QUT Digital Repository:
http;;//eprints.qut.edu.au
Cunningham, Stuart D. and Ryan, Mark D. and Keane, Michael A. and Ordonez,
Diego (2004) Financing Creative Industries in Developing Country Contexts.
© Copyright 2004 (please consult author)
Financing Creative Industries in Developing Country
Contexts
Stuart Cunningham, Mark David Ryan, Michael Keane, Diego Ordonez
Creative Industries Research and Applications Centre (CIRAC)
Queensland University of Technology
In this paper we address some issues of financing for creative industries in developing
countries, including the relationship between financial investment and best practice. The
discussion illustrates how different modes of finance are adopted – or how they might be
employed - to develop sustainable and export orientated creative industries. In addition,
we touch upon the larger and more difficult question of why cultural products and
services from developing countries struggle to make an impression in global markets.
Three regions of the globe offer important and different lessons. These are the People’s
Republic of China, Latin America, and Indigenous Australia. Examples from these
specific ‘regions’ include the commercial mass media (exemplifying economies of scale
and quality) as well as smaller innovative niche markets (illustrating unique and
distinctive inputs). In defining the scope of our discussion we acknowledge sectors
identified by the UNCTAD XI High Level Panel on Creative Industries and Development
as the core creative industries, namely: motion picture industry, the recording industry,
music, publishing, books, journal and newspaper publishing, computer software industry,
music and theatre production, photography, commercial art and display, radio, television,
and cable broadcasting industries (UNCTAD 2004). It should be made clear at the outset,
however, that this discussion does not claim to represent a comprehensive survey of
creative industries financing in what are highly differentiated global regions.
This paper is organised as follows: First, we introduce some key issues in relation to
financing creative industries in developing countries, including a basic value chain
framework. The first section also provides a typology of the cultural sectors in relation to
developing country contexts. This is followed by a snapshot of the kinds of markets that
currently exist. The second section is a discussion of barriers to development and modes
of finance currently being utilised or contemplated.
In the third section we examine specific case studies (from China, Latin America, and
Indigenous Australia) that illustrate the following:
z Shifts from a state-centred to a mixed financing model (China);
z Reliance on foreign finance leading to weaknesses in value chain and how private
partnerships can overcome systemic distribution barriers (Latin America); and
z Hurdles facing micro-financing models and lessons for developing international niche
markets (Indigenous Australia).
This is followed by a synthesis of the findings of this study.
-1-
EXECUTIVE SUMMARY
This paper examines modes of finance and barriers to the development of export
orientated creative industries in the following regions: China, Latin America and
Indigenous Australia. While the term ‘creative industries’ has yet to be widely embraced,
it is evident that culture is increasingly used as a resource for development. In these
regions, however, creative industries are still predominantly viewed as having a strong
association with traditional, official or national culture, a perception that needs to be
broadened in order to maximise future diverse economic development. The findings of
this study are categorised into three sections: emerging trends and issues, modes of
finance, and lessons learnt from the case studies.
Emerging trends and issues
The role of culture in development is currently being reassessed. The issue we have
canvassed here is not about access - but growing capacity and reforming financial
mechanisms. Structural adjustments and reform within developing countries
mandated by the IMF and the World Bank are beginning to indirectly effect the
cultural sector: new management strategies and new business models have been taken
up.
New financial models are emerging in response to the inherently risky nature of
creative business models. An emerging trend is the development of safeguards and
specific parameters as a feature of creative industries financing and risk management.
National economic agendas need to understand how traditional cultural segments are
increasingly influenced by the marketplace.
Creative industries in developing countries may struggle to compete in international
markets on a national level, but targeted development at a firm level may produce
internationally competitive firms that in turn generate flow-on value for the broader
economy.
Developing competitive advantage at a firm level is essential to the development of
export markets. The growth of creative industries needs to be assessed from the point
of view of innovation incentive structures. Such incentives can come from the state in
the form of direct industry assistance, or in an enabling sense, by providing incentives
to middle players in the value chain.
Finance, in a development context, cannot be considered in isolation from other
issues. As well as finance, creative enterprises require specialised business support,
marketing, management development, attention to innovation, copyright protection,
and rights management.
The majority of finance is directed towards the content creation and production stages
of the value chain. However, primary barriers are the packaging, marketing, and
distribution of creative products. Emphasis needs to be directed towards segments of
the value chain that inhibit growth and information flows.
-2-
In many sectors regulatory bottlenecks, as well as country-specific political and
cultural barriers, act as primary barriers to development.
Financing is closely linked to a need for an awareness of types of markets and
potential markets for export. Cultural specificity works against the capacity for
products from these regions to enter into mainstream global markets, with the
exception being breakthrough cultural markets (world music, art-house cinema) and
culturally proximate markets (e.g. Spanish or Chinese speaking markets). Economic
agendas need to consider targeting and strengthening these potential markets.
Modes of finance
A number of primary finance trends emerge from this study:
Financing is often serendipitous and fragmented.
Institutional and informal people networks are extremely important in leveraging
financial support and developing connections to financial sources.
Most modes of finance are aimed at the creation and production stages of the value
chain.
There is a lack of large-scale capital investment in the regions and creative industries
examined.
Public subsidy remains the primary form of finance in the regions examined.
Public support mechanisms have an important role to play in the future, however,
they will need to re-focus on specific segments of the value chain where barriers stifle
development.
New technologies and in particular partnerships with technology firms (ISPs, telcos,
etc), provide a new avenue to enter global markets and to overcome distribution
barriers. In this context, countries that have networked information infrastructures in
place have a considerable advantage.
Public/private partnerships present a ‘third way’ of financing creative industries.
Further examination is required to understand how public funding agencies can act as
a short-term guarantor, to foster creative enterprises through a transition from a
reliance on public funding to full or partial commercial viability derived from private
forms of investment.
Case studies
China
China illustrates the shift from a state-centred financing regime to a mixed financing
model with the rise of new private partnerships and innovative financing arrangements. It
also illustrates the role of informal mechanisms in getting product into the marketplace.
Irregular modes of production and distribution both inhibit and enable the flow of finance
-3-
with creative industries.
Latin America
For Latin America, reliance on foreign finance has led to weaknesses in the value chain.
Most investment incentive schemes are directed towards foreign entities. However,
innovative private partnership (more the exception than the rule) are enabling new modes
of distribution, and creating synergy. Informal people networks play an important role in
development, such as where a creator/producer is able to draw upon the institutional
networks of another agent/intermediary.
Indigenous Australia
This case study illustrates that: individual actors can successfully adapt ‘traditional elite’
cultural forms (without loosing cultural uniqueness of integrity) to appeal to the tastes of
a specific targeted international audience and market. Informal people networks and the
leverage of institutional networks (e.g. museums’ international networks) can be
important in developing an international network, obtaining finance and establishing
financial streams. Philanthropic, foundation and private investment can be important
financial sources for the production and distribution of ‘traditional elite’ art.
INTRODUCTION
In the past decade there has been a great deal of attention focused on the role of ICTs as
enablers of development (Preston 2001). As returns are eroded on lower-end
manufacturing, countries are seeking technological innovation as a means of capturing
markets higher up the value chain. Governments have responded by investing heavily in
national information infrastructures that will bridge the manufacturing economy and the
services economy (see Chin 2003). Along with this shift in priorities, there is increasing
acknowledgement of the global knowledge-based economy - and associated economies
such as the new economy, the online economy, the network economy, the learning
economy, and the information economy (Xue and Sheehan 2002).
The value of the creative economy - and in particular the economic rents that are derived
from intellectual property - has been heralded in industrialized and newly industrializing
countries. The harnessing of creativity brings with it the potential of new wealth creation,
the cultivation of local talent and the generation of creative capital, the development of
new export markets, significant multiplier effects throughout the broader economy, the
utilisation of information communication technologies and enhanced competitiveness in
an increasingly global economy. The core creative industries, which include the value-
added services that accrue with digital technologies, are now increasingly attractive to
governments outside the developed world. However, optimism that these advanced
services can provide a way forward is tempered by the knowledge that basic services are
not universally available outside of large cities in developing countries.
While creative industries are considered to be new growth areas, in developing countries
the output of creative industries barely figures in the reckoning of productivity. Creative
-4-
industries in developing countries are at a competitive disadvantage due to a more
pressing need for financial aid to be directed at problems of education, poverty alleviation,
and institution building. Likewise, the optimism that developing countries can leap-frog
into a neo-classical economic paradigm, needs to be evaluated from the perspective of
geography, social institutions, and lack of effective innovation systems (Sachs 2000).
This does not imply however, that creative industries cannot accrue capacity and value in
developing countries. The dot-com crash of 2000 and the Asian financial crisis of 1997-
1999 have caused governments and business to be more cautious about business models.
While the former dampened the fervour of entrepreneurial services providers and start
ups, the Asian economic crisis demonstrated that the state-industry nexus whereby
powerful corporations and state-owned enterprises monopolised the market had actually
worked against innovation, and in particular the formation of competitive creative
industries that could generate export earnings. In this respect the most pertinent lessons
about redundant development models in the creative industries has come via South Korea
where prior to the Asian economic crisis much of the economy was controlled by
chaebols (sprawling conglomerates). Short of cash following the Asian meltdown, the
chaebols were forced to divest cultural industry assets, among which were large
advertising agencies. Occurring during a period when Korea was moving from an export-
oriented economy to a consumer service economy along with a concomitant increase in
spending on advertising, this divestiture precipitated the growth of new competitive
enterprises (Yoon 2002). In the same time frame – and in response to the dot.com crash –
creative ventures such as SM Entertainment and record label YBM Seoul went public
while other start-up entertainment businesses took advantage of government largesse
towards culture industries and venture capital seed money. According to Suh-kyung
Yoon, ‘Money has allowed the industry to prosper, but competition has sparked its
creativity’ (Yoon 2001: 2).
This focus on the dual role of competition and creativity is relevant for our discussion of
the financing of creative industries in developing countries. While start-up finance is a
factor input often lacking in creative industries, the marriage of finance with creativity is
(and has been) fraught with risk (see Ryan 1992). Many creative projects remain within
the realm of ideas because there is inadequate finance to facilitate their development and
a lack of support mechanisms such as marketing, distribution, and promotion to add value.
In this context, forms of micro-finance have potential (for some creative micro-
enterprises) to ‘kick-start’ or develop ideas to a level where they can be taken further.
Moreover, in some newer and investment-heavy creative sectors, such as the video games
and digital animation industries, there is reluctance from investors to commit ‘sunk’
funds to develop what might be seen as ‘risky business models’. This deficiency in
funding mechanisms is linked to the unclear relationship between cultural capital and
economic capital. Returns on investment in culture increasingly need to be quantified,
whether positive public good externalities such as contributing to a peaceful and
multicultural environment, or actual profits to shareholders.
In the words of Throsby (2001), cultural value is ‘various and variable’ (29). While he
argues that the measurement of cultural value is difficult, it can be disaggregated into
-5-
several culturally valued components: aesthetics, spiritual, social, historical, symbolic
and authenticity (159). Thus cultural value permeates myriad issues including cultural
identity, diversity, creativity, cultural life of the community, regional development, and
heritage tourism (148).
Cultural value in developing countries is often embedded within national cultural and
folkloric contexts. Where there is a long cultural history, the creation of products for the
marketplace is both constrained and aided by tradition. While many elements of
traditional culture have contributed to the development of contemporary creative
industries such as video gaming, design, and cinema, the maintenance of traditional
aesthetic forms often requires that the aesthetic code remains intact. This can be
illustrated by debates over the commercialisation of tradition. In portraying these
separations, we provide the following segmentation in developing countries based on the
nature of markets for cultural products.
Fig. 1 Cultural segmentation in developing countries
Segments Examples Investment and Returns/ markets
models
Traditional elite Indigenous Static aesthetic forms High value in original
This segment most (traditional) art, with low capacity for form in elite markets;
reflects aesthetics, Chinese classical hybridisation; low some traction in tourism
authenticity, poetry. value-adding and markets;
spirituality and level of investment Symbolic capital for
inherent historical except in training of national identity but
cultural identity practitioners. often meets uninterested
national markets
Traditional Folkloric legends Evocative folk Cross-cultural
popular and myths e.g. culture capable of acceptance high, public
This segment Romance of the commercialisation domain IP but has
reflects social, Three Kingdoms and hybridisation capacity for transition
historic, and (China); across mass media and commercialisation
mythical forms Dreamtime stories into contemporary
(Indigenous) popular segment and
breakthrough markets.
Example of traditional
motifs in video gaming
Contemporary Ballet and High costs of Discriminating markets
elite symphony, high- production with but low economic
Often prestigious end performing patronage and returns; prestigious
-6-
cultural troupes; arts business sponsorship; cultural capital
high social capital. low capacity to
commercialise due to
consumer resistance
Contemporary Music, film, Consumer driven; National and
popular anime, video high value added international consumer
Most closely games, TV upstream and markets, as well as
correlated with the formats and series, downstream linking to content
creative industries advertising seeking business
design, interactive markets
content
Source: adapted from Richard Kraus, 1995
The breakdown of cultural production and consumption into the above four categories is
useful in identifying impediments to marketisation. However, it does not imply that
cultural production is necessarily trapped within these ‘boxes’. While elite and popular
cultures exist as critical discourses, research into consumption patterns shows that high
culture users are increasingly eclectic in their tastes, becoming ‘cultural omnivores’ - that
is, they consume both commercial and subsidized forms (O’Regan 2001: 9). Cultural
consumption is not confined to the cinema, the museum or the art gallery. In contrast to a
conservative predisposition to argue that there is not enough elite culture, or too much
popular/commercial culture, there is a view that culture is ubiquitous and value-adding.
In fact, culture is a vital element of economic value chains and it constitutes a way of life.
It is also expressed in polyvalent forms from public art to folk festivals, from urban
design to the design of web-sites.
