Monthly Archives: February 2014
Cultural entrepreneurship in developing economies
(The interview can be also found under the Interviews>CulEnt in developing economies page)
Following the previous publishing of an article about “Strengthening entrepreneurship through policies and strategies” where I presented a Technical Assistance project in Barbados that was funded by the EU in collaboration with UNESCO, I had the opportunity to interview Andrew Senior, the international expert who undertook the project. Andrew is the Director of Andrew Senior Associates Ltd.
As stated in his company’s website, Andrew is a leading expert in the field of the creative economy and is particularly interested in entrepreneurship, copyright and policy making. Our conversation went around all three subject areas.
First, I asked Andrew to talk about his work in Barbados. The mission report accompanying the project, highlights the need for “economic data… to substantiate the argument for investment and to guide evidence-based policy-making”. I wondered what was mostly missing in order to have evidence for the creation of a proper cultural/creative policy.
Andrew explained to me that one of the things that has allowed the UK creative economy to move forward was a mapping of the economy that started back in 1998. It allowed the government to see in number terms what was it all about. The question policy makers ask is really ‘how is value created?’. The creative industries were working on good will up to now instead of measured economic outcomes. The real need is to understand how value is created and adapt the necessary business models to develop the sector. In the case of Barbados he said, the government had never done any mapping apart from some work with carnivals. It has also been working a lot around assumptions rather than real data. That created a distorted image of the economy without really getting a deep understanding of the specific market. Andrew explained that “unless you want to look into creating markets, it’s very difficult to create one if you do not have a very good understanding and insight of the existing market.” He had faced the same problem in his work in Buenos Aires through the same EU-UNESCO programme.
What is interesting from his experience is that although it seems very easy to speak about free markets, there is a difficulty in understanding existing ones. The degree to which we understand first the local market – quite well, then the sub-regional market which is easy to play into and finally, a third market in diaspora which tends to be very conservative usually, affects how much we can innovate in policy making. Then there is also a fourth element he explained: “if you are somewhere where tourism is important, tourists don’t look into innovation, they want tradition”. And that also stops innovative strategies from being developed.
Andrew gave a very good example of how big cities with all sorts of different people tend to innovate more. He said that a melting pot creates innovation and “those places that have that dynamism like big cities, are predisposed to innovate, like NY and London”. Small places have smaller budgets, therefore, it is more difficult to pay for data collection studies. “If you don’t have the data, its more difficult to find out where to invest. It is all about leveraging a different approach. The danger is to end up investing in the same old markets”.
Our conversation moved on to the promotion of “a culture of entrepreneurship”. Andrew questioned the way creative economies switch from introspective to an outward looking practice. He said that it is all “about making new opportunities in the creative industries here. About creating a different mindset.” He further explained that convergence is important and that having trained and worked as a lawyer, he brought a lawyer’s eye into the conversation when he joined the creative industries. “You have to ask the difficult questions” he said, no matter how much resistance you will receive at first when introducing change.
Then, there is the question of leadership. Economic research shows economic value although sometimes the data have issues with only counting formal and official data. How do you then count the economic return? This is when trends and fashion come into the game. Governments need to be able to do medium and long term planning, but also be reacting to challenges when they happen.
Talking about change, I asked Andrew how can cultural and creative enterprises shift from state support to profit making. Could this automatically solve the policy making issue? Andrew explained that “the crisis is about change”. Although this is a banking crisis, he expressed his concern about artists asking questions without really understanding the economic world. He believes that more informed decision making by consumers enabled through technology will bring a new industrial revolution around the creative industries. “Unfortunately, governments are on the back foot in terms of all that” he said. When a government is too big, it tends to intervene in the way the market changes. Rather, if regulation is achieved through citizen power, a huge shift is taking place. “Business and citizenry are driving the change, governments have to identify the market failure and leave space for society to advance.”
He further explained that up to now, there have been 3 to 4 different models:
1) philanthropy – the US example
2) large amounts of money to sports and arts – Germany example
3) mixed model, business and state funding – the UK example
4) no support at all from anyone – developing countries example. This is the most open solution because it is a really free market he said.
