster Cultural Goods Creative Economy Creative Sector Creative Industries Creative Class Creative Capital/Creative Capital Theory Copyright Industries ICT – Economy (information- and communication technology) Content-Economy, Media-Economy

In order to dissolve this – at first glance confusing – diversity of concepts, we extensively discuss the term of creative industries and will finally have a clear idea of what it means. To begin with, we contrast the notions of 䊏 䊏

Anglo-American versus Continental-European approach as well as the horizontal versus vertical approach

and ask up to which extent the technological sector can be considered as being part of the Creative Industries. We close the chapter by confronting the opposing notions of “Creative Class” and “Creative Industries”.

24 2.1

2 The Notion of Creative Industries

Anglo-American and Continental-European Approach The term creative class, which dominates studies from the Anglo-American region, uses a wider and more inclusive definition of creative industries than the term “Cultural and Creative Economy”, which is most frequently found in European studies. Thus, the share of creative employees among the labor force is in Anglo-American studies typically higher than in continental-European studies.

First of all we introduce both the Anglo-American1 and Continental European approach as two basically opposing views. The basic distinction between those two different approaches is a recurring topic in the literature and as such enters the multitude of studies and surveys on the topic. While according to the Continental-European approach circumvents the Creative Industries by drawing on branches and sectors of the economy, the Anglo-American approach uses professions and activities. Thus, one could speak about an economic (Continental-European) and a sociological (Anglo-American) approach (cf. Figure 2). An additional distinction between the two approaches lies in the limitedness of the concept. While creative industries in the Anglo-American approach subsumes a rather broad mix of jobs and professions, resulting in a wider definition, the Continental European context traditionally uses narrower concepts with a lower number of branches and sectors being included. 2.1.1

Anglo-American Approach following R. Florida

Richard Florida’s (2002) bestseller The Rise of the Creative Class and how it’s transforming work, leisure, community and everyday life is the activator and catalyst for both an increasingly intensive international academic discourse as well as intensive debates and discussions among economic- and regional policy makers on the topic of creative industries. According to Florida the Anglo-American approach uses, as noted earlier already, a comparably wide definition of creative industries. Florida himself uses the term “Creative Class” instead of “Creative Industries”. The distinguishing criterion on who counts as a member of the creative class is the type of activity someone follows. Members of the creative class work innovative, are capable of identifying problems and develop appropriate solutions, and through this they find new ways to combine and apply the available knowledge In contrast, people working outside the creative class most frequently do routine-jobs and ordinary activities. Following Florida, the creative people can be distinguished into three subgroups (Fritsch and

1

The United Kingdom has an exceptional position and cannot be denoted as being AngloAmerican by all means. (Cf. the discussion in the United Kingdom on using the term “Creative Class” outlined below). Thus, we first and foremost subsume by the term “Anglo-American” the United States and, though not in all applications, also Canada and Australia.

2.1 Anglo-American and Continental-European Approach

25

Stützer, 2007). Alongside the “Bohemians” Florida distinguishes between the “highly creative” and the “creative professionals”. 䊏

䊏

䊏

“Highly creative” people are innovative: This group is dominated by scientists and people doing scientific activities (physicists, chemists, mathematicians, computer scientists, readers, people being employed in scientific and public administration, among others) Among the “Creative Professionals” we attribute consulting and organizational specialists, finance and marketing experts, lawyers, specialists in administration, jobs in social- and health care and others. “Creative Professionals” work in skillintensive areas. Among the “Bohemians” we eventually subsume authors and writers, performing and visual artists, artistic jobs in entertainment and sports as well as models. “Bohemians” represent the artistic part of the creative class.

A central conception in this context is that enterprises and companies follow the creative class. This view poses a strong antipode towards the approach coming from development theory, which assumes that people move into regions where companies offer jobs and resources are available (Kröhnert, 2007). 2.1.2

Continental-European Approach

2.1.2.1 Cultural and Creative Economy European Studies and scientists use definitions of creative industries that differ from Florida’s concept. In Continental Europe – and here predominantly in Germany – one basically speaks of the “Cultural and Creative Economy”. Within this approach, the cultural economy is a subset of the Creative Economy2 – the “Creative Industries” extend the “Cultural Industries” by affirmative technologies (Ratzenböck et al., 2004). “The notion of “culture in a wide sense” is the common characteristic within the concept of cultural economy” (Söndermann, 2007). The cultural economy subsumes the publishing business, the film industries, visual and performing arts, literature, journalists as well as architects and designers. “Creativity” plays, as the name suggests, a central role in the concept of “Creative Economies” The creative economy includes the already mentioned branches of the cultural economy3 as well as the advertising business and software and gamesindustries (Söndermann, 2007). 2

“Creative industries can be viewed as the Cultural Industries defined in a wider sense” (Fesel und Söndermann, 2007). 3 The term “Cultural Economy” refers more to the chain of economic value added, whereas the term “Creative Economy” is viewed – next to its focus on creativity, in close relationship with the intellectual property issue (Keywords patents, copyright).

26

2 The Notion of Creative Industries

2.1.2.2 The 3-Sector Model The 3-sector model divides the Cultural and Creative Economy into a private, a public and a charitable sector. By employing such a grouping, economic policy measures can be targeted more accurately.

An additional characteristic of the Continental-European approach is the basic division of the Cultural and creative sector in three areas of a 3-sector model, which dates back to the 2003’s first bulletin on the Cultural Economies in Switzerland. The first area of the Cultural and Creative Economy is the private sector, targeted on making profits. The second sector is the public sector and the third one is an intermediate, charitable sector. The literature points out and shows that this distinction is essential and should be further used and become visible in future studies, since those sectors differ in tasks, appropriate measurement scales and problems (Wiesand, 2006). The distinction is particularly relevant for economic policy considerations, since employing it can considerably increase their accuracy.

)$""$ $ )  

  7

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  %   ' &  &        !

   

       

      $ $"#( *&     (

     (   

  

      '& "  % ! 4            7

Figure 1: The 3-Sector Model Source: Bulletin on the Cultural Economy in Switzerland (2003)

2.2

Horizontal and Vertical Approach

The variety of definitions of the Creative Industries is not the only distinctive feature among terms and contexts described above. Studies and surveys on the Creative Industries differ in a further direction in whether they capture the topic following a horizontal or a vertical approach.

2.4 Creative Class or Creative Industries

27

The horizontal approach uses selected criteria to classify the jobs an activities belonging to the Creative Class (cf. amongst others, Kröhnert et al., 2007), it essentially views several branches as being “creative”. By contrast, the vertical approach, which is, as already noted, related to the chain of economic value added, aims at measuring the share of creativity along the chain of economic value added. In doing so, the area of creative economy is divided into the subsectors “supply of intermediate inputs”, “production”, “reproduction” and “distribution” (Ratzenböck et al., 2004; Traxler et al., 2006). 2.3

Technological Sectors as Part of the Creative Industries

If, and to which extent Technological industries should be counted among the Creative Industries is controversially discussed in the literature and depends not least on whether patents, copyrights and similar indicators are involved in capturing the term “creativity”. Using patents and copyrights etc. (cf. Figure 2 – approach related to exploitation rights) results in a strong expansion of the Creative Industries into the technological sector. On the other hand, an approach involving patents etc. leads to an underrepresentation of essential cultural and artistic businesses (Ratzenböck et al., 2004). In this context the literature does not only use the term “Cultural and Creative Economy” but in addition the – particularly in Anglo-Saxon studies widely discussed – concept of “Copyright Industries”. In this context, “Cultural Economy” represents the core, “Creative Economy” the extension of the core with Software and GamesIndustries. Beyond that, Copyright Industries include the whole information- and communication technologies (the so-called ICT-Economy) (Söndermann, 2006). The most comprehensive topic to be found in the literature is the term “Creative Economy”, which is most frequently used in the Anglo-American region. It extends the “Creative Industries” about the research and development sector (ICG culturplan, 2007). John Howkins views the “Creative Industries” and “Creative Economy” respectively as the sum of the following four economic sectors – Copyright Industries, Patent Industries, Branding Industries and design industries (cited in: Cunningham, 2002). Alongside the approach based on exploitation rights, one could also use a more production-oriented approach to define the Creative Industries. The focus of such an approach lies in the distinction between content and technology (cf. Figure 2). 2.4

Creative Class or Creative Industries? Defining the term Creative Industries by patents and copyrights bares the danger of under-representing essential cultural and artistic sectors.

Richard Florida’s definition of the Creative Class is, as noted earlier already, based on jobs and activities, not on economic sectors. Creative jobs and activities are normally done by creative people. As such, Florida’s definition seems, at first glance,

28

2 The Notion of Creative Industries

plausible and appropriate, however, it involves problems when it comes to measuring the Creative Class. Since jobs are classified according to the necessary education and operational procedures, the mapping of jobs into the Creative Class tends to bias the definition towards better educated persons. This bias results from the fact that, by definition, persons in branches with lower educational prerequisites are excluded from the selection procedure. Thus, the main problem in this context is the separation of creative and non-creative jobs (Boschma und Fritsch, 2007). European authors predominantly use the approach of capturing the Creative Industries by classifying economic sectors. Moreover, they use the terms “Cultural and Creative Economy” instead of “Creative and Cultural Class”. Another distinctive feature is that while Florida’s creative class is solely built up using statistics from sociology of employment, the terms “Cultural and Creative Economy” are both based on the notion of activities and enterprises and thus rely on both organizational and entrepreneurial statistics (ICG culturplan, 2007). 2.5

A Variety of Terms Due to reasons of accuracy, comparability with other European studies and due to the differences in the treatment of the artistic sector, we prefer for this study the “European definition” of Cultural and Creative Economy over the definition based on the “Creative Class”.

An essential reason for the existence of a variety of definitions is the fact that the discussion on the topic of Creative Industries does not exclusively stem from science. The area of regional- and economic policy plays an important role in it as well. The creation of terms and definitions is thus most often related to the respective locations and selected such that it fits to the available data. This explains the pragmatic consideration that seems to be inherent in all approaches to definition. The operationability economic approach

sociological approach

Creative Industries

Creative Class

• music, performing arts, film, radio, TV • advertising, PR, visual arts, arts and crafts, design, architecture, cultural heritage, print-media • software, internet, telecommunications

• scientists (i.e. physicists) • creative professionals (i.e. lawyers, consultants)

− related to branches and economic sectors

− jobs, activities

• • • •

• • • •

ICT (information and communication technology) Content- Economy Media-Economy Cultural Economy

− essentially content versus technology

production-oriented approach

copyright patents branding design

− inventions, developments that are usable and can be protected by copyright law

exploitation rights-oriented approach

Figure 2: The Creative Economy in the Form of a Matrix Source: Puchta (2009)

2.6 Tentative Conclusions

29

with respect to economic policy needs and targets directs the selection of definitions (Ratzenböck et al., 2004). Next to the orientation towards usability in economic policy making, another reason for the vast variety of definitions lies in the regionally different historical and socio-cultural understanding of the term “Creative Economy”. A well-arranged description of the various approaches is displayed by Figure 2. It opposes the economic, sociological, and production-oriented and exploitation rights-oriented approach in form of a matrix and thus gives a condensed view of the aspects and approaches discussed above. 2.6

Tentative Conclusions

Out of the rank growth of definitions we now need to select those that are capable of dealing with the central questions to be answered by this study. Out of the following reasons, the presented study relies on definitions that stand in the tradition of European views towards the term “Creative Economy”. Accuracy The term “Creative Economy” is not as comprehensive as the term “Creative Class” used by Florida, which makes it better usable for the questions posed by this study – particularly the questions concerning economic potentials and possible furtherance. Comparability Next to international Organizations like the EU or UNESCO, several European nations and public institutions rely in many surveys, bulletins and studies on the Cultural and Creative Economy on the narrower definition we use here (cf. i.e. Deutscher Bundestag, 2007; Fesel and Söndermann, 2007 or Kulturwirtschaft in Berlin, 2005). The German government and its ministry for economy and technology as well use this definition of “Creative Economies” (see, for example “Initiative Kultur- und Kreativwirtschaft der Bundesregierung”, 2007). Artistic Activities A considerable point of criticism against Florida lies in his broad definition of the Creative Class, which at the same time crowds out persons being employed in arts. Söndermann (2007) uses the word of malapropism of the artists and the creative in the context of Florida’s definition of the Creative Class4. Out of this and other reasons we decided to use a narrower definition of the Creative Economy. 4

For Europeans, it is difficult to comprehend why Clerics, Controllers, bankers, dentists, articled clerks or aldermen are creative jobs (cf., amongst others, Kröhnert et al. (2007), who in their study use the definition of the Creative Class following Florida). The authors of the presented study, however, deny by no means that persons working in the listed jobs are creative!

30

2 The Notion of Creative Industries

As such, we view within the presented study, following Fesel und Söndermann (2007) the following branches and economic sectors as being part of the “Creative Industries”. By doing so, it is possible to group them into nine cultural and two creative branches. Cultural branches 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

publishing film industries private broadcasting industries music, visual and performing arts journalists, news agencies museum shops and exhibitions of art retailing of cultural goods architecture design industries

Creative branches 䊏 䊏

advertising software and games industries

3

On the Theory of Creative Industries

The scientific discussion on Creative Industries follows a highly interdisciplinary approach. While the analysis of the Creative Industries is naturally a prime subject of interest for economists, sociologists, political scientists, geographers, urban planners etc. concern themselves with it as well. Cultural scientists focus in particular on the Cultural Industries, which is, as discussed above, part of the wider defined Creative Industries. 3.1

Characteristics of the Creative Industries

In the following, we present the theory of the Creative Industries from an economist’s perspective. The economist Richard Caves (2000) describes the Creative Industries as “industries [which] supply goods and services that we broadly associate with cultural, artistic, or simply entertainment value […]”. He was successful in figuring out, following economic criteria, the common attributes of enterprises in the creative Industries as well as the differences between “creative” and “ordinary” products and services. In the following we discuss the attributes of the Creative Industries in detail. They are not exclusive, though most probably encountered among the Creative Industries. 3.1.1

Uncertain Demand The utility derived from Creative Products depends strongly on subjective and intangible categories. Thus, estimating demand ex ante involves high degrees of uncertainty.

For many products and services of the Creative Industries, no experienced data are available, so that the economic literature characterizes creative products as “experience goods”. This means that experience on these goods is recorded only by consumption. Beyond that, the satisfaction a consumer derives from creative products and services depends strongly on subjective and often intangible scales (Flew, 2002). Following this, enterprises of the Creative Industries face higher uncertainty, because the value the consumers assign to their products and demand is difficult to estimate ex ante. However, the fact that the value of the products will only be identifiable by the customers’ experiences and that thus the value of the products is unclear ex ante, affects the ways of cooperation of enterprises involved in the production process. If one assumes that each part of the production process is compensated according to the share it contributed to the final product, the problem in the Creative Indus-

32

3 On the Theory of Creative Industries

tries is valuing this share. Thus, contracts signed among people involved in the production process of creative products must take into account the uncertainty that may arise in valuation. Caves (2000) alludes in this context to some “symmetrical ignorance”, which all signatories face and therefore plays an important role in Creative Industries‘ contracts. The methods to solve these issues vary with the complexity of the respective production process. The approaches range from very informal contracts on the basis of handshake and trust to option contracts that allow changing the allocation of property- and decision rights as soon as information is updated and uncertainty decreased. 3.1.2

Creativity as a Value in Itself Creative people define the quality of their job not only on wages and employment conditions. Beyond that, the quality of the product they produce and its originality play an important role.

Economic models often assume that employees base their decision on labor supply and whether to take up a specific job on wages and employment conditions. The product itself and its specific attributes however, do not play a significant role in the decision process. employees in the Creative Industries however, do not always behave as suggested by rational labor economic theory. Caves (2000) notes in this context that employees in the Creative Industries define themselves and their work to a higher extent by the quality and the attributes of the product they produce. Originality, the technical skills associated with a product, and the overall expression of the “created” Product play an important role for those employees. Creative employees often find themselves in an area of conflict between creative work on the one and economically necessary activities on the other hand. 3.1.3

A Mix of Skills

Some products of the Creative Industries require different creative qualifications and specialized employees as inputs to the production process. However, each part of the production process involves personal values and expectations towards the product. This might foster conflicts which have to be solved in order to successfully complete the production process. Conflict resolution is mandatory in this context, since most often the production process requires the availability of each and every factor of production. If only one of such factors is missing, there will be no positive output.5 5

Contrary to more traditional branches of the economy whose production can most often be characterized by a production function with substitutable and additively separable inputs, the Creative Industries distinguish themselves by multiplicative production functions. Output is positive if and only if all production inputs are available so that substitutability is very limited. Harvard economist Michael Kremer (1993) alludes to the “O-rings theory of production” in this context.

3.1 Characteristics of the Creative Industries

3.1.4

33

Differentiability

The products of the Creative Industries differ not only by objective criteria of quality, but beyond that by criteria that are not quite tangible. For instance, such products might differ by symbolism, aesthetics as well as the values, atmospheres and styles associated with the product. Those factors and criteria revoke themselves from an objective evaluation of quality by the consumers. From this subjective components follows that each product is, from a consumer’s point of view, unique. Economists allude to product differentiation in this context. It is clearly characteristic to products of the Creative Industries that product differentiation is carried out to a large extent via the subjective attributes described above. 3.1.5

Differentiation of Inputs

Artists and other suppliers of creative products differentiate themselves by their qualifications, their originality and talents. It is the mix of those attributes that is perceived by the customers. The creatively active are related to one another and compared. A qualitative ranking emerges. Economically speaking, the creative inputs are vertically differentiated. US-Sociologist Howard Becker (1982) asserts in this context that these rankings of artists and their work are immanent to the process of problem solving that is characteristic for all forms of creativity. The economic consequence is that the share of revenues is correlated to the ranking. 3.1.6

Time is a Critical Factor

In the course of complex projects in the creative industries where all people involved in the production process, with all their differing qualifications are to be coordinated, time is eventually more important than outside the Creative Industries. As such we have with respect to the selection of Creative Industries, beyond quality, a second criterion; availability. If you search, for example, a creative employee for a performance to be given at a certain date, quality is a necessary, but not a sufficient requirement. Rather, she must be available for the time in which the performance is planned and given.6 3.1.7

Durable Goods

Many products of the creative industries are durable in the sense that they can be repeatedly used. An orchestra can repeatedly play a once composed piece, and a once programmed video game can be sold million fold. 6

Cf. the discussion on substitutability in the production process.

34

3 On the Theory of Creative Industries

Many products incorporate intellectual property which can be legally protected by patents and copyright laws, for instance. As such, the configuration of the treaties determining the share of revenues plays an essential role. However, since the demand for creative products is, as discussed above, uncertain, accurate estimations of the revenues is very difficult. Thus, in coherence with patents and copyright laws, a trade-off between appropriateness and accessibility emerges (Hölzl, 2005). If the protection by patents is too strong, further development of the product by other enterprises is made impossible due to high transaction cost. If, however, the protection is too weak, the value of the patent is diminished, and incentives to create and invent new products are decreased. 3.1.8

Uncertainty

Uncertainty with respect to demand as well as the production process can be viewed as an embracing issue among the characteristics of Creative Industries discussed above. Thus, Söndermann calls the Creative Industries in this context a high risk area (2007). 3.2

Differences between Creative and Traditional Industries

If one investigates the Creative Industries with respect to their structural particularities, one finds that they differ from traditional branches of economic activity predominantly by 䊏 䊏 䊏 䊏 䊏 䊏 䊏

the degree of integration the type of actors the types of markets the business models the labor markets the investment patterns the driving growth

and should thus be viewed as a 䊏

Cross-sectional area.

3.2.1

The Degree of Integration

Compared to traditional industries, the Creative Industries stand out by a high degree of integration. The integration can come in informal nature – networks, events and informational fora – as well as in formal nature – i.e. in form of a cluster. By the strong degree of integration and usage of ICT (information- and communication technology), creative people are gearing towards global activities. At the

3.2 Differences between Creative and Traditional Industries

35

same time though, creativity requires initiatives and organization on a local level. As such, the Creative Industries are punched globally as well as locally – they are essentially “glocal” (KEA, 2006). 3.2.2

Type of Actors

Comparing the Creative Industries in different countries shows that the structures are similar and that there is some kind of international structure. However, there are large differences within the Creative Sector. One-person enterprises (OPE) and micro enterprises are clearly the most dominant part of the Creative Industries.7 However, the backbone of these industries with respect to employment and the economic value added are the small- and medium enterprises (SME). Alongside those types of actors we find some big players who demand and take up the products of the SMEs. (Söndermann, 2007). Leadbeater (1999) describes the relations and sharing of work among the different types of actors in a similar way: “Creative Industries […] are driven […] not by trained professionals but cultural entrepreneurs who make the most of other people’s talent and creativity. In creative industries, large organizations provide access to the market, through retailing and distribution, but the creativity comes from a pool of independent content producers”. 3.2.3

Types of Markets High fix costs in the Creative Industries lead to oligopolistic markets.

Some branches of the Creative Economy can be characterized by high fix costs. The film- and game industries are a prominent example. This leads to the formation of enterprises which have an appropriate size and are capable of bearing those fix costs. Ultimately, this leads to oligopolistic markets (Marcus, 2005). At the same time, we observe on the one hand a clear tendency towards stronger vertical integration (ranging from production to distribution) and, on the other hand, the tendency towards outsourcing certain activities to other creative enterprises. 3.2.4

The Business Models

Following Puchta (2009) we can distinguish between three generic business models which are characteristic to enterprises of the Creative Industries. These are 䊏 䊏 䊏

7

the project approach the service approach and the approach towards asset accumulation.

Micro enterprises make a share of 75% of the enterprises of Germany’s Creative Industries (Söndermann, 2007).

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3 On the Theory of Creative Industries

Within the project approach, enterprises supply whole packages of products and services, while in the service approach the customers essentially buy working hours. The approach towards the accumulation of assets ultimately involves the accumulation and exploitation of intangible assets. 3.2.5

The Creative Industries as a Cross-Sectional Area

The Creative Industries are, above all, cross-sectional areas. They are built up from different branches of the production-, the service and the commercial sector. (Söndermann, 2007). As such, the production of computer games, for example, requires beyond software and programming skills, artistic and creative know-how and skills (Puchta, 2009). 3.2.6

Investment Patterns

It is typical for the Creative Industries that they show a strong tendency towards investing in intangible assets like research and development or ICT (Flew, 2002). In this respect, they clearly distinguish themselves from traditional branches of economic activity which might be an important reason for the difficulties enterprises from the Creative Industries encounter when searching for investment and financing of projects and economic activity. Part 4 of this study deals at length with difficulties in financing the Creative Industries and discusses potential approaches towards finding solutions for this problem. 3.2.7

Labor Markets The inequality of income is higher on the creative labor market than on other labor markets. Monetary incentives are less important, and the educational level is higher.

Since, as discussed already, the Creative Industries are heterogeneous with respect to their structure, the discussion of labor markets indicates a differentiation between areas involved in culture and areas apart from culture. The labor market in areas apart from culture (i.e. the advertising business or the software and games industries) does not fundamentally differ from labor markets outside the Creative Industries. The labor markets in cultural areas are, however, somewhat special since they have the following common criteria (Marcus, 2005): 䊏 䊏

dominance of part-time employment high frequency of employees having multiple jobs

3.2 Differences between Creative and Traditional Industries 䊏 䊏 䊏

䊏

37

unequal distribution of income Few people with high income and many with an income below the average employees incurring higher risks than employees of other professions Little response to pure pecuniary incentives: “Arts for the sake of arts” and the assumption that not only monetary incentives, but acceptance and appreciation for one’s work play an important role in the decisions of creative employees. As O’Connor (1999) formulates, “Making money and making culture are one and the same activity”. Higher level of education compared to the average of the total labor force. Some 50% of the employees in the Creative Industries have graduated from University, compared to some 25% of the total labor force (KEA, 2006).

Note in this context that the employment conditions in some branches of the Creative Industries are clearly precarious and repeatedly the subject of political discussions. The issue of the so-called new self-employed (“Neue Selbständige”) and their social security as well as the discussion on health insurance for artists are two prominent examples. 3.2.8

Innovation as a Driving Force

Innovation is the basis and primary source of economic growth in the Creative Industries.8 In order to make the potential of innovation thrive however, social, cultural as well as institutional innovations are necessary (Flew, 2002). The social environment as well as the social attitude towards innovation, risk etc. is thus playing an important role. Excursus – Talent, Technology and Tolerance Talent, Technology and Tolerance essentially determine where creative people locate.