It is important to recognise therefore that the globalisation of cultural production and
governmental support of cultural policy are breaking down the divisions between what is
elite and popular, and between what ought to be subsidized and what ought to be subject
to market forces. Arguments, such as Throsby’s (2001), about the ‘intangible’ attributes
of culture, which have long been the premise for public support of traditional classical,
traditional contemporary, and elite segments remain pertinent, especially in developing
countries, but the capacity of these segments to be repurposed via the medium of heritage
and tourism for example, means that they are not insulated from the marketplace.
Traditional forms of culture, aside from its role as maintaining cultural identity, now
targets niche markets in innovative ways. In China, for instance, it is possible to
download a classical Chinese poem on a mobile phone. This issue is pertinent if we
consider that domestic creative industries in developing countries are still predominantly
sourced from traditional culture.
Creative industries and location
In confronting the question of financing it is important to point out the fact that
difficulties and barriers to raising finance for creative industries development are not
limited to developing countries. A lack of start-up finance, capital for expansion, a
scarcity of venture capital, the knowledge and inflexibility of commercial financial
-7-
institutions, as well as the monopolization of international markets by a few multi-
nationals are problems faced by creative industries across the developed world. Barriers
to financing creative industries in developing countries is exacerbated by information
asymmetry, weak institutional and political support, low levels of entrepreneurial
capability, a dependency on foreign firms and foreign investment, inefficient or non-
existent copyright regimes and piracy.
The question is one of how to proceed in this environment. Michael Porter, well-known
for his work on competitive advantage, asserts that the productivity of nations and
regions depends on the value of products and services, their quality and uniqueness, and
on the efficiency with which they are produced. In short, productivity depends on how
firms (and nations) compete (Porter 2000: 16). While the issue of competitiveness has
been critiqued in relation to developing countries (UNCTAD 2003), the creative
industries do not replicate characteristics of industrial sectors. The discussion of China
provides an instance where national investment in the video games industry is designed
to create a base for the development of skills and expertise that will enable China to
compete with Korea in this lucrative value-added field. Likewise, the involvement by the
All China Sports Federation in the development of e-sports (national video gaming
competitions) shows that competitiveness in such new sectors is contingent on national
demand. China hopes to leverage its advantages of low cost Internet access and massive
demand to develop an industry champion. The same applies in the broadcasting industries
where state-directed agglomeration is aimed at increasing national competitiveness in
response to the perceived threats of cultural imperialism by transnational media and
communication companies (See Keane 2004). Moreover, there is overwhelming evidence
to suggest that creative industries - and the networks that enable them – cluster in
networked cites and regions in the developed countries, and increasingly in big cities in
East Asia (see Yusuf and Nabeshima 2004).
The inability to raise finance for start-ups is just one reason for the lack of sustainability
of creative businesses in developing countries, in comparison to resource-rich regions in
developed countries. It also illustrates why places such as Hollywood in the US and
Tokyo (Japan) have assumed leading roles as exporters of cultural content: the former for
its film industry, the latter primarily for amine and video games. The quality and
uniqueness that makes these products exportable depends on financial investment being
readily available. The fact that multinational producers of creative content are cognisant
of the role of breakthrough cultural movements (rap, ‘world’ music) provides some solace
for developing countries and impoverished regions within developed countries, from
where such breakthroughs and innovations are often incubated. However, the
development of the quality and uniqueness of creative industries is also contingent on
having a large consumer market available to test and feedback quickly into the product
innovation cycle. In this sense knowledge of where markets lie for products is essential in
the development process. This is clearly illustrated in the Indigenous Australian case
study.
An emerging trend in the developed world is that creative industries (and creative
practitioners) are needing to recognise the limits of purely grant-driven public funding
-8-
due to both the limited availability of such funding and also, the culture of grant
dependency that it can generate. In the process, innovative activity is occurring, with a
focus on establishing private and community partnerships. The report Banking on Culture
illustrates European responses to the difficulties in obtaining funding through traditional
means and how this is leading to new ways of obtaining finance and indeed how public
and financial institutions finance creative industries. The issue of financing creative
industries cannot be viewed in isolation from other integral issues that underpin the
successful economic development of these industries. Banking on Culture illustrates three
key issues that need to be considered in conjunction with issues of financing the creative
industries. These three issues are:
• ‘creative enterprises and business require highly specialised business support
delivered alongside finance;
• other forms of business support for marketing, management development and
innovation are equally important; and
• creative industries need specific help to access effective and expanded protection
for intellectual property rights’ (Hackett et al 2000: 4).
In short, the quality and the uniqueness of the product - as well as the efficiencies of
production - may be comparable within developing economies, but middle value-adding
factors in the value chain: namely promotion, branding, and distribution, as well as
protections against piracy are underdeveloped. In fact, it is worth drawing attention to
where value is lacking and ask if finance is being directed appropriately.
Fig 2. Basic value chain model
Creation Packaging Distribution Retail Users and
and Publishing channels/ distribution/ consumers
production repurposing Service Provision Market makers
Source: Adapted from Cutler (2002) and Caves (2000).
What we note from the case studies in this report is that there are many variables and no
general rule of thumb for where finance is best directed in the creative industries. It may
not be simply a case of providing more finance to the creation and production stage of the
chain but instead to target the distribution or marketing segments. If, for instance, there is
a perceived weakness in branding or distribution, then mergers and acquisition activity, or
joint ventures between international companies (with technical expertise, R&D, and
distribution networks) and independent creatives (with local knowledge) may provide a
better recipe for development. Moreover, while branding and distribution are problems
-9-
for small producers, increasing interactivity between users/consumers and
creators/producers means that the latter have a better idea of how the marketplace is
responding to new developments. In relation to export markets the Internet can provide a
means of getting ones ideas to a wider market. This disintermediation reduces the role of
the ‘market makers’: gatekeepers such as reviewers, festival curators, and the media
promotional circuit. Most calls for funding, however, still come from the initial ‘creation
and production’ segment in the value chain; for instance, funding to mount operatic
productions or to finance a movie.
Types of markets
Dynamism of markets (i.e. demand) impacts directly upon the financial bottom line. The
characteristics of markets also provide a barometer to measure export potential. The
typology presented below is an attempt to represents the limitations and potential of
markets for developing countries:
The uninterested (domestic) market
Producers of elite forms of traditional culture such as Beijing Opera (China) or
Australian Indigenous culture often meet with consumer apathy within domestic
markets. The problem of disinterest in national cultural treasures is often seen by
supporters of such forms to be a simply an effect of a lack of finance but could be as
much a result of discount due to ready availability and domestic everydayness .
The grants ‘market’
This is where cultural producers compete for a limited supply of government and
foundation funds for approved activities and projects, including those that enhance
national or regional identity, and increasingly multiculturalism. As we observe in the
case studies, culture that is beholden to government for support is often unable to
sustain itself commercially. This is one of the standard rationales for subsidy.
Alternatively, straight subsidy has come under increasing attack as it often leads to
dependency and stymies entrepreneurial spirit in the creative industries.
The tourist market
Tourists seeking to purchase authentic cultural relics and experiences represent an
important market for local creators. Cultural theme parks provide outlets for sale of
Indigenous and national cultural goods. Tourist markets act as outlets for the work of
creative producers, often independent producers or micro-businesses. Little product
differentiation is required because tourists often seek artefacts identifiable with their
tourist destination. The darker side of this trade is the high incidence of opportunistic
copying and cloning, with value not being returned to the producer.
The Diaspora market
- 10 -
National and culturally specific cultural content can be successfully targeted at
buyers located at a distance from the homeland. Diasporas often seek out authentic
homeland culture. By way of contrast pockets of production exist within first world
countries that service Diasporas and often squeeze out the authentic cultural
production of the homeland. An example is the huge production centre for
Vietnamese culture in California that is distributed internationally through diasporic
retail outlets (Cunningham & Sinclair 2001).
Breakthrough markets
International elite markets such as Sotheby’s auctions are an example of
breakthrough markets. Product from the developing world finds itself occasionally
celebrated as unique and valued. The market for Indigenous art (see case study below)
represents a breakthrough into this narrow but lucrative market. Similarly, where the
creative product or service from a marginal location is unique and distinctive it can
inspire or kick-start a new mainstream fad, for example reggae in the 1970s; hip-hop
in the 1980s; world music in the 1980-1990s.
- 11 -
FINANCING CREATIVE INDUSTRIES IN DEVELOPING
COUNTRIES: BARRIERS AND MODES OF FINANCE
Barriers
There are numerous barriers to the development of export-orientated creative industries
in the developing country contexts examined in this study. The tables illustrated below
represent the primary financial, public support, distribution and piracy barriers restricting
creative industries development in key sectors such as film, television,
audiovisual/multimedia, publishing and performing arts. While many specific barriers are
discussed in some detail in the respective case studies, this section presents an illustrative
overview.
China
The process of starting a creative business in China is not straightforward. Funding is just
one of the impediments. Another significant hurdle to navigate is the intractability of the
regulatory system that oversees particular creative industries sectors. In new and
potentially profitable industries such as streaming content firms need to obtain multiple
licenses in order to operate. Over-bureaucratisation is endemic to China’s cultural sector
and works against implementation of long-term business models. In television drama
production, licenses are given to new entrants for short-form productions. Joint venture
productions, moreover, are permitted on a case-by-case basis. The necessity of obtaining
multiple permits to produce creative content, often from different industry regulators
(Ministry of Culture, The State Administration of Industry and Commerce, The State
Administration of Radio, Film, and Television, Ministry of Information Industry), can act
as a deterrent to entry into creative industries. This entry barrier is further exacerbated by
dependency on relationship maintenance as a means of achieving success. This leads to
uncertainty and fosters a huge grey market where permits are not required. There are
some notable start-up exceptions in the ICT sector such as Netease (Internet portal) and
the Hunan Television consortium in southern China (broadcasting), but in most cases,
these success stories have been supported by foreign investment and early entry into the
marketplace.
Survivability of start-ups is thus endangered by regulatory agencies getting out of
synchronisation. This has the effect of creating systemic weaknesses in business models.
Other difficulties facing start-ups include the high transaction costs associated with
copyright and rights management, technology input costs, and the shortage of working
capital and skill sets. In fact, the most pressing problem facing investment are copyright
and revenue sharing. Lack of copyright protection in film, television, and Interactive
software constrains investment. Investors in these industries are likely to see their profits
dispersed via DVD pirates, or in the case of television their program ideas are copied
without permission (Keane, Moran & Ryan 2003). Likewise, revenue from rights
management is yet to be systematically regulated although the Chinese government is
making concerted efforts in this area.
- 12 -
The necessity of conforming to governmentally prescribed forms and genres is
complicated by distribution bottlenecks. These factors, in combination with existing
conventions within the marketplace, notably a propensity to rely on relationships make it
difficult for cultural enterprises to generate start-up capital. Product innovation is
therefore more likely to be incremental and imitation is favoured over innovation. The
focus on imitation has led to the success of Japanese and Korean creative industries.
Whereas these countries have managed to move to the next stage (innovation), China
remains locked into a cycle of dependency.
In short the kind of reflexivity that is needed to ensure innovation and creativity,
particularly in industries such as media, music, and entertainment software that operate in
an environment of uncertainty, is stymied. While people working in creative industries
often need to find creative solutions to problems such as bureaucracy and censorship, the
solutions are often pragmatic and exemplify low risk-taking. In some respects therefore
China’s cultural sector embodies many aspects of developing countries. In other instances,
it typifies a marketplace where there is a large enough domestic market to allow a
multitude of small players to make money. The fragmentation of China’s massive market
is itself an impediment to the growth of brand equity.
Figure 3. China: Barriers to export orientated creative industries
Barriers Film Television Audio- Publishing Performing
visual1 Arts
Start-up 9 9
capital
Working 9 9 9 9
capital
Lack of 9 9 9
business
expansion
Capital
Distribution 9 9 9
Barriers
Intellectual 9 9 9 9
Property
regime
Piracy 9
Institutional 9 9
Support
framework
Latin America: Music
Latin American countries, notably Brazil and Mexico, have large and significant local
music industries. Latin American music sales account for 5 per cent of total world music
sales. As illustrated in figure 7, domestic consumption of local music is also healthy. With
1
Audiovisual production in China is: Video games, Multimedia content and Internet-based
content
- 13 -
the emergence of new music genres such as World Music, New Age Music, and Latin
Music since the early 1990s new international markets and opportunities have opened up
for Latin American music production (Gauthier & Yudice 2002: 10). As music is deeply
rooted in local Latin American cultural traditions there is an abundance of naturally
skilled local talent. There are low barriers to entry and no restrictive start-up capital
requirements (artists generally draw upon personal savings or loans to purchase
equipment) with artists beginning with live performance for payments, then move into
broadcasting before embarking upon recording for the local market (Throsby 2002:14).
The Latin American music industry has an established live music practise, a local and
national broadcasting system, a domestic recording industry, and in some instances
access to international markets.
However, the primary barrier to development of Latin American music is the domination
of national and international commercial distribution channels by the ‘major’
transnational music corporations (EMI, BMG, the Warner Music group, Sony Music
Entertainment and Universal/PolyGram). As one study has noted, ‘if a recording
produced by an independent company is successful, it is quite likely that big scale
revenues from a newly discovered artist are not earned by the company. Rather, they
generally are overtaken either by the majors who offer lucrative contracts to successful
artists or they are pirated’ (Gauthier & Yudice 2002: 10). As a result, talent is effectively
‘poached’, companies lose control of the distribution of their product, and economic
returns are siphoned away from the country of origin. Throsby (2002) argues that
independent firms act in ways that suit the ‘majors’ as they develop music outside of the
mainstream, and if they generate new audiences, begin to become successful, and pose a
threat to the ‘majors’ dominance, they are simply absorbed by the ‘majors’ (10). The
combined lack of working capital and the lack of capital for business expansion stunt the
growth of local companies and their capacity to compete against the majors.
Latin America: Film
Public support for the Latin American film industry is characterised by an over-reliance
on foreign investment; this is reflected through a wide range of available tax breaks for
foreign film-makers; in comparison negligible public financial and funding support are
available for local production. The lack of public funding for local production is largely
the product of an over-emphasis on regulatory and tax incentives. As a result, combined
with low levels of private investment, there is a scarcity of start-up and working capital.
