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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 press publishing
CIRCLE 2: CREATIVE INDUSTRIES AND ACTIVITIES
Design Fashion design, graphic design, interior design, product design
Architecture
Advertising
CIRCLE 3: RELATED INDUSTRIES
ICT manufacturers
DCMS’ approach to the cultural industries
• Creative industries include advertising, architecture, the arts and antiques market, crafts, design, designer fashion, film and video, interactive leisure software, music, the performing arts, publishing, software and computer games, television and radio
• DCMS’ findings for the UK in 2001:– Turnover: €165.43 billion– Value added to national GDP: €85 billion (6.8% of national
GDP)– Exports: €15.1 billion (4.7% of total exports)– Employment (private sector): 1.3 million people (4.3% of total
workforce)
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)
14.60322.174
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 2121.771
2.498
6.3584.066
6.875
33.372
132.682
14.841
0
20.000
40.000
60.000
80.000
100.000
120.000
140.000
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 (UK: 1.38); 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)
• UK: 8.7%
Intangible assets: ratio on turnover• EU25 Average is 4.2% (by comparison, the average ratio for
the Finnish ICT sector is 4.8%)• UK: 8.4%
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
Cultural and cultural tourism employment in the EU25 (2004 - in thousands)
957
181
883
182
467
156
496
122
379
180
296
47
231
34
136
20
97
42
89
27
76
40
94
19
79
32
81
22
81
9
78
11
51
20
53
10
46
16
29
1229
6
295
29
3
19
3
8
0
7
1 3
2 4
1
0
200
400
600
800
1000
1200
DE UK IT FR ES NL PL SE EL CZ PT BE AT HU DK FI BU NO IE SK SI LT LV EE CY IS MT LU
Cultural employment Cultural tourism employment
The role of public support
• Different levels of intervention– Financial (cinema – heritage – performing arts)– Regulatory (books, TV)
• Difficult to compare data - definitions
• Estimated total public expenditure (EU28) €46.6 billion (source: KEA) (UK: €5.1 billion)
• 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 uptake
Examples: broadband penetration, 3G mobile phones, digital TV
GROWTH PROSPECTS FOR THE CULTURAL & CREATIVE SECTOR Digital technology is radically transforming the production, circulation and consumption of content, leading to new supports, applications and content offerings
The Long Tail Theory
Outlook - PWC
• New spending streams on ICT-related media (Internet, digital music, online video games, digital TV, VOD) will account for 12% of the total increase in entertainment and media spending until 2009
• Compound annual growth for Europe is forecast at 6.5%
• From a market valued at USD 417 billion in 2004 to USD 572 billion by 2009
Source: Global Entertainment and Media Outlook – PWC (June 2005)
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
Film tourism in the UK
People are interested in visiting locations in which a film or a scene was shot
• Doubling of visitors in Alnwick Castle, location for Hogwarts School of Magic in the Harry Potter films. Overnight revenues from tourism increased to almost €13 million a year
• Queen Elizabeth suite at the Crowne Hotel, Amersham, has been booked up a year in advance after “Four Weddings and a Funeral”
• Rosslyn Chapel on the outskirts of Edinburgh is well-known thanks to the numerous film scenes screened there. It can easily be combined with other cultural attractions in Edinburgh
Creativity as a tool for local development (1)
“Creative cities”
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 employmentMontréal:• The “video games industry’s Hollywood”• A broad range of tax credits and local support measures• Multimedia companies provide 3,500 jobs (2005)
Creativity as a tool for local development (2)
A Welsh creative family enterprise: Ty Nant
• Designed an innovative cobalt-blue bottle of mineral water• Won a long list of Design Awards• Ranks first by value in the UK (estimated turnover of around £4 million)• Exports 60% of its production to some 30 different countries• Employed 38 staff in Llanon in 2004
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 Welsh success: the Aberystwyth Arts Centre
• Located within the Aberystwyth University Campus, the Centre hosts and organises a wide variety of activities including performing arts, cinema and art education.
• The Centre is the main regional employer: 40 full time and 119 part time employees
• Turnover: £3.3 million in 2004-2005 (71% from earned income, 29% from public grants)
• Significant indirect impact on the local region: £5.7 million of turnover in total, £1.6 million of income, and 150 full time equivalent jobs→ The Centre is both a driver of local demand and activity and a driver for visitors. It also fulfils essential education and enlightenment functions
A strategy for creativity: Europe, UK, Wales
A strategy for a Creative Europe/UK/Wales
• Europe’s competitiveness rests in culture and creativity
• Post-industrialised knowledge economy
The challenges:• Europe’s global and national champions• Weak export potential• Sector is SME-driven• Nature of cultural products• Market fragmentation
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.
Recommendations for a Creative Europe/UK/Wales
1. Establish a stronger quantitative evidence base for policy makers
2. Integrate the culture and creative sector into the Lisbon Agenda
3. Support the Digital Shift4. Address chronic under-funding of cultural & creative
industries5. EU regional policy to boost creativity6. Support cultural diversity in Europe and internationally7. Create coherence and engage with the creative sector
Next steps
• EC Communication on Culture (spring 2007)
• Culture Council in Brussels (24-25 Ma y 2007)
• Follow-up with the Portuguese and Slovenian EU Presidencies
Download the PDF file of our study The Economy of Culture in Europe
from the welcome page at www.keanet.eu
THANK YOU!