The stream of thought focusing on the environment as a central issue for creative people was first formulated by Richard Florida. His bestseller The Rise of the Creative Class and how it’s transforming work, leisure, community and everyday life (2002) makes a considerable – though often controversially discussed contribution to the literature on the Creative Industries.9 The starting point for his analysis is the assumption that regions with a higher share of creative people have higher potential growth rates, which seems to be supported by some empirical investigation results. Thus – so the argument – such regions will be economically more successful in the future than regions with only a low share of creative people. 8

This is certainly not only true for the Creative Industries. In contrast to more traditional industries though, innovation plays, in comparison with other inputs, a more dominant role in the Creative Sector (Flew, 2002). 9 As discussed above, Florida uses the term “Creative Class” instead of “Creative Industries”.

38

3 On the Theory of Creative Industries

In this context, Florida investigated how an environment should be like and which factors are essential in order to attract creative people. He identified three criteria:10 䊏 䊏 䊏

talent technology tolerance

Those three factors – called the 3 Ts for short – ultimately determine where the creative people will locate. Since enterprises are looking for creative employees, they locate plants and headquarters in such “creative” regions. Essentially, this means that enterprises follow the employees and not vice versa. By using this approach, Florida distinguishes himself from the established assumption that employees locate where employment opportunities are. Thus, in the future the economic success of regions will massively depend on how and to which extent they are successful in efficiently and sustainably identifying and fostering the inventive abilities of the “Creative Class”. (Keuper et al., 2008). In this way, innovative and modern economic policy should aim at providing the nutrient for talent, technology and tolerance, in order to “harvest” economic growth in the future.

If one views the “3 Ts” as an indicator for a region’s attractiveness for creative people, one ultimately has to spend a view words on the causality issue. Cause and effect are not always clearly identifiable. Do artists locate in a town, because tolerance is high there, or is tolerance high because of the many artists located there? The correlations which Florida documents in his work might be statistically significant, but they say nothing about the direction of causality (Berry, 2004). From a statistician’s point of view, a high index can both be a cause as well as an effect of high economic growth. Even more, it is not possible to exclude that both scales are in fact dependent on a third, unobservable scale. Statistically, causality can only be refuted, though never proven (Bortz, 1993). Focus box 1: Reversed Causality

10

In order to measure the extent of those three factors, Florida developed some appropriate indices. In the meantime, more indices have been established which are capable of better imaging the European particularities. Talent could, for example, be measured by counting the number of people who graduated from university. Technology could appropriately be measured by the number of patents and the share of R & D expenditure. Tolerance is often measured using the share of immigrants in the total population, the share of votes for right-wing parties in elections, the agreement with xenophobic statements or the share of people being employed in arts (Kröhnert et al., 2007).

3.2 Differences between Creative and Traditional Industries

39

Finally however, we must note that Florida is being criticized by the scientific community on his methods. The strongest point of criticism is that he finds statistically robust correlations, which essentially does not allow concluding on causality issues (cf. Focus box 1). In this study we abstain from giving a comprehensive criticism and critical acclaim on the work of Florida, since this is not the main point of investigation. The gentle reader is thus referred to a short and inspiring review on Florida’s The Rise of the Creative Class by Glaeser (2004).

4

An International Overview on the Creative Industries

In the following we give an overview on both national as well as international studies on the Creative Industries. Since in the recent past a vast amount of such studies has been published we are by no means able to analyze all studies, but will present those which clearly influenced the current discussion on the topic in the scientific community. Above all, studies from the United Kingdom are major contributions to and catalysts of the ongoing debate. Another focus of the following chapter is the situation in Germany. 4.1

The United Kingdom The United Kingdom has, in terms of the gross national product, the largest Creative Sector worldwide. The country is the first reference in the European discourse on Creative Industries.

According to some estimation, the United Kingdom has, in absolute terms, the greatest Creative Sector of all countries of the European Union and, in terms of gross national product, most probably the greatest of the world (Hutton, 2007). The United Kingdom’s role as a cutting edge in identification of and debating on the Creative Economy is indisputable. There, already ten years ago, the potential of the Creative Industries with respect to employment and economic growth has been discovered and elaborated on. The United Kingdom is thus – even in the discussion going on in Continental Europe – the benchmark in the discussion on the Creative Economy, which has become more and more intense both in economic policy as well as in the scientific community. At the same time, the United Kingdom is the reference for other countries in case they are developing potentially successful recipes for the Creative Industries. The so-called “Creative Industries Mapping Document”11 defines the following 13 areas of the Creative Industries (DCMS, 2008): 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 11

advertising architecture (retailing of) arts and antiques computer- and video games arts and crafts design design-Fashion film and video Developed and published by the department for culture, media and sport, first edition 1998, amended 2001).

42 䊏 䊏 䊏 䊏 䊏

4 An International Overview on the Creative Industries

music performing arts publishing software TV and radio

As a first and predominant criterion for the mapping of branches of economic activity to the creative industries we mention the usage of creativity in production as well as supply of products and services. A second criterion is the protection of products by copyright rules (KMFA und IKM, 2006). The department for culture, media and sports (DCMS) defines the Creative Industries as industries which heavily rely on individual creativity, qualification and talent. They have the potential to bring about welfare and jobs by creating intellectual property (DCMS, 2008). Moreover, we are able to assert that the definition of Creative Industries in the United Kingdom is more consistent than definitions used in other countries. There is much less discussion on the limits and borders of the term “Creative Industries” in the United Kingdom than in many other countries. It seems that the issue of Creative Industries-issue has left its infancy and has already arrived in the social mainstream of the country.

4.2

Australia

Australia has a somewhat exceptional position because here, scientists and policy makers have followed a different approach towards the problem of identifying the Creative Industries. Given the assumption that many of the traditional branches of art can be transferred into the concept of Creative Industries, a categorization in “core-arts” and “arts-related industries” seems appropriate. In this context, the mapping into one of the two categories will be based on product quality and the relative share of cultural and non-cultural goods involved in production (Mayerhofer, 2002). This “Cultural industries-model” can be visualized using concentric circles emanating from the “core-arts” (music, dance, theatre, visual arts, arts and craft, film) and going up to the “arts-related industries” (books and magazines, TV, radio, newspaper an even more remote economic branches like design, architecture, tourism and advertising). This approach dates back to Guldberg and Throsby (O’Regan, 2001, in Mayerhofer, 2002) and found its implication with respect to economic policy as early as the 1990s in Australian cultural policy. It is typical of the Australian understanding of cultural policy that the Cultural Economy has long been viewed as being part of the cultural policy. The scientific discourse views the term “Creative Industries” as a means to overwhelm the dichotomy between arts and the economy, which can be interpreted as a sign to make the term more democratic. As such, creativity is the common denominator of arts and the economy (Cunningham et al., 2003, in Ratzenböck et al., 2004).

4.3 The Netherlands

4.3

43

The Netherlands Depending on the definition used, between 19% and 35% of Dutch employees belong to the Creative Class.

In the Netherlands, we observe some studies and scientific contributions dealing extensively with Richard Florida and his theory of the Creative Class since a couple of years. Representing those studies we mention in this context the study of Marlet and van Woerkens of 2004. This study is of primary interest since the authors select two different definitions of the Creative Class and evaluate how the selection of definitions influences the results. Since both authors are aware of the difficulties involved in identifying and quantifying the Creative Class, they adopt in a first step the definition of Florida and show that the share of creative employees with respect to the total labor force in the Netherlands is 35%. In a second step, they select an alternative definition which they view in a European context more appropriate. It is narrower than Florida’s definition. By employing this alternative definition, the share of the Creative Class of the total labor force falls from 35% to 19%. Using this alternative definition is not about erasing certain jobs from the definition. Rather, the authors try to measure the supposedly true share of creative people in the various branches of the Creative Class (Marlet und van Woerkens, 2004)12. Viewing the results of this study clearly shows how sensitive conclusions on the Creative Class are, with respect to the selection of its definition. In another study (üNN GmbH, 2007), which compares the Netherlands and Germany and which is essentially of qualitative nature, the authors define the Creative Industries as those branches of economic activity whose products are based predominantly on creative work or are essentially creative work, and whose market value depends essentially on the creative input (üNN GmbH, 2007). More specifically, the authors define the Creative Industries as the branches of classical arts, media and entertainment, architecture, design and advertising. The categorization in Creativeand Non-creative Industries results within this study from the understanding of the respective branches, in particular the artistic-aesthetic branch on the one hand and the purposeful-profane branch on the other hand. By employing this definition, knowledge-based branches are not mapped into the Creative Class (which although is the case in Richard Florida’s studies).

12

Florida, for example, views all managers with university degrees as being part of the Creative Class, while in the Dutch study, the share of managers being part of the Creative Class is, according to definitional amendments, only 56%. An essential conclusion drawn by the authors is that the “… Creative Class is theoretically much the same as Human Capital.” (Marlet and van Woerkens, 2004).

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4 An International Overview on the Creative Industries

4.4

Switzerland

The Swiss Creative Industries have been analyzed in, among other studies, two “Bulletins on the Creative Economy” (2003 und 2007) as well as a special report on Zurich (2005). In contrast to other European countries, the discussion on the Cultural and Creative Economy is very recent in Switzerland. However, it takes place on a quite high level. As such, the Bulletin of 2003 is, with respect to certain points in it, seminal for the subsequent debates on the topic in Europe. The three sector model we cited earlier in this study is from the first bulletin on the Creative Economy of 2003 (Weckerle und Söndermann, 2003). It is frequently cited in the scientific literature and discussion. This model divides, as noted earlier already, the Cultural and Creative Sector into a private, a public and an intermediate sector. Since then, the international discussion has adopted the view that the term “Creative Industries” compasses the private, profit-oriented sector. According to the second bulletin on the Creative Economy, Switzerland counts the following 13 partial markets as being part of the Creative Economy (Weckerle et al., 2007): 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

music industries books market arts market film industries broadcasting market for performing arts design industries architecture advertising industries software- and games industries arts and crafts press and publishing audio-engineering market

4.5

Austria

In recent years some Austrian institutions started to intensively concern themselves with the Creative Economy. Next to some political institutions like the chamber of commerce there are various research institutions that investigate the Creative Industries. The connection between the economy on the one hand and science and research on the other hand was most prominently expressed in this context by the foundation of a private university for Creative Economics, the “New Design University” in the capital of Lower Austria, St. Pölten. According to the first Austrian bulletin on the Creative Economy (KMFA und IKM, 2003) the following branches are part of the Creative Economy.

4.6 Germany

䊏 䊏 䊏 䊏 䊏 䊏

45

cultural heritage performing arts audiovisual branch visual arts books and press transversal branches (i.e. cultural initiatives, dance schools etc.)

With respect to the identification of the Creative Industries, Austria is pursuing a special approach in the sense that it uses the LikusKreativ©-scheme (“LänderInitiativeKulturStatistik”), which is based on the three sector model from Switzerland, but uses a definition which is more focused on the content. In contrast to the Swiss example, “Austria” views, next to the private sector, the public and intermediate sector as being part of the Creative Economy as well.13 By doing so, the scope of the definition of the term “Creative Economy” used in Austrian studies is different from the scope of the definition in other European countries. For Austria, there are two bulletins on the Creative Economy (2003 und 2006) at the moment, as well as some studies focusing on specific provinces or branches. 4.6

Germany Structural breaks and the declining competitiveness of the old industries have been a major motivation for debating and investigating the Creative Economy.

By now quite a large number of studies and bulletins on the German Cultural and Creative Economy has been published. In particular, the federal states and larger towns have issued reports on their Creative Economy.14 This does, on the one hand, underline the importance of the Creative Economy and the fact that economic policy makers have to concern themselves with the topic, on the other hand although, it is a sign of confusion with respect to the concept of terms and definitions (Söndermann, 2006). publishing bulletins on the Creative Economy was not motivated by benevolent economic- and regional policy makers. Rather, the de facto power of economic change and structural breaks was responsible for raising the awareness of policy makers for the Cultural and Creative Economy.15 13

Note again in this context that there is no clear borderline between the three sectors of the Creative Economy (private, public and intermediate). The borderline is rather blurred (Mandl et. al., 2006). 14 Discussing the bulletins of all the German federal states and towns is beyond the scope of this study. Thus, we must abstain from discussing a number of German reports on the Creative Economy (i.e. those featuring Mecklenburg-Western Pomerania, Bremen, Bavaria, Lower Saxony and Aachen). 15 German studies frequently use the term “Cultural Economy”, but, with respect to the scope and content, we find this term in close relationship to the definition of the “Creative Economy”.

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4 An International Overview on the Creative Industries

It is thus far from coincidence that the first federal state to issue a bulletin on the Cultural Economy was North Rhine-Westphalia (1992). It was this federal state of Germany that experienced a great structural break due to the dominance of old industries. In the new federal states in Eastern Germany, the motivation for engaging in and investigating the Creative Economy is an economic necessity as well. The search for the potential of employment, which is imminent to the Cultural and Creative Economy is a driving force there. In the east, structural policy is not as much in the foreground as it is in North Rhine-Westphalia, however, the ultimate aim is the same: securing regional welfare and employment (Söndermann, 2006.) It is truly essential that German studies employ the term “Creative Economy”, which is not as inclusive as the term “Creative Industries” used in Anglo-American studies, since the term “Creative Economy” does not encompass non-cultural branches and information technologies. Moreover, according to the definition by Michael Söndermann, the “Creative Economy” does not even encompass the nonprofit branch of the cultural sector (KMFA und IKM, 2003.) In the following, we select some of the multitude of bulletins on the German Creative Economy and discuss them in detail below. A particular focus of the discussion will be the scope of the terms’ definitions. We have selected the presented reports according to their actuality and the literature they cite. 4.6.1

North Rhine Westphalia North Rhine-Westphalia published the first German bulletin on the Cultural Economy.

North Rhine-Westphalia was the first German federal state to issue a bulletin on the Cultural Economy. This first bulletin is from 1992, since then, four more bulletins have been presented. The first bulletins of the “Consortium on the Cultural Economies” employ the term “Cultural Economy” and define it as encompassing the following three areas. First, “culture in a narrower sense” (books, music, musicals, freelance artists), second, “culture in a wider sense” (architecture, Design) and third, “additional branches with high relevance for culture and the media” (i.e. cultural construction industries and cultural tourism) (Wiesand, 2006). With respect to the scope of definitions however, we have been observing a change in the recent years. As such, the current fifth bulletin in the Cultural Economy of the federal state of North Rhine-Westphalia of 2007 takes into account that the term “Cultural Economy”, which has been central to many previous German studies, has come under pressure due to international comparison. Thus, the fifth bulletin tries to enlarge the definition of the “Cultural Economy” by some aspects and branches of the “Creative Economy”. Essentially, it arranges the terms by offering a mapping of three categories.

4.6 Germany

䊏 䊏

䊏

47

“Cultural Economy” (music, literature-, books-, press-, and arts markets, design industries, Film and TV-Industries, theatres, architecture and advertising) “Core of the Cultural and Creative Economy” (freelance artists, writers, journalists, artists, restorers; publishing Industries, music publishers, sound studios, film- and TV production; concert halls, movies, varietés, cabaret; retailing of books, CDs, musical instruments, objects of art; event managers; architecture and design, advertising design) “Creative Economy” (procurement of advertising, publishing of software, software consultancy and software development)

Besides, the term “Cultural Economy” includes branches that are preceding and following the branches of the Cultural Economy itself. For example, manufacturing of musical instruments (preceding branch) or copying of sound- and image carriers (following branch) are part of the Cultural Economy (Arbeitsgemeinschaft Kulturwirtschaft NRW, 2007). It is a common and identifying criterion of North RhineWestphalia’s bulletins on the Cultural and Creative Economy that they include only profit-oriented branches. Summing up, we assert that the fifth bulletin has brought about a symbiosis of the Cultural and the Creative Economy. 4.6.2

Schleswig-Holstein

The first bulletin on the Cultural Economy in Schleswig-Holstein has been published in 2004 and deals with the following branches (Schleswig-Holsteinischer Landtag, 2004): 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

music market books- and literature market arts market arts and crafts, design performing arts film radio TV and entertainment electronics socioculture administration, management of and research on culture cultural construction and monument protection Cultural Economy and tourism

Even though the statistical data of the bulletin are mainly on the profit-oriented sector, the underlying definition is fairly wide. The term “Cultural Economy” is defined as encompassing both the profit-oriented as well as the public branch of it. The consideration of Cultural construction and tourism as being part of the Cultural Economy is unique to the Schleswig-Holstein bulletin and has to be noted therefore.

48 4.6.3

4 An International Overview on the Creative Industries

Hessen

The federal state of Hessen has published its first bulletin on the Cultural Economy in 200316. It is characteristic for the approach used in it, namely that the public sector is considered as a part of the Cultural Economy. The term “Cultural Economy” is defined in a wider sense. This results in encompassing the Cultural Economy in a narrower sense (persons and enterprises who are primarily and mainly concerned with production, processing and distribution of cultural goods or directly contribute to procurement of artistic and cultural products) as well as further activities apart from the first element of the chain of economic value added (Cultural Economy in a narrower sense). Among those further activities, we find the distribution of cultural goods by wholesale trade, copying of cultural goods in the sense of mass production, the press market as well as big parts of applied arts, architecture and public administration of culture. Furthermore, the definition includes branches more remote to the term “culture” or branches that are mixed with non-cultural activities (i.e. translation bureaus or maintenance of TV, radio, and sound devices) (Piesk und Werner, 2003). 4.6.4

Saxony-Anhalt

Two bulletins on the Creative Economy have been published for Saxony-Anhalt (2001, 2006). The second bulletin distinguishes itself from the reports on other federal states by prefixing a comprehensive theoretical part which presents and discusses the various approaches towards treating the Cultural Economy and their motivation. The second bulletin uses a definition which divides the Creative Economy into nine sectors of the Cultural Economy and two creative Sectors (see the discussion above). This definition seems to gradually establish itself in European studies on the topic. In one point although, the bulletin on Saxony-Anhalt reclines to studies from the Anglo-American region. Next to the term “Cultural Economy”, the bulletin uses the German term “Kreativwirtschaft”. The latter has a wider definition than the former and is used to construct an even more encompassing term, “Creative Economy”, which includes, unlike narrower definitions, the copyright-based industries. 4.6.5

Hamburg

The bulletin on the Cultural Economy of Hamburg identifies six partial markets belonging to the total cultural market: 16

Another bulletin published in 2005 explicitly focuses on sponsoring of culture and patrons in Hessen. Although it does not deal with the problems concerning the scope of the term “Cultural Economy” anymore.

4.6 Germany 䊏 䊏 䊏 䊏 䊏 䊏

49

music performing arts visual arts applied arts cultural heritage literature

In succession, each of those partial markets is specified in detail. The music market, for example, encompasses producers and reproducers of sound carriers, music clubs and bars, manufacturers of musical instruments, retailing of music, orchestras, choirs, event managers as well as the procurement of artists and concert halls. In contrast to the bulletins on other federal states, it has to be noted that some sectors which are commonly considered to be a part of the Cultural Economy are not included here. As such, the bulletin does not consider advertising and public relations, broadcasting and TV as well as the print media and multimedia industries (Institut für Kultur- und Medienmanagement, 2006). 4.6.6

Berlin

The bulletin on the Cultural Economy of the capital city of Berlin defines the term “Cultural Economy” as all self-employed and profit-oriented enterprises that produce, market, distribute or retail cultural products and services or conserve cultural goods (Kulturwirtschaft in Berlin, 2005). To be more specific, the bulletin considers the following eight partial markets: 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

books- and press market film- and TV industries arts market software development/database hosts/telecommunication music industries advertising architecture and cultural heritage visual arts

For each of those markets, the bulletin defines the relevant self-employed, enterprises and institutions. Other than the North Rhine-Westphalian bulletin, the Berlin bulletin views software development and advertising as being part of the Cultural Economy. As such, the definition of the term used in Berlin very much resembles the definition of the “Cultural Economy”. 4.6.7

Cologne

Bernd Fesel and Michael Söndermann have written the Cologne bulletin on the Cultural Economy 2007. It has been published in March 2008. This bulletin is the first to

50

4 An International Overview on the Creative Industries

deal with the Creative Economy using a definition that seems to be currently establishing itself in Continental Europe. It includes, as noted earlier already, nine cultural as well as two creative branches. More specifically, those branches are: Cultural branches 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

publishing (books-, press-, sound carrier- and music publishers) film industries (film-, TV- and video production, rental and distribution, movies and theatre) private broadcasting industries music, visual and performing arts (freelance artists, private theatres, cabaret and varieté, Theatre- and concert agencies, stage tech enterprises) journalists and news agencies museum shops, art exhibitions (commercial museums and art exhibitions) retailing of cultural goods (Music- and bookstores, galleries, art trade) architecture (interior and garden architecture, design, surface and underground architects) design industries (industry-, product-, fashion-, textile design and related industries)

Creative branches 䊏 䊏

advertising (procurement of advertising, advertising agencies) software- and games industry (software development and games, including consultancy)

It is a central element of this bulletin that it consequently uses the two terms “Creative Economy (Kreativwirtschaft)” and “Creative Industries” always pair wise. Another distinctive feature is the mapping of the categorization of branches into a statistical categorization. This approach assures that the economic complex of the “Creative Economy/Creative Industries” can be quantitatively analyzed using statistical data (Fesel und Söndermann, 2008). Moreover, this approach could enhance the comparability of both national and international studies on the topic in the future. Note finally, that Fesel and Söndermann view, in accordance with the 3-sector model discussed earlier, the “Creative Economy/Creative Industries” as the more market- and profit-oriented branch of the Cultural and Creative Sector. 4.7

International Institutions

4.7.1

European Union Spurring the Creative Industries is part of the Union’s Lissabon-strategy. It focuses on the information- and communication technologies therein.

In addition to the bulletins of nations and federal states, the European Union publishes its own studies on the Creative Economy. The motivation behind those studies is,

4.7 International Institutions

51

in addition to reasons related to economic- and labor market policy, the aim to strengthen social cohesion within the European Union. The intellectual debate and treatment of the Creative Economy is embedded into the so-called Lissabon-strategy, which has formulated in 2000 the ambitious aim to make the European Union the most competitive, dynamic and knowledge-based region of the world and to make it a region capable of combining sustainable economic growth, more and better jobs and improved social cohesion (European Commission, 2008). Note that within this context the study “The Economy of Culture” (KEA, 2006) has been published. It uses the following definitions and scopes for the Cultural and Creative Sector. Besides the core sectors of art (visual and performing arts and cultural heritage) the Cultural Sector encompasses the branches of film and video industries, TV and broadcasting, video games as well as music, books and press. The Creative Sector instead encompasses the branches related to creation and design (i.e. fashion, product development, etc.) as well as architecture and advertising. Moreover, some related branches like, for example, production of personal computers, mobile telephones etc. are attributed to the Creative Sector as well. Those branches are highly dependent on the creative branches mentioned before (KEA, 2006). In this context, it is noteworthy that most frequently in European Union bulletins the attention is drawn to the ICT-sector (information- and communication technologies). This observation is further corroborated by the existence of the “European i2010 initiative on digital integration – participating in the information society”, which has been introduced in 2005. 4.7.2

UNESCO

A newsworthy study on behalf of UNESCO uses the distinction between Cultural and creative branches. Within this study however, the scope of the Cultural Economy is somewhat narrower and the Creative Economy encompasses, in addition to the above mentioned branches of the Cultural Economy, the software and games industries as well as the advertising industry (Fesel und Söndermann, 2007). 4.7.3

WIPO

The World Intellectual Property Organization WIPO has established a separate department for the Creative Economy (Creative Industries Division) in 2005. The WIPO views the Creative Industries as economic sectors whose activities and outputs are closely related to intellectual property (WIPO, 2008). To be more specific, it attributes those branches that can be associated with “patent”, “trademark”, “copyright and related rights” as well as “design patterns” (Kulturwirtschaftsbericht Sachsen-Anhalt, 2006). “Copyright-based industries” are the central term in this context, which alludes to a somewhat limited scope, in comparison to other studies.

