The endemic vagueness and lack of transparency surrounding statistics and other financial indicators for the creative industries, especially in the media and entertainment sector, are symptomatic of our archaic attitudes about the role creativity has in our local and national economies.
The trend towards solving that vagueness is vital, because our economic growth is increasingly dependent on intellectual properties and creative industries.
State and Federal Government
"Decades of experience, creativity, and growth have made film production and distribution one of the most economically important industries in the United States," notes the 2001 U.S. Department of Commerce Report on Runaway Production, "[u]unfortunately, our official statistics are woefully deficient."
Current available data does not offer a precise picture of employment numbers for the full rage of professions involved in motion picture production or, for that matter, consistent measures of the industry's economic impact both regionally and nationally. Data available for production days and budgets is primarily collected by local film commissions and prone to irregularities and inaccuracies by default of naturally occurring idiosyncrasies in the measures and classifications used by those organizations.
In the absence of incentives or common effective measures, figures used are often volunteered by production companies and, therefore, in-audit-able or even suspect.
According to one film commissioner I spoke with, volunteered figures do not necessarily reflect actual monies spent in one's own region, especially when a production crosses state lines. In those cases, revenues accounted for in one state may be simultaneously accounted for in another state's revenue totals. Obtaining aggregate data at the national level is even more difficult.
Outside the specificity of film production, we may have begun to rectify our overall fiscal vagueness about the creative industries with the recent adoption of the North American Industry Classification System (NAICS) that replaces the U.S. Standard Industrial Classification (SIC) system originally devised in the 1930s.
The SIC system, although periodically updated throughout the last century, structured our economy on an obsolete industrially driven model. The NAICS identifies hundreds of new, emerging, and advanced technology industries, while reorganizing industry into more meaningful sectors--especially in the service-producing segments of the economy.
Advertising
The growing price and waning influence of advertising expenditure on mainstream television channels is a serious issue for many advertisers today. Intolerance about wasted ad spending is mounting. ROI is the today's advertising catch phrase. The linkage gap between producers and consumers of non-subscription broadcast content amounts to failure of means for assessing consumer preference with suppliers and network television was chosen by thirty-two percent of respondents as the worst medium for proving ROI, according to a study by Advertising Age.
Advertising, long the main revenue source for much of the media industry, is rapidly moving to the Internet, and shown by the financial success of sites like Google. This is part of the trend in advertising from "mass" marketing to "measurable" marketing. The interactivity of the Internet is driving the process of fragmentation for broadcasters, but has the potential to provide advertisers with information about the taste, preferences, and habits of consuming audiences. So the Internet offers advertisers a valuable advantage that mass media cannot provide.
Media and Entertainment
Many commentators have noted how inefficiently Hollywood does business. A studio will spend millions of dollars marketing a particular star in lieu of having its own brand only to toss that brand away at conclusion of a project.
There is no question that media and entertainment are by nature risky.
What I am suggesting here, however, is that there is a slow evolution towards efficiency measures in the media firm and entertainment firm business models. So for example, gaming firms reuse code from failed titles instead of starting from scratch with every title. Digital technology allows for greater fluidity and quantification in distribution, for example: In d-cinema the ticketing systems are integrated into the pre-show systems and concession stands, so business can see clearly what is working and what does not.
Outdated Views on Creative Industries
Most Americans are oblivious to the considerable role that content industries play in job and wealth creation - not only in terms of regional economic development and growing high-tech industry, but also in terms of U.S. global economic competitiveness.
So much of the discussion about media and entertainment, in my view, is overly politicized by both the left and right: "Hollywood is destroying America!" or "Advertising is destroying art by commodifying it." What I aim to do is open up a space for discussion that looks at these matters in wider context.
Creativity is Mainstream
In fact, the media, entertainment, and cultural copyright sectors create new jobs at a rate three times faster than the remaining economy. In 2002, these sectors employed 5.48 million workers and accounted for six percent of U.S. gross domestic product. These sectors also generated $89.26 billion in export revenue - surpassing every other category including automotive, aviation, agricultural, as well as chemical and allied products.
Foreign sales of motion pictures alone totaled $17 billion in 2002. The motion picture industry is the only U.S. sector that boasts a surplus balance of trade with every other country in the world; and the international sale of filmed entertainment plays a significant role in our nation's overall trade surplus in services.
U.S. sales of entertainment software also totaled $8.2 billion in 2004, and U.S. game designers exported an additional $2.1 billion the same year. Deutsche Bank forecasts that global revenue for game software will grow at thirteen percent annually over the next four years, while PricewaterhouseCooper projects that the U.S. media and entertainment industries will be worth $690 billion by 2009.
This development has hastened the transformation of the U.S. economy from one based largely on information and knowledge to one driven principally by creativity. John Howkins categorizes the creative economy to include fifteen creative sectors - such as research and development, software, design, and content industries like film, music, and video games - that produce intellectual property in the form of patents, copyrights, trademarks and proprietary designs. The annual global revenue for Howkin's fifteen identified sectors was $2.24 trillion in 1999. The U.S. share represents forty percent of the market with revenue totaling $960 billion. The U.S. share also accounts for more than forty percent of research and development, forty percent of television and radio, and thirty percent of film. Howkins calculates that core copyright industries will be worth $6.1 trillion internationally in fifteen years. U.S. dominance in these segments - more than productivity improvements related to new technology and new manufacturing methods - is responsible for much of the nation's global economic competitiveness since the nineteen-eighties.
Conclusions
Creative mystique has marketing power, but it can blind to our strengths and vital interests. Fundamental to solving creative inefficiencies is dispelling myths and understanding the nature of the creative process. Only then can we develop models or solutions that make those processes profitable and capable of sustained duplication.
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