In trying to explain the link between entrepreneurship and change, Andrew gave me an example from his work back in 2004 in Indonesia through his collaboration with the British Council. Instead of approaching the Ministry of Culture, he proposed to do the same work with the Ministry of Economic Development and Industry. The Creative Entrepreneur Programme which started back then and is celebrating its 10th anniversary this year,had as a goal to engage with the sector. It gave a new energy to the creative sector. The idea behind was to recognize that something was overlooked and that was Entrepreneurship. As Andrew explained, “[…] a system is far more stable if it has a business agenda attached to it. This is what drove the development in that award”. He said that the reason why he worked with emerging economies in 2004, was because his EU colleagues “didn’t understand entrepreneurship at that time.” And that was only 10 years ago I exclaimed! We ended up agreeing that the psychology of the creative sector can be incredibly conservative at times.
Finally, we discussed his work for the World Intellectual Property Organisation about Copyright for the Creative Industries. While I was looking for Copyright info about the creative industries, I found a very interesting WIPO guide entitled “Managing Creative Enterprises”, Creative industries – Booklet No. 3. So I asked Andrew what was different in this new guide.
“The new guide will have a stronger narrative. It recognizes different entry points for the creative entrepreneur and is easier to be read by the people whom it is intended for.” Having read myself the existing guide found in WIPO’s website, I can see that it could be useful to approach the Copyright issue through a simpler vocabulary for artists and creative professionals. What I mostly liked about Andrew’s approach is the idea of giving guidelines for basic “housekeeping” for the creatives professionals since so many of them lack the technical knowledge to actually run and manage a business. They know how to be good artists. The best point (paraphrased here) was that “artists should make money to keep being free as artists”. Creative people he said, need careful management because they are fragile. “We need to make them more robust to face the challenges of businesses.”
As I am looking forward to the new WIPO guide by Andrew Senior, I will update this page when the link is available and post a new article about it.
I would like to present a new series of events entitled culent@athens, aka Cultural Entrepreneurship@Athens, that will roll out throughout this spring in Athens, Greece.
The events are organized in collaboration with CulturePolis (NGO), EURICCA asbl and the European Music Day, and will take place in Athens, Greece in a limited number of sessions that will be shortly announced through this blog.
The idea behind the meetings:
‘Creativity ‘ and ‘Entrepreneurship’ are two words that form part of the new crisis-jargon in the cultural sphere and beyond in what is globally now called the ‘creative economy’.
The events will focus on Cultural Entrepreneurship: what it is, who are the players, how is it being developed, mutations of the creative economy, historical changes in the common European cultural consciousness etc. New efforts in creative arts will be investigated as well as how the Athenian Metropolis and its rich ecosystem of established companies, investors and institutions affect the evolution of this type of entrepreneurial activity.
Participants will get a complete picture of entrepreneurship in the area of culture. They will listen to and discuss the latest developments in the economy of
– The art market
– Cultural institutions
– The promotion of cultural goods
– Culture across markets
– Cultural & Creative Startups
– Companies and other entities that support incumbents in Cultural Entrepreneurship
– Venture Capital firms that invest in cultural industries and
– Collaborative spaces/startup incubators
For more info, click here.
Intellectual Property in the creative enterprises
(The interview can be also found under the Interviews>Intellectual Property page)
Following the previous publishing of an article about MyCreative Ventures in Malaysia, “a government investment arm for Malaysian creative industry”, as CEO Johan Ishak mentions on his LinkedIn profile, I had the opportunity to have a brief interview with him.
I first wanted to know why the Malaysian government decided in 2012 to allocate RM200 million to the Malaysian creative industry via MyCreative Ventures. J. Ishak explained that “the creative industry in Malaysia only contributes about 1.3% of the gross domestic product. It is very low” he said. “Malaysia traditionally relies on oil & gas, electronics and plantation for its economy. However, in the efforts to reduce that dependency, a secondary level of economic commodity should be nourished to cushion any economic downturn that affects the primary economic dependencies mentioned earlier.”