52 4.8

4 An International Overview on the Creative Industries

Tentative Conclusions

The remarks on the pages above show that the discussion on the Creative Industries differs quite largely across nations and institutions. Not only does the significance of the Creative Industries in the debates among policy makers differ. In addition to that, we observe that some models and approaches are gradually establishing themselves in the international discussion, while others remain limited to only a national relevancy. Table 1 summarizes the main points of the discussion presented above. Table 1: An International Overview of the Creative Industries

United Kingdom

• leading role in the discussion on Creative Industries • clear definition of 13 branches among the Creative Industries, documented and described in the so-called “Creative Industries Mapping Document” • prominently accompanied by the Ministry of Culture, Media and Sports • relatively little discussion on the scope of the terms and their definitions

Australia

• Cultural Economy is by tradition part of cultural policy • art is the midpoint of the so-called Cultural Industries Model • Creative Industries overwhelming the dichotomy of art and the economy

Netherlands

• Debate on the “Creative Class” as defined by Richard Florida • The “Creative Class” is, according to European traditions, defined in a narrower sense than in the USA

Switzerland

• Relatively young, although profound and high-level discussion on Cultural and Creative Economy • 3-Sector-Model as the central benchmark in the first bulletin on the Swiss Creative Economy – today the benchmark for countless studies on the Creative Economy • Private and profit-oriented branch of the Creative Industries is the central item of investigation

Austria

• special approach insofar as the intermediate and public sector are analyzed as well • hardly any commitment to harmonization, thus only limited possibilities for international comparisons

Germany

• • • • •

EU

• focus on Cultural and Creative Economy • part of the Lissabon-strategy which aims at making the European Union the most dynamic region of the world • information and communication technologies are viewed as being part of the Creative Economy

UNESCO

• current endeavor to define the Cultural and Creative Economy • Following a general tendency, the Creative Economy is viewed as being an extension of the Cultural Economy

WIPO

• Creative Industries are economic sectors focusing on intellectual property • copyright-based industries as a distinguishing feature of the Creative Industries, which alludes to a limited scope of the term in comparison to the general tendency observable in other studies

multitude of studies and bulletins, on national as well as federal level intensive debate on the term “Creative Industries”, its scope and its definition slow movement from Cultural Economy in a narrow towards Creative Economy in a wider sense commitment to harmonization observable in latest bulletins leading role in Continental Europe, together with Switzerland

Source: Own illustration

Part 2

5

From Theory to Empirics

On the basis of the discussion above we highlight the following central elements. Differences in Definitions The definitions according to which the Cultural and Creative Economy are distinguished from one another differ both in space as well as in time. It happens that, for example, one federal state attributes the software- and games industries to the Creative Economy, while another state does not. Even in case a specific economic sector is considered as being part of the Creative Economy, we have to determine whether the whole sector or only parts of it are included. Retailing, for example, is treated differently across studies. While some employ, like this study, a narrower bound, some other studies use a more generous approach and attribute vast parts of retailing to the Creative Industries. However, the meaning of the term changes as time proceeds. As such, we observe an opening of the term “Cultural Economy” towards the wider definition of the “Creative Economy” in the bulletins on North Rhine-Westphalia and Cologne. Since the topic is newsworthy and the international discussion is intensive, it comes with no surprise that terms and their meaning are not fixed, but constantly undergoing change. It is clear that such differences in definitions and in the content provoke differences across empirical results. Differences in Mappings Sometimes one and the same economic sector is mapped into different markets. For example, archives and libraries are attributed to the books- and press market in Swiss studies, while they are mapped into “Cultural Heritage” in Austria. The differences in mappings are thus concerning more the description and visualization rather than the content itself (ICG culturplan, 2007). Comparability of Studies The variation of definitions and sources of statistical data which present aggregate pictures of the economic sectors set some more or less tight limits to both the international as well as the national comparability of the existing studies. Since we have no or only rudimentary statistics on the specific properties of the Creative Economy we have to rely on the existing, though not always fully appropriate data. Furthermore, we observe some national peculiarities within this data, which make comparisons across countries somewhat difficult and feasible only with some caveats.

56

5 From Theory to Empirics

Clear Tendency Regardless of all the differences encountered when reviewing the European studies we observe a clear tendency towards defining the Creative Industries in a wider sense than the Cultural Economy. To be more specific, the latter is simply extended by including advertising as well as software and games industries. As such, we attribute, as many other studies do (Bundesministerium für Wirtschaft und Technologie, 2007) nine cultural as well as two creative branches to the Creative Industries. Those are: 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

publishing film industries private broadcasting industries music, visual and performing arts journalists and news agencies museum shops and art exhibitions retailing of cultural goods architecture design industries advertising software- and games industries

After finding and motivating an appropriate definition for the term “Creative Industries”, we now turn to capturing the various economic sectors of the Creative Industries by statistical data. Thus, we now move on, after giving a lengthy discussion of terms and definitions, with presenting a quantitative picture of the Berlin Creative Industries. We rely on ES 200317 in this context. In doing so, we give, for each relevant economic sector, in particular the number of employees, the number of taxable enterprises18 as well as their revenues. The goal of this procedure is to give a quantitative impression of the current situation. Moreover though, we will use those insights in later reasoning. Note again that gathering data on the Creative Industries involves difficulties, and it does so by definition. The Creative Industries are an intangible branch of the economy, and as such its depiction in statistical data is very limited (Söndermann, 2006). We thus have to image a modern market by using traditional statistical instruments. 17

Although the categorization of economic sectors has changed by January 1st 2008 from ES 2003 to ES 2008, we rely on the former rather than the latter, since the new categorization does not include all data in sufficient quality. The categorization of the economic sectors is based on the European Union system of economic sectors (NACE). 18 Taxable enterprises are those with yearly revenues exceeding “ 17.500 and/or at least one employee who earns enough to be subject to social insurance contributions. Note that the statistics on value added tax use a principle which attributes the revenues of an enterprise to the region where its headquarters are located.

57

5.2 The Mapping of Economic Sectors

Creative Industries creative branches

cultural branches

publishing

film industries

Private broadcasting Industries

Music, visual and performing arts

journalists and news agencies

Museum shops and Art exhibitions

retailing of cultural goods architecture

design industries

advertising

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

ES

software and games industries

ES

ES

Figure 3: Creative Industries, their Branches and Economic Sectors Source: Own illustration

5.1

Data Sources

We classify the economic sectors according to an approach employed by Statistisches Bundesamt Wiesbaden, which in this context reclines to internationally standardized rules. For the economic sectors, we resort to a categorization using five digits19, since it allows for a most accurate mapping of enterprises into economic sectors. The data on the number of enterprises and their revenues are from “Amt für Statistik Berlin-Brandenburg”. All data relate to the year 2006, unless otherwise noted. The data on part- and fulltime employees subject to social security contributions as well as the number of marginally employed persons are from “Bundesagentur für Arbeit, Statistik-Service Ost” in Berlin and dated with September 30, 2007. 5.2

The Mapping of Economic Sectors

The primary goal of the classification of economic sectors by the federal statistical bureaus is to map various kinds of economic activities into a widely accepted categorization. Creativity however, is not the item according to which the mapping is done. Thus, we have, above all, to select the economic sectors relevant to this study, and to map them, in a second step, into the partial markets of the Creative Industries. We base both the selection and the mapping on the discussion presented in part 1 of this study. Since vast parts of the existing literature on the Creative Industries query the non-comparability of quantitative analysis, we recline in this context to studies em-

19

In case we present four-digit numbers in context with the economic sectors, we do not dispose of the finer aggregation in the five-digit system for the respective data.

58

5 From Theory to Empirics

ploying timely methods that focus on comparability. By doing so we want to make an, admittedly small, contribution to the efforts towards standardization we observe in some parts of the literature. To begin with, we give a general overview of the Berlin Creative Industries as well as its Cultural and creative branches. In the following, we discuss and image those eleven branches in detail.

“In towns like Berlin, where industry and high qualified services are almost entirely gone, in fact only the creative sector can maintain a functioning economy (and, above all, guarantee enduring fascination)” (Horx, 2006).

6

The Berlin Creative Industries at a Glance

Berlin’s creative industries involve more than 20,000 taxable enterprises; they employ just fewer than 80,000 people and realize total revenues of about “ 4.7 bn. The share of enterprises being part of the Creative Industries with respect to the total number of enterprises in Berlin is 14%. The share of people employed in the Table 2: Creative Industries at a Glance Creative Industries with respect to the total number of employees in Berlin, however, is enterprises in the Creative Industries only 6.5%. The fairly low average number of cultural branches 16,401 employees per firm (lower than four) thus shows that creative enterprises are typically creative branches 4,341 small. The Creative Sector is obviously domishare in Berlin enterprises 14.2% nated by one-person enterprises (henceforth 3 revenues in th. OPE) and small enterprises20, which under- in the Creative Indutries lines the structure we already discussed in part cultural branches 5,121,867 1 of this study. By contrast, an average Berlin company has more than eight employees and creative branches 2,301,897 is thus twice as big as an average creative enshare in Berlin enterprises 8.8% terprise. employees in the Creative Industries However, if one calculates the average number of employees per enterprise without cultural branches 53,267 considering OPEs, the average number of emcreative branches 26,342 ployees per non-OPE – that is the total number share in Berlin enterprises 6.5% of enterprises less the number of OPEs – increases to 16. This difference is exceptionally remarkable in the branch “journalists and Source: Statistisches Bundesamt Wiesbaden and own news agencies”. More than 98% of all enter- calculations 20

According to the recommendation 2003/361/EC of the European Commission of May 6, 2003 concerning the definition of micro enterprises as well as small and medium firms, we define micro enterprises as enterprises with less than 10 employees and revenues of less than “ 2 m. Small firms are defined as enterprises with less than 50 employees and a turnover less than “ 10 m.

60

6 The Berlin Creative Industries at a Glance

prises in this branch are OPEs, so that concerning the number of employees in nonOPEs this branch moves from the bottom to the lead. It has 0.6 employees per enterprise, but 25 employees per non-OPE. Comparing Cultural and Creative branches shows that the creative branches have 20% of all enterprises in the Creative Industries, but yield 30% of the total revenues and employ 30% of all the employees in the Creative Industries. Table 3 shows the total number of employees and the revenues per year for all nine cultural branches and the two creative branches. Table 3: Creative Industries at a Glance – Enterprises and Revenues revenues [th. 3]

enterprises total

%

OPEs

%

total

%

OPEs

%

cultural branches publishing

1,732

8.4

864

5.5

1,800,191 24.2

64,017

4.5

film industries

1,170

5.6

666

4.2

751,397 10.1

76,856

5.4

93

0.4

–

–

–

–

music, visual and performing arts

5,329

25.7

4,472 28.3

journalists and news agencies

2,187

10.5

2,135 13.5

private broadcasting services

museum shops and art exhibitions

200,365

2.7

1,130,943 15.2 150,427

2.0

394,826 27.9 120,381

8.5

–

–

–

–

–

–

–

–

923

4.4

705

4.5

357,597

4.8

151,382 10.7

architecture

2,855

13.8

2,272 14.4

529,718

7.1

216,086 15.3

design industries

2,112

10.2

1,892 12.0

201,229

2.7

121,210

advertising

2,183

10.5

1,527

9.7

957,274 12.9

software and games industries

2,158

10.4

1,266

8.0

1,344,623 18.1

20,742

100

15,799

100

retailing of cultural goods

8.6

creative branches

total

7,423,764

100

172,411 12.2 95,554

6.8

1,412,723

100

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 4 shows the total number of employees as well as the number of fulltime, part-time, and marginal employees separately for each branch.

61

6 The Berlin Creative Industries at a Glance

Table 4: Creative Industries at a Glance – Employees employees total

%

fulltime and part-time

%

marginal employees

%

cultural branches 15,902

20.0

13,379

19.4

2,523

24.0

film industries

7,565

9.5

6,550

9.5

1,015

9.6

private broadcasting services

4,383

5.5

4,246

6.1

137

1.3

11,523

14.5

9,158

13.3

2,365

22.4

journalists and news agencies

1,306

1.6

1,261

1.8

45

0.4

museum shops and art exhibitions

3,980

5.0

3,764

5.4

216

2.0

retailing of cultural goods

3,308

4.2

2,587

3.7

721

6.8

architecture

4,740

6.0

4,239

6.1

501

4.8

560

0.7

434

0.6

126

1.2

publishing

music, visual and performing arts

design industries creative branches advertising software and games industries total

9,649

12.1

7,567

11.0

2,082

19.8

16,693

21.0

15,884

23.0

809

7.7

79,609

100

69,069

100

10,540

100

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

7

The Creative Industries in Detail

In the following chapter we will introduce the different branches of the Berlin Creative Industries in detail. We are going to review the current situation in order to get a clear image and to have a starting point for our discussion of appropriate economic policy measures and furtherance in part 4. 7.1

Details of the Cultural Branches

To begin with, we will introduce and discuss the nine cultural branches out of the total of eleven different branches of the Creative Industries. 7.1.1

Publishing

Table 5: Publishing – Classification

7.1.1.1 Statistical Classification

ES 03

economic sectors

Publishing includes both what is called publishing in a narrower sense as well as printing. Since the mapping of the different sectors into the branches is not consistent in the literature, we discuss it in detail here. We attribute both freelance translators as well as translation offices to the category of publishing, whereas we map news agencies and syndicates as well as freelance journalists into the separate category of “journalists and news agencies”. Moreover, retailing is not part of publishing, but of the branch “retailing of cultural goods”. Table 5 gives an overview of the publishing branch in Berlin and it mentions the classification of ES 2003.

22.11.1

publishing of books (excluding address directories)

22.11.2

publishing of address directories

22.12.1

publishing of daily newspapers

22.12.2

publishing of weekly newspapers and Sunday papers

22.13.1

publishing of professional journals

22.13.2

publishing of general magazines

22.13.3

publishing of other magazines

22.14.1

publishing of recorded sound carriers

22.14.2

publishing of music supplies

22.15.0

other publishing

22.21.0

printing of newspapers

22.22.0

printing of other media

22.23.0

further processing in printing

74.85.1

freelance translators

74.85.2

translation bureaus

7.1.1.2 Facts and Figures Table 6 and Table 7 give an overview of the economic significance of the publishing branch in Berlin. There are somewhat more than 1,700 enterprises which realize total revenues of “ 1,8 bn. In

Source: Statistisches Bundesamt Wiesbaden

64

7 The Creative Industries in Detail

Table 6: Publishing – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors publishing of books (excluding address directories)

total

%

OPEs

%

total

%

OPEs

%

186

10.7

62

7.2

1,078,999

59.9

8,675

13.6

publishing of address directories

–

–

–

–

–

0.0

–

–

publishing of daily newspapers

4

0.2

–

–

30,198

1.7

–

–

publishing of weekly newspapers and Sunday papers

–

–

–

–

–

–

–

publishing of professional journals

26

1.5

–

–

34,136

1.9

–

–

publishing of general magazines

33

1.9

–

–

74,161

4.1

–

–

publishing of other magazines

22

1.3

11

1.3

11,168

0.6

1,835

2.9

publishing of recorded sound carriers

16

0.9

–

–

15,513

0.9

–

–

publishing of music supplies

128

7.4

48

5.6

50,621

2.8

4,244

6.6

other publishing

118

6.8

–

–

63,688

3.5

–

–

printing of newspapers

8

0.5

–

–

2,833

0.2

–

–

printing of other media

387

22.3

–

–

337,253

18.7

–

–

55

3.2

38

4.4

29,591

1.6

7,910

12.4

freelance translators

653

37.7

629

72.8

49,756

2.8

37,042

57.9

translation bureaus

96

5.5

76

8.8

22,274

1.2

4,311

6.7

1,732

100

864

100

1,800,191

100

64,017

100

further processing in printing

total

Source: Amt für Statistik Berlin-Brandenburg and own calculations n. b.: Those data have not been published by the Amt für Statistik Berlin due to the low number of observations and resulting privacy protection restrictions.

total, 13,379 persons have been employed either full- or part-time, and 2,523 more have had a marginal job in this branch. While we find 533 enterprises with 7,900 employees belonging to the publishing branch defined in a narrower sense, there are some 450 enterprises employing somewhat more than 5,000 full- and part-time employees in printing. 749 more enterprises are either freelance translators or translation bureaus. The latter have 414 full- and part-time employees and realize some “ 70 mn. of revenues. Thus, they account for 4% of the total revenue of the publishing branch. 7.1.1.3 Specifics With 186 enterprises, publishers of books account for some 10% of all enterprises in the publishing branch. However, those 186 enterprises employ more than 3,000 fulland part-time employees, which results in a share of 23% of all employees in this branch. And their revenues of “ 1 bn. account for almost 60% of the branch’s total revenues.

65

7.1 Details of the Cultural Branches

Table 7: Publishing – Employees employees economic sectors publishing of books (excluding address directories)

total

%

fulltime and part-time

%

marginal employees

%

3,233

20.3

3,068

22.9

165

6.5

241

1.5

182

1.4

59

2.3

2,305

14.5

2,305

17.2

publishing of weekly newspapers and Sunday papers

202

1.3

157

1.2

45

1.8

publishing of professional journals

903

5.7

851

6.4

52

2.1

publishing of general magazines

450

2.8

427

3.2

23

0.9

publishing of other magazines

192

1.2

156

1.2

36

1.4

87

0.5

78

0.6

9

0.4

385

2.4

353

2.6

32

1.3

1,994

12.5

321

2.4

1,673

66.3

publishing of address directories publishing of daily newspapers

publishing of recorded sound carriers publishing of music supplies other publishing

0.0

printing of newspapers

268

1.7

250

1.9

18

0.7

printing of other media

4,750

29.9

4,454

33.3

296

11.7

433

2.7

363

2.7

70

2.8

freelance translators

60

0.4

45

0.3

15

0.6

translation bureaus

399

2.5

369

2.8

30

1.2

15,902

100

13,379

100

2,523

100

further processing in printing

total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

Another interesting feature is the structure of freelance translators. More than 650 enterprises dependently employ just 45 persons in total. Thus, almost all freelance translators are OPEs, which is, as noted several times already, typical for many enterprises of the Creative Industries. 7.1.2

Film Industries

7.1.2.1 Statistical Classification Within this study we attribute the economic sectors for production of films and videos, film distribution and supply of video programs as well as movies to the film industries. We do, however, not consider manufacturing of various products (sound-, image-, and data carriers and entertainment electronics), copying and reproduction of sound-, image-, and data carriers as well as retailing of entertainment electronic devices. Since some other studies, among them the bulletin on the Creative Economy of Berlin (Kulturwirtschaft in Berlin, 2005) attribute the broadcasting branch to the

66

7 The Creative Industries in Detail

ES 03

economic sectors

92.11

production of films and videos

92.11.1

production of films for cinemas

92.11.2

production of films for TV

92.11.3

production of industry- and advertising films

92.11.4

production of other films

92.11.5

film technologies

92.11.6

sound studios

92.12

film distribution and supply of video programs

92.12.1

film distribution

92.12.2

supply of video programs

92.12.3

marketing of films

92.13.0

cinemas

Table 8: Film Industries – Classification Source: Statistisches Bundesamt Wiesbaden

film industries, we explicitly point to part 1 of this study where we discuss and motivate our selection of categories which views broadcasting as a separate branch. The same is true for stage-, film-, radio-, and TV-artists who belong to the branch of “music, visual and performing arts”. Table 8 gives a detailed outline of the various economic sectors we attribute to the film industries.

Table 9: Film Industries – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors production of films and videos

total

%

total

%

1,103

94.3

%

OPEs 666

100.0

669,165

89.1

OPEs 76,856

100.0

%

–

–

–

–

–

–

–

–

production of films for TV

–

–

–

–

–

–

–

–

production of industry- and advertising films

–

–

–

–

–

–

–

–

production of other films

–

–

–

–

–

–

–

–

film technologies

–

–

–

–

–

–

–

–

sound studios

–

–

–

–

–

–

–

–

film distribution and supply of video programs

18

1.5

–

–

48,270

6.4

–

–

film distribution

–

–

–

–

–

–

–

–

supply of video programs

–

–

–

–

–

–

–

–

marketing of films

–

–

–

–

–

–

–

–

49

4.2

–

–

33,962

4.5

–

–

1,170

100

666

100

751,397

100

76,856

100

cinemas total

Source: Amt für Statistik Berlin-Brandenburg and own calculations

67

7.1 Details of the Cultural Branches

7.1.2.2 Facts and Figures We can see from Table 921 and Table 10 that with respect to the revenues and the number of taxable enterprises, the sector representing the production of films and videos alone accounts for 90% of the film industries as a whole. This sector employs some 75% of all full- and part-time employees working in the film industries. While cinemas account for only about 4% of the total number of enterprises in the film industries, they employ more than 16% of the full- and part-time workers in this branch. If one considers the 349 marginal jobs too, about 20% of all film industries employees work there. Table 10: Film Industries – Employees employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

production of films and videos production of films for cinemas production of films for TV

947

12.5

827

12.6

120

11.8

2,890

38.2

2,636

40.2

254

25.0

production of industry- and advertising films

270

3.6

252

3.8

18

1.8

production of other films

888

11.7

826

12.6

62

6.1

film technologies

282

3.7

250

3.8

32

3.2

sound studios

170

2.2

142

2.2

28

2.8

film distribution

187

2.5

159

2.4

28

2.8

supply of video programs

459

6.1

335

5.1

124

12.2

film distribution and supply of video programs

32

0.4

32

0.5

–

–

cinemas

1,440

19.0

1,091

16.7

349

34.4

total

7,565

100

6,550

100

1,015

100

marketing of films

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

7.1.2.3 Film Industries in the Context of the Creative Industries Relating the film industries to the Creative Industries as a whole shows that only 5.7% of all enterprises belong to the film industries. They account however, for about 10% of both the number of employees as well as revenues. Note again that the literature uses various different approaches towards categorizing and classifying the 21

The data on the number of taxable enterprises and revenues are published only for the more aggregated four-digit system of economic sectors due to data privacy protection reasons. The data on employees however, are available in the five-digit system.

68

7 The Creative Industries in Detail

film industries. Thus, a comparison of those figures involves some caveats and should be handled with care.22 7.1.2.4 Outlook The Berlin film industries have experienced a positive development during the recent years, such that revenues are expected to grow by 24% from 2005 to 2008 (Investitionsbank Berlin, 2008). This makes the film industries one of the most successful and fastest growing branches within the Berlin Creative Industries. New support programs like the “Deutsche Filmförderfonds” (DFFF) by the German government aim at sustainably spurring this development and guaranteeing competitiveness of the film industries in an international context. “Berlinale” is one of the greatest Film Festivals of the world and has as such become the epitome of the German film industries. 2008 saw the 58th edition of this event, featuring more than 380 international films from about 60 different countries. Apart from the presentation of the movies, the festival has become a distinguished trade show within the international film industries (Investitionsbank Berlin, 2008). Next to the direct economic impulses in February, the month featuring “Berlinale”, this event affects the Berlin film industries as a whole and thus the Creative Industries as well. Focus box 2: Berlinale

7.1.3

Private Broadcasting Industries

7.1.3.1 Statistical Classification As noted earlier already we treat the private broadcasting industries as a separate branch of the Creative Industries and do not attribute it to the film industries. Table 11 shows that the private broadcasting industries contain the Broadcast Stations as well as the Production of Radio- and TV-programs. Freelance stage-, film-, radio- and TV-artists are mapped into the branch “music, visual and performing arts” and are thus not considered here. 22

Table 11: Private Broadcasting Industries – Classification ES 03

economic sectors

92.20.1

broadcasting stations

92.20.2

production of radio- and TV programs

Source: Statistisches Bundesamt Wiesbaden

For example, an investigation by Investitionsbank Berlin (Investitionsbank Berlin, 2008) maps the TV sector into the film industries. By doing so, this study finds about 2,000 taxable enterprises with 12,600 employees subject to social security contributions. If one includes freelancers, the selfemployed and marginal employees, one finds about 36,000 employees in this branch.

