THE ECONOMY OF CULTURE IN EUROPE

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THE ECONOMY OF CULTURE IN EUROPE Study prepared
for the European Commission (Directorate General
for Education and Culture)
October 2006
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The Ambition

• Put a figure on creative value
• Consider Europes 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

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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

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Delineation of the cultural creative sector
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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)

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Quantifiable socio-economic impact of the
cultural and creative sector
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Contribution of the European cultural and
creative sector to the national economies
Source Eurostat and AMADEUS Data elaborated by
Media Group
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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

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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

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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 tomorrows job market

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Cultural and cultural tourism employment in the
EU25 (2004 - in thousands)
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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

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The indirect contribution of the cultural
creative sector to the Lisbon Agenda
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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)

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The interdependence between the cultural and
creative sector and ICT

• INCREASED GROWTH PROSPECTS FOR ICTs
• Media 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

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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)

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Culture as an engine for the emergence of
creative hubs and local development

• Three distinct roles for culture in local
  development
• Cultural activities attract tourists
• Culture goods and services produced at a local
  level and benefiting from cultural clusters
• Cultural activities have significant social
  impacts

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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

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Culture as an engine for tourism

• Heritage
• Arts fairs
• Museums and exhibitions
• Festivals and trade fairs
• The performing arts
• Film tourism

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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

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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 UKs creative capital
• Second largest business sector (29 billion GBP
  annual turnover) and third largest sector of
  employment
• Montréal
• The video games industrys Hollywood
• A broad range of tax credits and local support
  measures
• Multimedia companies provide 3,500 jobs (2005)

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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

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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

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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

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A strategy for creativity Europe, UK, Wales
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A strategy for a Creative Europe/UK/Wales

• Europes competitiveness rests in culture and
  creativity
• Post-industrialised knowledge economy
• The challenges
• Europes global and national champions
• Weak export potential
• Sector is SME-driven
• Nature of cultural products
• Market fragmentation

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The European cultural and creative sector -
Strengths and weaknesses
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Recommendations for a Creative Europe/UK/Wales

• Establish a stronger quantitative evidence base
  for policy makers
• Integrate the culture and creative sector into
  the Lisbon Agenda
• Support the Digital Shift
• Address chronic under-funding of cultural
  creative industries
• EU regional policy to boost creativity
• Support cultural diversity in Europe and
  internationally
• Create coherence and engage with the creative
  sector

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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

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THANK YOU!

• Download the PDF file of our study
• The Economy of Culture in Europe
• from the welcome page at www.keanet.eu