Since the economic crisis hit many countries, several governments have started paying ‘attention’ to the creative economy. I asked him, how did the Malaysian government conclude that the country’s creative industry was significant to the national economy.
He explained that “Malaysia has thousands of years of culture and art and this is not being monetized as well as some other countries like Korea, Indonesia, Canada, Japan. These other countries have at least 5% to 7% of creative industry contribution to their overall economy.”
In my first article about MyCreative in this blog, what had caught my attention was the notion of recognizing Intellectual Property (IP) as loan collateral for funding creative entrepreneurs. So I asked J. Ishak to explain in simple non-finance words what is “strategic and innovative funding in a form of equity or debt investments”. “We do not give out grants” he said. “We only give business loans in term loan format or revolving credits. We also invest via equity in preference shares format. Our investee companies or our clients who borrow money from us need to meet key criteria.” These criteria he said are
– Malaysian incorporated company
– At least 51% owned by Malaysians and
– Running business in the areas of creative elements such as visual arts, performing arts, music, literature, content creation (TV, film, games), fashion & design and traditional & cultural arts.
I further asked for some examples of companies having received MyCreative’s support. J. Ishak mentioned
1. Fashion designer “Melinda Looi”
2. Games developer “Accurve”
3. Art gallery “Art Cube”
4. Film producer “Dragon Slate”
5. Theatre production management “Mypaa” and
6. Fashion designer “Khoon Hooi”.
Finally, my questions were towards the Intellectual Property (IP) issue which, to many creative professionals seems difficult to deal with. Very often, artists fail to understand its value, let alone its commercial attributes. I asked Johan Ishak how does MyCreative recognize IP as loan collateral? He said that “we require them [creative companies] to register their IP with the relevant authorities (in Malaysia it is MYIPO).”
At this point, it is valuable to mention that in 2006, the World Intellectual Property Organisation (WIPO), a UN Agency, published a very interesting Booklet entitled “Managing Creative Enterprises”. It is a very useful guide when talking about IP and the value of creative works. The document can be found here and it gives great insight in managing IP in Creative Enterprises.
In trying to understand better the role of IP Valuers, I asked J. Ishak what is their role for the creative industries in placing a monetary value to the IP assets concerned? He said that “at this juncture for MyCreative, we do not need valuers for IP as we will look at the business as a whole to see whether the cash flow model is adequate to sustain recoveries of our loans or investments. The Valuers are mainly for the existing commercial banks to work out how much the IP value is so that they can figure out how much of the loans to be given can be secured with the collateralisation of those IP.”
That made very clear the distinction between a traditional bank lending money and MyCreative’s overall assessment of the financial status of a creative enterprise. So, I asked for some examples of an artist’s IP that has been valued as loan collateral in Malaysia or elsewhere. J. Ishak explained that “so far, no valuation has been done for creative industry IP in Malaysia yet. It had just begun.” He said that “[…] this is still progressing because the only financiers in Malaysia that take IP as collateral are MyCreative and Malaysian Debt Ventures under their IP financing fund.” He didn’t know of any other example other than in Malaysia and he said that “perhaps the most famous one that is close to this concept of IP collateralisation, would be the singer David Bowie who issued bonds to raise money from the public. The bond is back to back to his IP assets.”
Looking into this case, I found out that “the Bowie Bonds, as they were named, are asset-backed securities of current and future revenues of the first 25 albums (287 songs) of David Bowie’s collection recorded before 1990. The bonds were issued by David Bowie in 1997, and were bought for $55 million by the Prudential Insurance Company. The 287 included songs also acted as collateral to insure the bond. The Bonds were a ten-year issue, after which the royalties of the songs would return to David Bowie.
By forfeiting ten years worth of royalties, Bowie was able to receive $55 million up front, which allowed him to buy out the rights to the David Bowie songs owned by a former manager. David Bowie now owns the rights to every one of his songs.
The Bowie Bond issuance was perhaps the first instance of intellectual property rights securitization. The securitization of the collections of other artists, such as James Brown, Ashford & Simpson and the Isley Brothers, later followed.” (Source)