THE ECONOMY OF CULTURE IN EUROPE Study prepared for the European Commission (Directorate General for Education and Culture) October 2006 With the support of: MKW Wirtschaftsforschung Saarbrücken, Innsbruck, München

The Ambition Put a figure on creative value Consider Europe’s competitiveness in the creative sector Provide evidence that the cultural and creative sector deserves support from policy makers Present a strategy for a creative Europe The context: the Lisbon Strategy

The Methodology and its limits Scarcity of available statistics No standardised data categorisation at EU level Developed own Methodology: Eurostat/Amadeus/Unesco/EAO databases Inventories of existing studies Industry profiles Case Studies Excludes: Self-employed, small companies, large parts of the public economy, electronic commerce (“new economy”) Results are a conservative estimate

Delineation of the cultural & creative sector CIRCLES SECTORS SUB- SECTORS CORE ARTS FIELD Visual arts Crafts Paintings – Sculpture – Photography Performing arts Theatre - Dance – Circus - Festivals. Heritage Museums – Libraries - Archaeological sites - Archives. CIRCLE 1: CULTURAL INDUSTRIES Film and Video Television and radio Video games Music Recorded music market – Live music performances – revenues of collecting societies in the music sector Books and press Book publishing - Magazine and newspapers publishing CIRCLE 2: CREATIVE INDUSTRIES AND ACTIVITIES Design Fashion design, graphic design, interior design, product design Architecture Advertising CIRCLE 3: RELATED INDUSTRIES ICT manufacturers Cultural Tourism

Quantifiable socio-economic impact of the cultural and creative sector TURNOVER  The sector turned over more than €654 billion in 2003 Car manufacturing industry was € 271 billion in 2001. ICT manufacturers was € 541 billion in 2003 (EU-15 figures) VALUE ADDED TO EU GDP The sector contributed to 2.6% of EU GDP in 2003 Real estate activities accounted for 2.1% The food, beverage and tobacco manufacturing sector accounted for 1.9% The textile industry accounted for 0.5% The chemicals, rubber and plastic products industry accounted for 2.3% CONTRIBUTION TO EU GROWTH The sector’s growth in 1999-2003 was 12.3% higher than the growth of the general economy. EMPLOYMENT In 2004 5.8 million people worked in the sector, equivalent to 3.1% of total employed population in EU25. Total employment in the EU decreased in 2002-2004, employment in the sector increased (+1.85%).

Contribution of the European cultural and creative sector to the national economies Source: Eurostat and AMADEUS Data elaborated by Media Group

“Not everything that counts can be measured, and not everything that can be measured counts” Albert Einstein

Contribution to European competitiveness The unrecognised competitiveness of the sector The cultural & creative sector suffers from stereotypes when it comes to assessing its economic performance Culture often perceived as a non-economic activity Common perceptions: Individual artists Heavily subsidised public organisations “Cottage industry”

Assessing the competitiveness of the sector Productivity: ratio between value added and employment costs Average productivity level was 1.57 in 2003; similar to productivity level in other service sectors (typical productivity level of service industries included between 1.2 and 1.9) Profitability: operating margin of companies Average European level is 9% in 2003 (profit margin of 5% up to 10% considered as an indication of a healthy level of profitability for service industries) Intangible assets: ratio on turnover EU25 Average is 4.2% (by comparison, the average ratio for the Finnish ICT sector is 4.8%)

Cultural Employment – Main Findings A total of 5.8 million people worked in the cultural & creative sector, equivalent to 3.1% of total employed population in the EU25 Evolution 2002-2004: +1.85% (General trend = -0.04%) Cultural employment is characterised by an inherent “flexibility” requirement and “mobility” constraint The sector is overwhelmingly made up of small/micro businesses and self-employed The level of qualifications is higher in the cultural and creative sector than in most of the sectors of the economy Cultural employment is of an “atypical” nature → frontrunner of tomorrow’s job market

The role of public support Different levels of intervention Financial (cinema – heritage – performing arts) Regulatory (books, TV) Estimates for European public budgets devoted to culture (EU30) in 2000: €55billion Estimates of licence fees for public broadcasters in 2000: €16 billion Public support to culture as a share of national GDPs is between 0.5% and 1% of national GDPs Justification: democratic empowerment, education, promote values, reinforcement of identity, social cohesion, factor of economic progress

The indirect contribution of the cultural & creative sector to the Lisbon Agenda

Indirect contributions of the cultural & creative sector to Lisbon The cultural & creative sector is crucial for the take off of ICTs The cultural & creative sector has a multiple role to play in local development powerful catalyst for the tourism industry strategic importance for growth and employment in cities and regions (“creative cities”) significant social impact (culture as a tool for urban and regional regeneration)

