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 WirtschaftsforschungSaarbrücken, 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 CraftsPaintings – 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 manufacturersCultural 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 AMADEUSData elaborated by Media Group

Turnover 2003, all sectors included (€ million)

14.603

22.174

3185.577

10.111

612

10.677

79.424

126.060

6.922

84.359

508 759 673 236.235

61.333

18.155

884 2.205 212

14.841

132.682

33.372

6.8754.066

6.358

2.4981.771

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

Austri

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Belgiu

m

Cypru

s

Czech

Rep

ublic

Denm

ark

Eston

ia

Finlan

d

Franc

e

Ger

man

y

Gre

ece

Hunga

ry

Irelan

dIta

ly

Latv

ia

Lith

uani

a

Luxe

mbo

urg

Mal

ta

Nethe

rland

s

Polan

d

Portu

gal

Slova

kia

Slove

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Spain

Sweden

Unite

d Kin

gdom

Bulga

ria

Roman

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Norway

Icela

nd

“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 ICTsMedia content → key driver for ICT uptakeExamples: broadband penetration, 3G mobile phones, digital

TV, MP3 players (Apple’s iPod and iTunes music store)

GROWTH PROSPECTS FOR THE CREATIVE SECTORDigital 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:

1. Cultural activities attract tourists

2. Culture goods and services produced at a local level and benefiting from “cultural clusters”

3. 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 EuropeMain 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

Download the PDF file of our study The Economy of Culture in Europe

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THANK YOU!