69

7.1 Details of the Cultural Branches

7.1.3.2 Facts and Figures Berlin has 16 broadcasting stations which realize in total about the same revenue than 77 enterprises operating in the production of radio- and TV-programs. Although the former have more than 3,000 employees, which is about twice as much as the latter. The private broadcasting industries have 137 marginal employees who account for only 3% of the total number of employees in this branch. 7.1.3.3 Specifics The business organization of the private broadcasting industries is somewhat striking. While the Creative Industries as a whole have on average a small structure of four employees per enterprise, the private broadcasting industries have a medium to large structure. Table 12 and Table 13 show that the 93 enterprises of this branch have on average more than 45 full- and part-time employees, and the average is even higher when viewing the broadcasting hosts separately. Those have more than 187 full- and part-time employees on average. As such, the enterprises of the private broadcasting industries are of above average size in comparison to the Creative Sector as a whole. This can also be documented by regarding revenues. An enterprise of the private broadcasting industries realizes about “ 2,15 mn. on average and is thus six times as big as an average Creative Industries enterprise. In this way, the private broadcasting industries are – with respect to both the number of full- and part-time employees as well as revenues – an exception within the predominantly small-scale Creative Industries. Table 12: Private Broadcasting Industries – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors broadcasting stations

total

total

%

OPEs

%

total

%

OPEs

%

16

17.2

–

–

101,752

50.8

–

–

77

82.8

–

–

98,613

49.2

–

–

93

100

–

–

200,365

100

–

–

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 13: Private Broadcasting Industries – Employees employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

broadcasting stations

3,047

69.5

3,003

70.7

44

32.1

production of radio- and TV programs

1,336

30.5

1,243

29.3

93

67.9

total

4,383

100

4,246

100

137

100

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

70

7 The Creative Industries in Detail

Cubico Media TV GmbH operates the niche channel XXHome, which represents both a TV-channel as well as a platform for TV and the web. XXHome is the first service-channel to deal with housing, gardening and do-it-yourself matters. By employing special-topic days, magazines and documentaries the channel shows in an informative way how one’s home can be made more beautiful (XXHome, 2008). Additional information accompanying the programs can be drawn from the trailer as well as be downloaded from the web. Moreover, there are community features in which the audience can broadcast own videos and receive mobile offers via SMS or MMS. Focus box 3: XXHome – a Completely new Service-Channel

7.1.4

Music, Visual- and Performing Arts

7.1.4.1 Statistical Classification The cultural branch “music, visual- and performing arts” is generally defined in a very wide sense. Many economic sectors to be found in it although, could be defined as arts in a much narrower sense. The variety within this branch ranges from freelance artists of various types, theater- and concert managers, photography and sculpture to manufacturing of musical instruments. Table 14: Music, Visual and Performing Arts ES 03

economic sectors

ES 03

economic sectors

92.31.1

theater ensembles

92.34.1

Dance schools

92.31.2

ballet groups, orchestras, chapels, choirs

92.34.2

supply of other cultural and entertainment services

92.31.3

freelance visual artists

74.81.1

photography

92.31.4

freelance restorers

74.81.2

photo laboratories

55.40.3

discotheques and dance halls

92.31.5

freelance composers and processors of music

71.40.3

libraries and reader circles

92.31.6

freelance writers

26.70.1

sculpture and masonry

92.31.7

freelance stage-, film-, radio- and TV-artists

28.52.3

artist blacksmiths

92.31.8

freelance artists

36.22.2

manufacturing of adornment from noble metal

92.32.1

theater- and concert managers 36.22.3

manufacturing of gold- and silversmith products

92.32.2

operas, theaters, concert halls and similar institutions

36.30.0

repairing of musical instruments

92.32.3

varieté and cabaret

92.32.5

technical support for cultural services

92.72.2

supply of other services for entertainment, recreation and leisure

92.33.0

showmen and amusement parks

Source: Statistisches Bundesamt Wiesbaden

71

7.1 Details of the Cultural Branches

Note at this stage that the existing literature maps some sectors of this branch into the film industries or the private broadcasting industries. This fact must be taken into account in case of comparing the figures. This study views the economic sectors listed in Table 14 as being part of the “music, visual- and performing arts”-branch. Table 15: Music, Visual and Performing Arts – Enterprises and Revenues employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

1,344

11.7

1,201

13.1

143

6.0

ballet groups, orchestras, chapels, choirs

505

4.4

494

5.4

11

0.5

freelance visual artists

162

1.4

110

1.2

52

2.2

freelance restorers

129

1.1

116

1.3

13

0.5

freelance composers and processors of music

13

0.1

9

0.1

4

0.2

freelance writers

46

0.4

16

0.2

30

1.3

315

2.7

217

2.4

98

4.1

8

0.1

4

0.0

4

0.2

theater- and concert managers

1,096

9.5

589

6.4

507

21.4

operas, theaters, concert halls and similar institutions

3,885

33.7

3,543

38.7

342

14.5

88

0.8

71

0.8

17

0.7

technical support for cultural services

849

7.4

679

7.4

170

7.2

showmen and amusement parks

170

1.5

95

1.0

75

3.2

dance schools

141

1.2

77

0.8

64

2.7

supply of other cultural and entertainment services

354

3.1

248

2.7

106

4.5

photography

291

2.5

231

2.5

60

2.5

photo laboratories

278

2.4

199

2.2

79

3.3

discotheques and dance halls

400

3.5

139

1.5

261

11.0

theater ensembles

freelance stage-, film-, radio- and TV-artists freelance artists

varieté and cabaret

34

0.3

27

0.3

7

0.3

sculpture and masonry

154

1.3

128

1.4

26

1.1

artist blacksmiths

111

1.0

106

1.2

5

0.2

manufacturing of adornment from noble metal

88

1.0

24

1.0

libraries and reader circles

112

1.0

manufacturing of gold- and silversmith products

12

0.1

5

0.1

7

0.3

manufacturing of musical instruments

138

1.2

115

1.3

23

1.0

supply of other services for entertainment, recreation and leisure

888

7.7

651

7.1

237

10.0

11,523

100

9,158

100

2,365

100

total

Source: Amt für Statistik Berlin-Brandenburg and own calculations

72

7 The Creative Industries in Detail

Table 16: Music, Visual and Performing Arts – Employees revenues [th. 3]

enterprises economic sectors theater ensembles ballet groups, orchestras, chapels, choirs

total

%

16

OPEs

0.3

4

%

total

%

0.1

16,047

1.4

OPEs

%

584

0.1

60

1.1

7

0.2

38,744

3.4

2,921

0.7

freelance visual artists

629

11.8

595

13.3

56,129

5.0

50,834

12.9

freelance restorers

137

2.6

121

2.7

12,955

1.1

7,577

1.9

freelance composers and processors of music

230

4.3

198

4.4

31,284

2.8

17,766

4.5

freelance writers

719

13.5

709

15.9

50,184

4.4

49,091

12.4

1,699

31.9

1,649

36.9

140,366

12.4

133,152

33.7

89

1.7

75

1.7

5,246

0.5

4,551

1.2

133

2.5

51

1.1

178,162

15.8

8,084

2.0

operas, theaters, concert halls and similar institutions

20

0.4

5

0.1

53,909

4.8

295

0.1

varieté and cabaret

12

0.2

3

0.1

2,820

0.2

160

0.0

freelance stage-, film-, radio- and TV-artists freelance artists theater- and concert managers

technical support for cultural services

436

8.2

397

8.9

66,835

5.9

29,718

7.5

showmen and amusement parks

57

1.1

48

1.1

12,643

1.1

9,715

2.5

dance schools

82

1.5

57

1.3

10,191

0.9

5,959

1.5

supply of other cultural and entertainment services

87

1.6

56

1.3

41,852

3.7

4,126

1.0

401

7.5

357

8.0

46,768

4.1

32,383

8.2

photo laboratories

38

0.7

22

0.5

21,651

1.9

2,600

0.7

discotheques and dance halls

51

1.0

37

0.8

18,746

1.7

5,845

1.5

4

0.1

–

–

1,766

0.2

–

–

sculpture and masonry

62

1.2

38

0.8

14,420

1.3

6,206

1.6

artist blacksmiths

20

0.4

12

0.3

26,078

2.3

958

0.2

manufacturing of adornment from noble metal

35

0.7

–

–

10,624

0.9

–

–

manufacturing of gold- and silversmith products

84

1.6

–

–

7,545

0.7

–

–

manufacturing of musical instruments

43

0.8

31

0.7

65,189

5.8

22,301

5.6

185

3.5

–

–

200,789

17.8

–

–

5,329

100

4,472

100

1,130,943

100

394,826

100

Photography

libraries and reader circles

supply of other services for entertainment, recreation and leisure total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

7.1 Details of the Cultural Branches

73

7.1.4.2 Facts and Figures 5,329 enterprises operating in music, visual- and performing arts make more than 25% of the Creative Industries enterprises and thus the relatively largest share of it. Slightly fewer than 1,700 – cf. Table 15 – or one third of those enterprises belong to the Economic Sector of “stage-, film-, radio- and TV artists”. Freelance writers and freelance visual artists together account for some 10% of the total number of enterprises belonging to this branch. Operas and theaters, concert halls and similar institutions alone employ more than 3,800 people and are thus responsible for a third of all employees belonging to this branch. With respect to the number of enterprises although, those 20 enterprises account for only 0.4%. Theater ensembles are in a similar situation. These 16 enterprises account for 11.7% of all employees, although only for 0.3% of all enterprises. Together, those two sectors thus have 36 enterprises and employ slightly viewer than half of all the employees belonging to the branch of music, visual and performing arts. 7.1.4.3 Specifics It is truly remarkable that this branch employs that many people. We observe 9,158 full- and part-time employees as well as additional 2,365 marginal employees. Thus, the share of marginal employees within the branch is 20%. 4,472 out of 5,329 enterprises are OPEs; they thus account for about 84% of the enterprises belonging to this branch. When regarding this ratio together with the number of full- and part-time employees, we see that the total number of 9,158 employees is working for the remaining 16% of enterprises. Within this group, operas, theaters, concert halls as well as similar institutions are the dominant sources of labor demand. The few enterprises of those two economic sectors (27 Non-OPEs) account for 5,229 employees. This results in an average number of 194 employees per enterprise. With yearly revenues of “ 0.4 bn. the OPEs account for about 35% of the total turnover of “ 1.13 bn. realized in the branch.

November 2008 saw the Third European Month of Photography. 120 galleries, museums and cultural institutions took part in this event and provided a dense program of exhibitions, vernissages, events, symposia and workshops. The European Month of Photography is celebrated in Berlin as well as Paris, Vienna, Bratislava, Luxembourg, Moscow and Rome. (European Month of Photography, 2008).

Focus box 4: Month of Photography

74 7.1.5

7 The Creative Industries in Detail

Journalists and News Agencies

7.1.5.1 Statistical Classification We treat, as noted earlier already, the cultural branch “journalists and news agencies” as a separate part of the Creative Industries. Other bulletins however, attribute it to the books-, and press market. (cf., for example, Kulturwirtschaft in Berlin, 2005). Table 17 shows the economic sectors belonging to this branch. There are two of them. ES 03

economic sectors

92.40.1

syndicates and news agencies

92.40.2

freelance journalists and press photographers

Table 17: Journalists and News Agencies – Classification Source: Statistisches Bundesamt Wiesbaden

7.1.5.2 Facts and Figures As can be seen from Table 18 in connection with Table 19 , the two economic sectors of the branch “journalists and news agencies” differ largely with respect to their structure. While there are 36 taxable syndicates or news agencies which employ more than 1,100 persons, we have 2,151 taxable freelance journalists and press phoTable 18: Journalists and News Agencies – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors

%

total

syndicates and news agencies

total 36

% 1.6

OPEs 20

0.9

22,292

14.8

%

OPEs 2,266

% 1.9

freelance journalists and press photographers

2,151

98.4

2,115

99.1

128,135

85.2

118,115

98.1

total

2,187

100

2,135

100

150,427

100

120,381

100

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 19: Journalists and News Agencies – Employees employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

syndicates and news agencies

1.109

84,9

1.064

84,4

45

100,0

freelance journalists and press photographers

197

15,1

197

15,6

–

–

1.306

100

1.261

100

45

100

total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

75

7.1 Details of the Cultural Branches

tographers who dependently employ 197 persons. To put it differently, more than 85% of the people employed in the branch work for just 1,6% of its enterprises. With respect to revenues although, note that 85% of the branches’ total revenues are realized by the freelance journalists and press photographers, while only 15% can be attributed to the syndicates and news agencies. Moreover, the large number of freelance journalists and press photographers is documented by the 10% share of the total number of taxable enterprises this branch accounts for with respect to the Berlin Creative Industries as a whole. 7.1.5.3 Specifics From the numbers below we conclude that syndicates and news agencies belong to – with 69 employees on average (excluding OPEs) – the medium-scale23 enterprises of the Creative Industries. The freelance journalists and press photographers however must be attributed to the micro-enterprises and OPEs respectively. Out of 2,151 enterprises in the Economic Sector of “freelance Journalists and press photographers”, 2,115 or 98% are OPEs. There is another ratio to document this structure. While 36 syndicates and news agencies realize more than “ 0,6 mn. on average, an average freelance journalist or press photographer realizes less than one tenth of this value. 7.1.6

Museum Shops and Art Exhibitions

7.1.7

Statistical Classification

Table 20 lists the different economic sectors belonging to this branch. Note again that some of the economic sectors discussed here are in other bulletins attributed to different cultural branches. For example, the bulletin on the Berlin Creative Economy maps the Economic Sector of “Libraries and archives” into the books- and press market, and “museums and art exhibitions” into a “market for architecture and cultural heritage” (Kulturwirtschaft in Berlin, 2005). The timeliest bulletins although, tend to define museum shops and art exhibitions as a separate cultural branch (cf., for example, Fesel and Söndermann, 2008). 23

Table 20: Museum Shops and Art Exhibitions – Classification ES 03

economic sectors

92.51.0 92.52.1 92.52.2 92.53.1 92.53.2 92.53.3

Source: Statistisches Bundesamt Wiesbaden

According to the recommendation 2003/361/EG of the European commission as of May 6, 2003, enterprises with less than 250 employees and yearly revenues of less than “ 50 mn. are defined as medium-scale enterprises.

76

7 The Creative Industries in Detail

7.1.6.2 Facts and Figures The 3,980 employees of this branch account for a share of 5% of the total number of people employed in the Berlin Creative Industries. The most dominant Economic Sector within the branch is the sector of museums and art exhibitions. It is responsible for more than 50% of total employment within the branch Table 21 depicts the employment structure in more detail. Unfortunately we have no data on both the number of taxable enterprises as well as their revenues, since those figures are not published by the statistical bureaus due to data privacy protection reasons. There are few enterprises; and having the numbers would enable the user to draw conclusions on specific enterprises. Table 21: Museum Shops and Art Exhibitions – Employees employees economic sectors

Total

%

fulltime and part-time

%

marginal employees

%

libraries and archives

1,249

31.4

1,216

32.3

33

15.3

museums and art exhibitions

2,200

55.3

2,023

53.7

177

81.9

–

–

–

–

–

–

507

12.7

501

13.3

6

2.8 –

monumental protection botanical and zoological gardens natural preserves and zoos nature- and landscape protection total

–

–

–

–

–

24

0.6

24

0.6

–

–

3,980

100

3,764

100

216

100

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

7.1.7

Retailing of Cultural Goods

7.1.7.1 Statistical Classification Within this study we use a fairly narrow definition of retailing as a part of the Creative Industries. Thus, we intended to select those ES 03 economic sectors economic sectors of retailing in which the asretailing of musical instruments pects of culture and creativity are central or play 52.45.3 and supplies a significant role at least. As can be seen from 52.47.2

retailing of books, magazines and journals

52.48.2

retailing of objects of art, coins, souvenirs etc.

52.50.1

retailing of antiques and antique carpets

52.50.2

antiquarian bookshops

Table 22: Retailing of Cultural Goods – Classifications Source: Statistisches Bundesamt Wiesbaden

77

7.1 Details of the Cultural Branches

Table 22, we include retailing of music, books, magazines and journals, objects of art as well as antiques. Moreover, we view antiquarian booksellers as being part of this branch.24 7.1.7.2 Facts and Figures As can be seen from Table 23 and Table 24 in connection with Table 3 and Table 4, the share of both taxable enterprises as well as employees with respect to the Creative Industries as a whole is in each case less than 5%. Concerning the number of taxable enterprises and revenues, retailing of objects of art is the most dominant sector within the branch. In both categories – number of enterprises and revenues – retailing of objects of art accounts for somewhat less than 50% of the branch as a whole. Retailing of books and professional journals however has the largest share of employees – two thirds. The share of taxable enterprises of this sector with respect to the branch as a whole is just 25% although. Table 23: Retailing of Cultural Goods – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors retailing of musical instruments and supplies

total

%

OPEs

%

total

%

OPEs

%

68

7.4

55

7.8

18,833

5.3

12,259

8.1

retailing of books, magazines and journals

243

26.3

158

22.4

137,203

38.4

44,922

29.7

retailing of objects of art, coins, souvenirs etc.

420

45.5

329

46.7

173,454

48.5

76,485

50.5

retailing of antiques and antique carpets

135

14.6

115

16.3

18,374

5.1

12,252

8.1

57

6.2

48

6.8

9,733

2.7

5,464

3.6

923

100

705

100

357,597

100

151,382

100

antiquarian bookshops total

Source: Amt für Statistik Berlin-Brandenburg and own calculations

24

In retailing, the classification of Creative Industries seems exceptionally difficult. Prorating the different branches is a feasible approach (i.e. some parts of retailing with textiles could by all means be coined as being creative and thus attributed to the Creative Industries). However, data to document the relevant shares are scare and one would have to rely on assumptions and estimations. Within this study, we completely abstain from such estimations, and our results concerning the number of enterprises and employees as well as revenues are thus somewhat conservative.

78

7 The Creative Industries in Detail

Table 24: Retailing of Cultural Goods – Employees employees economic sectors retailing of musical instruments and supplies retailing of books, magazines and journals

total

%

fulltime and part-time

%

marginal employees

%

144

4.4

102

3.9

42

5.8

1,940

58.6

1,679

64.9

261

36.2

retailing of objects of art, coins, souvenirs etc.

999

30.2

664

25.7

335

46.5

retailing of antiques and antique carpets

158

4.8

94

3.6

64

8.9

67

2.0

48

1.9

19

2.6

3,308

100

2,587

100

721

100

antiquarian bookshops total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

7.1.8

Architecture

7.1.8.1 Statistical Classification ES 03

economic sectors

74.20.1

superstructure- and interior architects

74.20.2

urban-, regional-, and land use planners

74.20.3

gardening and landscaping

Table 25 lists the economic sectors we consider as being part of the architectural branch.

Table 25: Architecture – Classification Source: Statistisches Bundesamt Wiesbaden

7.1.8.2 Facts and Figures Table 26 and Table 27 give a detailed overview on the facts and figures relevant for this branch. A share of 13% of all Berlin creative enterprises belongs to it. Total revenues are somewhat more than “ 0.5 bn. or more than 7% of the total revenue realized by the Berlin Creative Industries. Within the branch, urban-, regional-, and land use planners have an exceptional position. Although there are only 148 of such taxable enterprises, which amount to a share of 5% of all architecture offices, they employ more than a third of the people working in the branch. 56% of the enterprises in this Economic Sector are OPEs. The remaining 65 non-OPEs have on average 22 employees. More than 85% of the taxable architecture offices are in the sector of superstructure and interior architecture, although (2,480 enterprises). More than 80% of those are OPEs, and the remaining non-OPEs dependently employ 6.4 people on average.

79

7.1 Details of the Cultural Branches

Table 26: Architecture – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors

total

total

%

%

total

%

OPEs

%

2,012

88.6

453,681

85.6

193,620

89.6

5.2

83

3.7

44,815

8.5

7,623

3.5

8.0

177

7.8

31,222

5.9

14,843

6.9

100

2,272

100

529,718

100

216,086

100

2,480

86.9

148 227 2,855

OPEs

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 27: Architecture – Employees employees economic sectors superstructure- and interior architects

gardening and landscaping total

total

%

fulltime and part-time

%

marginal employees

%

3,008

63.5

2,632

62.1

376

75.0

1,459

30.8

1,375

32.4

84

16.8

273

5.8

232

5.5

41

8.2

4,740

100

4,239

100

501

100

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

The 227 garden- and land use planners realize about 6% of the branch’s total revenues and are responsible for some 6% of total employment. With respect to those figures, they lie somewhat behind the branches we mentioned before. 2,272 out of the branch’s 2,855 enterprises are OPEs, and, with a share of somewhat less than 80% a dominant part. They realize yearly revenues of “ 216 mn., which is about 40% of the total revenues realized in the branch.

Aedes was opened in 1980 and thus the first gallery for architecture in Europe. Since then, Aedes has become one of the internationally most successful institutions for communication of culture within architecture, urban planning and related content. The spectrum ranges from exhibition series, symposia and lecture series to publications and has made Aedes a name for itself in both the national as well as international community. The purpose of Aedes is in putting the culture of construction and architecture into the center of public interest and to introduce architectural visions, sustainable urban concepts as well as urban and landscape planning. In more than 350 exhibitions and the accompanying catalogues many noteworthy architects and today’s Pritzker-laureates have introduced their work long before achieving worldwide reputation (Aedes, 2008). Focus box 5: Aedes, the First Architectural Gallery in Europe

80 7.1.9

7 The Creative Industries in Detail

Design Industries

7.1.9.1 Statistical Classification ES 03

economic sectors

74.20.1

superstructure- and interior architects

74.20.2

urban-, regional-, and land use planners

74.20.3

gardening and landscaping

We see the Economic sectors listed in Table 28 as being part of the Creative Industries.

Table 28: Design Industries Source: Statistisches Bundesamt Wiesbaden

7.1.9.2 Facts and Figures Table 29 and Table 30 show that there are only 434 full- or part-time employees and 126 marginal employees in the two sectors belonging to the design industries. Thus, less than 1% of all people employed in the Berlin Creative Industries are working in the design industries. On the other hand although, the branch is characteristic for the Creative Industries since it has a large number of OPEs. There are 1,892 of them; they thus account for some 90% of the total number of enterprises in the branch. Thus, the dominant part of enterprises has no dependent employees. Table 29: Design Industries – Enterprises and Revenues revenues [th 3]

enterprises economic sectors

%

total

%

147

7.0

120

6.3

19,188

9.5

10,005

8.3

studios for textile-, adornment-, furniture- and other design

1,965

93.0

1,772

93.7

182,041

90.5

111,205

91.7

total

2,112

100

1,892

100

201,229

100

121,210

100

industrial design

total

%

OPEs

OPEs

%

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 30: Design Industries – Employees employees economic sectors

Total

%

fulltime and part-time

%

marginal employees

%

98

17.5

74

17.1

24

19.0

studios for textile-, adornment-, furniture- and other design

462

82.5

360

82.9

102

81.0

total

560

100

434

100

126

100

industrial Design

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

81

7.2 Details of the Creative Branches

However, more than 2,100 enterprises of the branch account for more than 10% of all creative enterprises in Berlin. Their relative revenue is lower though – “ 0.2 bn. or about 2.7%. 22.5% of all the branch’s employees are not subject to social security contributions. Thus, this branch has, of all Cultural and creative branches in Berlin, the highest share of marginal employment. Non-OPEs employ 2.5 persons on average, such that the branch is, apart from OPEs, dominated by micro-enterprises. 7.2

Details of the Creative Branches

As noted earlier already, 20% of all enterprises in the Berlin Creative Industries are belonging to either one of the two creative branches. In relative terms however, those two creative branches contribute more to both total employment and total revenues of the Creative Industries. As such, both creative branches together account for a third of the total revenues as well as a third of total employment of the Berlin Creative Industries. Another distinctive feature is the structure of the enterprises. While enterprises of the cultural branches employ 3,2 persons on average, the enterprises of the creative branches have on average 6,2 employees. Thus, the average number of employees is larger in the creative branches than in the cultural branches, however, it is lower than the average number of employees in the German Economy as a whole. Here, we observe an average firm size of eight employees. 7.2.1

Advertising

7.2.1.1 Statistical Classification We define the advertising branch as consisting of the economic sectors of advertising design, the distribution and procurement of advertising media and PR-advisory.

Table 31: Advertising – Classification ES 03

economic sectors

74.40.1

advertising design

74.40.2

distribution and procurement of advertising media

74.14.2

PR-Advisory

Source: Statistisches Bundesamt Wiesbaden

7.2.1.2 Facts and Figures Somewhat more than 2,000 taxable enterprises realize total revenues of about “ 1 bn., and thus account for a share of some 12.9% of the total revenues realized by the Berlin Creative Industries as a whole. Advertising design is by all means the most prominent sector, it outperforms the distribution and procurement of advertising media and PR-advisory with respect to the number of enterprises, revenues as well as the number of employees.