The interdependence between the cultural and creative sector and ICT INCREASED GROWTH PROSPECTS FOR ICTs Media content → key driver for ICT uptake Examples: broadband penetration, 3G mobile phones, digital TV, MP3 players (Apple’s iPod and iTunes music store) GROWTH PROSPECTS FOR THE CREATIVE SECTOR Digital technology is radically transforming the production, circulation and consumption of content, leading to new supports, applications and content offerings (the Long Tail) NEED TO FIND APPROPRIATE MODELS

Digital Shift in € million (EU25) Market size in terms of revenues 2005 2010 VOD Market 30 1,269 Digital Music (online – mobile) 196.3 1,794 Games (online, mobile) 699 2,302 Publishing (online) 849 2,001 Radio 15 250 Source: European Commission, Study on Interactive content and convergence: Implications for the information society – Final Report, Screen Digest, Goldmedia, Rightscom, CMS Hasche Sigle London, 2006.

Culture as an engine for the emergence of creative hubs and local development Three distinct roles for culture in local development: Cultural activities attract tourists Culture goods and services produced at a local level and benefiting from “cultural clusters” Cultural activities have significant social impacts

Tourism: one of the most important industries in Europe Tourism sector generates 5.5% of EU GDP (3 to 8% in individual member states) and up to 11.5% when integrating indirect impacts 2 million enterprises employing more than 9 million people across Europe Europe: most visited destination in the world (443.9 million international arrivals in 2005) Europe: 55% market share of the global tourism industry

Culture as an engine for tourism Heritage Arts fairs Museums and exhibitions Festivals and trade fairs The performing arts Film tourism

Creative cities and clusters THE TERRITORIAL DIMENSION OF CREATIVITY Cultural activity characterised by constantly shifting production (“industry of prototypes”) and increased uncertainty → Geographical concentration and clustering as a way to reduce these risks Idea of “creative class” (Prof. Florida)

Successful strategies (1) London & the creative industries: 6% annual growth between 1997 and 2002 (3% for the whole economy) 40% of the UK’s creative capital Second largest business sector (29 billion GBP annual turnover) and third largest sector of employment Montréal: The “video games industry’s Hollywood” A broad range of tax credits and local support measures Multimedia companies provide 3,500 jobs (2005)

Successful strategies (2) Bilbao: Direct and indirect revenue €26+€139=€165 million (2005) 1 million average visitors each year since its opening in 1997 (60% foreign) Creation of 4,361 employments since its opening The museum covered 18 times the investment made for the construction of the building Irish music industry: Irish artists sold 56 million albums in 2001 55 million albums sold abroad Net income generated by music artists: €224 million

The role of culture in urban and regional organisation Culture is a major tool for territorial and social cohesion Main objectives: Cultural diversity Inclusiveness Territorial cohesion Community identity

A STRATEGY FOR A CREATIVE EUROPE

Challenges for a Creative Europe Making culture and creativity a EU priority In EC law implementation (Art. 151.4) Getting creativity on the EU Agenda Harnessing the digital shift Regulatory challenges The challenge of consumer behaviour and expectations The challenge of new business models Fostering a creative education Supporting creative territories Ensuring consistency between EU internal and external actions

The European cultural and creative sector - Strengths and weaknesses Plenty of individual talent but with limited business skills and attracted to the USA (creativity drain) Some of the largest competitive players at global level but they lack same power and leverage than the US-based creative industries on governments A myriad of creative SMEs with strong local presence market access and undercapitalisation problems Importance of the public sector but a resistance in taking stock of international challenges Sustained consumer demand (growth in demand for content) but poor understanding of consumers’ demand in relation to the digital economy Strong IP laws in the EU but poor enforcement in some countries (piracy levels) and subsidising broadband rollout.

A strategy for a Creative Europe Main recommendations for EU action INTELLEGENCE GATHERING  Establish a strong quantitative evidence base for policy makers. Creativity scoreboard THE LISBON AGENDA Use existing EU support programmes (structural funds) Internal market and competition policies Promote creativity and business education Promote links between creators and technology to support the digital shift (FP7) Address chronic under-funding of creative industries and maximise use of financial instruments (EIB,EIF) Integrate the cultural dimension in cooperation and trade agreements (UNESCO Convention) STRUCTURAL REFORM Reinforce coordination of activities and policies impacting on the cultural & creative sector within the European Commission .

European Agenda for Culture in a Globalised world Spring European Council (8-9 March 2007): Need to review the Single Market […] and give particular attention to the potential of creative industries’ SMEs European Commission’s Communication on Culture (May 2007): Call to put culture and the creative industries at the heart of the Lisbon strategy – new “EU Agenda for Culture”. Conclusions of the Council of the European Union: point in the same direction (24-25 May 2007) European Cultural Forum under Portuguese Presidency 2009 European Year of Creativity

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