Endemic piracy and copyright barriers stunt the commercialization and diffusion of Latin
American film products, and restrict opportunities for the development of economically
sustainable regional markets. The strengthening of copyright laws and the control of
piracy may open up new economic markets throughout Latin America.
- 14 -
Figure 4. Latin America: Barriers to export orientated creative industries
Barriers Music Film
Start-up capital 9
Working capital 9 9
Lack of capital for business 9 9
Expansion
Distribution Barriers 9 9
Piracy 9 9
Institutional 9 9
Support framework
(Subsidy, grants, etc)
Finance
The modes of finance examined in this study are drawn from the case studies identified
and are grouped into three principal categories: ‘Public support’; ‘Private investment’
and ‘Hybrid/Other’.
These categories are not mutually exclusive; they demonstrate degrees of overlap as
investment in the creative industries is heterogenous and fragmented: in many instances a
mix of public, private, and reciprocal partnerships.
Public support includes grants (e.g. from cultural and film funding agencies), tax breaks
(including concessions and exemptions), and various levies to pool funds to finance local
production.
Private investment includes direct private investment, commercial sponsorship or
patronage, and various forms of contracts based on revenue sharing including venture
capital.
Hybrid/Other includes philanthropic investment, co-productions or ventures where
government has provided seed funding or start-up capital, and various forms of
investment where services are provided based on furthering relationships.
NB: The appendix to this document contains a typology of the modes of finance
identified and examined in this study.
A number of primary trends emerge in this study. First, financing is often serendipitous
and fragmented. Public funding can be determined by political agendas as much as public
demand for particular forms and private investment is often opportunistic. Financing is
also fragmented, deriving from multiple sources. For example, sponsorship of prestigious
cultural events and projects in developing countries by telecommunications and media
companies, and national airlines, often supplements funding from government agencies.
Second, organisational/institutional networks and informal people networks are extremely
important in leveraging financial support and developing connections to financial sources.
As Yudice (2003), illustrates, intermediaries such as curators are important in brokering
- 15 -
complex forms of collaboration between capital (often from the developed world). This is
demonstrated in the discussion on the aboriginal art market. Third, most modes of finance
are aimed at the creation and production stages of the value chain. This generally takes
the form of grants for individual projects, grants for individual artists, commissioned
pieces etc. There is limited funding targeted at other segments of the value chain. Fourth,
there is a lack of large-scale capital investment in the regions and creative industries
examined. Government and foundation largesse towards cultural and economic
development rarely extends to large-scale funding. Fifth, new technologies, and in
particular partnerships with technology firms (ISPs, telco’s, etc), do provide avenues for
firms to enter global markets and to overcome distribution barriers.
Nevertheless, despite the trend towards the commercialisation and privatisation of public
cultural resources, there remains a strong role for governmental support mechanisms in
sectors that are deemed to embody national or regional cultural value. For the state,
whose capacity to fund cultural development is stretched, investment from the private
sector, whether through sponsorship, advertising, or venture capital, provides a
mechanism to get new industries up and running, and to wean them off the public purse.
In China, for instance, the state invests in creative industries but encourages them to
commercialise outputs and attract commercial investment including private sponsorship
and advertising. The dividend that is returned to the state is increased taxation revenue. In
Latin America on the other hand, the low levels of seed funding and capital investment
has led to a rise in alternative models (grouped under ‘Hybrid/ Other) that attempt to
overcome barriers and compensate for the lack of public and private capital investment.
Mixed forms of public/ private investment in creative industries are more evident in
developing countries.
The establishment of creative enterprises is inherently risky. There is a need for mid-term
seed funding to sustain business activities. Public/private partnerships present a ‘third
way’ of financing creative industries. Further examination is required to understand how
public funding agencies can act as a short-term guarantor, to foster creative enterprises
through a transition from a reliance on public funding to full or partial commercial
viability. This may include the initial provision of public seed or core capital funding with
a mandate to develop enterprises commercially, to foster private partnerships, and to
ensure they reach certain commercial milestones.
There are several issues that arise from the consideration of a ‘third way’. The shift from
public to private funding may require arts and cultural centres to develop ‘commercial
arms’ to their organisations. Can public capital therefore be viewed as venture capital?
The above Chinese example clearly illustrates that this is beginning to happen. Thinking
in these terms has the potential to restructure the models by which creative enterprises are
funded. Such a model encourages public funding agencies to be more strategic in how
funds are allocated with more goal-orientated objectives rather than purely ‘public good’
objectives.
Models of public financing
- 16 -
The financing of the creative industries has an uneven legacy across the globe.
Developing countries have often tended to fund culture more in the cause of national
development and less as a means of economic development. One way of characterising
the spectrum of public support for creative industries is through variations in what has
sometimes been called ‘the arm’s length principle’ (For a discussion of this see
http://www.culturaleconomics.atfreeweb.com/arm’s.htm).
The arm’s length principle describes cultural policy models that allow degrees of
involvement for government. It is a useful model because it pre-empts a shift towards
commercialisation as more viable and less dependent and politicised model of financing.
At one end of the spectrum is the engineer state model, suggesting a direct and often
intrusive public intervention into the domain of cultural production. The governments of
the former Soviet Union and the People’s Republic of China favoured this model in order
to control the output. Management was centralised, product was standardised, and
autonomy was low. The architect state model is typified by a Ministry of Culture
dispensing funds to creators and producers who meet national cultural objectives. The
funding of flagship performing arts companies can often be linked to their role in
supporting a national vision of excellence. Likewise a patron state model implies
financial support administered through arm’s length councils, a model that has the
advantage of promoting excellence without compromising the process of creativity.
Grants, however, are often subject to risk preferences of grantees. Awards and prizes
disbursed by councils are often distributed based on criteria that are directed towards
specific rationales, which may not be linked to business development. However, an
example of ‘aid’ that is linked to productivity is the Creative Capital Foundation
(http://www.creativecapital.org) where marketing and other ‘non-artistic aid’ is provided.
This model is more indicative of facilitation, which has increasingly been seen as the
best means of assuring a mix of public-private support. Mechanisms include providing
tax deductions for donor contributions to the creative industries and incentives for export-
oriented creative industries. This model has a high uptake in the U.S.
Models of public-private funding: Micro-finance
Micro-finance is a mode of financing already employed in large number of developing
countries as a means of poverty alleviation and as a way of financing micro-enterprises
across a number of industries. The most common micro-finance models are: village
banking, credit unions, self-help groups, and rural financial systems (McGuire & Conroy
2000: 5-6). The most notable institutional examples of successful micro-finance
programs operating in developing countries are Grameen Bank 2 in Bangladesh, the
Bolivian BancoSol3, and PlaNet Finance4 sponsored micro-finance institutions operating
2
The Grameen Bank is the most renowned micro-finance bank in the world. It was established in
Bangladesh 25 years ago and has now invested $1 billion primarily in the form of small denomination loans
of about $30. The primary mode of finance is through peer group systems that lead to high repayment rates.
3
Banco Sol is a micro-finance institution, established in 1992 and operating in Latin America and the
Caribbean. BancoSol provide several modes of micro-finance ‘based on group guarantees, sequential
- 17 -
in a number of countries. However, from preliminary analysis and evidence available, the
majority of these micro-finance programs are generally aimed at financing micro-
businesses in primary industries, retail, and marginalised social groups who may not have
access to credit. Micro-finance programs of this sort have seldom been directed
specifically at creative industries – at least in relation to enabling creative inputs. There
are two sides to this the lack of uptake of micro-credit. While there may be a clear lack of
financial assistance available for creative industries, there may also be a lack of
awareness of available assistance measures on the part of the creative producers,
especially in the case of generic financial models.
Nonetheless, micro-credit offers a viable model for financing micro-business in the
creative industries – especially in terms of developing or ‘kick-starting’ ideas. Banking on
Culture foregrounds micro-credit as a loan instrument with significant potential in
developing micro-enterprises in the cultural sector (Hackett et al. 2002: ‘Section 5.3’).
These findings are based upon a case study of the UK Full Circle Loan Fund established
in 1997, a successful generic micro-credit fund supporting female entrepreneurs modelled
on a Grameen Bank model of micro-finance.
The Grameen Bank micro-finance model is generally structured as follows: loans are lent
at either start-up or growth phases of the business cycle; initial loans are restricted to
income-generating activity. High repayment rates are achieved through peer group
systems/group lending, social pressure and legal measures. Transaction transparency is an
essential component and savings can be associated with credit to act as an additional safe-
guard5. The Full Circle Loan Fund adapts this model to suit female entrepreneurs with
poor credit ratings. The Fund adopts its lending practices, its peer group and social
pressure system, and its repayment structure. An added condition is the provision and
approval of a workable business model. Although this fund is a generic mode of finance
with a broad focus on financing micro-enterprises generally, it has financed a range of
creative micro-enterprises such as: clothes designers, a book publisher, artists and a web
page-designer (Hackett et al. 2002). There is potential for the development of similar
models that can be used to provide either specific or generic finance for creative
industries in developing countries contexts.
Micro-finance has potential for several reasons. First, it is already a proven and effective
model of financing micro-business in developing countries. Second, it makes available
amounts that are suitable for both start-up and working capital within some sectors (the
average BancoSol loan is $USD 1,3906). Third, it has the potential to develop micro-
enterprises to a level where they become more attractive to investors, and eligible for
other forms of credit (Nazirwan 2003: 1). Micro-credit models are flexible and can be
lending, a close relationship with the client, simple and speedy procedures’. Available:
www.mixmarket.org.
4
PlaNET Finance is an international NGO that fosters and acts as an umbrella organisation for an
international network of Microfinance institutions.
5
‘Credit Delivery System’ [Online]. Available: http://www.grameen-info.org/bank/cds.html [Accessed
08/03/2004].
6
‘General Institutional and Legal Data’, Available: www.mixmarket.org. [Accessed: 08/03/2004].
- 18 -
regionally or locally adapted thus making it a suitable model for most (and the poorest)
developing country contexts. Finally, as safe-guard mechanisms are a standard feature of
this financial model, many of the systemic problems in obtaining finance from
commercial institutions – risk-management concerns, the intangible nature of creative
assets, a lack of institutional specialisation – are to an extent mediated.
However, micro-credit is only really an appropriate instrument for small enterprises and
certain creative activities such as photography, independent music, publishing, and
similar forms of small-scale production. As Banking on Culture notes, micro-finance is
not an effective form of finance in areas that require high-levels of grant funding or in
larger commercial sectors requiring large capital injections such as venture capital, and
equity investments.
Emerging characteristics of finance models: Parameters and Safeguards
An emerging trend for creative industries specific finance models is the development of
unique parameters or safeguards to effectively cater for the intangible nature of creative
assets and outputs, manage risk and to ensure the robustness of business models. The
development of these parameters varies and depends on the type of finance being
allocated. The following parameters are developed from findings in Banking on Culture
and micro-finance models being applied by Grameen Bank and BancoSol.
Examples of emerging creative industries financing parameters are:
Loans, Credit and Funding
- Loans are lent to entrepreneurs at either start-up or growth phases of the business
cycle;
- All applicants must provide a workable business model;
- In some cases potential borrowers must agree on becoming a member of a lending
circle or a ‘peer group’ scheme consisting of small groups of borrowers who meet
regularly, effectively providing a collective guarantee to the lender;
- High repayment rates are achieved through the peer group systems/group but also
through innovative techniques such as group lending and social pressure, legal
measures and economic sanctions.
- Specialised knowledge including an understanding of the respective sector, the
market and pricing is becoming pertinent to the development of creative industries
specific loans, the assessment of loan applications and the management of risk. To
use the music sector as an example, the lending institution requires an informed and
specialized knowledge of:
o the music market;
o income flows (regular gigs, potential merchandising, royalties structures, etc);
o pricing issues (gigs, likely CD sales, etc); and
o the nature and value of assets (guitars, amplifiers, mixers, etc).
Organisation and Institutional Parameters (Building the capacity of organizations to
deliver loans)
- 19 -
- The provision of a business plan;
- Careful analysis and acceptance of the business plan;
- Innovative guarantee mechanisms;
- Different ways of accessing risk;
- Local and specialist knowledge to assess market trends and proposed business models;
- Methods to measure product or service effectiveness such as conventional impact
assessments;
- Assessments of transparency or disclosure;
- Social accounting and auditing;
- Monitoring through management information; and
- Legal frameworks.
CASE STUDIES
FINANCING CREATIVE INDUSTRIES IN CHINA
Introduction
China is presented as a case study for the principal reason that it exemplifies a
transitional environment (Curran and Park 2000, 13), in which many cultural institutions
that were previously funded directly from the public purse are adopting a mixed model of
enterprise and subsidy; this is often typified by unusual (and sometimes irregular) forms
of financial investment. From an industry development perspective China is
endeavouring to add value to its cultural economy by learning from creative industries’
management models utilized in developed nations.
From the outset, however, we need to point out that the term used in this paper (creative
industries) is yet to be officially recognised within China. Likewise, discussions of how
creativity functions as an input into economic development are also relatively rare, apart
from international business literature translated into Chinese. The more familiar term
used in China is in fact, ‘innovation’ (in Chinese chuangxin), being part of the
government’s broad reform agenda promoting the concept of social renewal and progress
(Yi 2000). The slogan ‘innovation is the spirit of a nation’s progress’ is widely propagated
and ‘innovation centres’ are to be found in Chinese universities, including cultural
industries innovation centres at Shanghai Jiaotong University and Beijing (Peking)
University. While innovation is widely touted, there is an acknowledgement among many
critics and industry professionals that China needs to re-assess its cultural industries
development approach due to a tendency to favour imitation over innovation. In short,
while innovation is a theoretical catch word, it has yet to be transformed into practice.
Innovation without creativity means that the pressure is on business to produce products
and services that capture markets. As markets are fragmented, there is a tendency to
borrow creativity from elsewhere (see Keane 2004).