82

7 The Creative Industries in Detail

Table 32: Advertising – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors

total

%

total

%

OPEs

%

1,640

75.1

1,126

73.7

708,703

74.0

125,277

72.7

distribution and procurement of advertising media

378

17.3

280

18.3

208,539

21.8

37,557

21.8

PR-Advisory

165

7.6

121

7.9

40,032

4.2

9,577

5.6

2,183

100

1,527

100

957,274

100

172,411

100

advertising Design

total

%

OPEs

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 33: Advertising – Employees employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

advertising design

6,456

66.9

5,145

68.0

1,311

63.0

distribution and procurement of advertising media

2,923

30.3

2,190

28.9

733

35.2

270

2.8

232

3.1

38

1.8

9,649

100

7,567

100

2,082

100

PR-Advisory total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

Another striking feature of the branch is the high share of marginal employees. We observe 7,567 full- and part-time employees and 2,082 more marginal employees, which results in a marginal employees‘ share of 21.6% of all people being employed in advertising. For direct comparison, the relevant share in the Berlin Creative Industries as a whole is 13,2%. Table 32 and Table 33 show the details. 7.2.2

Software- and Games Industries

7.2.2.1 Statistical Classification The software and games industries constitute the second creative branch, next to advertising. As can be seen from Table 34, the Software and Games industries contain the economic sectors of publishing Software, Software consultancy, Development and programming of web-presentations, Other software development as well as the economic sector of “online provision of databases, books etc.”.

Table 34: Software and Games Industries ES 03

economic sectors

72.21.0

publishing of software

72.22.1

software consultancy

72.22.2

development and programming of web-presentations

72.22.3

other software development

72.40.0

online-provision of databases, books etc.

Source: Statistisches Bundesamt Wiesbaden

83

7.2 Details of the Creative Branches

7.2.2.2 Facts and Figures In the software and games industries we observe – cf. Table 35 and Table 36 – with 2,158 only slightly fewer enterprises than in the advertising industries. However, those 2,158 enterprises realize yearly revenues of “ 1.34 bn. – some 40% more than the advertising industries. With respect to the number of employees the situation is similar. While the advertising industries employ, as noted earlier already, 7,567 fulland part-time workers, the software and games industries have more than twice the amount – 15,884. If one takes into account the marginal employees, the ratio somewhat changes in favor of the advertising industries. Nonetheless, the number of employees in the software and games industries is considerably higher than in the advertising industries. Comparing the software and games industries with the Berlin Creative Industries as a whole shows that the software and games industries are with 15,884 full- and part-time employees as well as a share of 23% of the total number of employees in Table 35: Software and Games Industries – Enterprises and Revenues revenues [th. 3]

enterprises economic sectors publishing of software software consultancy development and programming of web-presentations other software development online provision of books, databases etc. total

total

%

total

%

9

% 0.4

OPEs 3

0.2

27,327

2.0

OPEs 148

% 0.2

431

20.0

312

24.6

106,495

7.9

28,059

29.4

356

16.5

214

16.9

150,583

11.2

12,599

13.2

1,309

60.7

718

56.7

855,054

63.6

53,380

55.9

53

2.5

19

1.5

205,164

15.3

1,368

1.4

2,158

100

1,266

100

1,344,623

100

95,554

100

Source: Amt für Statistik Berlin-Brandenburg and own calculations

Table 36: Software and Games Industries – Employees employees economic sectors

total

%

fulltime and part-time

%

marginal employees

%

publishing of software software consultancy development and programming of web-presentations other software development

total

16,693

100

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

15,884

100

809

100

84

7 The Creative Industries in Detail

the Creative Industries as a whole the largest and most dominant branch of the Berlin Creative Industries. With respect to revenues, the software and games industries are with “ 1,34 bn. or a share 18,2% the runner-up behind the cultural branch of publishing. (with revenues of “ 1,8 bn. and 24,4% respectively). Moreover, the software and games industries are characterized – similar to the advertising industries – by enterprises of above-average size. We observe a share of OPEs of somewhat less than 59%. Thus, the share is even lower than in the advertising industries. Those 1,266 OPEs contribute only 7% to the total revenues of the branch. The remaining 41% of non-OPEs employ some 19 workers on average, and the economic sector of software consultancy has the largest enterprises, with 31 employees on average.

7.3

Tentative Conclusions

The ratio of the revenues of the Berlin Creative Industries with respect to the Berlin Regional GDP is about 9%. If one compares this figure to the nation-wide ratio in Germany, which is 5.2%, the importance and economic relevance of the Creative In-

Figure 4: The Berlin Creative Industries – Enterprises, OPEs and Employees

85

7.3 Tentative Conclusions

dustries in Berlin becomes visible. Thus, Berlin can by all means be denoted as a “creative city”. More than 20,000 enterprises, 15,799 of them OPEs, realize yearly revenues of about “ 7,4 bn. and employ some 80,000 people. The structure of micro- and small enterprises which has been observed by many bulletins on the Creative Economy elsewhere and discussed extensively in part 1 of this study is characteristic for the Berlin Creative Industries. One-person enterprises are the dominant type; they account for 76.2 percent of all enterprises in the Cultural and creative branches. Figure 4 summarizes the key data by employing a portfolio-diagram. However, the branches “museum shops and art exhibitions” as well as “Private broadcasting industries” cannot be depicted due to missing data. On the x-axis, we draw the number of enterprises excluding OPEs and on the y-axis we put the number of OPEs. The size of the bubbles within the diagram represents the relative share of employees (full- and part-time as well as marginal jobs) of the respective branch with respect to the number of employees in the Berlin Creative Industries as a whole. Journalists and news agencies, for example, have a high share of OPEs among the total number of enterprises. Moreover, since the bubble representing it is relatively small, it is responsible for only a relatively low share of total employment in the Creative Indus-

advertising publishing software and games industries private broadcasting industries music, visual and performing arts journalists and news agencies film industries retailing of culture design industries architecture 2,000

1,000

0

1,000 revenues [mn. 2]

2,000

3,000

4,000

enterprises

Figure 5: The Berlin Creative Industries – Enterprises and Revenues [mn. “ ]

5,000

86

7 The Creative Industries in Detail

tries. By contrast, publishing has many non-OPEs and comparably few OPEs, and it employs a considerably high share of all the creative employees. If one draws attention to the revenues yielded by the Berlin Creative Industries in 2006 (cf. Figure 5), it becomes clear that few branches account for a high share of it. Again, the value for museum shops and art exhibitions cannot be displayed due to missing data. Among the most dominant branches are publishing, the software and games industries, advertising as well as music, visual and performing arts. Comparing the revenues of each of the Cultural and Creative branches to the number of its enterprises shows that private broadcasting industries, the film industries as well as advertising yield the highest average revenues per enterprise. Knowledge of the structure of the cultural and creative branches is essential for finding an efficient way to further and treat them with economic policy measures. The figures shown in this part of the study are thus the starting point for the discussion and subsequent selection of appropriate means to support the enterprises of the Berlin Creative Industries.

8

Excursus: Differences among Research Results

8.1

Possible Reasons

In 2005 the “Senatsverwaltung Berlin25” issued the bulletin on the “Creative Economy in Berlin – Development and Potentials”. This bulletin is the first and as yet only comprehensive report to deal with and quantitatively capture the Cultural and Creative Economy in Berlin. Drawing on this first bulletin, the Senate Office for Economy, Technology and Women (SenWTF) has issued further studies on the topic. These studies divide the Berlin Creative Economy into eight branches – cf. short-info of SenWTF. Table 37 shows that those eight branches encompassed 22,629 enterprises which realized total revenues of “ 18.5 bn. in 2005. In total, they have been employing more than 167,000 people. Table 37: SenWTF – Creative Economy enterprises

revenues [th. 3]

employees

Berlin Creative Economy as of 2005 books- and press market

4,800

4,522,005

27,074

film- and TV industries

1,986

2,535,195

35,997

arts market

5,401

1,799,915

17,481

software / telecommunications

2,732

6,613,604

27,871

music industries

1,515

1,033,338

13,564

advertising / PR

2,103

907,106

17,857

architecture and cultural heritage

2,874

650,698

10,120

performing arts

1,218

518,106

17,623

22,629

18,579,967

167,587

total Source: Statistisches Landesamt Berlin and DIW, Description SenWTF

Comparing these descriptions and results with ours immediately shows that both the definitions as well as the results differ. As discussed extensively earlier, this study uses a categorization of nine cultural as well as two creative branches to classify the Berlin Creative Industries. Those eleven branches feature more than 20,000 enterprises which realized revenues of somewhat less than “ 7.4 bn. and employed about 80,000 people in 2006. In order to 25

The Berlin Senate Office for Economy, Technology and Women (formerly the Senate Office for Economy, Labor and Women) is the editor of this bulletin.

88

8 Exkursus: Differences among Research Results

Table 38: This Study – Creative Industries enterprises

revenues [th. 3]

employees

cultural branches publishing

1,732

1,800,191

15,902

film industries

1,170

751,397

7,565

93

200,365

4,383

music, visual and performing arts

5,329

1,130,943

11,523

journalists and news agencies

2,187

150,427

1,306

–

–

3,980

923

357,597

3,308

architecture

2,855

529,718

4,740

design industries

2,112

201,229

560

private broadcasting industries

museum shops and art exhibitions retailing of cultural goods

creative branches advertising

2,183

957,274

9,649

software and games industries

2,158

1,344,623

16,693

20,742

7,423,764

79,609

total

Source: Amt für Statistik Berlin-Brandenburg, Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

facilitate comparison with Table 37, Table 38 summarizes the results of this study so that they can be captured at one glance. Since for some parts there are considerable differences, we show and discuss at this stage some possible reasons for the deviating results.26 For sure, one of the most important reasons is the lack of a binding definition of the Creative Industries; a problem we discussed at length in part 1 of this study. While we recline to the international scientific discussion and classify the Creative Industries, as noted earlier already, into nine cultural as well as two creative branches, the Senate office editors follow in their short-info an – as they call it – “pragmatic approach”. This results in the fact that the two studies to be compared here partly consider different branches and thus yield different results. For example, we do not consider telecommunications as being part of the Creative Industries, while the Senate Office does so. In addition to the deviating consideration of branches, there is an additional source of differences in the consideration of economic sectors which is different as well. Retailing is a prominent example for those differences. We consider only fairly small parts of the retailing sector as being “creative”. While both studies, for instance, consider retailing of objects of art as belonging to the Creative Industries, retailing of clothes is denoted “creative” only in the study of the Senate Office, but not in this one. 26

Appendix B contains a detailed list of the economic sectors considered in this context.

8.2 Working off the Books

89

However, there are, in addition to differences in the definition of branches and economic sectors, further reasons for deviating results. First, using different data sources could cause different results. For this study, we exclusively employ data from official statistics like those on Value-added tax or employment. The Senate Office however supplements those official data by primary data it gathered on its own. Moreover, the Senate Office regionalized the data containing revenues of superregional enterprises according to the share of employment these enterprises had in the respective regions. Second, deviations could result from a different treatment of definitions. For example, within this study we consider only the employees subject to social security contributions as well as marginal employees as being employees. The Senate Office however, considers the self-employed and freelancers as being employees as well. Finally, we have to consider the reference period of the respective studies. 8.2

Working off the Books

Research of the recent years shows that working off the books plays an important role; even in developed countries. Thus, we give at this stage some estimation on the scope of clandestine employment as well as black-market revenues within the Berlin Creative Industries. On the basis of disaggregate numbers for Berlin we assume that in addition to the number of employees documented in official statistics, there is clandestine employment accounting for 11% of official employment. If we consider in this context the numbers of employees in the Berlin Creative Industries published by the Senate Office for EconTable 39: Working off the Books omy, Technology and Women and take into account that not all of those employees are working fulltime, we assume 14,748 persons27 – in full- official revenues 18,579,967 time-equivalents – work off the books in the [th. 3] Berlin Creative Economy. black revenues 1,308,030 In order to estimate the revenue generated by [th. 3] clandestine employment within the Creative In- official employees 167,587 dustries, we use the average revenue per official clandestine employee within all branches of the Berlin Cre- employees 14,748 ative Industries as an approximation and assume [fulltime-equivalents] that the average revenue from working off the books is lower due to differences in productivity Source: SenWTF and own calculations

27

The total number of employees is multiplied by 0.8 in order to derive the number of fulltimeequivalents.

90

8 Exkursus: Differences among Research Results

and other factors. On the basis of those assumptions, we yield average yearly revenues per worker in the Creative Black Economy of about “ 88,70028. Employing the approach described above results in additional estimated revenues of “ 1.3 bn. in the Berlin Creative Economy. Thus, its yearly revenues increase from some “ 18.6 bn. to “ 19.9 bn. in total (cf. Table 39). Table 40 reviews the results of this study as well as those of the bulletin issued by SenWTF. Moreover, it shows revenues and the number of employees on the basis of the statistics published by SenWTF and with consideration of clandestine employment. Table 40: Overview – Revenues and Employees

Source: own description § … Since we use fulltime-equivalents of clandestine employees, the given number represents the lower bound of the number of employees.

The differences in the results shown by the tables result strongly from the reasons discussed above.

28

(“ 18.6 bn./167,587 employees)(1–0.2).

Part 3

9

Value Added and Employment

In part 2 of this study we have shown that the Creative Industries are an important and considerable sector within the Berlin Economy. In order to be able to investigate the potential of funding, sponsorship and support as part of economic policy, we will now analyze to which extent investment in the Creative Industries will boost the economic value added and employment. In order to exemplify our analysis we will refer to the venture capital Fund “VC Fonds Kreativwirtschaft Berlin”29 provided by Investitionsbank Berlin throughout the chapter. This fund aims at providing capital for creative projects and is anticipated to be available until 2015. The investors plan to supply the Berlin Creative Industries with capital of “ 3,75 mn. per year. In addition to Investitionsbank Berlin, the European Regional Development Fund (ERDF) will contribute to the venture capital Fund. Moreover, the investors plan to supplement every venture capital holding by additional private investments of at least 100% of the fund’s money, so that the total volume of provided capital is “ 7,5 mn. (Keuper et al., 2008). Here, we will estimate the economic effects of such an engagement. It is in this context reasonable to assume that the investment throughout the years will result in additional income that is considerably higher than the capital expenditure. Moreover, we expect increasing employment or a reduction of unemployment respectively. We will perform our investigations by employing the Berlin Economic Simulation Tool BEST. This tool is essentially a regional macroeconometric model which has been developed by Kollmann et al. (2006) on behalf of Investitionsbank Berlin. It images the Berlin Economy and will be described in the following section.

9.1

The Model

The Berlin Economic Simulation Tool BEST is a regional macroeconometric model which images the Berlin Economy by means of a system of multiple equations. Its properties make BEST the ideal tool to analyze the effects of the economic activities of Investitionsbank Berlin. As such, it is suitable to investigate the consequences of issuing venture capital within the VC Fund “Kreativwirtschaft Berlin“. 29

In addition to it, Investitionsbank Berlin offers, amongst others, unbureaucratic small-scale loans up to a sum of “ 10,000 (BerliNews, 2008) as well as micro-credits fed by the KMUFunds up to a sum of “ 25,000.

94

9 Value Added and Employment

Each simulation performed by BEST is essentially a comparison between two scenarios. The benchmark scenario is the status quo, a situation without any investment capital provided. It is typically called the “business-as-usual scenario”. The second scenario is a situation involving an exogenous change of various macroeconomic variables. The results of such changes – which are, from a macroeconomists point of view – denoted as “economic shocks” (Kollmann et al., 2006) – are simulated by BEST. The economic effects calculated by BEST always relate to a comparison with the business-as-usual scenario. To be more specific, BEST consists of a system of several multivariate equations to be econometrically estimated as “seemingly unrelated equations“30. Within this approach, the following variables imaging the Berlin Economy are exogenous to the model: 䊏 䊏 䊏 䊏 䊏

population net exports interest rate average wage in Germany public expenditure

while the following variables are determined endogenously within the model 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

gross value added gross investment consumption consumer price index employment wage level unemployment rate capital cost public revenues

All variables are, if possible, gathered and reported separately for the economic sectors of Agriculture, Production, Construction and Services (Kollmann et al., 2006). The simulations are based on the variables described above for the years 1991 to 2004. For later points in time, BEST allows for constant extrapolation as well as extrapolation according to a linear trend. For our simulations, we extrapolate the data according to the linear trend. The interactions between the different variable are depicted in Figure 6. 30

The seemingly-unrelated-regressions-model dates back to A. Zeller and is thus called the Zeller-Estimator. It takes into account possible correlations among the error terms in the population which, increases the efficiency of the estimator. (Stocker, 2008).

budget deficit

net transfers

disposable income

consumption

GDP

Source: Kollmann et al., 2006

public debts

wages Germany

wages

production (gross value added)

investment

public outlays

inflation/ prices

capacityutilization/ output gap

Figure 6: Berlin Economic Simulation Tool BEST – Fow Chart

public revenues

wealth

User costs of capital

key interest rate

net exports

employment

unemployment rate

migration

population

9.1 The Model

95

96

9 Value Added and Employment

9.2

Simulation Approach

The simulation model BEST allows for the following differentiations with respect to the analysis of the effects of investment into various branches on the economic value added and employment. First, it allows determining the distribution of the total investment sum among the economic sectors of 䊏 䊏 䊏 䊏

agriculture production construction and services

Secondly, it allows for determining the respective weights of the following technologies 䊏 䊏 䊏 䊏 䊏

administration/event management education employment low- and medium-technology research/high-technology

Table 41 shows the weights for economic sectors and technologies we used in our simulations. Since for the analysis of effects on the value added and employment in the Creative Industries, not all economic sectors and technologies are relevant, we abstain from displaying two out of five technologies as well as two out of four economic sectors. The weights for the technologies of education and employment as well as for the economic sectors of agriculture and construction are set to zero and not included in the table. We assume that an investment into the Creative Industries has no or just negligible effects on those technologies and economic sectors and we thus do not consider them in the following analysis. Table 41 shows that, for example, the cultural branches realize a share of 69% of the total revenues of the Creative Industries (cf. Table 3). We assume that in the Table 41: Weights of Technologies and Economic Sectors

69.0

20

60

20

50

50

31.0

20

40

40

30

70

Source: Own calculations and assumptions § … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries.

97

9.3 Scenarios

cultural branches the distribution of weights among technologies is 20% for administration/event management, 60% for low- and medium technologies and 20% for research/high-technologies. Moreover, we assume that 50% of the output of the creative branches emerges from the production- and 50% from the service-sector. The weights for the creative branches are to be interpreted analogously. Those two branches realized 31% of the total revenues observed in the Berlin Creative Industries. In contrast to the cultural branches, we assume that 30% of the output of the creative branches emerges from the production- and 70% from the service sector. The weights for technologies were set to 20% for administration/event management, and 40% for low – and medium technologies as well as research and high-technologies respectively.

9.3

Scenarios

As noted already, Investitionsbank Berlin plans to provide “ 3.75 mn. per year until 2015 by its venture capital Fund “VC Fonds Kreativwirtschaft Berlin”. The goal is to supplement the investment capital by additional private investment of at least the same amount. Thus, we can formulate the following scenarios. In scenario 1 we estimate the effects triggered by the investment of Investitionsbank Berlin, without regarding possible private supplements. We investigate the effects on the economic value added and employment. Thus the basis for the simulations is capital expenditure of “ 3.75 mn. Within scenario 2 we account for private supplements. Since it is the goal that they amount for at least 100% of the capital expenditure of Investitionsbank Berlin and ERDF, we base our simulations on total capital expenditure of “ 7.5 mn., which is twice the investment amount assumed in scenario 1. For both scenarios we assume that the investment amounts would, unless invested into the Creative Industries, not be invested into alternative projects in Berlin. Moreover, we assume that the investment amounts of “ 3.75 mn. and “ 7.5 mn. respectively are distributed among the cultural and creative branches according to the relative revenues of those branches. Thus, by using this approach we implicitly asTable 42: Scenario 1 – Assumed Investment Amounts investment amounts [mn. 1] branches

2008

2009

2010

2011

2012

cultural branches

2.59

2.59

2.59

2.59

2.59

creative branches

1.16

1.16

1.16

1.16

1.16

total

3.75

3.75

3.75

3.75

3.75

Source: Own description

98

9 Value Added and Employment

Table 43: Scenario 2 – Assumed Investment Amounts investment amounts [mn. 1] branches

2008

2009

2010

2011

2012

cultural branches

5.2

5.2

5.2

5.2

5.2

creative branches

2.3

2.3

2.3

2.3

2.3

total

7.5

7.5

7.5

7.5

7.5

Source: Own description

sume that there is a higher demand for venture capital in branches with higher than in those with lower revenues. Table 42 and Table 43 show for both scenarios the assumed investment amounts separately for the cultural and creative branches. BEST is capable of simulating the effects of investment for at most five upcoming years, such that we show the assumed amounts for the years 2008 until 2012.

9.4

Simulation Results

The calculated effects on the economic value added as well as employment can be categorized into primary and secondary effects. The primary effects are connected directly to the investment amount, which is in this context “ 3.75 mn. and “ 7.5 mn. respectively. The secondary effect however, occurs because the additional income generated by the primary effects partly flows back into investment and consumption; creating a cycle. Thus, within this second step, demand increases again and generates more income and more employment. This is the so-called multiplier effect. From Table 44 to Table 47 we learn the respective sums of primary and secondary effects. As noted earlier already, BEST can perform simulations for the upcoming five years, such that we can show the values for economic value added and additional employment for the years 2008 until 2012 in the tables. Note again that the average values shown in the tables must be interpreted as the differences in regional GDP and employment with respect to the business-as-usual scenario. They cannot be cumulated. 9.4.1

Regional GDP

Within scenario 1 we consider only the investment amount provided by Investitionsbank Berlin and ERDF. The provided capital of 3.75 mn. per year yields an additional Berlin Regional GDP of “ 5.0 mn. (cf. Table 44) already in the first year of investment. Since, however, in the following years the secondary effects resulting from investment in the past years come into place, the total effect on the economic value

99

9.4 Simulation Results

Table 44: Scenario 1 – Additional Regional GDP in the years 2008 until 2012 additional regional GDP [mn. 1] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

3.4

5.5

6.7

8.0

8.5

6.4

creative branches

1.6

2.5

3.0

3.6

3.8

2.9

total

5.0

8.0

9.7

11.6

12.3

9.3

branches

Source: BEST

added steadily increases over time. Thus, in the years 2008 to 2012 we expect the Berlin Regional GDP to rise by “ 9.3 mn. per year on average, compared to a situation where no investment takes place (the business-as-usual scenario). Moreover, Table 44 includes the relative shares of the additional Berlin Regional GDP which result from investment in either the cultural or the creative branches. The assumed investment amount of “ 2.59 mn. (cf. Table 42) which feeds the cultural branches thus increases the Berlin Regional GDP by “ 6.4 mn. per year on average. The remaining capital, to be invested in the creative branches, (“ 1.16 mn. within scenario 1) generates an additional GDP of “ 2.9 mn. per year. If the capital provided by Investitionsbank Berlin is doubled by additional private investment so that the Berlin Creative Industries are fed with a total volume of “ 7.5 mn. (scenario 2), we expect the Berlin Regional GDP to rise by “ 10.0 mn. already in the first year of investment, (cf. Table 45). In the following years, the increase in regional GDP will soar up to an amount of “ 24.6 mn. in 2012 because of the secondary effects coming into place. Within the simulation period, we expect the Berlin Regional GDP to increase by “ 18.7 mn. per year on average. Table 45: Scenario 2 – Additional Regional GDP in the years 2008 until 2012 additional regional GDP [mn. 1 ] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

6.9

11.1

13.3

16.0

17.0

12.9

creative branches

3.1

5.0

6.0

7.2

7.6

5.8

total

10.0

16.1

19.3

23.2

24.6

18.7

branches

Source: BEST

The relative shares in Berlin Regional GDP growth resulting from either the cultural or the creative branches are consistent with the shares in capital provided to the branches. For example, the cultural branches receive 69% of the capital provided by Investitionsbank Berlin and private investors, and the GDP growth resulting from in-

100

9 Value Added and Employment

vestment in the cultural branches accounts for 69% of total GDP growth within the scenarios we assumed (cf. Table 43 and Table 45). 9.4.2

Employment

As discussed intensively already, the money provided by Investitionsbank Berlin and private investors increases the Berlin Regional GDP within the period of investigation. Going along with this effect on regional GDP is, however, an additional effect on employment. Investment into the Berlin Creative Industries increases employment or decreases unemployment respectively. In scenario 1 within which we consider only the capital provided by Investitionsbank Berlin and ERDF, we expect that on average 58 fulltime jobs, each lasting for one year, are created through both primary as well as secondary effects of investment. (cf. Table 46). Since however, the secondary effects grow over time and come into place later, the effect of investment on employment in the first year of investigation is only half as big as in the following years. Table 46: Scenario 1 – Additional Jobs in the years 2008 until 2012 additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

19

40

51

46

43

40

creative branches

9

18

23

21

18

18

28

58

74

67

61

58

branches

total Source: BEST

If we consider private investment in addition to the capital investment of Investitionsbank Berlin and ERDF, we expect 116 jobs on average, each lasting for one year, to be created through investment in the Berlin Creative Industries of “ 7.5 mn. per year in total (cf. Table 47). Table 47: Scenario 2 – Additional Jobs in the years 2008 until 2012 additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

38

80

102

93

85

80

creative branches

17

36

46

41

37

36

total

55

116

148

134

122

116

branches

Source: BEST

9.5 Targeted Investment

101

Figure 7: Share of Additional Jobs for the Different Economic Sectors

Figure 731 shows the estimated distribution of additional employment in the economic sectors of services, construction and production within the simulation period. In the first two years of investment, we find more than 75% of the total number of new jobs in the service sector and 10% each in the construction and production sector. In the following years which see a steadily growing importance of the secondary effects of investment, the impact shifts from the service sector towards construction and production. However, even in those years about half of additional employment must be attributed to the service sector. 9.5

Targeted Investment

Within the scenarios discussed above we assumed that the total investment amounts of “ 3.75 mn. and “ 7.5 mn. is distributed among the cultural and creative branches according to the relative size of the revenues they realize. The following tables, how30

The distribution of additional employment over the economic sectors is identical in the Scenarios 1 and 2. Thus, we do not show an additional diagram for scenario 2. Note, however, that by construction of the simulation model, we find additional employment in agriculture when simulating scenario 2. Since the effect is minor and we do not feature this sector at any other point within this study, we do not consider it in Figure 7. Thus, the percentages do not necessarily add up to 100.

