On November 7th 2017 a Forum is being convened, by BCre8ive and Digital Catapult, in London to look at the funding for content creation in the creative industries.
In the recent survey of creative freelancers in the UK access to finance was cited as a consistent problem. An issue which was also identified as needing attention in the independent review of the creative industries by Peter Bazalgette. While research into the productivity of the creative industries found that investment had fallen consistently since the end of the 1990’s. Why is investment in creative content so problematic?
The aim of this blog is to try to answer this question – by the way there is no simple answer – and to point to ways in which it could be improved. Something which will be pursued at the Investment Forum.
There are numerous ways you are able to raise money to pay for your creative work. These range from the most obvious of being commissioned through loans and equity to crowdfunding, personal donations to DIY. The latter has proved very successful for vloggers with millionaires being created on YouTube, while the commissioning approach is still the bedrock of the visual arts and broadcast, including increasingly the streaming channels. So why has investment declined?
Everything is Cheaper
Much of the investment in the recent past has focused on technological advances in content creation. These have ranged from lighter cameras to 3D rendering from faster streaming to design apps. All advances which have made the creation of content cheaper. The argument then flows that access to production is cheaper, fewer people are needed to complete tasks and thus there is less need for finance/investment. Though this is obviously true it fails to take into account that someone, somewhere, has to pay for the content to be created in the first place, for these economic benefits to have any benefit at all. There may be cheaper resources but if you have no money to use them, they might as well not exist.
A Lack of Opportunity
Some have suggested that perhaps it relates to a lack of investment opportunities.
In the digital age the business model for content is increasingly ‘winner takes all’ with a few huge hits driving the economics of the industry. The creative content sub-sectors have also been hard hit by IP piracy. It may be the case that the combination of these two trends has reduced the potential profitability of the large majority of SME content firms, making capital investment both less attractive and less feasible.
Understanding the future of productivity in the creative industries, CQW,2016 p41
The ‘winner takes all’ approach to creative content has long been seen as the basis for ‘cherry picking’ the likely winner from a vast array of potential creative projects and products. The equivalent in many people’s eyes to gambling as compared to backing a proven product or market in the retail or utilities sectors. However, this does not appear to stop people backing yet another artisan beer company or investing in a prototype battery, all of which may fail economically, just as easily as a creative project.
Access to Audience
Gate Keepers for many creative investments are another barrier to early stage investment in certain sub-sectors of the creative economy. From fashion buyers and TV commissioners to book editors and gallery owners, the gatekeepers, have a for a long time controlled who can make money from creative content. So, for instance, it has been easy to invest in, or lend to, a TV company that already has a commission, but not to a new company developing a programme without such a commission, yet which may in the longer term be more successful.
The digital age with web distribution and social media, challenges this business model. The success of niche products and labels, the growth of self and e-publishing, the online distribution systems from music and games to video have created ways to by-pass gate-keepers and establish revenue streams directly with audiences and consumers.
Too Much Content
Everyone knows the statistics. Sixty hours of video uploaded to YouTube every minute. Five hundred games launched daily in the AppStore. One million songs released annually. Over 150,000 books published annually in the UK. Over 900 films released in the UK in 2016. We live in an era of mass creative content, with numerous ways in which to consume it.
The key to understanding this issue is to recognise that ‘Quality still Rules’. The vast majority of creative content has obvious faults. The way to avoid being swamped by the numbers and the content is to focus on those projects and products that have been well developed. It is not about the idea, or the track record, it is about the quality of the creative content itself, and its potential.
A Little Knowledge is a Dangerous Thing.
So how can anyone decide which individual creative projects will succeed, and how much money will they make? Well the simple answer is people have been making these types of decisions since the dawn of creativity. Initially it was patronage, then local markets, then specialist collectors and commissioners, and now it is crowds plus versions of all the previous options. However, tying to choose without any knowledge of the audiences, markets, distribution, and revenue streams places serious limitation on much investment. The aim of current investors must be to improve their knowledge of the creative markets, or to work with people who do have this knowledge.
Lack of Contacts
Over 90% of the creative industries is made up of freelancers and micro-companies, who employ less than four people. They are distributed across the country, and are now connected with clients and suppliers largely through digital networks. They work on up to 100 or more contracts a year, with no spare development monies, little or no marketing experience, and often no or only local support networks.
The problem for investors is this fractured market lacks obvious contact points, has no clear investment strategy, is individualised and often shows little interest in engaging with traditional forms of investment. This lack of an effective interface between the creatives and investors is a key problem which needs to overcome if the potential of the creative industries is to be realised.
Given all of these issues and obvious structural problems why should investment be made in the creatives industries?
First it is a current economic success story.
“The Creative Industries are a success story, playing a key role in the UK’s economic recovery. They contributed £87.4bn in GVA in 2015, 5.3% of the UK economy (comparable to the Construction or Information sectors) and between 2010 and 2015 grew by 34% – faster than any other sector.
They have also outperformed other sectors in terms of employment growth:between 2011 and 2016, employment in the sector increased by 25.4% (circa 400,000 jobs) compared to 7.6% average across the wider UK.
The sector is also a net exporter of services (£11.3bn surplus in 2015).”
DCMS Sector Economic Estimates 2017 :DCMS, 2017
Second it has potential growth
“The UK Entertainment and media sector, alone, will grow at a compound rate of 3% per annum over the next 5 years to be worth £72 billion by 2021.”
The 2017 Entertainment and Media Outlook :PriceWaterhouseCoppers
Third its importance is global
“Creative and Cultural Industries revenues worldwide exceed those of telecom services (US$1,570b globally), and surpass India’s GDP (US$1,900b)”
“Cultural Times – The First Global Map of Cultural and Creative Industries”.EY 2015
In this context investing in the creative industries is a good option – the question is how?
More on this at the Creative Investment Forum : Funding Creative Content.