The importance of creativity is now coming into finer focus in China. The reluctance
(until recently) to see creativity as a crucial ingredient in relation to innovation can be
- 20 -
explained to some extent by the tendency to equate innovation with science and
technology, and as a antidote for China’s non-innovative manufacturing sectors. Another
important reason for the lack of focus on creativity is the role of culture in socialist China,
where cultural output was considered superstructural and intangible - rather than an
economic commodity. In short, culture’s role was to reflect the economic reality, a role
that did not privilege the creator in the sense understood in liberal democracies. Until the
early 1990s China’s cultural sector produced standardized cultural goods and
commodities, which were distributed to a national community, namely ‘the people’.
Output was largely organised around quotas and proscribed forms; and those who were
charged with the responsibility of determining production criteria were in most cases
bureaucrats with little real sympathy for the autonomy of creative artists.
While this description presents an industrial model of production, it did not mean that
culture was an industry in the commercial sense. It was a state administered industry, one
where the costs were born by government and business models were conspicuous by their
absence. Cultural production was not about diversification, product differentiation, and
profits. This ‘engineer state’ model receded in the wake of economic reform and gave
way to a market model of production in the mid-1980s and early 1990s. In this
transitional period central government moved away from direct administration and
encouraged enterprise and local initiatives partly in order to amortise the cost of cultural
production. The term ‘cultural institution’ (wenhua shiye) became the preferred term, at
least until 1998, when the national government officially endorsed the concept of
‘cultural industries’ (wenhua chanye). Whereas the former designated publicly funded
culture and included state-funded troupes such as musicians, dancers, opera troupes etc,
the contemporary cultural industries are directly associated with the notion of enterprise.
(See Keane 2004).
Statistics pertaining to the cultural industries in China can not be directly correlated with
international benchmarks and are therefore best read as indicators of sectoral growth.
According to Chinese Ministry of Culture, the value of the cultural sector increased from
1.21 billion yuan ($USD146 Million) in 1990 to 8.37 billion yuan ($USD1.01 billion) in
1998, representing a six-fold increase. Meanwhile the number of registered organizations
associated with culture increased from 68,000 to 92,000 – an increase of 35%.
Employment in the cultural sector increased 46%, from 495,000 to 721,000 during the
same period. Most significantly, the number of private enterprises engaged in some form
of cultural activity increased rapidly. In 1990 the private cultural sector numbered less
than government cultural units. By 1998 private enterprises constituted 2.7 times the
number of public units and the level of employment and the value of output was 1.5 times
that of the official public cultural sector (Ministry of Culture 2003). When one takes into
account that all of China’s media are state owned, the dynamism of the surrounding or
non-core enterprises is evident.
Despite impressive growth statistics and activity within the private sector, China’s
cultural consumption lags behind international benchmarks. Whereas cultural industries
have become mainstay contributors to GDP in developed countries, the value of the
(national) cultural economy in China in 1998 occupied just 0.26% of GDP and 0.8% of
- 21 -
the services sector. By comparison the cultural economy of the USA contributes an
estimated 7% to GDP. In 1997 the consumption of culture and entertainment services per
resident was 2.35% of total consumption, far below the level of developed countries and
less than other developing countries (Ministry of Culture 2003). While these figures tell a
less than impressive picture it should be noted that the majority of China’s population are
classified as peasants, despite recent trends suggesting massive urbanization. Moreover,
if we look at mega-cities such as Beijing, Shanghai, Guangzhou, Chongqing, and Tianjin
we find a strong level of cultural consumption. According to a recent report, the
consumption of knowledge-based services by Beijing residents comprised more than 4%
of expenditure (Luo & Zhao 2003). It also needs to be noted that there is also a high
degree of elasticity inherent in these figures taking into account the grey economy and the
high incidence of pirated cultural goods. In other words, much cultural consumption is
not registered as market sales.
The basic value chain of Chinese creative industries/cultural industries is impacted upon
by numerous impediments in the distribution channels segment (see below). In this sense
it demonstrates unique characteristics that allow products to reach consumers more
directly than the formal commercial route of proscribed distribution outlets, venues, and
galleries. However, the high incidence of informal distribution of products (such as
pirated DVDs and music CDs) and the frequent barter of services and content has
seriously impacted upon the capacity to grow creative enterprises. Informal relationships
based on guanxi (networks) further hinder the implementation of professionalism and
best practice. Moreover, the large numbers at either end of the value chain (creators and
end-users) mean that a great deal of importance is focused on the middle segments, which
are stymied by institutional rigidities: for instance the role played by market makers - in
many instances, officials who preside over allocation of book numbers, television
production licenses, and permits.
Fig 5. China’s unique value chain.
Grey Alternative Users and
Creation and
market distribution consumers
production
production channels (large and
(large
numbers) fragmented
Packaging Distribution Market market)
Publishing channels: makers/
Re-purposing formal Regulatory
Source: CIRAC analysis 2004
Dominant sectors, targeted markets, and export potential
- 22 -
The dominant cultural sectors are here defined by China’s own industry classification
system. As the term cultural industries has recently evolved there is still no absolute line
on what is included, and there is a tendency to add more sectors to the cultural economy,
particularly with China now coming into contact with the concept of creative industries,
which is favoured by Hong Kong, Singapore, Taiwan, and Korea – as well as Australia
and New Zealand. Probably the most useful attempt to correlate the cultural industries
with creative industries comes from the Chinese Academy of Social Science, which
designates core industries such as media (publishing, broadcasting and digital content)
and non-core performing arts industries. However, consensus among academics is that
the broad cultural sector includes film, television, audiovisual, publishing, cultural arts,
sport, and education. It is noteworthy that the cultural industries (as defined) in China do
not as yet include architecture, advertising, design, and heritage (although these elements
are indeed embedded within the current categories).
The following is a snapshot of business models, investment models, and export potential
in these industries (with the exception of education) with particular emphasis on new
financing models.
Film
The success of China’s film industry and the capacity to create exportable content is
contingent on unleashing creativity as much as stimulating finance. The film industry is
currently in a state of crisis, despite the endorsement by Quentin Tarantino of China as an
ideal location for production. Tarantino has undoubtedly been impressed by the
willingness of Chinese to work enthusiastically for low salaries in contrast to the
spiralling costs in other international locations. The most salient points to note, however,
are that low levels of capital investment, combined with an unwillingness to embrace risk
and flawed distribution segments in the value chain, are retarding the competitiveness of
China’s film industry. Ten years ago China’s fifth wave generation of film makers –such
as Zhang Yimou, Chen Kaige and Tian Zhuangzhuang were acknowledged internationally.
As China’s film fortunes wane the Korean film industry is achieved international
recognition. Can China learn something from Korea where money has poured into the
film making from a range of private investors? The success of the Korean new wave has
seen film financing models going on-line, allowing ordinary people to buy into the
movie-business (Kim 2003). Netizen funds are a way by which (mostly) young Koreans
invest in film projects for a return based on the movie's success after release.
In China, international directors with links to majors are likely to be seen as folk heroes
bearing money, technology, and skills. Of these money is the most crucial. In 1995 the
Chinese government promoted the development of non-state investment by allowing
investors (both individuals and non-state enterprises) whose outlay was more than 70 per
cent of budget to be regarded as producers. The following year this was reduced to 30 per
cent (Chu 2002: 46). However, the government stipulation forcing studios to produce a
quota of approved ‘mainstream melody’ films (that is, propagandistic films echoing
China’s reform) has meant that exhibitors have turned to foreign productions for box
- 23 -
office revenue. Investor unwillingness to support the film industry has opened the door
for foreign investment. Since 1997 the partial privatisation of China’s leading film
studios (Beijing Forbidden City Film Corporation, Xian Film Corporation, Ermei Film
Corporation, and Shanghai Film Corporation) has stimulated private investment and co-
productions with most of the capital coming from Hong Kong, Taiwan and Japan. Return
on investment is however stymied by a lack of enforceable copyright regime that sees
pirated copies widely sold on city streets.
Television
Television is a creative industry that employs an army of people in China. Television
stations are still technically owned by the state but they are now allowed to apply for
licenses to operate as corporate entities responsible for their profits and losses. A stimulus
to market competition has been the growing ad spend as China’s consumer market
develops. The market for prime time television has acted as a barometer for assigning
value to productions. The increasingly competitive nature of television production has
forced production units to countenance a range of financing options. Often a producer or
a ‘middle man’ is engaged to raise funds. This person might be a cultural entrepreneur
with connections in the corporate world. The producer (or alternatively someone in the
production company) may approach an old school friend or army comrade of high rank
and ask for financial favours. This is not straightforward philanthropy, however, but
investment based on guanxi (reciprocal) relationships. Direct investments are also
negotiated with profitable enterprises that stand to gain on their outlay or simply wish to
have their name and/or product associated with the program or placed within the
screenplay.
The recent consolidation of China’s television broadcasters into mega-conglomerates
(echoing the formation of film corporations) has seen the emergence of new business
models, including increased outsourcing to new independent companies and the
subsequent trading in programs rights in China’s evolving multi-channel marketplace,
which is enhanced by digital television roll out (Keane & Donald 2002). The
development of independent creative production, however, is constrained by the need to
establish relationships with regulators in order to secure licences. An additional means of
investment that has become common in China’s television and new media (Internet
portals; broadband) sectors is listing on the Chinese stock exchange and Nasdec
respectively. The most successful commercial venture to utilise this model of raising
finance has been the Hunan Television network in southern China. Hunan TV, a
provincial station controlled 75 per cent of in-province advertising revenue by the late-
1990s and subsequently used this advertising base to set up a shell company and list on
the Shenzhen stock market.
Audio-visual
The audio-visual industries sectors (in China categorised as music CDs, DVDc, VCD,
Internet-based content, and video games) vary in degrees of innovation and in their
capacity to target export markets. While the domestic mass market for audio-visual
products is large in terms of actual consumers, there exists a high degree of parasitic
- 24 -
imitation that constrains returns on investment. There is also massive copyright
infringement and pirating, particularly in the popular music (CD) and film (DVD)
industries. Problems replicated in the publishing industry (see below) pertain to the start-
up of music operations. Record companies in China can only release albums through a
music publisher/distributor, which by definition is a government entity. These music
publishing houses recoup the bulk, approximately 60 per cent (See de Kloet 2002).
There are some notable exceptions in the audio-visual sector, however, that do allow
substantial profits; these manage to cut out the grey markets and the rake-off by
publishing houses by linking directly to a subscription model. For instance, the video
games market demonstrates potential growth and presents a model for private investment.
Most of the Internet portals in China currently derive from 15%-30% of their revenues
from gaming (other significant earning derive from the SMS boom). For instance, a
leading Internet portal, NetEase, draws up to 38% of total revenue from gaming (Fong
2003).
Publishing
Publishing in China is typified by the relative cheap costs of reproduction and the
relatively difficult process of getting product into the marketplace. China has its best
sellers and its popular magazines but most publishing loses money due to the necessity of
distribution through state outlets. Successful manuscripts are often duplicated and
distributed on the grey market. As in the music publishing sector there are constraints
imposed by the need to obtain a book number (license) in order to publish. These are
allocated by government. A publishing house in China generally has several studios in
which editors work. Editorial studios and publishing house have an internal commercial
relationship. However, the editorial studios are not autonomous from publishing houses,
although they may venture into the marketplace under their own imprint– a kind of semi-
commercial arrangement. These independent commercial ventures still depend on
publishing houses for the book number, which allows them to publish. They cannot form
a business without this. At present, publishing is a controlled economy that is regulated
by the book number system.
Greater financial autonomy exists in the magazine market although a proprietor of an
independent magazine needs to be associated with a publishing company to obtain a
license. While foreign investment in content publishing is prohibited there are a number
of models to circumvent this bottleneck. A foreign publisher may not invest directly in a
Chinese magazine start-up although it may obtain a license to form a joint venture and
distribute a Chinese version in China after content has been vetted (for instance Elle and
Cosmopolitan magazines). Alternatively, money is made available to magazine
proprietors by informal investment mechanisms, that is, where the magazine proprietor
has guanxi (relationship of trust) with a foreigner investor. Another model of publishing
that typifies a model of disintermediation is online publishing whereby the author sells
the rights to an online content provider linked to an Internet portal.
Cultural/ performing arts
- 25 -
The varieties of cultural arts are many, as would be expected in a country with such
history and a depth of tradition. These include Beijing opera and kunqu (a form of high
opera), modern classical opera and ballet, traditional and folk songs, acrobatic troupes,
visual arts, calligraphy, spoken theatre, puppetry, and multimedia performance art. The
cultural arts remain heavily reliant on government funding and are constantly faced with
the dilemma of how to adopt new business models and to adapt their aesthetic practices
to nurture younger audiences increasingly lured to interactive forms of performance and
media. For some years now the Chinese government has levied a 3% tax on karaoke
parlours and other popular entertainment venues with funds being returned to support the
cultural arts (Kraus 2004). The reform of the cultural performing arts sector has recently
entered a new phase with the setting up in April 2004 of the China Arts and
Entertainment Group, which consists of nearly two dozen enterprises, including China
Performing Arts Agency and China International Exhibition Centre. The two core
companies will be State holding enterprises and will derive investment from all sectors of
society, including individual and foreign capital. Two core companies will be China's
sole agencies for running the global art performance and exhibition business sectors.
An interesting example of the avant-garde in China’s cultural arts sector is the 798 Space
in the Dashanzi Art district in north-east Beijing. The 798 Space is based upon a simple
business proposition. Artists contribute a nominal fee for use of the space to the land
owner, Hongkong Land Holdings, which has an eye to create an upscale environment for
a residential development called Central Park. This instance of urban redevelopment it is
not about heritage, but rather the future. The developer has reportedly spent massive
amounts of money to refurbish the premises. It is unclear however, what will happen to
the artist studios, cafes and bars when the factory is demolished in 2005 but in the interim
the space provides a creative milieu for the development of avant-garde and experimental
culture. The space operates via a collective management company in order to oversee the
studio space, the products, and its activities. The area that houses this community
(independent filmmakers, photographers, designers, video and visual artists, musicians
and theatrical groups) is an old switching factory, no 798, from which the space derives
its name. In April 2004 the organizing committee representing the studios housed in the
798 space are planning to organize the Dashanzi International Art Festival, which will
incorporate contemporary Chinese and international art and performance.