102

9 Value Added and Employment

ever, show the effects on the Berlin Regional GDP and employment under the assumption that the total investment capital goes into either the cultural or, alternatively, the creative branches.

9.5.1

Regional GDP

Table 48 shows the additionally generated Berlin Regional GDP and is to be interpreted in the following way. Within scenario 1, an investment of “ 3.75 mn. in the cultural branches yields an estimated increase of the Berlin Regional GDP for the year 2008 of “ 5.0 mn. Thus, the effects of investing in the cultural or the creative branches are the same with respect to the economic value added. In the years 2009 to 2012 however, regional GDP-growth increases due to additional investment as well as multiplier effects. On average, a yearly investment of “ 3.75 mn into the Cultural or the creative branches thus yields an additional Berlin Regional GDP of “ 9.3 mn. per year. Table 48: Targeted Investment – Scenario 1 – Additional Regional GDP additional regional GDP [mn. 1 ] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

5.0

8.0

9.7

11.6

12.3

9.3

creative branches

5.0

8.1

9.7

11.6

12.2

9.3

branches

g Source: BEST

From scenario 2 we learn that the intended additional private investment and a total investment amount of “ 7.5 mn. per year into either the cultural or the creative branches result in an additional Berlin Regional GDP of “ 10.1 mn. in the first year and “ 24.7 mn. in 2012. The latter value is higher due to the secondary effects of investment. On average, we expect the Berlin Regional GDP to increase by “ 18.6 mn. per year. Table 49: Targeted Investment – Scenario 2 – Additional Regional GDP additional regional GDP [mn. 1 ] in… branches

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

10.0

16.0

19.3

23.2

24.7

18.6

creative branches

10.1

16.1

19.4

23.1

24.5

18.6

g Source: BEST

103

9.5 Targeted Investment

9.5.2

Employment

Table 50 and Table 51 are to be interpreted like Table 46 and Table 47. Within scenario 1 we consider only the money provided by Investitionsbank Berlin and ERDF. The assumed yearly investments result in 58 additional jobs per year on average and each job lasting for one year if the capital is invested in the cultural branches. If it goes into the creative branches instead, the estimated increase in employment is 57 jobs per year on average; each job lasting for one year. Table 50: Targeted Investment – Scenario 1 – Additional Employment additional jobs in… 2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

27

58

74

67

62

58

creative branches

28

59

74

66

60

57

branches

G Source: BEST

Table 51: Targeted Investment – Scenario 2 – Additional Employment additional jobs in... 2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

55

116

148

134

123

115

creative branches

56

117

148

133

119

115

branches

g Source: BEST

Within scenario 2 we expect, already for the first year of investment, 55 and 56 additional jobs if the total amount of available capital is invested in the cultural- and creative branches respectively. Due to additional investment in the following years as well as the secondary effects, we expect total employment within the simulation-period to rise by 115 jobs on average per year. Each of those jobs is a fulltime job with duration of one year. Note that the simulation results depend on the assumptions over the weights of technologies and economic sectors. However, some sensitivity analysis which we relegate to appendix C show that changing those weights produces only slightly differing simulation results.

10

Conclusions

Investitionsbank Berlin provides venture capital for the Berlin Creative Industries. It endows its VC Fund “Kreativwirtschaft Berlin“ with “ 3.75 mn. per year. It is, however, the goal to double this amount by additional private investment, so that in total, the Berlin Creative Industries will be provided with “ 7.5 mn. of investment capital. The effects of such investment with respect to the Berlin Regional GDP and employment in Berlin are estimated and investigated by the Berlin Economic Simulation Tool. This is essentially a macroeconometric simulation model developed by Kollmann et al. (2006) on behalf of Investitionsbank Berlin. By employing this model, we are able to simulate two different scenarios. Within scenario 1 we consider only the capital amount of “ 3.75 mn. per year, provided by Investitionsbank Berlin together with the European Regional Development Fund (ERDF). Within scenario 2 instead, we consider the intended total amount of investment capital. We assume “ 7.5 mn. of yearly available capital here, because the goal is to supplement the amount provided by Investitionsbank Berlin and ERDF with additional private investment of at least the same amount. We simulate the effects of such an engagement on the Berlin Regional GDP as well as employment for the years 2008 until 2012. The venture capital provided by Investitionsbank Berlin and ERDF of “ 3.75 mn. per year results within the simulation-period in an additional regional GDP of “ 9.3 mn. per year on average and additional employment of 58 fulltime-jobs per year (cf. Table 52). If the capital provided by Investitionsbank Berlin and ERDF is supplemented by private investment and the total available capital is thus “ 7.5 mn. per year, we expect the Berlin Regional GDP to rise by “ 18.7 mn., and employment to rise by 116 fulltime jobs per year on average, as a cause of capital provision to the Berlin Creative Industries. Table 52: Additional Regional GDP and Additional Employment 2008

2009

2010

2011

2012

average 2008 – 2012

additional regional GDP [mn 1]

5.0

8.0

9.7

11.6

12.3

9.3

additional jobs

28

58

74

67

61

58

10.0

16.1

19.3

23.2

24.6

18.7

55

116

148

134

122

116

scenario 1

scenario 2 additional regional GDP [mn 1] additional jobs Source: BEST

Part 4

11

Instruments to Foster the Creative Industries

After having described and quantitatively captured the Berlin Creative Industries and after investigating the effects of investment in the Creative Industries on the Berlin Regional GDP as well as employment, we now turn to discussing appropriate ways to foster and support the creative enterprises. Having access to and being endowed with capital are important determinants of investment decisions made by the enterprises of the Creative Industries. Naturally however, those investment decisions subsequently determine the growth of the regional GDP as well as employment, and the decline of unemployment respectively. A firm pattern of finance as well as easily accessible capital are essential requirements for making the enterprises of the Creative Industries able to prevent the Creative Class from moving away to other regions. This in turn will make, according to Florida, both the enterprises as well as the economic area flourish (Keuper et al., 2008). A portfolio of products taking into account the special needs of the creative enterprises is mandatory for making economic policy measures effective in fostering the Creative Industries. Thus, an attractive portfolio of measures must be both vertically as well as horizontally differentiated. Vertical differentiation is, within this context, to provide different products for the different economic sectors within the heterogeneous Creative Industries, while horizontal differentiation means adjusting the means of support to the respective position of the creative enterprise within its life cycle. For example, the enterprises have to be offered appropriate instruments, taking into account whether they are in the start-up stage or already in a stage of expansion and growth. Professional support on the parts of policy makers and investors requires medium-run planning at least. Especially in context of the Creative Industries however, where, as we will discuss below, capital is typically needed for short periods of time only, suspect is that policy makers predominantly apply short-run thinking only. Moreover, investors tend to aim at short-run success, especially if the investing institutes are run according to market-economy rules where shareholders require continuous and short-term rather than sustainable success. For the creative enterprises however, most often the medium- and long run is critical; they need to be able to bank on investors who show some degree of sustainability at least. Within this context, one could view the security of capital provision over a prespecified period of time as an instrument of support itself (Drda-Kühn, 2007). Since policy makers and investors have supported and financed the traditional economic branches for decades, which with respect to some points differ drastically from the Creative Industries, investors are now required to acquire knowledge on and concern themselves with those new types of customers coming from the Creative Industries and their specific needs. Only if the investors have acquired knowl-

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11 Instruments to Foster the Creative Industries

edge of the special features and parameters of those Industries and the markets they are working in, they will be able to issue appropriate and effective means of support and capital provision. At the same time although, the creative entrepreneurs must face their responsibility and actively concern themselves with potential supportive measures and furtherance they could apply for.

11.1

Instruments

There are different basic features according to which the instruments of economic support and furtherance could be categorized. On the one hand, it is possible to distinguish between monetary and non-monetary ways of support (cf. Puchta, 2009). We will discuss this criterion of distinction in the following. An alternative way of categorization is to draw on the distinction between supply-side (direct) and demand-side (indirect) instruments. Direct instruments focus on the furtherance of stakeholders and entrepreneurs (Keuper et al., 2008), while indirect instruments selectively foster the demand for products and services of the economic sector to be supported. 11.1.1

Monetary Instruments

By monetary furtherance we mean the access enterprises have to means of external financing. Within the context of monetary furtherance, the public sector disposes of a broad variety of instruments and measures it could issue in order to support the creative enterprises. The range of possible measures includes allowances and awards, fully as well as partly refundable loans, financing by means of equity capital in various ways, hybrid types of furtherance, guaranties, the adoption of liabilities and tax exemptions. Within this range, we can distinguish between non-refundable allowances on the one and roll-over instruments on the other hand. Roll-over instruments have, by construction, the advantage that they involve a continuous back-flow of clearance- and/ or interest payments, which can be used for other supportive measures in turn. The roll-over instruments can be categorized into three different types. External financing, provision of equity capital as well as some hybrid types (Keuper et al., 2008). Consider, for example, micro-credits, venture capital and mezzanine-capital in this context. Roll-over Instruments Roll-over instruments have in the recent past generally gained in importance and have thus gradually been crowding out the previously dominating non-refundable allowances. Roll-over instruments thus are a meaningful supplement and extension of the variety of supportive measures, as long as they are adjusted to the needs of the en-

11.1 Instruments

111

terprises who apply for furtherance. If the range of possible furtherance and sources of capital is enlarged by issuing roll-over instruments, and if at the same time the instruments related to market-economy thinking gain in importance, we can indicate a positive development of the whole issue. Both the group of suppliers as well as the group of receivers of capital should be positively affected by such development. To sum up, the directive could be formulated as “issue as many roll-over instruments as possible and as little non-refundable allowances as necessary”. Note in this context, however, that the movement from non-refundable allowances towards roll-over instruments has not been driven exclusively by new insights within the context of possible means of support and the development of modern instruments of financing. In addition, some more constraints are likely to have been in place. For example, more restrictive rules in the context of public expenditure could have considerably tightened the scope of policy makers. Moreover, the rules of supra- and international institutions regarding the furtherance and support within a national or regional context have massively influenced the framework and considerably tightened the scope of policy measures. Note finally that the ongoing change of paradigms towards instruments related to the market-economy has considerably contributed to favoring instruments which revolve at the market and thus pay off (Puchta, 2009). All those points have led to considerable changes in the framework within which modern furtherance of enterprises takes place today. In addition to the classical instruments, we observe more modern and innovative ones, like the “Local Exchange Trading Systems” (LETS), too (Hackett et al., 2000). LETS are local and non-profit networks in which products and services can be exchanged without money. Instead, time is the predominant means of payment. Each participant has a fictive account which is visible to everybody else. Hackett et al. conclude that such LETS have the potential to considerably foster growth and prosperity within the arts and cultural community by building social capital and highlighting future demand. Even though such alternative approaches can be sporadically observed in practice, there is no evidence that such systems could be capable of sustainably fostering the Creative Industries as a whole. Focus box 6: LETS – Local Exchange Trading Systems

11.1.2

Non-monetary Instruments

The primary aim of non-monetary instruments of furtherance is to create an attractive environment in terms of policy measures, law and bureaucracy. According to Puchta und Röder (2008) those non-monetary instruments can be viewed as being the political complements to the monetary instruments of furtherance and capital provision.

112

11 Instruments to Foster the Creative Industries

In addition to regulatory policy, the consulting of enterprises to be fostered as well as the furtherance of cooperation play a crucial role within the context of nonmonetary instruments of support. The range of such instruments includes training and consultancy for start-up businesses as well as established enterprises, carrying out business-plan competitions, creating and organizing networks, cooperation fora, workshops, tradeshows, lectures and similar events. Within the context of providing optimal support, non-monetary instruments should not deal exclusively with selected points within the broad range of furtherance. Rather, they should, as noted already, accompany the monetary instruments and extend their scope in different ways. Appropriate extensions could be, for instance, consultancy for start-ups, support in entering new markets or advice in the context of promoting sales. Policies targeted at supporting new industries will only be successful if they are capable of reconciling the monetary with the non-monetary aspects of furtherance at a high level. As Drda-Kühn (2008) points it out, the policies have to move away from monetary allowances for single projects towards a more complex structure which features consultancy, the transfer of knowledge, network-building and individual qualification as its key issues. In accordance with this motion though, both the organizational expenses as well as the willingness to cooperate with extraneous fields and people will have to increase.

11.2

Specifics

In order to find and develop instruments of furtherance which are specifically targeted at the needs of creative enterprises, we will, in a first step, investigate the problems of creative enterprises and determine in what respect they differ from more traditional enterprises. In the following we thus will highlight some attributes that are characteristic to a broad variety of enterprises in the Creative Industries and responsible for the difficulties those enterprises face in borrowing capital. In a second step, we will discuss appropriate means of financing which take into account the special attributes of creative enterprises. The creative enterprises differ from more traditional enterprises in various dimensions. First, the composition of the employed production factors is a primary source of differences. Creative human capital is most probably the dominant input for enterprises in the Creative Industries. Secondly, the two types of enterprises clearly differ with respect to the endowment of and access to both equity and borrowed capital. Thirdly, we observe differences among the creative enterprises. The various cultural and creative branches differ largely with respect to capital endowment and access to capital, which results in different needs and thus in differences in the appropriate means of furtherance.

11.2 Specifics

11.2.1

113

Low Capital Endowment

Many enterprises of the Creative Industries have a weak capital endowment (Puchta, 2009). But since vast parts of the Creative Industries exhibit a structure of small and micro enterprises, this is not surprising. The equity-to-asset ratio of middle-class enterprises has been continuously declining for decades. The ratio was about 30% in the 1960ies and only 17% on average in 2000 when being measured with respect to total assets. Moreover, the smaller an enterprise is, the lower its equity-to-asset ratio tends to be (Bundesverband der Deutschen Industrie e.V., 2002). The equity-to-asset ratio is, however an important signal for potential debtees, since it essentially influences the rating of the enterprise. The lower the equity-toasset ratio, the higher is, ceteris paribus, the risk a potential debtee incurs when investing. This fact results in difficulties in capital access for enterprises with a low equity-to-asset ratio. In the recent past, those difficulties have been corroborated by banks and credit institutions obeying to stricter rules regarding equity capital requirements necessary for issuing credits. And even if an enterprise is successful in acquiring loans, a weak rating will result in higher risk premier – the enterprise receives the loan, but the interest payments will be higher because of the risk premier, which are taken into account when determining the appropriate interest rate. 11.2.2

Lack of Debt Guarantees

In addition to the endowment with equity capital, debt guarantees play a significant role in determining the conditions for the access to credit capital. The availability of guarantees is another distinctive feature between creative and more traditional enterprises. First and foremost, credit institutions require that such guarantees are ratable. For certain types of assets (i.e. real estate, machines, financial assets etc.) there are market values which make a rating easily possible. While traditional enterprises typically dispose of such assets, creative enterprises often don’t. Even if some enterprises of the Creative Industries are able to exhibit some guarantees, they are seldom clearly ratable since market prices for those most often intangible guarantees (i.e. licenses, patents, copyrights) do not exist and credit institutions do simply not accept them, for whatever other reason. Considering those issues it is not surprising that 85% of the creative enterprises view themselves as badly endowed with guarantees and securities relevant for credit capital (medien.barometer berlinbrandenburg, 2006). The lack of relevant guarantees results in the same problem as the lack of equity capital does – creative enterprises face difficulties in acquiring credit capital, and in case they get it, interest payments are higher. 11.2.3

Low Funding Requirements

Another criterion common to a wide range of creative enterprises are their typically low funding requirements. For, say, pre-financing of orders, the average funding re-

114

11 Instruments to Foster the Creative Industries

quirement was below “ 25,000 in 62% of the analyzed cases. Moreover, the duration of the required financing is comparably short in most cases. Differing with respect to the very purpose, most financing is needed only for one year or for periods up to three years (medien.barometer berlinbrandenburg, 2006). This segment of smallscale and essentially short-run credits is, however, not sufficiently covered by the credit institutions, and there are no appropriate instruments within it. In this context, the recent past saw the development of so-called “micro-credits” which are especially targeted to the peculiarities of low-volume financing.32 We see a similar image for financing of alternative purposes (i.e. investment in marketing, procurement of licenses or the appearance at trade shows). Most often, creative enterprises demand small-scale and short-run financing. 11.2.4

Uncertainty of Success

In most cases, creative enterprises need capital for the development of own products and projects, for pre-financing of orders they receive or for financing marketing and sales. However, the financing of investment, machines or office equipment plays only a minor role in the Creative Industries (medien.barometer berlinbrandenburg, 2006). The potential success of the features we have listed above is difficult to estimate, though. Whether at the end of some product development there will be a marketable product, whether some project will be successfully completed or whether some marketing strategy will increase sales is highly unclear at the beginning and estimation of success involves a lot of uncertainty. Moreover, in many cases there are no experienced data and characteristic figures available so that determining the potential success of an investment becomes most often a non-trivial task. Thus, it comes with no surprise that 67% of the surveyed creative entrepreneurs view the uncertainty of success as a major obstacle with respect to acquiring credits (medien.barometer berlinbrandenburg, 2006). The fact that on the one hand, most often start-up businesses are in need of credit capital, and that on the other hand we see many creative enterprises currently being in their growth stage is further exacerbating the estimation of potential success. Both of those types of enterprises face high risks and their potential is thus difficult to determine (Puchta, 2009). 11.2.5

Ideas Instead of Machines

A fact closely related to the uncertainty of success is that creative enterprises seldom need financing for machines. Rather, human capital is the dominant factor, whereas 32

Investitionsbank Berlin, for example, uncomplicatedly issues micro-credits up to “ 10,000 for start-up businesses of the Creative Industries (BerliNews, 2008). Further small-scale credits up to “ 25,000 from KMU-Fund supplement the supply within this product group.

11.2 Specifics

115

in more traditional branches, financing clearly focuses on production plants, machines and real estate (Puchta, 2009). The investors however, still aim at financing traditional enterprises and have therefore acquired more knowledge in estimating risks, evaluating potential success and providing capital for traditional forms of production. Thus, in order to take account of the growing importance of the Creative Industries, resources have to be devoted to developing new financial instruments which account for the specific needs of creative enterprises. 11.2.6

Pre- and Interim Financing, Sustainability

Even if projects are well-endowed with credit capital, some costs of preparation and conceptualization might remain; and those costs might be subject to appropriate financing. A comparable challenge is, for example, interim financing of TV-productions.33 Moreover, securing the sustainability of projects could produce costs where financing is needed for. Thus, note that apart from requiring capital to finance production, creative enterprises might have further borrowing requirements which are not visible at first sight. 11.2.7

Lack of Knowledge on Funding Possibilities

One out of five creative enterprises is, according to its own declaration, lacking knowledge on appropriate funding possibilities (medien.barometer berlinbrandenburg, 2006). We are at this stage not able to determine whether this fact is an essential reason for difficulties in acquiring capital and whether creative enterprises significantly differ from more traditional ones with respect to this lack of knowledge. However, we will mention two potential reasons for this deficiency. On the one hand, only for a short time the Creative Industries are treated as common industries, and they thus have not yet fully established a reputation as being key industries among the public opinion and economic policy makers. In contrast to more traditional economic branches, the creative enterprises lack of an overview on appropriate funding- and furtherance possibilities, such that it is not surprising that both receivers and providers of capital lack knowledge to a certain degree. On the other hand, most companies of the Creative Industries are either one-person-enterprises or small enterprises. It is, although, in particular for those types of enterprises difficult to devote enough time to getting an overview on funding possibilities, whereas enterprises with separate finance departments obviously have enough personnel and enough know-how to intensively concern themselves with the funding possibilities appropriate for them.

33

Investitionsbank Berlin has, together with Investitionsbank of the Federal State of Brandenburg and Medienboard Berlin-Brandenburg GmbH issued a program which provides such interim financing (Investitionsbank Berlin, 2008).

116 11.2.8

11 Instruments to Foster the Creative Industries

Lack of Commercial Comprehension

Over and over again a lack of commercial comprehension and knowledge among Creative Entrepreneurs is stated. 14% of the surveyed entrepreneurs view this lack of knowledge as an obstacle against their access to credit capital (medien.barometer berlinbrandenburg, 2006). To us it is, however, a black box why, of all types of entrepreneurs, the ones belonging to the Creative Industries lack this knowledge, and inhowfar they differ from traditional entrepreneurs with respect to this issue. 11.3

Types of Financing

After having discussed the difficulties in and the peculiarities of endowing creative enterprises with the amount of capital they need, we now turn to describing appropriate instruments of financing. We do so under consideration of the structural characteristic of the Creative Industries. Since within the Creative Industries we find various different types of enterprises, there is a need of various different types of funding possibilities which cover the whole range of furtherance requirements the enterprises have. We already discussed extensively in part 1 of this study that on the one hand, the Creative Industries typically feature a structure of one-person enterprises and small enterprises. On the other hand although, we also observe small- and medium enterprises with differing perspectives of economic growth.34 On the basis of the classification into one-person-enterprises (micro enterprises) as well as small- and medium enterprises, the Creative Economy can be categorized according to three segments. This classification is performed in order to be able to provide each segment with targeted and appropriate funding instruments (Puchta, Table 53: Segmenting the Creative Industries segment

financial instrument

start-ups and one-person-enterprises

micro credits and small-scale loans

small- and medium enterprises with average growth perspective

credit capital and liability assumptions

enterprises with high growth- and accretion perspective

venture capital

Source: Puchta (2009) and own description

34

Big corporations and players constitute the third type of enterprises. For those however, the peculiarities concerning endowment of and access to credit capital are only contingently relevant, if at all. Due to this reason, and due to the fact that the number of such big corporations is rather small, we do not consider this third type of enterprises in the following analysis. This type of enterprises is clearly not the most dominant target group of the economic policy measures we discuss within this study.

