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)
While looking for information on IPs in the creative industries and how they are used in cultural enterprises, I found a very interesting initiative by the Malaysian government called “MyCreative Ventures”. MyCreative is “a government investment arm to spur Malaysia’s creative industry via strategic and innovative funding in a form of equity or debt investments.”
In the article entitled “ELEVATING THE CREATIVE INDUSTRY IN MALAYSIA” the author explains how “unlike other types of businesses, creative industry entrepreneurs have nothing solid to show. They lament that it is almost impossible for them to obtain the funding they need in order to expand their operations.
This is mainly because banks are reluctant to accept or recognize intellectual property (IP) as loan collateral because of the lack of Certified IP Valuers who are able to place a monetary value to the IP assets concerned.”
The article further explains how MyCreative Venture was “incorporated by the Minister of Finance Incorporated ‘MOF(Inc)’ on April 20, 2012 to overcome this valuation lacuna and spur development in the creative industry by providing avenues for IP financing. Top on the MyCreative Venture’s agenda is to convince banks and financial institutions on the viability of accepting IPs as collaterals for loans.”
MyCreative Venture Chief Executive Officer Johan Ishak says that the creative industry in Malaysia “has generated an abundance of IPs which could be turned to valuable assets. […] MyCreative Venture’s mission then is to bring the Malaysian creative industry to the next level by achieving a sustainable future that is rewarding from the social, cultural and economic perspectives,” he said.
More articles to come on Intellectual Property in cultural enterprises in the coming weeks.
In the Touch Shanghai website of the Municipality of Shanghai, a visitor can find info and contact details of 10 selected developments for the Creative Industries. It is an impressive promotion and work in the different creative disciplines.
- The Bridge 8 Creative iesCluster
A Promising Land for Creative ies
The Bridge 8 Creative iesCluster lies in the center of Shanghai. As one of the first creative iesclusters, it is a demonstration center of energy conservation and consumption reduction for the renovation of the old workshops of Shanghai, a base of Shanghai for foreign culture exchanges, and a landmark for creative iesof Shanghai and even China. Official Website: http://www.bridge8.com
- F525 Art Forest
How Did an Old Factory Become a Mini “UN”
As a creative industry cluster, F525 Art Forest was built on the transformed workshops of a garment factory. The zone is designed to create a working atmosphere suitable for these engaged in creative industries and provide value-added services suitable for the development of creative enterprises. Official Website: http://www.dobechina.com; http://www.f525.com
- New Ten Steel (Redtown)
New Art Life of the Old Workshops
Redtown Culture and Art Community, created in the New Ten Steel Creative Industry Cluster, is located at No. 570 West Huaihai Road, Changning District, adjoining Xujiahui Business Center. Built on the former site of No. 10 Steel Plant of Shanghai Steel Company, it covers an area of around 50,000 square meters and a total building area of 46,000 square meters. Official Website: http://www.redtown570.com
- Wise Jinsha – 3131 Creative Park
A Creative Industry Park Based Upon E-commerce
Wise Jinsha – 3131 Creative Park is the Phase I project of Wise Jinsha, Shanghai International Information Service Industry Park. The park is located at No. 3131 Jinshajiang Road. The former site of the park is the workshop building of a factory on Zhenxin Sub-district. Official Website: http://www.g-park.cn
- Shanghai Pan-Tongji Design and Creation Cluster
Creative Industry Cluster in the “City of Design”
Shanghai Pan-Tongji Design and Creation Cluster covers an area of 2.6 square kilometers around Tongji University. In 2009, the zone was denominated by the Ministry of Science and Technology of China as “Pan-Tongji R&D Design Service Industry Base” under the National Torch Program.
- Shanghai Design and Trade Promotion Center
A Platform for International Design and Trade Services
Considering the circumstance that China lacks independent brand and independent innovation ability in export products, Shanghai Design and Trade Promotion Center was founded on September 16, 2010. With a view to becoming a public service platform, the center focuses on the industries of home textile and household products, textile and garment, etc. in the early stage. Official Website: http://www.shdtcenter.org
- M50 Creative Park
Art Blossoms on the New Tree
Built upon the plot affiliated to Shanghai Chunming Roving Factory, M50 Creative Park is located at No.50 Moganshan Road on the south bank of Suzhou Creek, Putuo District, which is also one of the birthplaces of national industries in Shanghai. The Park is renowned for its best protected national textile industrial complex along Suzhou Creek spanning from the 1930s to the 1990s. Official Website: http://www.m50.cn, http://www.m50.com.cn
- China Peasant Painting Village
Artistic Creative Power from Countryside
China Peasant Painting Village, the birthplace of Shanghai Jinshan Peasant Painting, is the hometown of Chinese folk painting and enjoys high prestige home and abroad. The folk culture and art have been well preserved, inherited, and explored locally. Currently developing into a special cultural industry, Jinshan Peasant Painting is in sound growth under joint support of government, media and peasant painters. Official Website: http://www.chinesefolkpaint.com
- Shanghai Multimedia Industry Park
A New Digital Frontier and Culture Landmark in Shanghai
Founded in 2002, Shanghai Multimedia Industry Park is the first of its kind in China featuring multimedia. The park has been granted the titles of National Digital Media Technology and Industry Base and National Cultural Industry Model Zone by Ministry of Science and Technology as well as Ministry of Culture successively. Official Website: http://www.multimediapark.com.cn
- Zhangjiang Cultural Industry Park
Forging the Service Chain of Cultural Industry for Development of Digital Media Industry
Zhangjiang Culture Holdings Co., Ltd was founded in June of 2008 through RMB 300 million Yuan investment from Shanghai Zhangjiang (Group) Co., Ltd. As the operator, service integrator, and developer for cultural industry in Zhangjiang Park, Zhangjiang Culture Holdings Co., Ltd adopts the mode of group operation and focuses on policy, service, industry, and the talents. Official Website: http://www.zjcreative.com.cn