According to the developers this collaborative venture between art and real estate will
cultivate wealthy buyers. It is estimated that 30% of the traffic that passes through is non-
Chinese, including many tourists. It is also estimated that 90% of the buyers of property
at Central Park have the minimum of a bachelor’s degree and 70% are employed by
multinationals (Collier 2003). George Yudice (2003) has described similar sites of
‘extracting cultural capital’ in Mexico. His point about artists being ‘service providers’ is
relevant: return on investment in such projects accrues to the land developers, the
sponsors, curators, and artists. The district also benefits from the availability of low
wages in the service sector, which paradoxically make the site attractive for international
investors while at the same time making the district too expensive for ordinary Chinese.
Arguably, the site also provides publicity for the Chinese contemporary art scene and the
artists-in-residence will come into contact with international peers. This is the
- 26 -
impoverished under-funded segment of the art world forming a temporary development
alliance with the wealthy elite. This ambitious project flies in the face of the traditionally
conservative system of art patronage in China, where the new rich middle class embellish
their homes with traditional forms such as calligraphy but seldom countenance
experimental art. Moreover, state funds are rarely directed towards independent artists,
although cities such as Beijing and Shanghai are keen to promote biennales to enhance
their cosmopolitan status.
Sport
Sport is regarded as a cultural industry in China and indeed one where creativity is now
emerging as an input. Sport is linked to broadcasting and advertising and this assumes
greater importance as the Beijing Olympics moves closer. The importance of sport as a
creative industry can be illustrated by the case of cyber-gaming and the government
supported China E-Sports. China E-Sports Games , or CEG has been officially listed as
the 99th competitive sports in China. The first China E-Sports games was sponsored by
All-China Sports Federation, China Interactive Sports Development Co. and China
Interactive Sports Communications Technology Co. in 2004. The event was a commercial
enterprise: that is, competitors pay to play. As well, the competitions are broadcast on
cable television channels. CEG includes competitions for 4 popular real-time PC games,
FIFA Football, Half-Life: Counter Strike, Warcraft III: The Frozen Throne, and StarCraft:
Brood War. Prior to official endorsement by the All China Sports Federation, several
important international e-sport events had already been introduced into China. These
included World Cyber Game (WCG) from South Korea, Electronic Sports World Cup
(ESWC) from France and Cyberathlete Professional League (CPL) from the US.
The emergence of sports marketing and sponsorship is now emerging as a mainstream
industry in the lead up to the Beijing Olympics. Foreign investment in Chinese sport via
sports marketing companies like IMG have helped sports to develop a brand profile.
Investors including Nike, Coca-Cola, Motorola, Siemens, Heineken, and Philip Morris
have invested in high profile sports such as football, basketball, and formula one motor
racing. In recent years the Chinese corporations Legend Computers and Li Ning Sports
Goods have entered into the marketplace (Ashton 2002).
Change in business models
Markets for new cultural products are rapidly emerging, aided by the fact that China has
on tap one of the most valuable resources for product development: large demographics
of discriminating consumers willing to test new products and services. The domestic
market for commercial creative industries is characterized by large numbers of persons
engaged in cultural activities, both formally and informally. As Richard Kraus (2004) has
noted in his recent publication The Party and the Arty, the arts-entertainment complex in
China embraces a diversity of cultural workers and artists, who receive commissions,
sponsorships, and salaries from a range of state-owned enterprises - and more recently
private business. Kraus writes that ‘Arts angels have mixed motives, ranging from a
generous desire to support culture to vulgar self-promotion’ (213). In typifying this
- 27 -
transitional funding cultural environment Kraus draws attention to new kinds of
commercial patrons (220):
One Chengde wine company sponsored a local spoken drama troupe when it
made a television play glorifying the history of its wine. An engineering-supplies
company in Zhejiang provided travel expenses to enable an amateur playwright to
accept a prize, then publicized its philanthropy. The Yangzi River Power Company
funds tours by the Beijing Opera Company of Hubei, which considered changing its
name to the China Yangzi River Power Company Beijing Opera Troupe…
This funding is evidence of the changing landscape. Branding is an idea that is beginning
to take root within China’s media and investment, sponsorship, and philanthropy are
gradually increasing as the state moves further away from supporting the cultural sector.
Within the formal sector (state funded troupes and institutions), a large percentage of
funding goes to salaries and retirement pensions. Despite much rhetoric about cultural
development and innovation from the central government, investment in cultural
industries has never been a state priority. In fact, while average yearly investment by
central and local governments increased by an average of 19.08 % and 9.48%
respectively from 1998-2002, funding as a percentage of taxation income during the same
period has declined rapidly. Investment nationwide as a percentage of income gained
from the cultural sector has dropped from 10.6% to 0.2% (Wang & Song 2004). Much of
this can be attributed to more efficient collection of revenue, and itself is testimony to the
growing contribution of culture to GDP.
In attempting to offset this decline in government investment, there have been
recommendations emanating from the Chinese Academy of Social Sciences that draw
upon a national competitiveness paradigm: arguing for guaranteed funding for essential
public cultural services, funds for strengthening national culture, and funds to support key
projects and institutions. In addition there are recommendations to subsidize cultural
institutions that are commercial, and to open up ways of rewarding non-government
investment in such enterprises through preferential tax schemes, echoing international
models. In short, the argument is a mix of national development and commercial reality
(Wang & Song 2004).
FINANCING CREATIVE INDUSTRIES IN LATIN AMERICA
Introduction
As in other markets, independent creative production in Latin America faces serious
financing constraints. The region’s fragmentation (with the exception of large markets in
Brazil, Mexico and possibly Argentina), provides incentives for entertainment majors in
the region to focus on distribution of imported products rather than on artistic
development. This, in conjunction with the globalization of media outlets and promotion
vehicles, generates an increasing disconnection of the local audiences with Indigenous
- 28 -
genres, a situation that is illustrated in some Latin American music industries.
In the Latin American economies described in this report there is an excessive
concentration of investment in large companies. This fact alone works to marginalize
local cultural entrepreneurs. In addition, the lack of scale of the capital markets
(especially the equity markets), generates barriers to the entry of investment capital to
support small and medium enterprises.
It is not altogether surprising that finance for creative production is highly concentrated
in government agencies. These, and small seed capital sums provided by multi-task
producers themselves (distributors, financiers etc.), are invested in the production of
cultural goods that generally do not reach massive distribution. Both instruments are
scarce by nature, and do not generate appropriate industry development incentives;
indeed they may create dependency.
The Latin American Music Industry
The Latin music industry enjoys an average of between 4-5% percent of the music
industry sales globally. During the last decade it has experienced an average yearly
growth of 4%. During this period the industry has experienced steady growth in units,
despite the significant impact of piracy on unit sales and late 90s currency devaluations
on total revenue (Impacto del sector fonográfico sobre la economía colombiana).
There is evidence of strong consumption of local product (Mexico and Venezuela), of
regional product (Colombia), and Portuguese product (Brazil). In Brazil, 75 per cent of
total domestic music consumption is estimated to be local product; local Colombian
consumption is estimated at 46%; and Venezuelan domestic consumption is valued at 35
percent. There is also high regional Latin American music consumption, with Columbia
consuming 45 per cent of regional music products, Venezuela 35 percent and Chile 35
per cent. Considering the popularity of local and regional music through Latin America
there is potential to strengthen regional consumption and markets for ‘Latin music’.
Figure 6. Latin America: Local Music Consumption
- 29 -
70
60
50
40
30
20
10
0
Argentina Brasil Chile Colombia Mexico Venezuela
Domestic Regional Anglo
Source: Yudice, George (1998), La Industria de la música en el marco de la
integración América Latina-Estados Unidos, seminario Integracion Economica e
industrias culturales en América Latina y el Caribe, Buenos Aires.
Though some countries possess strong independent production activity, especially in
folkloric genres, majors are active in all Latin American countries and account for the
lion’s share of each local market:
Figure 7. ‘The Majors’ share of the Latin American music market
Market Share BMG EMI Polygram Sony Warner Indies
Argentina 20 19 19 24 13 5
Brasil 13 16 20 17 15 19
Chile 18 20 18 24 17 3
Colombia 13 8 11 28 4 36
México 16 13 14 18 13 26
Venezuela 12 9 26 29 8 16
Average % 15 14 18 23 12 18
Source: CAB 2003b
The film industry
Like the European film industry, the Latin American film sector has suffered from
cultural barriers across countries, limited production capabilities, ‘art focus’ over
‘commercial focus’, as well as limited distribution and promotion skills and capabilities.
The region is characterized not only by small to medium independent markets, but also
by low per capita income and volatile economies. It is estimated that in Latin American
countries through the 1990s, local film companies received approximately 0.5 per cent
per capita public assistance in comparison to approximately 1.8 per cent for the European
industry and 5.5 per cent for the US local industry (CAB 2003a).
- 30 -
Financing
The globalization of culture, led by American content and symbols has had the effect of
making cultural entities, practitioners, and workers in developing countries more aware
of the need for financing and management support. Support alternatives need to take into
account the fact that the commercial output of creative production is at most levels
uncertain and risks may only be mitigated by achieving critical mass and developing
industry structures in which distribution channels ‘connect’ and help to facilitate supply
and demand (Hearn, Cunningham & Ordonez 2004). In addition, the distribution of
investment between heritage and ongoing cultural industries development is typically
biased towards the former, particularly in poorer regions.
As elsewhere the relationship between financing and industry development is unclear.
First, to ensure the growth of competitive enterprises there is a need to focus on getting
the right mix between (purely) private support and grant funding. Second, there is the
issue of how to execute strategies. From a quick review of the features below, it can be
concluded that the solution is somewhere in the middle rather than on the ends.
Emergence of purely private investors: Although it would be interesting to see venture
capital funds targeting cultural startups, such entities act with the incentive to optimize
profitability, and will only invest if the investment provides an ‘exit path’ towards value
maximization (Hackett et al 2000). There is also the issue of scale. Venture capitalists
will not be attracted to initiatives that do not have a sizeable market potential, or that can
transform from interesting niche cultural manifestations to reach larger markets.
Grant funding: This is the traditional appeal to the public purse, usually on the basis of
cultural worth and national identity. However, it leaves the cultural sector subject to the
will of political turns and public capital availability. It also condemns the population to a
diet of public culture and creates dependency within the cultural community, obstructing
incentives for industry development and self sustainability. There should be no
diminution of public funding; however, it should be investment as much as grant-driven,
treat its client base in the most business-like fashion possible, and strategically target key
points of the value chain not only production inputs.
The fact that neither capital nor private investment have proved to be suitable funding for
creative production, makes clear the need and a role for new instruments that would be
different in structure and could emerge from private-public partnerships. While public
support can contribute to the new instruments financial resources and a tolerance for
investment tenors, private agents would contribute investment discipline, a link to a
broader investment community and asset management know- how.
Sources of funding in the region
Grant/state funding
- 31 -
Due to scarce public investment capital available much of the state support has been
provided as regulatory incentives and tax-breaks. Extensive regulation to support cultural
expressions and industries can be found in Latin American countries, particularly in the
film and heritage sectors. No significant regulatory support was found in the case of the
music industry.
In Chile, the Fondo de Artes y Cultura (FONDART) channels all government economic
support to the sector. From its inception in 1992 the organization has financed almost
3,000 projects to the value of $USD17M. The fund is administered by the Ministry of
Education and evaluates and selects projects based on quality, budget, and viability.
In Colombia, the Ministry of Culture possesses limited resources for investment, most of
which are dedicated to heritage preservation. Notwithstanding, an important amount of
incentives and measures are targeted at culture and creativity, especially in the area of
film. Film ticket pricing is exempt from VAT; Colombian income tax payable by
foreigners will be calculated on the basis of 60% of the generated income; no taxes on
remittances of proceeds of movie exploitation. In order to further encourage investment,
reinvested profits in any of the stages of movie production receive a 50% exemption of
income tax. All investments in the preservation of local movie material are 100%
deductible from income tax. The law provides various authorizations to the Minister of
culture to give further support to the cultural activity through regulatory changes.
Peru maintains similar film industry support schemes, including income tax exemption
for revenue generated from motion picture commercialization (decree 42, 1995), and
GST exemption for revenue generated from motion picture exploitation (decree 821,
1996)
In Venezuela 60% of the yearly budget of CNAC (National Autonomous Cinema Centre),
is dedicated to local movie production and 100% of any investment in any stage or movie
production is tax deductible
In Argentina 10% of all movie tickets, 10% of all movie sales or rentals and 25% of all
income received by the National Radio Broadcasting aggregate funds for the ‘Motion
Picture Fund’ administered by the INCAA (National Cinema Institute for Audiovisual
Arts). This fund finances production of local films and the functioning of drama and
movie schools.
As of writing, no systematic commercial funding models - such as private equity funds
and commercial credit lines - have been identified in the region. This type of financing
typically does not suit small companies and creative enterprises. However, there are some
instances of innovative strategies to build value from a low base.
Case Study: Distribution of ‘Arepa 3000’ by Latin World Records (Contemporary
popular)
Latin World Records is a Venezuelan independent record label owned by Samuel Quiroz,
- 32 -
a native Salvadorian and ex-investment banker. After more than twenty years in the
finance world, Quiroz quit his job and with the support of his partners at Latin World
Securities, founded Latin World Entertainment group. Since its inception the label has
been characterized by an aggressive production schedule across a range of different
genres including tropical, contemporary, pop and rock. The ability of LWR to sustain the
scale of activity it has, is largely the result of resources Quiroz has been able to marshal
from his linkages and experience in the Venezuelan business and investment community.