11.3 Types of Financing

117

2009). Table 53 documents this categorization and introduces the adequate instruments for each segment.35 We will now elaborate on the respective instruments of financing in more detail. 11.3.1

Credit Capital

Financing by providing credit capital is probably the most dominant way of financing. Due to the characteristics of creative enterprises, which have been discussed at length already, we introduce loans as instruments based on credit capital before elaborating on micro credits and small-scale loans. The market offers various different alternatives of loans and subsidies connected to loans. While loans themselves can be configured differently with respect to duration, exploitability, clearance, interest payments and similar factors, subsidies can be related to different parameters as well. Assumptions of liabilities, guarantees, interest allowances, interest-caps and similar features are possible ways to subsidize loans and thus increase the attractiveness of such instruments of furtherance. Small- and Micro Loans Since one-person-enterprises and micro enterprises typically have – as discussed above, quite low credit capital borrowing requirements, small- and micro loans are often the adequate way of providing capital to them. Start-up businesses are a further target group of these instruments, since start-ups from most cultural- and creative branches typically have low capital requirements too. By employing such small-scale instruments, providers of capital can easily adjust to changing market determinants and thus create an attractive environment for enterprises of the Creative Industries. The Creative Industries have no or only a very weak lobby in society, politics and administration, since they are a newer type of key industries. Thus, the issue is not on providing an environment where the top five or ten enterprises/corporations can thrive and pull the weights of the smaller companies in the following. Rather, the task is to create an environment in which thousands of cultural- and creative enterprises can develop and increase their potentials of growth (Söndermann, 2007). Small- and micro loans thus bring about significant advantages for both providers and receivers of credit capital. While the capital requirements of small- and micro enterprises can be satisfied by such small-scale instruments and the basis for flourishing activities thus can be laid by providing such instruments, the investors face advantages coming from the diversification of risks within their portfolios. Due to diversification, the negative effects of loan defaults are less severe if the portfolio includes many small- and micro loans than if it features few big loans. Furthermore, 35

An alternative description is to be found in Puchta (2009). It elaborates on the capital requirements and risk profiles we discussed in part 1 of this study.

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11 Instruments to Foster the Creative Industries

such small- and micro loans can be operated easily and rapidly, since elaborate investigations of balance sheets and risk structures are not necessary. The providers of capital thus have to develop the prerequisites for such fast operation – conditions, consultancy, sales and administration can be standardized to a high degree in this context. Easier application, low requirements of guarantees and securities as well as institutionalized liability assumptions could complete the supply of small- and micro loans and thus make them attractive for a vast number of creative enterprises. The European Commission corroborates in its “European Initiative for the Development of Micro-credit in Support of Growth and Employment”, which is in line with the Lissabon-strategy for growth and employment, the significance of smallscale instruments of financing. Even if, at first glance, the opportunities to earn money are lower with small- and micro credits, capital providers must not ignore that the market for micro credits is flourishing (Delvaux, 2008) and thus offers significant opportunities to make profits as long as the providers of credit capital are able to adjust to the changing environment. Note finally that creative enterprises should be accompanied and guided by the providers of capital even after completion of funding and financing. What is a matter of course for complex approaches like providing venture capital, should become, in a feasible scope, the norm for smaller instruments as well. Even if, at first glance, the costs for the providers of capital increase, such accompanying measures can considerably reduce the risk of loan default as well as create the basis for a frictionless operation of further provision of capital or other cooperation. The much acclaimed “knowyour customer-principle”, which incidentally stems from the finance sector, should be implemented for small-scale instruments too. 11.3.2

Mezzanine-Capital

In the recent past banks and credit institutions have – not only since the introduction of “Basel II” and its stricter requirements concerning equity capital – been forced to be more cautious and restrictive when issuing credit capital. Thus, the development of alternative forms of financing and their configuration towards marketability has been spurred in the past. Providing those new instruments should allow and facilitate the access to capital within the new environment. “Mezzanine-capital” is a generic term for funding instruments which are, due to their legal and economic characteristics, to be categorized according to accounting rules between equity and credit capital. They are thus viewed as hybrid forms of capital. Table 54 lists the typical properties of mezzanine-capital. Due to several reasons, mezzanine-capital can be an attractive source of capital for enterprises with relatively high borrowing requirements. The dominant advantages of mezzanine-capital over classical loans are in particular the 䊏 large choice over alternative features, 䊏 equity capital-character and 䊏 subordination in case of bankruptcy.

119

11.3 Types of Financing

Moreover, in contrast to loans, access to mezzanine-capital does not always require guarantees and securities. There are four dominant types of mezzanine-capital. Those are 䊏 subordinate loans 䊏 typical and atypical dormant equity holdings 䊏 options and convertible securities 䊏 bonus-shares Table 54: Properties of Mezzanine-Capital •

•

general properties

equity-equivalent properties

credit-equivalent properties

provider of Capital is not

•

subordination (in case of

•

has to be paid back

shareholder, no changing of

bankruptcy the provider of

•

primacy over liable equity

ratio of votes within the en-

capital is satisfied after other

•

terprise

debtees have been satisfied)

continuous interest according to success

•

deductibility of interest payments

flexible configuration of con-

•

ditions (individual adjustment

•

long-run duration of capital supply

of financing to the needs of

•

no guarantees and securities

the enterprise possible)

•

improves the structure of the balance sheet, positive influence on rating, access to credit capital is secured / improved

independent from legal form

as operating expenditure

Source: Förderland (2008a) and own descriptions

To sum up, note that mezzanine-capital is, above other reasons, attractive for enterprises of the Creative Industries due to its similarity to equity capital and the predominant abandonment of guarantees and securities. In this context we explicitly point to the fact that the target group of mezzanine-capital consists of enterprises with higher borrowing requirements. For micro- and small enterprises this instrument is inappropriate; due to its high transaction costs, amongst further reasons. Even if the dominant share of creative enterprises has a small-scale structure and is thus not in the run for mezzanine-capital, the spectrum of instruments should not abstain from it, since some branches of the Creative Industries might be willing to make use of it. 11.3.3

Venture Capital

In addition to loans and mezzanine-capital, venture capital is a third possible financing instrument.36 It is a fairly new instrument of economic furtherance which is not yet widespread. The term “venture capital” denotes the provision of liable equity 36

Private Equity is a term often used in combination with and as a substitute for Venture Capital. Private Equity, however, is a superordinate concept for equity capital participation offexchange. Thus, Venture Capital is a subset of Private Equity.

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11 Instruments to Foster the Creative Industries

capital or means similar to equity capital. In principle, the provision is limited to a prespecified period of time and regulated in specific contracts. enterprises which are in an early stage of entrepreneurial activity and not yet listed on the stock-exchange are primary and common receivers of venture capital. In addition to them although, enlargements of small enterprises are often financed by venture capital. It is, naturally, mandatory for receivers of venture capital to show, in addition to the intention of making profits, a high potential of enhancing their value and growth. In addition to that, receivers of venture capital typically have to provide an exit-perspective. It is another characteristic however, that venture capital investors abstain from requiring guarantees and securities. The decision of providing venture capital is thus determined by the potential of growth of the enterprise to be financed and, in combination with that, by the expected return to investment (Förderland, 2008). The returns however, are highly uncertain, and the risk involved in such instruments of financing is thus very high. In an extreme case, the invested capital could be totally lost. In addition to providing venture capital, the investors usually provide non-monetary support with management know-how and consultancy. Furthermore, investors often take extensive decision making power in the enterprise they finance in order to limit their risk and keep it small. The returns to investment are generated by current backflows (returns) or by selling shares of the enterprise which have been acquired in course of venture capital financing (revenues). Venture capital is, as noted earlier already, a roll-over financial market-instrument. A possible way to categorize different types of venture capital is to distinguish between informal and formal venture capital. The former is private venture capital stemming from acquaintances or private investors (business angels), while the latter is provided by more institutionalized investors. Formal venture capital can again be categorized by distinguishing private venture capital organizations, corporate venture capital, venture capital provided by holdings consisting of banks, trustees and insurances and venture capital provided by public institutions as a means of pursuing economic policy goals.37 Note that due to competition regulations, it is necessary to have private co-investors in order to be eligible for venture capital provided by the public. The provision of venture capital is, amongst other sources, granted by EU-regulations which allow for providing capital from the European Regional Development Fund (ERDF) under certain circumstances.38 In such cases, the equity holdings of the private co-

37

The VC Fund “Kreativwirtschaft Berlin” employs minority holdings as a basic instrument, dormant equity holdings (limited duration, mandatory repayment) as well as shareholder loans (limited duration, mandatory repayment). 38 The last of such European Union Regulations were 1080/2006 (Official Journal of the European Union, 2006), 1083/2006 (Official Journal of the European Union, 2006a) and 1828/2006 (Official Journal of the European Union, 2006b). In Regulation (EC) No. 1083/2006 as of (Continued at p. 121)

11.3 Types of Financing

121

investors can take place both at the stage of the fund as well as at the stage of the separate investment. 11.3.3.1 United Kingdom London is not only the largest financial center of the United Kingdom, it is also the most important in Europe and together with New York one of the most important in the world. It is thus not surprising that the United Kingdom is pioneering venture capital financing within the Creative Industries. We have noted already in part 1 of this study that the United Kingdom is the cutting-edge in the context of identifying and treating the Creative Industries. It seems that it is also the cutting edge in context of supporting and financing those industries. Creative Advantage Fund The first experiences in employing venture capital as an economic policy-instrument date back to 2003. The “Creative Advantage Fund” was the first venture capital fund to have the Creative Industries as its target group. It was first issued in 2003 and has had 70 investments in 47 creative enterprises of the West Midlands since then, among them enterprises producing and animating films, orchestras as well as enterprises of the software- and broadcasting Industries (Creative Advantage Fund, 2008). The fund invests up to GBP 250,000 (about “ 310,000) per enterprise and holds a respective share of the enterprise to be financed. The Creative Advantage Fund is an example for venture capital to be fed by public means39 and thus being aimed at supporting and furthering the Creative Indus-

38

(Continued from p. 120) July 11, 2006 it is noted that “Cohesion Policy” has to contribute to the enhancement of growth, competitiveness and employment and specifically take into account sustainable development. The goals of this policy are “convergence of member states and regions”, “regional competitiveness and employment” as well as “European territorial cooperation” Those goals are to be achieved by employing the structural fund and the cohesion fund. The regulation explicitly addresses the stiuation of small enterprises and their access to innovative financial instruments. In (41) we read that “it is appropriate to ensure that improved access to finance and innovative financial engineering are available primarily to micro, small and medium-sized enterprises and for investing in public-private partnerships and other projects included in an integrated plan for sustainable urban development”. Within this regulation we also find the percentage limits of public cofinancing, which depend on the relation between the regional gross domestic product and the average European Union gross domestic product. In the specific case of Berlin, the means provided by private sources may be co-financed by capital of the European Regional Development Fund ERDF up to an amount of 50%. 39 The means for the Creative Advantage Fund stem from the regional development agency “Advantage West Midlands”, from the European REgional Development Fund (ERDF) and from Arts Council England.

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11 Instruments to Foster the Creative Industries

tries. “[…] we are a publicly-funded organization whose long term aim is to strengthen and develop the creative industry sector throughout the West Midlands: all profits from our investments are retained and used to make further new investments in the future” (Creative Advantage Fund, 2008). In 2003 a total sum of GBP 5 mn. (about “ 6.25 mn.) has been provided for the years 2003 – 2008. Due to the success of the fund, all of its available capital has been distributed by July 2008 – six months before expiry of the prespecified duration of 5 years. It is a goal of this fund to become self-financing in the medium-run and to be able to support new enterprises by providing capital out of the returns of current investments. Creative Capital Fund This venture capital fund has been issued in 2005 and is aimed at the enterprises in Greater London. Since being embedded within the “Creative London Programme” it is part of an economic policy-concept. “Creative London” coaches and supports the Creative Industries in London and is part of the London Development Agency. With investments of up to GBP 500,000 (about “ 625,000) per enterprise it provides up to twice the amount of capital the Creative Advantage Fund provides per enterprise. However, the amount provided by the Creative Capital Fund has to be supplemented by private means of at least the same amount. The total volume of this fund is likewise GBP 5 mn. (about “ 6.25 mn.). It has successfully transacted ten investments since 2005. The Creative Capital Fund is likewise fed by public means. The capital stems from the London Development Agency on the one and the European Regional Development Fund ERDF on the other hand (Creative Capital Fund, 2008). 11.3.3.2 Germany Investitionsbank Berlin and its subsidiary “IBB Beteiligungsgesellschaft mbH” pioneer the financing of creative enterprises in Germany. In 2007 “VC Fonds Kreativwirtschaft Berlin” has been issued. It is the first German venture capital fund to be specifically targeted at the Creative Industries. It has a total volume of “ 30 mn. provided by Investitionsbank Berlin together with the federal state of Berlin. By the shareholding of Investitionsbank Berlin, “VC Fonds Kreativwirtschaft Berlin” is fed partly by capital from the European Regional Development Fund (ERDF) (IBB Beteiligungsgesellschaft mbH, 2008a). Thus, this fund shows many similarities to the venture capital funds in the United Kingdom. “VC Fonds Kreativwirtschaft Berlin” is, as the British Funds, an economic-policy instrument targeted to support creative enterprises. By September 9, 2008, the portfolio of “VC Fonds Kreativwirtschaft Berlin” includes the following investments (in alphabetical order).

11.4 Tentative Conclusions

123

Cubico Media TV GmbH By providing venture capital to Cubico Media TV GmbH “VC Fonds Kreativwirtschaft Berlin” invested in an enterprise of the private broadcasting industries. Cubico Media TV GmbH operates the niche channel XXHome. By employing special-topic days, magazines and documentaries the channel shows in an informative way how one’s home can be made more beautiful. XXHome offers programs on the topics do-it-yourself, house, garden and decoration (IBB Beteiligungsgesellschaft mbH, 2008). DFW Deutsche Fernsehwerke GmbH – TIMM TV DFW GmbH started TIMM TV, the first TV-channel of the German-speaking region to be especially targeted at gay men (IBB Beteiligungsgesellschaft mbH, 2008c). With this investment, Investitionsbank Berlin boosts its engagement in the media industries. South & browse GmbH South & browse GmbH produces documentaries and entertainment shows for magazines and various TV-channels (IBB Beteiligungsgesellschaft mbH, 2008c). DFW GmbH mentioned above emerged years ago out of a branch of South & browse GmbH, and South & browse GmbH recently took shares of TIMM TV, as did Investitionsbank Berlin. Sportme GmbH The first investment of “VC Fonds Kreativwirtschaft Berlin” was in the company Sportme. It is considered as the fastest growing Web 2.0 community for active sportsmen, teams and unions. In www.sportme.de all sports aficionados find a “virtual home” for themselves, their sport, friends, fans and sponsors (IBB Beteiligungsgesellschaft mbH, 2008b). 11.4

Tentative Conclusions

Part 4 of this study discusses various possibilities to support and further creative enterprises. It focuses on monetary instruments. This, however, does not mean that non-monetary furtherance is insignificant or plays only a minor role. In contrast, it is truly essential that policy makers view the Creative Industries as future key economic sectors. In this context, the commitment to the Creative Industries must result in the creation of an optimal framework in which those industries can thrive. Since the creative enterprises differ from enterprises of more traditional branches with respect to, above all, capital endowment, they face significant and specific difficulties in the context of access to capital. Table 55 summarizes the relevant difficulties and peculiarities.

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11 Instruments to Foster the Creative Industries

Table 55: Difficulties in the Access to Capital attribute

result

low capital endowment

bad rating, problems with raising of credits

lack of debt guarantees

difficulties with access to credit capital

low funding requirements

lack of supply of appropriate financial instruments

uncertainty of success

investors face difficulties in estimating risk

ideas instead of machines

no guidelines for evaluation by investors

pre- and interim financing, sustainability

investors face difficulties in estimating risks

lack of knowledge on funding possibilities

supply of funding is not fully exploited

Source: Own descriptions

In the following we discuss, under consideration of those peculiarities, various financing instruments and show that for each type of enterprise different instruments are appropriate for funding. While for start-ups and micro-enterprises the most appropriate financing instruments is credit capital in the form of micro credits and small-scale loans, enterprises with an average perspective of growth should rather choose credit capital in the form of loans accompanied with various elements of support and furtherance. Enterprises which have a high potential of growth and are thus likely to considerably enhance their value should go for Mezzanine- or venture capital funding. It is remarkable that the recent years have seen a paradigm change with respect to monetary business development. While in the past one-time non-refundable payments have been an essential instrument of support, policy makers nowadays more and more choose roll-over instruments. Such instruments generate backflows which can be reinvested into newer projects. Moreover, modern funding instruments are closely linked to managerial considerations which encompass the dimensions of risk and return. The federal state of Berlin clearly focuses on the extension and creation of roll-over instruments of business development. Table 56 gives an overview of the financing instruments, their advantages and disadvantages for the enterprises to be funded as well as the respective features for the investors. After discussing the various possible ways of financing and their potential fields of application within the Creative Industries we devote a final part to the most recent developments with respect to business development with venture capital. In an excursus we referred to the situation in the United Kingdom where first positive experiences with venture capital funds as a means to foster the Creative Industries have already been made. However, Germany already has first experiences in this area

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11.4 Tentative Conclusion

Table 56: Financial Instruments and their Attributes financial instrument

credit capital

advantage for receiver

micro- and • easy accessible small-scale • unbureaucratic credits • low requirements concerning guarantees

loans

mezzanine-capital

venture capital

disadvantage for receiver

investor

• suitable only for low funding • low risk due to a high number of small loans requirements • only limited duration

• medium- and long run investment • regular capital inflows • attractive profile of chances and risks

• well-known, classical instrument • amount to be freely chosen • easily assessable flows

• influence on capital structure and balance sheets • provision dependent on the rating of the enterprise

• big choice of financing instruments • equity capital character • no guarantees necessary • no granting of decision making power to the investor • independent of legal form • subordination in case of bankruptcy

• potentially strong growth • suitable only for mediumin the middle class sized and large enterprises • grouping and resale in • high transaction cost form of certificates possible • plethora of alternatives • attractive alternative for • know-how intensive enterprises with high • higher interest payments funding requirements than in classical investment (apart from, due to Basel II, instruments restrictive access to credit capital)

• • • •

• attractive possibility to • suitable only for mediumposition enterprise at the sized and large enterprises market • high transaction cost • endorsement of product • know-how intensive range • partial loss of independence • granting of decision making • high expected returns, but high risk power to the investor • preparation to going public or corporate sale

access to equity capital potentially high volumes potential of large growth various instruments possible

Source: Own descriptions

too.40 Some creative enterprises in Berlin have already taken the opportunity to access venture capital to boost their development. As such, the significance of this financing instrument in technological branches seems to increase. Note in this context that the venture capital Fund issued for Berlin enterprises bundles capital stemming from the federal state of Berlin, Investitionsbank Berlin as well as the European Regional Development Fund (ERDF). Moreover, private co-investment doubles the money coming from public sources. Since the Berlin Creative Industries can make use of the whole range of financial instruments and business development-means, we conclude that in the recent years Berlin has seen the creation of an attractive environment capable of sustainably increasing the economic value added as well as employment with these new key industries. It is essential that both the micro enterprises as well as the enterprises with high potential of growth and value enhancement are provided with the respective appropriate financing instruments. 40

“VC Fonds Kreativwirtschaft Berlin” is the first German venture capital fund to be especially targeted at creative enterprises.

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11 Instruments to Foster the Creative Industries

Since the Creative Industries are still a young branch which differs with respect to certain essential points from more traditional branches, non-monetary support plays an essential role and complements the monetary instruments in giving the Creative Industries more weight and more public awareness.

12

Executive Summary

12.1

Introduction

While the German Creative Industries have been in the focus of cultural rather than economic policy in the past, they are now gradually establishing themselves as a target of modern economic policy. This motion is due to the increasing international discussion and consideration of those branches. The Creative Industries are new key industries and contribute significantly to the economic value added and employment. They thus are an essential element within thriving economic regions in Europe. It is not surprising that both national as well as international institutions are now developing innovative instruments targeted at fostering the Creative Industries and thus fostering economic growth and employment. Despite the general difficulties in defining and clearly classifying the Creative Industries, we observe clear tendencies with respect to the question which economic sectors are to be attributed to the Creative Industries in Germany. The structure of this study is as follows. Part 1 gives an extensive discussion of the term Creative Industries, while part 2 describes the Creative Industries in their quantitative dimensions. In part 3 we investigate the implications and effects of investment into the Berlin Creative Industries on the Berlin Regional GDP and employment in Berlin. Finally, part 4 discusses various financial instruments suitable to foster the enterprises of the Creative Industries. 12.2

Results of this Study

Part 1 of this study discusses the term “Creative Industries” and possible ways to define it. While the Continental-European approach classifies the Creative Industries according to branches and economic sectors, the Anglo-American approach primarily uses activities and jobs to define the Creative Industries. Other issues we have raised in the discussion are on whether and to which extent technological branches are to be viewed as being “creative” and whether indicators like patents, copyrights and the like are suitable to encompass creative activities. Figure 8 summarizes the different approaches in a matrix. In the following we introduce an economic theory of the Creative Industries. On the one hand, we discuss the characteristics of the Creative Industries, the most important of them being uncertainty of demand, the production process and sales as well as limited substitutability of production inputs. We explicitly consider the typical products and services produced by the Creative Industries within this discussion.

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12 Executive Summary

economic approach

sociological approach

Creative Industries

Creative Class

• music, performing arts, film, radio, TV • advertising, PR, visual arts, arts and crafts, design, architecture, cultural heritage, print-media • software, internet, telecommunications

• scientists (i.e. physicists) • creative professionals (i.e. lawyers, consultants)

− related to branches and economic sectors

− jobs, activities

• • • •

• • • •

ICT (information and communication technology) Content- Economy Media-Economy Cultural Economy

− essentially content versus technology

production-oriented approach

copyright patents branding design

− inventions, developments that are usable and can be protected by copyright law

exploitation rights-oriented approach

Figure 8: The Creative Economy in the Form of a Matrix Source: Puchta (2009)

On the other hand, we show to which extent and in which points the Creative Industries differ from more traditional economic branches. The most significant differences are found in the degree of integration, in the types of actors and labor markets as well as in the investment patterns. We close part 1 by giving an overview on the Creative Industries in an international context. We conclude that a generally binding definition of the term “Creative Industries” has not emerged so far. The recent past however, has seen some endeavor on a supranational level, in particular by the EU and UNESCO, to find consensus on the question which activities and economic sectors are to be viewed as being “creative”. We affiliate with the endeavor to bring about harmonization and classify the Creative Industries thus in the nine cultural and two creative branches to be listed in the following. 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏 䊏

publishing film industries private broadcasting industries music, visual and performing arts journalists and news agencies museum shops and art exhibitions retailing of cultural goods architecture design industries advertising software and games industries

Drawing on this definition we attribute the economic sectors according to their official statistical classification to the respective cultural and creative branches and describe their quantitative dimensions. Table 57 summarizes the results.

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12.2 Results of this Study

Table 57: Enterprises, Revenues and Employees in the Berlin Creative Industries revenues [mn. 1]

enterprises

total

OPEs

total

employees

OPEs

total

fulltime and part-time

cultural branches publishing

1,732

864

1,800

64

15,902

13,379

film industries

1,170

666

751

77

7,565

6,550

93

–

200

–

4,383

4,246

music, visual and performing arts

5,329

4,472

1,131

395

11,523

9,158

journalists and news agencies

2,187

2,135

150

120

1,306

1,261

–

–

–

–

3,980

3,764

923

705

358

151

3,308

2,587

architecture

2,855

2,272

530

216

4,740

4,239

design industries

2,112

1,892

201

121

560

434

advertising

2,183

1,527

957

172

9,649

7,567

software and games industries

2,158

1,266

1,344

96

16,693

15,884

20,742

15,799

7,424

1,413

79,609

69,069

private broadcasting services

museum shops and art exhibitions retailing of cultural goods

creative branches

total

Source: Bundesagentur für Arbeit, Statistik-Service Ost and Amt für Statistik Berlin-Brandenburg OPE … one-person enterprise

One in seven Berlin enterprises is operating in the Creative Industries. The absolute number totals to more than 20,000. Those enterprises realize yearly revenues of about “ 7.4 bn. and employ some 80,000 people. They feature a remarkable structure of micro- and small-sized enterprises. More than 76% of the Berlin creative enterprises are one-person enterprises. The most dominant branches are, both with respect to revenues as well as employment, the cultural branches of publishing and music, visual and performing arts on the one and the creative branches of advertising and software and games industries on the other hand. Together, those four branches yield about 70% of the total Berlin Creative Industries revenues. Moreover, two in three of the people employed in the Creative Industries work in one of those four branches. Relating revenues to the number of enterprises shows that publishing, advertising and two additional cultural branches – private broadcasting industries as well as film industries – are the branches with the highest revenues per enterprise. In the last section of part 2 of this study we discuss the reasons for differences among the results of various studies on the Berlin Creative Industries. We show that, apart from deviating classifications and different consideration of economic sectors as being “creative”, different data sources are an additional cause of deviating results. These facts have to be taken into account when comparing the results of different studies.

