THEORIES CREATIVE INDUSTRIES
Need to know in general the competitive processes in the different creative industries for the exam
Lecture 1: Where is the money?
Two sides in the creative industries > subsidized by the government or not or partly, and has an
interdependent relationship.
Peltoniemi (2015) Cultural industries are those that produce experience goods with considerable creative
elements and aim these at the consumer market via mass distribution. Many cultural industries
definitions begin from the nature of the value of cultural goods. Such goods offer a low level of utilitarian
value, and a high level of aesthetic (Hirsch 1972; Power 2002), symbolic (DeFillippi et al. 2007; Throsby,
2001), social meaning (Markusen et al. 2008) and social display value (Bourdieu 1984; Scott 1999a).
Cultural industries as industry systems (Hirsch, 1972, 2000)
- which also means as value systems allowing particular business models at particular stages
- Cultural industries as communities – Peltoniemi (2015)
- which does not only mean communities of producers, but also include consumers
Creative industry business models:
- Where to find revenues in a particular market setting
- Where to find the stuff that will make revenues come to us at minimal cost
- If we can do 1 and 2, how to make sure it stays that way (competition/protection of content)
Sources of revenue: selling the creative good, advertisement, do you have subsidies, other types of
supports (grants, sponsorship), revenues we offer on the side (shop, restaurant).
Article - Frey & Steiner (2012): Pay as you go
Voluntary contribution if no museum entry price. But how/why to price?
- To help to fulfill its basic museum responsibilities, namely showing its collection responsibly; too many
visitors put the collection at risk and diminish the quality of the visit
- To achieve economic goals; revenue, differentiation
- To achieve other social/political goals; getting the support of broader groups of stakeholder, e.g. by
involving schools (which can lead to financial advantages if this contributes towards the museum’s
standing in the eyes of other stakeholders who provide revenue.
None of these goals can be pursued without affecting other goals, so they are interdependent.
Pricing schemes: fixed price, free entry, membership, voluntary donation, exit price.
Free entry has advantages: museums can be considered social, it increases the number of visitors, which
may be seen as a sign of increased cultural prestige for the museum and donors prefer nonprofit firms.
Free entry is sometimes justified with the economic efficiency argument that the additional cost of
admitting one more visitor is zero, but this is only in the short run. Disadvantages are: overcrowded,
quality diminishes and the total revenue of a museum decreases. There are 2 income sources for
museums: public grants and ticket revenues.
Voluntary (start/exit) donation can capture payments according to willingness and ability to pay.
However, the rational homo economicus, would give nothing having no reason to give a donation at the
end, when he already profited. However, this is a more efficient option than free entry and produces more
financial resources for the museum.
There are various reasons why a majority rejects the price system as rationing device, due to lack of
information, conflict over income distribution and pricing is considered unfair. But admission charges can
be considered reasonable because those who visit a museum are those who derive the most benefit from
it, given that a benefit-related tax cannot be implemented and can be used to promote access.
The great advantage of pricing according to neo-classical principles is that it produces an efficient
allocation of the scarce resources of museums. However, the efficiency approach has various problems
because it does not consider distributional aspects.
1
, Exit price could be fixed, voluntary or obligatory but variable. Pricing at exit according to time spent
inside and can take into account how satisfied the visitors were with the museum (something that is often
hard to capture). Not a voluntary contribution on the basis of subjective perception of how good the
experience was (and fairness), but a price that varies and justifies with an objectified experience. A side
effect of being more satisfied is that visitors may be willing to spend more money at the museum’s shop
or restaurant.
A disadvantage of exit prices is that people might rush, which conflicts with the idea of a cultural
experience being independent from economic necessities. Overall exit prices have the same advantages as
entry prices, plus: they take into account the good characteristics of a museum visit, the opportunity set of
visitors is increased en the entry barrier is lower than with a fixed price.
Price differentiation is efficient when:
- Demand is low and far from full capacity. Then the price should be close to 0
- People with a low price elasticity of demand should be charged higher prices than those with a high
elasticity of demand. Low price = long queue, high price = short queue.
- Demand is higher, meaning that the price also should be higher
Article – Caves (2003): Contracts between art and commerce
In cultural industries, suppliers of artistic inputs have to work together with suppliers of humdrum
goods. This leads to particular types of contracts in which the risks & rewards are distributed very
unevenly or to “motley-crew” type organizations
Contractual/economic relations between the artists and others to reach your consumer.