After one year of Quiroz heading LWR, Luaka Bop, an American independent record
label began looking for a distributor for the Venezuelan fusion band, Amigos Invisibles’
(an increasingly popular national band with a unique sound), second Album “Arepa
3000”. One of the ‘majors’, EMI, had first option to contract though negotiations were
not final. Learning of the proposed deal, Quiroz courted Luaka Bop and successfully
obtained the distribution deal, although LWR at the time was primarily a small label
focused on production and with limited distribution capacity. This was a major hurdle in
obtaining the deal and only a firm commitment to purchasing a large number of CD units
would convince Luaka’s executives of granting LWR an exclusive distribution deal for
this record.
Quiroz became acquainted with the forthcoming launch of a new prepaid mobile
telephone product by Movilnet, one of the largest mobile operators in Venezuela.
Realising that this product targeted the same youth demographics as ‘Arepa 3000’, he
conceived the idea of bundling the record with the pre-paid mobile in a packaged deal.
This would be the only way to get a legal copy of the record. Movilnet was fast to catch
up on the idea and bought 80, 000 units. This allowed Quiroz to secure the purchase of a
number of copies quite in excess of Luaka’s original sales estimates. A media campaign
including TV and radio ads featuring the members of the band was launched.
This case illustrates a small indie label making a “big hit” in their first participation in the
distribution business through an innovative scheme. This scheme illustrated innovation:
flexibility in the understanding of what the product was (from selling a CD to using it to
support the sale of a mobile phone), understanding that 80,000 records at a wholesale
price would not represent a major investment for a mobile telephony company, and
understanding that rather than selling your product to the retail market you can bring an
additional intermediary (the mobile company) to the value chain to strengthen your
marketing situation and magnify the distribution impact of your production. Replicating
the scheme elsewhere is a matter of identifying when large corporates can use music
products (gifts, campaign launches, charity, image campaigns etc.) in their product
strategy.
Conceptually this case shows an alteration of the typical value chain where conventional
distribution is bypassed in a form that does not generate retaliation from the channels.
This allows for a wide distribution of a record, without losing value for the artist and the
producer in the process. The record price is now embedded in the cost structure of the
sponsoring company at a cost that only shows production cost (marketing and distribution
have been “camouflaged” in the campaigns cost), in effect eliminating the wide margins
- 33 -
charged by distributors.
The value of this case is that irregardless of the structure it was business sense and savvy
that made it possible. No capital investment from the producer, or from the local record
company, was required.
Case Study: ‘KANKANO Laboratorio Cultural’ (Contemporary popular)
The Colombian music market is characterized by the presence of all six Majors and some
independent local activity in the segment of tropical folkloric music. This supply
structure has created important gaps in the offering of content and left an important
number of artists in the margins of the market. Majors tend to produce artists that can be
sold with the least local promotion and marketing effort. These are mainly international
artists that reach the public eye through the ever growing effect of the international
(mainly American) media which has been paid for by the holding companies of the
Majors.
To a group of local musicians it was clear that their options within this industry scheme
were very limited and that rather than trying to open a space for themselves in the current
structure, the goal should be to define an alternative model in which production and
promotion goals could be reached with the least amount of financial resources.
Various discussions and some opportunities (brought up by the landscape of the
entertainment industry in Bogotá) helped create an idea that is on its way to consolidating
a business model for musicians that require non mainstream options for the production
and distribution of their musical output, either in the form of CDs or live presentations.
‘KANKANO Laboratorio Cultural’ is one of the only venues in Bogotá dedicated
exclusively to the presentation of live music, mainly fusions of folklore and other music
genres like jazz, funk, reggae, and rock. Rather than conceptualizing the idea as a pub,
the owners, Gustavo Salcedo and Mayte Montero use the place as the promotion and
distribution site for high quality musical acts. In addition to having a good acoustic
condition (non-existent in other venues) the musicians are able to access recording and
rehearsing space during day hours.
Currently KANKANO operates in a 300 square meter site in the north of Bogotá, with
capacity to host up to 400 people in one evening. Attendance has averaged 60% to 70%
since the venue opened in January 2003.
As a business model KANKANO envisions the possibility of consolidating an
independent record label that can be distributed “in situ” or through mainstream
distribution channels7. A natural step from its core production and promotion activities
are artist development capabilities (i.e. tour support) and publishing. The fact that CD
distribution will be stronger in Bogotá has made the owners think about the possibility of
7
The fact that the distribution in the Colombian market is not integrated with production (not that it is
prohibited) and is 100% national brings interesting opportunities for independent producers.
- 34 -
opening other venues in different parts of the country in the medium term. Opening
similar venues (or franchising this concept) in other areas allows the possibility of
tapping an important revenue source: tourism. An entertainment venue focused in high
quality local acts could be an interesting tourist attraction in places like Cartagena or
Santa Martha, two Colombian cities of major local and international tourist affluence.
This case study highlights that the project is the result of the initiative of artists who
thoughtfully identified a trend towards an increasing relevance of the “live act” in an
environment where piracy allows cheap ownership of music products.
INDIGENOUS AUSTRALIAN VISUAL ART
Introduction
The Indigenous Australian context is not a developing country context. However, the
isolated, impoverished ‘third world’ environment in which Aboriginal and Torres Strait
Islander art has been produced since the 70s (Myers 2002; Altman et al. 2002) does strike
many correlations with developing country contexts. Indeed, the lessons to be learned
from the success of Indigenous Australian art exports have direct relevance to developing
country contexts. Most importantly in the context of this study, despite the ‘third world’
conditions in which this art is produced, Indigenous Australian visual art has become an
internationally renowned and economically significant Australian cultural export –
arguably, one of Australia’s most significant exports ever. This international success has
largely occurred outside of public support and public subsidy frameworks; it has been
driven by individual actors and it has drawn upon finance from private, philanthropic,
and foundational sources. In the seminal study Painting Culture, Myers (2002) illustrates
that public subsidy and support mechanisms whilst sustaining production in the 1970s,
largely limited the commercial flow of Indigenous Australian art to ‘uninterested’
domestic markets.
Over the space of three decades, Indigenous Australian art has become an industry
reportedly worth between $AUD 100 million and $AUD 300 million (Altman et al. 2002:
3). It is estimated that there are 5000 artists and painters working in the industry making
up between 25 and 50 per cent of total working Australian visual artists. This is a
remarkable figure considering that the Indigenous population makes up approximately 2
per cent of the Australian population. In 1994 an Australia Council funded study found
that the income generated from all Indigenous Australian creative activities (not including
rural Aboriginal art) was estimated at $720 million. Visual artists surveyed in the Council
report contributed $129 million to the economy - $66 million from their principal artistic
occupation and a further $63 million from "other arts work" (quoted in Langsam 1997).
Putting these figures in perspective, the Indigenous Australian ‘arts and crafts sector’
total is about the same size as the bauxite ($774million in 1992-93, ABS) or copper
($875million) industries and massively more important than uranium mining, valued at
$193 million for 1993-'94 (Langsam 1997). However it is important to note that
- 35 -
collecting accurate figures for the value of Indigenous Australian art is difficult as much
is produced in isolated communities and records are unreliable.
For Indigenous people in Australia, and elsewhere in developing countries, the raw
material of content creation is culture and knowledge. Combined with the creative talent
of the artist, the performer and the technician (incubation), this becomes a unique and
distinctive intellectual property that finds its way into several markets (domestic –
Indigenous and non-Indigenous, tourist, and international) of which the most profitable is
the elite international art or ‘high art’ market. The high end sale of Indigenous painting
represents the meeting of third world producer and first world art patron and connoisseur.
Moreover, a major feature of indigenous visual arts is that the majority of the output is
produced in remote parts of northern and central Australia. The production and sale of
arts and crafts constitute the only private sector economic activity in some communities.
The circulation and delivery of Indigenous art characterize a value chain where cultural
intermediaries play a key role, often drawing huge profits from their activity. Indigenous
artists rarely negotiate directly with commercial galleries or retail outlets for the sale of
their work. Their work is handled by Indigenous art centres or cooperatives. These
organisations are staffed by art coordinators who operate as both commercial and cultural
mediators between producers and mainly non-indigenous procurers of indigenous art.
Commercial galleries and retail outlets also have a mediating role, but they rarely have
direct contact with producers.
The Indigenous creative industries, despite their fragility, resemble mainstream creative
industries, insofar as they are generally characterised by an over-supply of content-
providers (Caves 2000) and dependent satellite producers clustered around profitable
links in the chain, notably distribution.
Figure 8. Indigenous Creative Industries Value Chain
Content creation/origination Intellectual property: the culture and
knowledge of the Indigenous people of
Australia and its expression in the form
of oral history, Craft, performance,
writing, music and song design etc.
Production and incubation The process by which this intellectual
property is transformed into products and
services, including support mechanisms
and resources, creative spaces, production
infrastructure, manufacturing inputs,
engineering etc.
Circulation The means by which products and
services are promoted to retailers and
advertised to the consuming public. This
includes various media, the role of
managers, agents, databases, mailing
lists, and websites.
Delivery mechanisms The point of sale or distribution of
- 36 -
products and services.
Current and potential markets The market for indigenous creative
practice. This varies across practice. For
example, the market (audience) for story
tellers and ceremonial performance is
limited whereas the market for
broadcasting is consistent. The four
principal markets are government
services, international tourism, domestic,
and the indigenous market.
Source: Keane and Hartley 2001
The following case study examines the international profile of Indigenous dot (acrylic)
paintings and the relationship between its position within elite markets and finance. This
account is not exhaustive, and although it makes historical references is not an attempt at
historical analysis of the developments leading to the establishment of an internationally
successful export industry. It highlights the primary developments with an emphasis on
drawing out the modes of finance involved in ensuring the success of this industry.
Indigenous creative industries are one of the least recognised but most vibrant and
innovative sectors in Australia. In many instances, these creative enterprises thrive from
minimal public funding and often community and local business support. The case of
Indigenous ‘high art’ is just one example of the successful development of high-value,
export orientated Indigenous Australian creative industries. There are several highly
innovative export orientated Indigenous creative enterprises emerging. Some examples
include:
Cyber Dreaming: An innovative multimedia firm based in Brisbane.
Website: http://www.cyberdreaming.com/
Murri Radio: An Indigenous operated country music community radio station based
in Brisbane. It receives some public funding but receives 50 per cent of its funding
from commercial sponsorship. It provides national niche programming (country
music and Indigenous broadcasting) and has become the most successful community
broadcaster in Australia. The station has ambitions to become self-funded in 3-5 years
(Keane & Hartley 2001).
Website: http://www.4aaa.org.au/
Goolarri Media Enterprises: Based in Broome, Goolarri is a cluster of integrated
media enterprises – radio, television, film and television production services,
recording facilities, events management and technical services – that links 16
indigenous media groups throughout Northwest Australia and community
organisations developing a range of media products for popular and mainstream
markets. Goolarri can be characterised as an entrepreneurial management team
utilising local knowledge to create a commercialisable media brand and generating
local content that embraces respect for tradition.
Website: http://www.gme.com.au/
- 37 -
Bangarra Dance Theatre: Situated in New South Wales, Bangarra Dance Theatre is
an internationally successful dance and performance company that combines
Indigenous Australian tradition with popular contemporary dance styles. The
company has now toured approximately 18 countries, undertaken extensive domestic
tours and released a multimedia CD-Rom in collaboration with Australia’s largest
Telco.
Website: http://www.bangarra.com.au/home.html
Case Study: The internationalisation of Indigenous Australian acrylic painting.
The beginnings
Until 40 years ago the Indigenous people known as the Pintupi lived in Australia’s
Western Desert without any involvement in the ‘cash economy’. The Pintupi people, like
many other Aboriginal groups, were brought in from the desert by the government during
the 1950s and 1960s and settled on a government reserve at Papunya, Northwest of Alice
Springs (Allan 2001). It was here, as one commentator has noted, in the ‘oppressive,
desolate and poverty-stricken conditions … with one sixth of residents dying of treatable
disease between 1961-1966’ (Allan 2001) that the Papunya Tula Art movement emerged
during the1970s giving birth to contemporary Indigenous Australian acrylic ‘high art’8,
part of an industry that is now valued at least $AUD100 million.
A school teacher posted at Papunya, Geoffrey Bardon, was an important figure in the
early development of Aboriginal art. Before Bardon’s arrival, Western Desert art was
largely confined to Aboriginal ceremonial practices and some small-scale tourist sales
(Allan 2001). Bardon was responsible for encouraging Indigenous Australians to express
their traditional motifs and dreamtime stories through painting. In 1971 he submitted
several acrylic works to the Alice Springs Caltex Art competition. The competition
resulted in $1,300 in cash sales. Bardon later established an artist’s cooperative at
Papunya and in 1972 he helped establish the Papunya Tula Artists limited liability
company. After this initial success, over 600 paintings and 300 smaller works were
produced over the next 18 months (Allan 2001).
Policy and the development of a market
From 1973-1975, Papunya Tula art production increased. The cash market, however, was
still small-scale and largely informal. Arts advisers visited painting communities
periodically to pay artists for completed paintings and to commission new ones. There
were small scale exhibitions and modest sales to museums and art galleries in the
Northern Territory but the survival of the Papunya Tula art collective was largely the
result of government action.
The principal backers of Aboriginal acrylic arts throughout the 1970s were two
government bodies: the Aboriginal Arts Board and Aboriginal Arts and Crafts Pty Ltd.
Whilst these two bodies had initial success in developing a market for Aboriginal art,
8
Papunya Tula art is most famously known for the portrayal of traditional motifs in the form of acrylic
‘dot’ paintings.
- 38 -
according to Myers (2002: 134), ‘there was a tremendous problem in maintaining a viable
stream of circulation between artists desire to paint and scarce demand.’
