• Stuart Cunningham, Paul Ormerod

04 April 2008
Almost all creative ventures fail, but the successful ventures can be spectacular, write PAUL ORMEROD and STUART CUNNINGHAM

AMERICA?s grip on cultural and creative activity has been a major source of jobs and wealth for the United States for decades.

Creative industries are becoming more and more important in the world economy. And Australia has been getting in on the act. The creative sector exhibits growth rates at times much higher than the economy as a whole.

Surely this must be a good thing? Well, up to a point. The creative industries ? film, music, games, for example ? are different. We all know that. But they are spectacularly different from more traditional industries. And the differences are inherent in the very nature of the creative process.

Failure is endemic in corporate life. More than 10 per cent of firms disappear every year ? here, in Europe and in America. But side by side with failure comes success. In the creative industries, these features are magnified to become larger than life. Almost all creative ventures fail. But the ones which succeed can do so on a spectacular scale.

Inequalities pervade creative industries in a way which would cause a massive public outcry if mirrored in society as a whole. Anyone who has ever put on a show at the Edinburgh Festival, and lots of Australians have, will recognise this immediately. Almost all performances there lose money, with many shows attracting a mere handful or even zero paying customers. A select few achieve success, which can then extend far beyond the festival itself.

In political life, people hold up the United States as the prime example of an unequal society. Social scientists have a way of measuring this, something called the Gini coefficient. In a completely equal society, where everyone earned the same, its value would be zero. At the opposite extreme, where all the income went to a single person and everyone else had none, it would be 100.

The American distribution of income is in the 40?45 range, compared to just over 30 in Australia. For the distribution of revenue amongst films, it is 80, and among film distributors almost 90.

Perhaps government could get round the problem by the traditional strategy of trying to pick winners. That way, at least success could be shared around different parts of the country by subsidising winners to relocate to areas where new growth sources and spurs to innovation are required. Unfortunately not. A further crucial feature of creative industries is that it is extremely difficult, and sometimes literally impossible, to say in advance whether a product, a concept and idea, or whatever, is going to succeed or not.

The reason why the success or failure of creative products is so unpredictable in advance is the same reason why gross inequalities of outcome pervade these industries. Whenever a new film, a new play, a new idea appears, by definition none of the potential audience can experience it in advance. People may have very strong views on, say, Wagner as a composer, but until the latest performance of Gotterdammerung is actually given, even Wagner fans do not know whether they will like it or loathe it. They can only form an opinion once it has appeared.

The key way in which opinions are formed is across social networks. Put more simply: word of mouth. Fans of a particular film star, author, comedian or whatever, will discuss the latest offering with other like-minded people. And their opinions count. The diffusion of these opinions can reach critical mass and tip the balance between blockbuster success or the ignominy of failing to break through. Only a few succeed and the rewards to those who do are great.

So does Australia?s growing success in cultural and creative industries mean that the country will ultimately become more like America, where marked inequalities are an everyday and widely accepted part of life? We already know that more than 30 per cent of Australia?s young rich come from the creative and new media industries. As creative enterprise becomes a bigger part of economies that are already heavily weighted towards services, will less desirable outcomes in terms of equality emerge?

The ARC Centre of Excellence in Creative Industries and Innovation and the Forum for European-Australian Science and Technology Cooperation, supported by British research agency the Arts and Humanities Research Council, hosted an international workshop in Brisbane last week to develop a theoretical framework and policy principles for creative industries and innovation.

The winner-takes-all dynamic doesn?t mean we will automatically have a colder, more heartless creative world. We have always known ? unusually for ?real? industries ? that creative industries span the boundaries between the so-called household and market sectors and provide a range of social and cultural benefit that is not captured in narrowly-defined economic ?performance indicators.?

Indeed, with the affordance provide by the internet and especially web 2.0, barriers to entry of the world of creative enterprise and activity are much lower. Along with the usual entry pathways to a creative career, social media, blogging, and user-generated content are exploding, providing the entry card for many who want to roll the dice and see if they can make it in the world of the arts, digital applications, games, writing, media, fashion, or design.

So there is also a hugely democratic and participatory element that is the flip side, as it were, of the winner-takes-all dynamic.

The key thing happening here is that closed, expert systems based on a purely provider mentality are becoming much more open. Creative enterprise is beginning to look like an enabling social technology or platform, like the law, science or even markets themselves, which provide a basis for effective participation ? and career opportunity in enterprises which are only now being born ? in a digitised, networked, globalised world. Social networks are becoming the basis for emerging markets.

The emergence of giant ?access corporations? like Google and Yahoo, which have grown by harvesting the creativity and communication activity of plain folks, shows that democratic participation and innovative business models can go hand in hand.

A key role for policy is to make sure that anyone is able to participate, regardless of location, education level, gender or age. Universal digital literacy is an important goal for social, economic and innovation policy as much as education policy. Equality of opportunity afforded by participation in digital creativity, communication and expression, rather than equality of outcomes, should be a basic policy objective.

This has significant implications for education policy. Digital literacy as one of the core capacities for functional as well as higher order, creative participation in twentieth century society has been recognised in policy debate in countries as diverse as Singapore and Britain. For us to modernise our grasp of core literacies, we would need to address the risk-averse nature of much formal schooling policy and practice. In many states, YouTube, Flickr, as well as social media such as MySpace and Facebook, along with other web 2.0 applications, are banned from use on school computers. Students could be engaged to learn about scaling up their vernacular creativity that might fit them well for entrepreneurial activity beyond school.

Obviously, policies to secure the provision of near-universal, reliable broadband access, especially beyond the cities, follows logically from what we have been arguing. Policies that strengthen links between vernacular creativity and the world of creative industries are also needed. An example is supplied in the recently released Creative Britain policy, where 5000 apprenticeships ?to help people of all backgrounds make the most of their creative skills? are to be rolled out. ?

Paul Ormerod is Director of Volterra Consulting, London and best-selling author of The Death of Economics, Butterfly Economics, and Why Most Things Fail. Stuart Cunningham is Director of the ARC Centre of Excellence for Creative Industries and Innovation.
Photo: Christopher Ewing/iStockphoto.com