Artist/facilitator deals: painter and gallery (50/50), writer and publisher (10%), musician and recording
company. However, this is a very unequal relation, for example in revenue sharing (exploitation). On the
other side, there may be no other options for the artists.
Motley crew deals: moviemaking, TV series, theatre
Core characteristics of cultural production:
- “Nobody knows” principle: nobody knows what will be successful; 3/4 doesn’t survive the year. Nobody
knows (+ oversupply of artists) give facilitators power to tell the artist s/he better sign or they can find
100 others who would. The input value is important, because when a musical flops, there is no economic
value. When a shampoo flops, shampoo can be repackaged and remains economic value. The investment
upfront can determine the risk of success. Operates in different ways, in different classes of people
(famous or not famous).
- “Art for art’s sake” (physical income) vs “show me the money”. People in the creative industries like
their work and have a psychological income, maybe less monetary income, but same point of satisfaction.
Balance of power on the other side of the equation, so when something becomes successful, the
contractual partner will want to have the bigger part of the revenue. When the artist is a famous star, the
balance of power is reversed (no “nobody knows” principle), because people will buy a ticket because
they know/like you. The stars can negotiate their contract.
Revenue-sharing joint ventures with up-front payments and real option contracts with successive
transfers of decision rights make repeated appearances in the creative industries.
Article - Hirsch: Fads and fashions, the cultural industries (revisited)
“Commercial cultural products are conceived as nonmaterial goods (live, on of a kind or contains a unique
set of ideas), directed at a mass public of consumers for whom that serve an esthetic, rather than a clearly
utilitarian purpose.”
Because of the uncertainty of cultural markets, products are made specifically to please cultural
gatekeepers (in reality tv these are the tv networks, in payola article these were the radio dj’s)
Important: cultural production takes place industry systems, meaning that there are a lot of different
stages of production and players (reviewers) that can influence the viability. The concept of an industry
system is proposed to trace the flow of new products as they are filtered through each level of
organization and examine relation among organizations. Furthermore, every consumer industry is
engaged to some extend in the production of cultural goods, and any consumer good can thus be
considered between cultural and utilitarian products.
2
Need to know in general the competitive processes in the different creative industries for the exam
Lecture 1: Where is the money?
Two sides in the creative industries > subsidized by the government or not or partly, and has an
interdependent relationship.
Peltoniemi (2015) Cultural industries are those that produce experience goods with considerable creative
elements and aim these at the consumer market via mass distribution. Many cultural industries
definitions begin from the nature of the value of cultural goods. Such goods offer a low level of utilitarian
value, and a high level of aesthetic (Hirsch 1972; Power 2002), symbolic (DeFillippi et al. 2007; Throsby,
2001), social meaning (Markusen et al. 2008) and social display value (Bourdieu 1984; Scott 1999a).
Cultural industries as industry systems (Hirsch, 1972, 2000)
- which also means as value systems allowing particular business models at particular stages
- Cultural industries as communities – Peltoniemi (2015)
- which does not only mean communities of producers, but also include consumers
Creative industry business models:
- Where to find revenues in a particular market setting
- Where to find the stuff that will make revenues come to us at minimal cost
- If we can do 1 and 2, how to make sure it stays that way (competition/protection of content)
Sources of revenue: selling the creative good, advertisement, do you have subsidies, other types of
supports (grants, sponsorship), revenues we offer on the side (shop, restaurant).
Article - Frey & Steiner (2012): Pay as you go
Voluntary contribution if no museum entry price. But how/why to price?
- To help to fulfill its basic museum responsibilities, namely showing its collection responsibly; too many
visitors put the collection at risk and diminish the quality of the visit
- To achieve economic goals; revenue, differentiation
- To achieve other social/political goals; getting the support of broader groups of stakeholder, e.g. by
involving schools (which can lead to financial advantages if this contributes towards the museum’s
standing in the eyes of other stakeholders who provide revenue.
None of these goals can be pursued without affecting other goals, so they are interdependent.
Pricing schemes: fixed price, free entry, membership, voluntary donation, exit price.
Free entry has advantages: museums can be considered social, it increases the number of visitors, which
may be seen as a sign of increased cultural prestige for the museum and donors prefer nonprofit firms.