A major policy problem that emerged was the purchasing procedure of Aboriginal Arts
and Crafts. The company was developed to stabilise an income flow, foster production,
increase employment and increase economic returns for artists. The company purchased
paintings from artists, and acted as a wholesaler selling artworks to metropolitan retail
outlets. The company paid for art-work at the point-of-sale, with the respective artist
receiving payment immediately, not on consignment as was the procedure of most
commercial galleries. The company failed to match sales with production rate, resulting
in stock saturation, and the exhaustion of the company’s funds. Consequently, no new
paintings could be purchased leading to prolonged delays between the sale of artworks
and cash flow back into art collectives. Additionally, without start-up capital arts advisers
– who are important intermediaries between artists and the market – were unable to buy
collections for potential exhibitions.
In response, Aboriginal Arts and Crafts developed a 60-day system, where the art work
would be held for 60 days, allowing time for artwork to be sold before a payment was
made to the artist. However, this system also failed with artists wanting immediate
payment in exchange for their work. Soon artists and advisers began selling artwork to
sources outside of the company. Private collectors were later to become important buyers.
Grants from the Aboriginal Arts Board largely kept the Papunya Tula cooperative
operational during the 1970s with its funds purchasing stockpiled paintings for museums
and international ‘cultural preservation’ exhibitions (Myers 2002: 143).
The early stages of this market can be categorised as a grants market. Papunya Tula and
other art collectives all competed for and became reliant upon limited funds from
Aboriginal Arts and Crafts and the Aboriginal Arts Board. At the same time the
government was attempting to develop the domestic ‘uninterested market’, namely, the
broad population who had little interest in Aboriginal art. As Myers (2002) has argued,
public support for the development of a market during this period can be characterised as
a ‘welfare’ approach (135). Financial support was directed at the market without support
directly going to producers in the form of fellowships or income support schemes, and
was viewed as a ‘culturally appropriate strategy for Aboriginal producers’ (135).
During the early 1980s government policy shifted from a focus on cultural preservation
to an emphasis on the development of an Aboriginal ‘arts and crafts’ industry: a broad
term generally encompassing visual arts, souvenirs, crafts and performing arts. With this
policy shift a more structured ‘art world’ emerged, generating increased journalistic
attention, a growth in institutional recognition and acquisition and an expansion of retail
galleries, collecting and curatorship (Myers 2002: 186). This policy rearticulation with a
focus on ‘economic enterprise’ marked a concerted shift away from public subsidy (137).
It was during this period, of policy restructuring and industry development that the
international success and development of international markets for Aboriginal ‘high art’
occurred, largely outside of public funding mechanisms.
- 39 -
The 1988 Dreamings exhibition in New York
The 1988 Asia Society exhibition, Dreamings: The Art of Aborignal Australia, held in
New York from 6 October 31, was instrumental in the achievement of international
critical acclaim, and recognition and the initiation of export markets for Indigenous dot-
art. The exhibition drew an attendance of 27, 000 people, becoming the most successful
event ever to be held at the Asia Society. It elevated Aboriginal art from being
‘ethnographic art’(anthropological artefacts) to internationally renowned ‘high art’ sought
after by elite up-scale galleries and collectors.
The Dreamings exhibition is important within the context of this study. First, the
exhibition is an exemplary case of the successful production of cultural products for a
specific targeted audience. The organisers of this exhibition carefully selected the venue.
At the time the Asia Society galleries were important in the mediation of culture and
commerce relations between the US and Asia; the art was displayed in ways that were
new according to ‘high art’ styles, and was displayed in renowned galleries rather than in
museums as it had been in the past (Myers 2002). As Myers notes the organisers of the
exhibition ‘constructed an Aboriginal art that … was always understood partly as being
directed to an American audience’ (244).
The financing of this event is indicative of the move towards new private partnerships.
The financing is illustrative of the successful utilization of informal networks of people
and institutions. The organisers of the event sought to raise finance through private
sources drawn from the Asia Society’s business network. The exploitation of the Asia
Society’s structure was important as it ‘worked through its trustees and its other
connections’ including ‘hired consultants who could make connections to corporations’
(Myers 2002: 243). The organisers attempted to obtain finance through Australian
corporations working in the United States and via influential and wealthy Australians
with an interest in art living in the United States. The strategy was directed at informal
people connections and elite networks (that is, the connections exhibition organisers had
with various elites) and through the utilisation of the Asia society’s private consultants.
While financial support for the event failed to eventuate from the major Australian and
corporate funding sources, finance eventually did arrive from other sources. It could be
argued that the exhibition was the discovery of US financial interest in Aboriginal art.
The exhibition received funding from the National Endowment for the Humanities9, and
through associates of the Asia Society galleries network. In addition, the exhibition
received funding from private/corporate sources such as the Andrew Mellon Foundation,
the Starr Foundation and Westpac Banking Corporation.
The New York market, private collectors and philanthropy
While there is now a large number of public funding and grant schemes available for
9
NEH is an independent grant-making agency of the United States government dedicated to supporting
research, education, preservation, and public programs in the humanities.
- 40 -
Aboriginal artists and arts enterprises through the Australia Council for the Arts 10 ,
international enthusiasm and most notably the New York market is largely driving
demand, production and the development of the high-end of the Aboriginal arts industry.
In July 2003 Sotheby’s (an important auction house for the sale of Indigenous Australian
art) in New York sold 560 Aboriginal art works at a total of $AUD 7.5 million (Cho
2004). Sotheby’s percentage of international Indigenous Australian art sales has risen
from 20 per cent in 1996 to 70 per cent in 2003 (Reid 2003). This market and the
international markets for Indigenous Australian art more generally is characterised by a
growing number of very serious collectors and a large number of occasional buyers (Reid
2003). The top-end of the New York market is characterised by lower demand but higher
returns for artists and the lower is end is characterised by higher demand but lower value.
New York art Galleries have become important purchasers of Indigenous Australian art.
Since the Dreamings exhibition in 1988 there has been a dramatic rise in the number of
up-market galleries specialising in Indigenous Australian art and general galleries that
have substantial sections dedicated to Indigenous Australian art. There are now direct
linkages between up-scale galleries and ‘talented artists’ and cooperatives. Galleries are
reported to foster and encourage artists to produce works either specifically for their
galleries or to be auctioned at Sotheby’s, New York (Reid 2003).
Private collectors and philanthropy have become another significant mode of finance for
the production of Indigenous Australian art. A primary example of this is through the
consideration of the private collection of 89 year-old Florida billionaire, John W. Kluge.
Kluge has amassed one of the largest collections of Indigenous Australian art outside of
Australia worth $USD 5 million in 1997 (and is now estimated to be worth twice as much)
containing 1,600 works from between the 1940s and 1990s. Kluge reportedly ‘fell in love
with Australian Aboriginal art’ after seeing the Dreamings exhibition in New York in
1988 (Genocchio 2004). He brought his first pieces of Indigenous Australian art in 1988
–a total of 130 paintings for $500, 000. The money from this sale was reportedly used by
the ‘impoverished reservation style community of some 700 people’ to build an arts
centre to contribute to the development of the region’s art communities (Genocchio 2004).
He also commissioned many pieces from individual artists and art collectives providing
them with sources of income and investment. In 1996, Arts agents hired by Mr. Kluge
reportedly injected $AUD 500, 000 into several Aboriginal arts communities in Northern
and Western Australia over a period of two years.
It is important to note that whilst private and philanthropic streams of finance have
potential for arts and creative industries development more broadly they also create
threats for individual producers. In the Indigenous Australian art context, private
collectors, advisors and curators have been largely responsible for the exploitation of
Aboriginal and Torres Strait Islander artists over the last three decades, with many artists
not seeing any revenue from artworks worth thousands and in some cases hundreds of
thousands of dollars. This also raises the issue of a need for appropriate copyright laws.
10
See http://www.ozco.gov.au/boards/atsia/ [Accessed 23/03/2004].
- 41 -
CONCLUSION
We have examined modes of financing creative industries in three different regions:
China, Latin America, and Indigenous Australia. While it is apparent that the term
‘creative industries’ has yet to be widely embraced, it is also evident that culture is
increasingly used as a resource for development. In these regions, however, creative
industries are still predominantly viewed as having a strong association with traditional,
official or national culture, a perception that needs to be broadened in order to maximise
future diverse economic development. This concluding section is divided into three
sections: emerging trends and issues, modes of finance, and lessons learnt from the case
studies.
The ultimate question, however, is whether or not creative industries in developing
countries can reach a level where they can compete in the global market place.
Emerging trends and issues
The role of culture in development is currently being reassessed. The issue we have
canvassed here is not about access - but growing capacity and reforming financial
mechanisms. Events such as the dot.com crash and financial crises in Latin America and
Asia have reshaped expectations and reformed practices. Structural adjustments imposed
by the IMF and the World Bank on developing countries may have had little direct
influence on the cultural sector but culture’s increasing prominence as a contributor to
GDP and national development means that flow-on effects have been registered: new
management strategies and new business models have been taken up.
Creative industries are by nature risky business. Traditional industrial models cannot be
imposed upon these industries. An interesting emerging trend is the development of
safeguards and specific parameters as a feature of creative industries financing and risk
management. Although these safeguards vary, they are designed to cater for the intangible
nature of creative assets and outputs, to manage risk, and to ensure the robustness of
business models.
While it is important that national economic agendas recognise the intangible attributes
and value of cultural assets, there is also a need to understand how traditional cultural
segments are increasingly influenced by the marketplace. Culture has become a
significant economic force in its own right and is beginning to target niche markets.
Developing the competitive advantage of creative industries is essential to the growth of
export markets. Creative industries in developing countries may struggle to compete in
international markets on a national level, but targeted development at a firm level may
produce internationally competitive firms that in turn generate flow-on value for the
broader economy. It is useful to think of competitive advantage in terms of a national
innovation system. The competitiveness of creative industries can be optimised on a
- 42 -
number of different levels: the level of the firm, the level of the sector, the regional level,
or a national level (see QUT CIRAC & Cutler & Company 2003). In this sense the
growth of creative industries needs to be assessed from the point of view of innovation
incentive structures. Such incentives can come from the state in the form of direct
industry assistance, or in an enabling sense, by providing incentives to middle players in
the value chain. To illustrate this need to fix the ‘middle factors’ to ensure development,
the competitiveness of the Chinese film and music industries is hampered by the role of
pirates who are not cultural intermediaries in the true sense and could be more gainfully
employed in other areas of the economy.
Banking on Culture illustrates that while finance is essential for creative industries
development, finance cannot be considered in isolation of other inherently connected
issues. Once again this relates to the unique nature of the creative industries. As well as
finance, creative enterprises require specialised business support, marketing, management
development, attention to innovation, copyright protection, and rights management.
The majority of finance is directed towards the content creation and production stages of
the value chain. However, emphasis needs to be directed towards segments of the value
chain that inhibit growth and information flows. This may - or may not - be the creation
stage. As the majority of creative industries in developing countries emanate from deeply
rooted cultural traditions, the impediments are not related so much to entry or production:
but rather the packaging, marketing, and distribution of creative products. For instance,
financial assistance or incentive could be directed at the distribution platform so as to
support local content, which in turn provides a showcase. It is also noted that in many
sectors regulatory bottlenecks, as well as country-specific political and cultural barriers,
act as primary barriers to development.
Financing is closely linked to a need for an awareness of types of markets and potential
markets for export. From an economic development perspective, cultural specificity
works against the capacity for products from these regions to enter into mainstream
global markets, with the exception being breakthrough cultural markets (world music,
art-house cinema) and culturally proximate markets (e.g. Spanish or Chinese speaking
markets). In terms of international export potential (in English or French-speaking
locations for instance), creative products from developing countries are often sought after
by educated elites, who may pay higher prices but whose consumption is more symbolic
than routine. In other instances there is potential for the development of ‘regional’ or
Diaspora markets. In Latin America, for example, there is potential for the development
and strengthening of markets throughout ‘culturally proximate’ neighbouring countries.
Modes of finance
A number of primary finance trends emerge from this study. First, financing is often
serendipitous and fragmented. Modes of finance are influenced by political agendas as
much as public demand and private investments are often opportunistic. Financing is
fragmented deriving from multiple sources. Second, institutional and informal people
networks are extremely important in levering financial support and developing
- 43 -
connections to financial sources. Third, while most modes of finance are aimed at the
creation and production stages of the value chain, private partnerships (e.g. small local
enterprises that form alliances with larger and sometimes international companies) rather
than direct capital investment, are becoming an important means in overcoming
distribution and other market barriers. Strategic alliances with service providers, with
high profile ‘branded’ media companies, and with distributors are becoming a way
forward for smaller innovative businesses. In this sense investment is counted not purely
in monetary terms but in the value of untraded interdependencies such as skills, know-
how, branding, etc. Further, there is recognition that cultural workers are often linked
into peer networks that circulate information. Cultural workers increasingly are inheriting
a role as service providers in the new economy. Business seeks out their skills to infuse
creative inputs into non-creative fields, such as government, education, and business
promotion.
Alarmingly, but not unsurprisingly, large-scale capital investment is low. Because of the
flexibility of the micro-finance model, the type of finance it delivers, and the inherent
safeguard features it contains, micro-finance offers a viable model to ‘kick-start ideas and
develop micro-enterprises to a level where they can obtain funding from other public or
commercial sources. However, this mode of finance is only suitable for limited creative
sectors. Larger commercial sectors require greater levels of capital investment and
venture capital.
While new modes of finance are emerging, in certain sectors public subsidy still remains
the primary form of finance. Public support mechanisms still have an important role to
play in the future, however, they will need to re-focus on specific segments of the value
chain where barriers stifle development. New technologies and in particular partnerships
with technology firms (ISPs, telcos, etc), also provide a new avenue to enter global
markets and to overcome distribution barriers. In this context, countries that have
networked information infrastructures in place have a considerable advantage.
There is a need for mid-term seed funding to sustain business activities. Public/private
partnerships present a ‘third way’ of financing creative industries. Further examination is
required to understand how public funding agencies can act as a short-term guarantor, to
foster creative enterprises through a transition from a reliance on public funding to full or
partial commercial viability derived from private forms of investment.