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12 Executive Summary

The total range of different results with respect to revenues realized by and employees in the Berlin Creative Industries can be taken from Table 58. Moreover, Table 58 includes an estimation of revenues and employment under consideration of working off the books on the basis of the results of the study by SenWTF Table 58: Range of Revenues and Number of Employees in the Berlin Creative Industries

revenues [th. 1]

employees

this study

SenWTF

SenWTF under consideration of clandestine employment

7,423,764

18,579,967

19,888,267

79,609

167,587

182,335§

Source: Own description § … since the estimated number of clandestine employees is denoted in fulltime-equivalents, the number shown in the table is the lower limit.

Part 3 of this study features an analysis of the effects of investment in the Berlin Creative Industries on the Berlin Regional GDP as well as employment in Berlin. In order to be able to estimate those effects on the economic value added as well as employment, we simulate investment decisions with the regional macroeconometric model BEST developed by Kollmann et al. (2006). We selected the venture capital fund “VC Fonds Kreativwirtschaft Berlin” from the spectrum of financial instruments offered by Investitionsbank Berlin and have bases our simulations on its volume. We have developed two different scenarios. In scenario 1 we assume that during the upcoming years the venture capital Fund will invest “ 3.75 mn. per year into projects run by creative enterprises in Berlin. In scenario 2 however, we assume that the investment amount is “ 7.5 mn., since Investitionsbank Berlin aims at supplementing the investment amount provided by itself with private co-investment of at least the same amount so that the investment amount of scenario 2 is twice the assumed investment amount in scenario 1. Note that in both scenarios we assume that the investment amounts are additional means. Thus, the simulation results are essentially to be interpreted as a comparison with a business-as-usual scenario in which the respective investment amounts would not be invested – not even in other projects apart from the Creative Industries. The simulations yield results for the years 2008 to 2012. Table 59 features the estimated effects on the Berlin Regional GDP and employment in Berlin under the assumptions of scenario 2. The additional jobs are denoted in fulltime-equivalents. The displayed values are to be interpreted as yearly average values realized by an assumed investment amount of “ 7.5 mn. per year. Within the simulations, the total investment amount has been divided among the cultural and creative branches according to their relative revenues. The cultural branches realize about “ 5.1 bn. per year or 69% of the total revenues yielded by the Berlin Creative Industries as a whole. The creative branches together realized “ 2.3 bn.; the remaining 31% of total

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12.2 Results of this Study

Table 59: Investment, Additional Employees and Additional Berlin Regional GDP investment amount§ [mn. A]

additional jobs&

additional Berlin GDP$ [mn. A]

cultural branches

5.2

80

12.9

creative branches

2.3

36

5.8

total

7.5

116

18.7

branches

Source: BEST and own assumptions § … average additional investment amount per year & … average number of additional jobs per year $ … average additional Berlin Regional GDP per year

revenues of the Berlin Creative Industries. Thus, “ 5.2 mn. are invested into the cultural branches and “ 2.3 mn. into the creative branches within our simulations. The assumed investment yields an average additional economic value added of “ 12.9 mn. within the cultural and “ 5.8 mn. within the creative branches. Both figures are to be interpreted as a comparison with a business-as-usual scenario where no investment takes place at all. Furthermore, the simulations show that a yearly investment amount of “ 7.5 mn. provided to the Berlin Creative Industries will create 116 additional fulltime jobs on average, as well as an average yearly additional Berlin Regional GDP “ 18.7 mn. The fourth and last part of this study discusses possible ways of fostering the enterprises of the Berlin Creative Industries on the basis of the results of Parts 1 to 3. After a more general introduction to the instruments of economic furtherance we will elaborate on the peculiarities and difficulties the creative enterprises face with respect to the access to equity and credit capital. This discussion shows that in particular the 䊏 䊏 䊏 䊏 䊏

low capital endowment, lack of guarantees and securities, low funding requirements, uncertainty of success and financing of ideas instead of machines

are critical in this context. Only under consideration of these peculiarities it is possible to develop appropriate instruments of furtherance and to offer a portfolio of means suitable to pursue a policy targeted at fostering the Creative Industries. We conclude that different types of creative enterprises require different funding instruments and means of furtherance. On the basis of Puchta (2009), Table 60 shows an appropriate approach to segment the Creative Industries. Due to the significant heterogeneity among the enterprises of the various cultural and creative branches, an attractive portfolio of economic furtherance must feature a broad range of different instruments which take into account the specific needs of the respective enterprises. Thus, the spectrum of adequate financial instruments must include micro- and small-scale credits for one-person enterprises, more classi-

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12 Executive Summary

Table 60: Segmenting the Creative Industries Segment

Financial instrument

start-ups and One-person-enterprises

micro credits and small-scale loans

small- and medium enterprises with average growth perspective

credit capital and liability assumptions

enterprises with high growth- and accretion perspective

venture capital

Source: Puchta (2009) and own descriptions

cal loans as well as Mezzanine- and venture capital. The latter two are primarily targeted at larger enterprises with larger funding requirements. Note that the public sector is now adopting venture capital as an instrument aimed at boosting business development. Thus, it is a fairly new instrument within this context. This development has not least been supported by European Union development policies. This type of furtherance features capital provided by the European Regional Development Fund (ERDF) as well as capital provided by the respective nations and private investors. Investitionsbank Berlin is the first German institution to have experience in using venture capital to foster and finance enterprises of the Creative Industries by issuing its venture capital Fund “VC Fonds Kreativwirtschaft Berlin”. 12.3

Outlook

In the course of its Lissabon-strategy, in March 2000 the European Union intended to make the Europe the most competitive economic region of the world. It considered the European knowledge-based as the driving force for the intended development. This underlines that the Creative Industries are to play a significant role in future development, and fostering them will become increasingly important. The European Union shows considerable endeavor by issuing various initiatives targeted at boosting the Creative Industries and exploiting their potential of increasing growth and employment. The results of this study show that the Creative Industries are a most significant and important factor within the city of Berlin. Thus, regional economic policy makers are required to develop innovative instruments aimed at fostering those future key industries. Within this set of instruments and policies, monetary and non-monetary means have to be coordinated. Thus, interdisciplinary thinking is required due to the considerable heterogeneity among the creative enterprises and the fundamental differences between the Creative Industries and more traditional economic branches. New financial instruments like micro credits and venture capital are certainly an important step into the right direction. Not only to foster the creative, but to creatively foster could be the future imperative.

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Appendix A – Economic Sectors in Detail

In Table 61 we list the appertaining economic sectors for each of the nine cultural and two creative branches. Table 61: Economic Sectors of the Branches of the Berlin Creative Industries ES 2003

economic sectors

cultural branches publishing

film industries

22.11.1

publishing of books (excluding address directories)

22.11.2

publishing of address directories

22.12.1

publishing of daily newspapers

22.12.2

publishing of weekly newspapers and Sunday papers

22.13.1

publishing of professional journals

22.13.2

publishing of general magazines

22.13.3

publishing of other magazines

22.14.1

publishing of recorded sound carriers

22.14.2

publishing of music supplies

22.15.0

other publishing

22.21.0

printing of newspapers

22.22.0

printing of other media

22.23.0

further processing in printing

74.85.1

freelance translators

74.85.2

translation bureaus

92.11

production of films and videos

92.11.1

production of films for cinemas

92.11.2

production of films for TV

92.11.3

production of industryͲ and advertising films

92.11.4

production of other films

92.11.5

film technologies

92.11.6

sound studios

92.12

private broadcasting industries

journalists and news agencies

film distribution and supplying video programs

92.12.1

film distribution

92.12.2

supply of video programs

92.12.3

marketing of films

92.13.0

cinemas

92.20.1

broadcasting stations

92.20.2

production of RadioͲ and TV programs

92.40.1

syndicates and news agencies

92.40.2

freelance journalists and press photographers

(Continued at p. 138)

138

Appendix

Table 61: (Continued) ES 2003

economic sectors

cultural branches museum shops and art exhibitions

architecture

music, visual and performing arts

retailing of cultural goods

92.51.0

libraries and archives

92.52.1

museums and art exhibitions

92.52.2

monument protection

92.53.1

botanical and zoological gardens

92.53.2

natural preserves and zoos

92.53.3

natureͲ and landscape protection

74.20.1

superstructureͲ and interior architects

74.20.2

urbanͲ, regionalͲ, and land use planners

74.20.3

gardening and landscaping

92.31.1

theater ensembles

92.31.2

ballet groups, orchestras, chapels, choirs

92.31.3

freelance visual artists

92.31.4

freelance restorers

92.31.5

freelance composers and processors of music

92.31.6

freelance writers

92.31.7

freelance stageͲ, filmͲ, radioͲ and TVͲartists

92.31.8

freelance artists

92.32.1

theaterͲ and concert managers

92.32.2

operas, theaters, concert halls and similar institutions

92.32.3

varieté and cabaret

92.32.5

technical support for cultural services

92.33.0

showmen and amusement parks

92.34.1

dance schools

92.34.2

supply of other culturalͲ and entertainment services

74.81.1

photography

74.81.2

photoͲlaboratories

55.40.3

discotheques and dance halls

71.40.3

libraries and reader circles

26.70.1

sculpture and masonry

28.52.3

artist blacksmiths

36.22.2

manufacturing of adornment from noble metal

36.22.3

manufacturing of goldͲ and silversmith products

36.30.0

repairing of musical instruments

92.72.2

supply of other services for entertainment, recreation and leisure

52.45.3

retailing of musical instruments and supplies

52.47.2

retailing of books, magazines and journals

52.48.2

retailing of objects of art, coins, souvenirs etc.

52.50.1

retailing of antiques and antique carpets

52.50.2

antiquarian bookshops

(Continued at p. 139)

139

Appendix A

Table 61: (Continued) ES 2003

economic sectors

cultural branches design industries

74.20.6

industrial design

74.87.4

studios for textileͲ, adornmentͲ, furnitureͲand other design

74.40.1

advertising design

74.40.2

distribution and procurement of advertising media

74.14.2

PRͲAdvisory

72.21.0

publishing of software

72.22.1

software consultancy

72.22.2

development and programming of webͲpresentations

72.22.3

other software development

72.40.0

onlineͲprovision of databases, books etc.

creative branches advertising

software and games industries

d

140

Appendix

Appendix B – Differences in Research Results

In part 1 and part 2 of this study we extensively discussed that there is no generally binding and acknowledged definition of the Creative Industries and there are no binding rules concerning the branches and economic sectors to be attributed to it. Thus, it comes with no surprise that some of the published bulletins and studies differ in their results. However, even if two studies consider the very same branches as being part of the Creative Industries, their research results might differ to a lesser or greater extent. There are several potential reasons for this. First, the two studies to be compared with one another might differ with respect to the detailed consideration of economic sectors. For example, the bulletin by the Senate Office for Economy, Technology and Women as well as this study consider the sector of “manufacturing of gold- and silversmith products“ (ES 36.22.3) as being a creative sector. The Cologne bulletin on the Cultural Economy by Fesel and Söndermann (2008), however, does not. Similar reasoning concerns the telecommunications branch (ES 64.30.1 to 64.30.4), which is attributed to the Creative Industries only by SenWTF (cf. Table 62). Secondly, differences among research results could stem from a deviating mapping of the economic sectors into the respective branches. SenWTF, for instance, maps “Producing radio- and TV-programs“ (ES 92.20.2) into the film- and TV market, while this study attributes it to the private broadcasting industries. Moreover, of some economic sectors we and other studies consider only parts as “creative“, which can result in differences if the parts being considered are of different size. A prominent example of an industry where this procedure is applied is retailing. Thirdly, deviating results could stem from different data sources. Some studies, for example, supplement data from official statistics on value-added tax and employment by primary data they gathered on their own. Furthermore, it is a feasible procedure to attribute the revenues of superregional enterprises to different regions according to the share in employment each region has – instead of attributing the total revenues to the regions where the headquarters are located. Unlike SenWTF, this study follows the latter rather than the former approach. The interpretation of the terms used in research is another source of differences. For example, one could attribute one-person enterprises to the category of enterprises and/or to the category of employees. Finally, one needs to take into account the regional classification. This study describes the Berlin Creative Industries, and does not consider enterprises and activities in Brandenburg. In Table 62 we summarize which economic sectors are considered as being “creative“ by the studies mentioned above. For comparison we have selected the bulletin

141

Appendix B

by SenWTF because it refers, as this study, to the city of Berlin. As a second study, we have chosen Fesel und Söndermann (2008) since many other bulletins use the classification of Creative Industries to be found there. (Kulturwirtschaftsbericht Sachsen-Anhalt (2006), Kulturwirtschaftsbericht Nordrhein-Westfalen (2007)). Table 62: Different Treatment of Economic Sectors ES is considered by … ES 2003

Economic Sector

18.10.0

production of leather clothing and fireproof clothing from leather production of working- and professional clothing production of woven outerwear for men and boys production of woven outerwear for women and girls production of knitted outerwear production of woven underwear production of knitted underwear production of corsage production of sportswear and fireproof clothing production of hats and other headdresses production of wardrobe and wardrobe accessories for infants production of other knitted finished products production of wardrobe accessories production of sports shoes and the like production of other shoes and the like publishing of globes, books, catalogues and yearbooks publishing of telephone and address books publishing of daily newspapers publishing of weekly newspapers and Sunday papers publishing of professional journals publishing of general magazines publishing of other magazines publishing of recorded sound carriers publishing of music supplies other publishing (without software) printing of newspapers printing of other media further processing in printing preliminary stage to printing and media other services related to printing reproduction of recorded sound carriers reproduction of recorded image carriers

18.21.0 18.22.1 18.22.2 18.22.3 18.23.1 18.23.2 18.23.3 18.24.1 18.24.2 18.24.3 18.24.4 18.24.5 19.30.1 19.30.2 22.11.1 22.11.2 22.12.1 22.12.2 22.13.1 22.13.2 22.13.3 22.14.1 22.14.2 22.15.0 22.21.0 22.22.0 22.23.0 22.24.0 22.25.0 22.31.0 22.32.0

SenWTF&

this Study

Fesel and Söndermann§

                              

            

         

(Continued at p. 142)

142

Appendix

Table 62: (Continued) ES is considered by … ES 2003

Economic Sector

22.33.0 24.65.0 26.21.2

reproduction of recorded data carriers production of magnetic and optic data carriers manufacturing and repairing of household articles and decoration items of crockery manufacturing and repairing of household articles and decoration items of clay sculpture and masonry artist blacksmiths production of radio devices and sound- and video technical devices production of cameras, projectors and the like manufacturing of adornment from noble metal manufacturing of gold- and silversmith products repairing of musical instruments retailing of clothing, without special focus retailing of menswear and accessories retailing of ladies wear and accessories retailing of children’s and babies’ clothing and accessories retailing of furriers’ products retailing of shoes retailing of leatherwear and luggage retailing of entertainment electronic devices retailing of musical instruments and supplies retailing of books, magazines and journals retailing of entertainment magazines and newspapers retailing of objects of art, coins, souvenirs etc. retailing of watches and jewels retailing of antiques and antique carpets antiquarian bookshops shipping and internet retailing of textiles, clothing, shoes etc. discotheques and dance halls broadcasting of radio- and TV-programs via cable wireless telecommunications satellite telecommunications Internet service provider, other telecommunications libraries and reader circles video rental shops publishing of Software software Consultancy development and Programming of web presentations

26.21.3 26.70.1 28.52.3 32.30.0 33.40.3 36.22.2 36.22.3 36.30.0 52.42.1 52.42.2 52.42.3 52.42.4 52.42.5 52.43.1 52.43.2 52.45.2 52.45.3 52.47.2 52.47.3 52.48.2 52.48.5 52.50.1 52.50.2 52.61.2 55.40.3 64.30.1 64.30.2 64.30.3 64.30.4 71.40.3 71.40.4 72.21.0 72.22.1 72.22.2

SenWTF&

this Study

Fesel and Söndermann§

                                    

 

  

 

 





  

   

 

(Continued at p. 143)

143

Appendix B

Table 62: (Continued) ES is considered by … ES 2003

Economic Sector

72.22.3 72.40.0 72.60.1 72.60.2 74.14.2 74.20.1 74.20.1 74.20.2 74.20.3 74.20.6 74.40.1 74.40.2 74.81.1 74.81.2 74.85.1 74.85.2 74.87.3 74.87.4 92.11.1 92.11.2 92.11.3 92.11.4 92.11.5 92.11.6 92.12.1 92.12.2 92.12.3 92.13.0 92.20.1 92.20.2 92.31.1 92.31.2 92.31.3 92.31.4 92.31.5 92.31.6 92.31.7 92.31.8 92.32.1

other software development online provision of databases, books etc. procurement of information services related to data processing PR-Advisory superstructure- and interior architects superstructure- and interior architects urban-, regional-, and land use planners gardening and landscaping industrial Design advertising Design distribution and Procurement of advertising media photography photo-laboratories freelance translators translation bureaus auctioning studios for textile-, adornment-, furniture- and other design production of films for cinemas production of films for TV production of industry- and advertising films production of other films film technologies sound studios film Distribution supply of video programs marketing of films cinemas broadcasting stations production of radio- and TV-programs theater ensembles ballet groups, orchestras, chapels, choirs freelance visual artists freelance restorers freelance composers and processors of music freelance writers freelance stage-, film-, radio- and TV-artists freelance artists theater- and concert managers

SenWTF&

                                     

this Study

Fesel and Söndermann§

 

                                 

      

                     

(Continued at p. 144)

144

Appendix

Table 62: (Continued) ES is considered by … ES 2003

Economic Sector

92.32.2 92.32.3 92.32.5 92.33.0 92.34.1 92.34.2 92.40.1 92.40.2 92.51.0 92.52.1 92.52.2 92.53.1 92.53.2 92.53.3 92.72.2

operas, theaters, concert halls and similar institutions varieté and cabaret technical support for cultural services showmen and amusement parks dance schools supply of other cultural- and entertainment services syndicates and news agencies freelance journalists and press photographers libraries and archives museums and art exhibitions monument protection botanical and zoological gardens natural preserves and zoos nature and landscape protection supply of other services for entertainment, recreation and leisure

SenWTF&

              

this Study               

Source: own description & … Senatsverwaltung für Wirtschaft, Technologie und Frauen (Senate office for economy, technology and women) § … Fesel, B., Söndermann, M. (2008). Kulturwirtschaftsbericht Köln 2007.

Fesel and Söndermann§           

145

Appendix C

Appendix C – Sensitivity Analysis

In part 3 of this study we discuss the effects of investment in enterprises of the Berlin Creative Industries on the Berlin Regional GDP as well as employment in Berlin. Those estimated effects, however, are based on the weighting of the technologies “administration/event management”, “low- and medium technology” and “research and high-technology” as well as the weighting of the economic sectors of production and service displayed in Table 41. Since we have to make assumptions on the weighting of technologies and economic sectors, we have to vary our assumptions within a sensitivity analysis and determine whether our simulation results are sensitive towards changes in our assumptions. The following analysis shows that this is not the case, and the results discussed in part 3 of this study can thus be viewed as being secure.

More Weight to the Production Sector First, we assign more weight to the production sector and, since weights by construction add up to one, we assign less weight to the service sector. The deviation with respect to the assumption displayed in Table 41 is for each of the respective branches +10% for the production sector and –10% for the service sector. Table 63 shows the parameters selected for the simulations within sensitivity analysis 1. Table 63: Sensitivity Analysis 1 – More Weight to the Production Sector weights of… technologies [%]

branches

revenues§ admin./event [%] management

economic sectors [%]

Low/medium technology

research/highͲ technology

production

service

cultural branches

69,0

20

60

20

60

40

creative branches

31,0

20

40

40

40

60

Source: own calculations and assumptions § … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries

146

Appendix

Regional GDP The simulation results yielded by the new weighting which attributes greater significance to the production sector differ only slightly from the estimated effects of investment on the Berlin Regional GDP calculated by our initial simulation documented in part 3 of this study. Concerning the estimated total additional Berlin Regional GDP, for example, in scenario 1 only some values deviate at the first digit by “ 0.1 mn. at most. Most often, this deviation is due to rounding and the actual deviation is even less. The average additional Berlin Regional GPD generated by investment in the Berlin Creative Industries is “ 9.4 mn. when assuming the alternative weights and thus differs only marginally from the value of “ 9.3 mn. documented in part 3 of this study (cf. Table 64 with Table 44). Table 64: Sensitivity Analysis 1 – Scenario 1 – Additional Berlin Regional GDP additional regional GDP [mn. €] in…

branches

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

3.4

5.6

6.7

8.0

8.6

6.5

creative branches

1.6

2.5

3.0

3.6

3.8

2.9

total

5.0

8.1

9.7

11.6

12.4

9.4

Source: BEST

For scenario 2, we again see only marginal differences in the estimated addi-tional Berlin Regional GDP for 2010 and 2011. The calculated value for 2012 deviates from the value realized with the initial weighting by “ 0.2 mn. Thus, the largest deviation of estimated additional Berlin Regional GDP is less than 1% of the respective estimated value (cf. Table 65 with Table 45). Table 65: Sensitivity Analysis 1 – Scenario 2 – Additional Berlin Regional GDP additional regional GDP [mn. €] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

6.9

11.1

13.4

16.1

17.2

12.9

creative branches

3.1

5.0

6.0

7.2

7.6

5.8

10.0

16.1

19.4

23.3

24.8

18.7

branches

total Source: BEST

147

Appendix C

Employment We observe the same pattern of marginal differences between our initial simulation results and the results yielded with the alternative weighting of economic sectors for the estimated effects of investment on employment (cf. Table 66 with Table 46 and Table 67 with Table 47 respectively). Table 66: Sensitivity Analysis 1 – Scenario 1 – Additional jobs additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

19

40

51

47

43

40

creative branches

9

18

23

21

19

18

28

58

74

68

62

58

branches

total Source: BEST

Table 67: Sensitivity Analysis 1 – Scenario 2 – Additional jobs additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

38

80

102

94

87

80

creative branches

17

36

46

42

38

36

total

55

116

148

136

125

116

branches

Source: BEST

More Weight to the Service Sector If, in contrast to the initial simulation, the weight of the service sector is increased and the weight of the production sector is decreased by 10 percentage points, the simulation results do not significantly change either. Table 68 shows the alternative weighting we selected for sensitivity analysis 2, while Table 69 to Table 72 feature the simulation results based on the alternative weighting. The deviations from our initial simulations are marginal both with respect to additional Berlin Regional GDP as well as additional employment.

148

Appendix

Table 68: Sensitivity Analysis 2 – More Weight to the Service Sector weights of technologies [%]

economic sectors [%]

revenues§ [%]

admin./event management

low/mediumͲ technology

research/highͲ technology

cultural branches

69.0

20

60

20

40

60

creative branches

31.0

20

40

40

20

80

branches

production

service

d

Source: own assumptions and calculations § … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries

Regional GDP

Table 69: Sensitivity Analysis 2 – Scenario 1 – Additional Berlin Regional GDP additional regional GDP [mn. €] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

3,4

5,5

6,6

8,0

8,4

6,4

creative branches

1,6

2,5

3,0

3,6

3,8

2,9

total

5,0

8,0

9,6

11,6

12,2

9,3

branches

Source: BEST

Table 70: Sensitivity Analysis 2 – Scenario 2 – Additional Berlin Regional GDP additional regional GDP [mn. €] in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

6,9

11,0

13,3

15,9

16,9

12,8

creative branches

3,1

5,0

6,0

7,1

7,5

5,7

10,0

16,0

19,3

23,0

24,4

18,5

branches

total Source: BEST

149

Appendix C

Employment Table 71: Sensitivity Analysis 2 – Scenario 1 – Additional jobs additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

19

40

51

46

42

39

creative branches

9

18

23

20

18

18

28

58

74

66

60

57

branches

total Source: BEST

Table 72: Sensitivity Analysis 2 – Scenario 2 – Additional jobs additional jobs in…

2008

2009

2010

2011

2012

average 2008 – 2012

cultural branches

38

80

102

92

83

79

creative branches

17

36

46

41

36

35

total

55

116

148

133

119

114

branches

Source: BEST