Free entry is sometimes justified with the economic efficiency argument that the additional cost of
admitting one more visitor is zero, but this is only in the short run. Disadvantages are: overcrowded,
quality diminishes and the total revenue of a museum decreases. There are 2 income sources for
museums: public grants and ticket revenues.
Voluntary (start/exit) donation can capture payments according to willingness and ability to pay.
However, the rational homo economicus, would give nothing having no reason to give a donation at the
end, when he already profited. However, this is a more efficient option than free entry and produces more
financial resources for the museum.
There are various reasons why a majority rejects the price system as rationing device, due to lack of
information, conflict over income distribution and pricing is considered unfair. But admission charges can
be considered reasonable because those who visit a museum are those who derive the most benefit from
it, given that a benefit-related tax cannot be implemented and can be used to promote access.
The great advantage of pricing according to neo-classical principles is that it produces an efficient
allocation of the scarce resources of museums. However, the efficiency approach has various problems
because it does not consider distributional aspects.
1
, Exit price could be fixed, voluntary or obligatory but variable. Pricing at exit according to time spent
inside and can take into account how satisfied the visitors were with the museum (something that is often
hard to capture). Not a voluntary contribution on the basis of subjective perception of how good the
experience was (and fairness), but a price that varies and justifies with an objectified experience. A side
effect of being more satisfied is that visitors may be willing to spend more money at the museum’s shop
or restaurant.
A disadvantage of exit prices is that people might rush, which conflicts with the idea of a cultural
experience being independent from economic necessities. Overall exit prices have the same advantages as
entry prices, plus: they take into account the good characteristics of a museum visit, the opportunity set of
visitors is increased en the entry barrier is lower than with a fixed price.
Price differentiation is efficient when:
- Demand is low and far from full capacity. Then the price should be close to 0
- People with a low price elasticity of demand should be charged higher prices than those with a high
elasticity of demand. Low price = long queue, high price = short queue.
- Demand is higher, meaning that the price also should be higher
Article – Caves (2003): Contracts between art and commerce
In cultural industries, suppliers of artistic inputs have to work together with suppliers of humdrum
goods. This leads to particular types of contracts in which the risks & rewards are distributed very
unevenly or to “motley-crew” type organizations
Contractual/economic relations between the artists and others to reach your consumer.
Artist/facilitator deals: painter and gallery (50/50), writer and publisher (10%), musician and recording
company. However, this is a very unequal relation, for example in revenue sharing (exploitation). On the
other side, there may be no other options for the artists.
Motley crew deals: moviemaking, TV series, theatre
Core characteristics of cultural production:
- “Nobody knows” principle: nobody knows what will be successful; 3/4 doesn’t survive the year. Nobody
knows (+ oversupply of artists) give facilitators power to tell the artist s/he better sign or they can find
100 others who would. The input value is important, because when a musical flops, there is no economic
value. When a shampoo flops, shampoo can be repackaged and remains economic value. The investment
upfront can determine the risk of success. Operates in different ways, in different classes of people
(famous or not famous).
- “Art for art’s sake” (physical income) vs “show me the money”. People in the creative industries like
their work and have a psychological income, maybe less monetary income, but same point of satisfaction.
Balance of power on the other side of the equation, so when something becomes successful, the
contractual partner will want to have the bigger part of the revenue. When the artist is a famous star, the
balance of power is reversed (no “nobody knows” principle), because people will buy a ticket because
they know/like you. The stars can negotiate their contract.
Revenue-sharing joint ventures with up-front payments and real option contracts with successive
transfers of decision rights make repeated appearances in the creative industries.
Article - Hirsch: Fads and fashions, the cultural industries (revisited)
“Commercial cultural products are conceived as nonmaterial goods (live, on of a kind or contains a unique
set of ideas), directed at a mass public of consumers for whom that serve an esthetic, rather than a clearly
utilitarian purpose.”
Because of the uncertainty of cultural markets, products are made specifically to please cultural
gatekeepers (in reality tv these are the tv networks, in payola article these were the radio dj’s)
Important: cultural production takes place industry systems, meaning that there are a lot of different
stages of production and players (reviewers) that can influence the viability. The concept of an industry
system is proposed to trace the flow of new products as they are filtered through each level of
organization and examine relation among organizations. Furthermore, every consumer industry is
engaged to some extend in the production of cultural goods, and any consumer good can thus be
considered between cultural and utilitarian products.
2