Case studies
China
China illustrates the shift from a state-centred financing regime to a mixed financing
model with the rise of new private partnerships and innovative financing arrangements.
This mixed financing model draws upon a number of modes of finance including public
tax concessions at one end (remnants of a state-centred model) and private direct
investment, technological enabled private online partnerships, collaboration between art
and real-estate, and philanthropic investment. China also illustrates the role of informal
mechanisms in getting product into the marketplace. Irregular modes of production and
- 44 -
distribution both inhibit and enable the flow of finance with creative industries.
Latin America
The Latin American case study illustrates some similar themes. Here reliance on foreign
finance has led to weaknesses in the value chain. Most investment incentive schemes are
directed towards foreign entities. However, innovative private partnership (more the
exception than the rule) are enabling new modes of distribution, and creating synergy.
Once again informal people networks play an important role in development, such as
where a creator/producer is able to draw upon the institutional networks of another
agent/intermediary.
Indigenous Australia
This case study exemplifies that a high-growth, high-economic value, export orientated
industry can emerge from an impoverished, isolated, and an initially undeveloped context.
Several key issues emerge from this case study with direct relevance to the development
of niche international markets and the raising of new private financial sources. Individual
actors can successfully adapt ‘traditional elite’ cultural forms (without loosing cultural
uniqueness of integrity) to appeal to the tastes of a specific targeted international
audience and market. The mobilisation and utilisation of informal people networks can be
a successful method of establishing an international network with linkages to important
financial sources. The leverage of institutional networks with formal (business
partnerships and international offices) or informal international networks (specialist
consultants or informal people networks) can be an important means of obtaining finance
and establishing financial streams. Philanthropic, foundational and private investment can
be important financial sources for the production and distribution of ‘traditional elite’ art.
Finally, these modes of finance are also potentially important in establishing,
international finance streams and international markets.
REFERENCES
Allan, Susan (2001), Papunya Tula: The birthplace of contemporary Australian
Aboriginal Art, World Socialist Web Site, published by International Committee of
the Fourth International.
Altman, J.C. Altman, Hunter, B.H. Ward, S. & Wright, F. (2002), Some competition and
consumer issues in the indigenous visual arts industry, no. 235, Discussion paper,
Centre for Aboriginal Economic Policy Research.
Ashton, Chris (2002), China: Opportunities in the Business of Sport, SportBusiness
Group Ltd: London.
Bergman, David (2004), ‘From Creativity to productivity’, EDANZ Conference,
Wellington, March 15-16.
- 45 -
Caves, R. (2000) Creative Industries: contracts between art and commerce, Harvard
University Press: Cambridge.
Chin, Saik Yoon, Digital Review of Asia-Pacific (2003/4), Asia Pacific Development
Programme, United Nations Development Programme, Penang: Southbound.
Cho, Ines (2004), ‘Aboriginal Art: a modern primitivism’, Joins.com, Dow Jones &
Reuters, 29 January.
Chu, Yingchi (2002), ‘The consumption of cinema in contemporary China’, in S. H.
Donald, M. Keane and Yin Hong (eds), Media in China: Consumption, Content,
and Crisis, RoutledgeCurzon: London.
Collier, Andrew (2003), ‘Hongkong Land to convert ageing factory into arts venue’
South China Morning Post, 24th September.
Convenio Andres Bello (CAB), (2003a), Impacto del Sector Cinematográfico sobre la
economía colombiana: situación actual y perspectivas, CAB, Bogota.
Convenio Andres Bello (CAB), (2003b), Impacto del Sector Fonográfico en sobre la
economía colombiana, CAB, Bogota.
Cunningham S. and Sinclair J. (2001), Floating Lives: The Media and Asian Diaspora,
Rowman & Littlefield: Lanham.
Curren, James, and Park, Myung-Jin (2000) De-Westernizing Media Studies, Routledge:
London.
Cutler & Company. (2002) Producing digital content: A consultancy to examine and
advance the understanding of the production of digital content, Department of
Communications, Information Technology and the Arts: Canberra.
De Kloet, Jeroen (2002) ‘Rock in a hard place: Commercial fantasies in China’s music
industry’ in S.H. Domald, M. Keane and Yin Hong eds., Media in China:
Consumption, Content & Crisis, RoutledgeCurzon: London.
Fong, Mei (2003), ‘Home turf advantage’ Far Eastern Economic Review, 6 November.
Gauthier, Maria Ochoa, Yudice, George (2002), The Latin American Music Industry in an
era of Crisis, November, Paper prepared for The Global Alliance for Cultural
Diversity, UNESCO, Paris.
Genocchio, Benjamin (2004), ‘An Artist Bounty from the Australian Wilderness’, The
New York Times, 7 March.
Hackett, Keith, Ramsden, Peter, Sattar, Danyal & Guene, Christophe (2000), Banking on
- 46 -
Culture: New Financial Instruments for expanding the cultural sector in Europe:
Final Report, European Commission, Banking on Culture Partners, The Arts
Council of England and the Gulbenkian Foundation.
Hearn, Greg, Cunningham, Stuart, Ordonez, Diego (2004), ‘Commercialisation of
Knowledge in Universities: The Case of the Creative Industries,’ Prometheus, In
press.
Hillman-Chartrand, H. & McCaughey, C. (1989), ‘The arm’s length principle and the arts:
an international perspective - past, present and future’, in Who’s to Pay for the
Arts? The International Search for Models of Support, eds M. Cummings & J. M.
D. Schuster, American Council for the Arts Books.
Jopson, Debra (2003), ‘Two Worlds, One Mission’, The Sydney Morning Herald, 2
August.
Keane, Michael (2004), ‘Brave new world: China’s creative vision’, International
Journal of Cultural Policy, Forthcoming.
Keane, Michael, Moran, Albert and Ryan, Mark (2003), Audiovisual works, TV formats
and multiple markets, Australian UNESCO Orbicom Working papers in
Communications, No.1, Griffith University, Brisbane.
Keane, M (2002) ‘Facing off on the final frontier: the WTO and the re-branding of
China’s national champions’, Media International Australia, no. 105: 130-147.
Keane, Michael and Donald, Stephanie H (2002) ‘Responses to crisis: convergence,
content industries, and media governance’, in S.H. Domald, M. Keane and Yin
Hong eds., Media in China: Consumption, Content & Crisis, RoutledgeCurzon:
London.
Keane, Michael and Hartley John (2001) From ceremony to CD Rom: Indigenous
Creative industries in Brisbane, CIRAC, Brisbane.
Kim, Mi Hui. (2002), Korean Netizens invest in local pix - Homegrown product nabs
more than 40% of B.O. Variety Jan 2.
Kraus, Richard (1995), ‘China’s artists between plan and market’, in Urban Spaces in
Contemporary China: the Potential for Autonomy and Community in Post-Mao
China, eds D. Davis et. al., Woodrow Wilson Center Press: Cambridge.
Kraus, Richard (2004), The party and the arty in China: the new politics of culture,
Rowman & Littlefield, Lanham.
Langsam, David (1997), Aboriginal art - Australia's $100 million hidden industry.
Available: http://ourworld.compuserve.com/homepages/dingonet/aborigin.htm
- 47 -
[Accessed: 12/03/2004].
Luo Liyuan and Zhao Mulan (2003), ‘Knowledge industries in Beijing’. In China’s
Future in the Knowledge Economy eds. Bhajan Grewal, Lan Xue, Peter Sheehan
and Fiona Sun. Victoria University and Tsinghua University Press, 326-333.
McGuire, Paul B. & Conroy, John, D. (2000), The Microfinance Phenomenon, The
Foundation for Development Cooperation, Brisbane.
Ministry of Culture (2003), Enterprise, Innovation Forum International. Available:
http://www.eifi.com.cn/gaofengzixun/wenhacy/whcy.htm [Accessed:
24/03/2004].
Myers, Fred, R. (2002), Painting Culture: The making of an Aboriginal High Art, Duke
University Press, Durham.
Nationwide News Pty Limited (2003), ‘Struck by the beauty of Aboriginal Art’, Dow
Jones & Reuters, Nationwide News Pty Limited, 3 December.
Nazirwan, Mohamad (2003), The way forward: Future Direction and Strategies for
Building a Sustainable Microfinance, The Commonwealth of Australia (AusAID),
Canberra.
O'Regan, Tom (2001), Cultural Policy: Rejuvenate or Wither? Griffith University,
Professorial Lecture, Brisbane: Australian Key Centre for Cultural and Media
Policy, Griffith University, Brisbane.
Porter, Michael (2000), ‘Attitudes, values, beliefs, and the micro-economics of
prosperity’ in L. Harrison and S. Huntingdon eds. Culture Matters: How Values
Shape Human Progress, Basic Books: New York.
Preston, Paschal, (2001), Reshaping Communications: Technology, Information and
Social Change, Sage Publications: London.
Queensland University of Technology (QUT), Creative Industries Research and
Applications Centre (CIRAC) & Cutler & Company (2003), Research and
Innovation Systems in the Production of Digital Content: Report for the National
Office for the Information Economy, National Office for the Information Economy,
Canberra.
Reid, Michael, (2003), ‘Aboriginal artworks set the standard’, The Australian, 13 August.
Ryan, Bill (1992), Making Capital From Culture: the corporate form of capitalist
cultural production, Walter de Gruyter: Berlin.
- 48 -
Sachs, Jeffrey (2000), Notes on a New Sociology of Economic development, in L.
Harrison and S. Huntingdon eds. Culture Matters: How Values Shape Human
Progress, Basic Books: New York.
Storper, Michael 1997, The Regional World: Territorial Development in a Global
Economy, Guilford University Press, New York.
Throsby, David (2001), Economics and Culture, Cambridge University Press,
Cambridge.
Throsby, David (2002), The Music Industry in the New Millenium: Global and Local
Perspectives, October, Paper prepared for The Global Alliance for Cultural
Diversity, UNESCO, Paris.
United Nations Conference on Trade and Development (UNCTAD) (2004), Creative
Industries and Development: UNCTAD XI High-Level Pannel on Creative
Industries and Development, February, UNCTAD, Geneva.
United Nations Conference on Trade and Development (UNCTAD) (2003), Trade and
Development Report 2003: Overview, UNCTAD, Geneva.
Wang, Jiaxin, and Song, Wenyu (2004) The Blue Book of China’s Culture: The
Development Report of China’s Cultural Industry, Social sciences Documentation
Publishing house: Beijing.
Yi, Jixiong (2000) Innovation Theory (Chuangxin lun), Arts Publishing Company:
Hefei:Anhui.
Yoon, Sun-kyung. 2001. Swept up on a wave. Far Eastern Economic Review,
October 18.
Yudice, George (1998), La Industria de la música en el marco de la integración América
Latina-Estados Unidos, seminario Integracion Economica e industrias culturales
en América Latina y el Caribe, Buenos Aires.
Yudice, George (2003) The Expediency of Culture: Uses of Culture in the Global Era,
Duke University Press: Durham.
Yusuf, Shahid and Nabeshima, Kaoru (2004), Urban Development Needs Creativity:
How Creative Industries Can Affect Urban Areas, World Bank. Available:
http://www1.worldbank.org/devoutreach/article.asp?id=221 [Accessed:
12/03/2004].
- 49 -
Appendix: Modes of Finance examined in this paper
Category Type Sector Country/ Page Description
Example reference
Public Entertainment Perfom- China 23-24 China has a 3% tax on
Support Levy/Tax ing Arts popular entertainment
venues with funds being
invested back into
supporting the Arts.
Funding Body Art Chile 29 The FONART fund is
administered by the Ministry
of Education and is the
primary form of Public Art
funding
Tax Breaks/tax Film Columbia 29 Foreign film producers tax
incentives will be calculated at 60 % of
generated income/local film
investment is 100% tax
deductible and others
Tax Exemptions Film Peru 29 Tax exemptions on local film
production revenues
Film Funding Film Venezuela 29 A percentage of a
Government body’s budget
is invested in local movie
production
Movie levy & Film Argentina 29 Percentages of movie
rental levy tickets, movie sales, rentals
and all income received by
the National Radio
Broadcasting are collated to
form the ‘Motion Picture
Fund’ which funds local
production.
Private Direct private TV and China 21 A direct investment is made
Investment investment film in return for publicity, such
as program naming with
products, and featuring of
products on-screen
IPO TV and China 22 Chinese companies raise
Internet finance through public
listings on both the Chinese
and NASDEQ stock-
exchanges
Foreign Media China 21, 22 Informal investment
investment arrangements circumvent
through informal regulatory barriers
people networks prohibiting foreign
investment; investors often
are foreign businesses
Commercial Cultural China 23-24 Arts companies are
Patronage arts sponsored by local
companies
Hybrid/ Other Philanthropy Art Aboriginal 37-38 Philanthropic funding have
Art contributed to the
development of Aboriginal
art communities and a
primary form of investment
Attracting Film China 21 The idea of luring
International International professionals to
professionals a local industry with links to
through co- ‘majors’, finance, technology
productions and skills
- 50 -
Philanthropic TV China 21 Producers negotiate
reciprocal investment deals through
investment personal contacts/networks
or with private enterprise
Publishing Publish- China 23 Publishers sell their rights to
partnerships with ing online content providers
Online content attached to Internet portals
providers to ensure wide distribution.
Collaborative Art China 23-24 Artists pay a nominal fee to
venture: Art & use the 798 space which the
real-estate owners are attempting to
develop into a residential
development project
Private Music Colombia 31-32 Kankano Laboratorio
Incubation Cultural has effectively
become a private incubation
centre providing musicians
with a live venue, and a
recording and rehearsal
space
Levering Art Aboriginal 37-38 The success of the
Institutional Art Dreamings exhibition was in
networks part through levering the
international network,
consultants and individual
actors of the Asia Society
Bundling of an Music Brazil 30-31 The album ‘Arepa 3000’
audio CD with a became part of a pre-paid
mobile phone mobile package from
package deal Movilnet, with 80, 000 units
purchased by the telephony
company
- 51 -
