Australian federal budget 2011: wrap-up of arts and cultural funding

The following article appeared in Crikey on Friday May 13th 2011. 

The 2011 federal budget contained some modest announcements for the arts and culture.

In the Arts portfolio, the government delivered on its 2010 election promise for $10 million over five years in new grants for artists to create work. The funding will support “up to 150 additional artistic works, presentations and fellowships over the next five years through the New Support for the Arts program.”

As well, $400,000 has been found for the federal government’s Contemporary Music Touring Program, a successful program which supports popular mid-level contemporary music acts to tour regional areas.

In broadcasting, $12.5 million has been provided for the proverbially penurious community radio sector, an increase of 25% for a critical area of broadcasting that generally receives very little government support

There was also a package for the screen industry, with a headline figure of $66 million (as we will see, it is actually less than this). Much of the extra money goes to production subsidies through the tax system in the form of lower qualifying thresholds for the Screen Production Incentive. According to Screen Australia, the changes include:

• Lowering the threshold for Producer Offset eligibility from $1 million to $500,000, for features, TV and online programs

• Replacing the Producer Offset for low-budget docos with a Producer Equity payment

• Converting the 65 episode cap to 65 commercial hours for TV

• Exempting documentaries from the 20% above-the-line cap

• A reduction in qualifying Australian production expenditure thresholds, and allowances for a broader range of expenses to be eligible for QAPE.

Some really good news is the restoration of the Australian Bureau of Statistics’ screen industry survey, which provided gold-standard data on the state of the industry and which hasn’t been performed since 2007-08 (shortly before the Rudd government slashed funding to the ABS in its first budget).

But how much new money for screen is really here? Go to Budget Paper 2 and you will find that the total extra funding is only $8 million. This is because, quoting from the budget papers, “these changes will be partly offset by $48 million in savings over four years from 2011-12 by removing the Goods and Services Tax (GST) amounts from [qualifying production expenditure] for the film tax offsets and increasing the minimum expenditure thresholds for documentaries to $500,000 in production (from the current threshold of $250,000).”

Money is also being clawed back from cultural agencies through the increased efficiency dividend. Rising to 1.5% in future years, the efficiency dividend hits smaller agencies much harder than big ones. And everything in the arts is small.

The efficiency dividend measures mean the Australia Council is being asked to save $3.3 million over the forward estimates, the Australian Film Television and Radio School will have to find $1 million, the National Film and Sound Archive $1.1 million, the National Gallery $1.4 million, the National Library $2.1 million, the National Museum $1.7, and Screen Australia $759,000. That’s more than $12 million in funding cuts for cultural agencies over the forward estimates.

If we look a little closer at the portfolio budget statements, for instance from the Australia Council, we can see the effects of the efficiency dividend in falling support for artists and cultural organisations. This year there will be “a decrease of approximately $2.5 million in forecast grants expenses compared with 2010-11.” Australia Council grants funding will be only 2% above 2010 levels in 2014-15. But CPI is forecast to run at 3% annually, meaning Australia Council support for artists and organisations will fall in real terms — by perhaps as much as 10%.

In other words, the “New Funding for the Arts” money announced in this budget will be almost completely clawed back by the effects of static funding and the increased efficiency dividend on the Australia Council.

The one really big-ticket spending item in culture was of dubious policy value: the $376 million spend on helping pensioners and senior Australians to make the switch to digital TV. Opposition leader Tony Abbott has already pilloried the program as “Building the Entertainment Revolution”, while our own Bernard Keane and Glenn Dyer have pointed out “the political imperative of ensuring pensioners aren’t left without television as analog signals switch off”.

Personally, I’m sympathetic to the argument that television represents an important human service that allows older Australians to stay connected with the broader community. But the spending program should also be seen in the context of the broader budget, in which $211 million in spending is being “saved” from aged care itself. The government appears to be prioritising access to daytime television over places in aged-care facilities.

Money for art and culture is often spuriously disparaged by critics as diverting resources away from the critical services that governments provide. In reality, of course, the numbers are tiny compared to the investments annually in roads, schools and hospitals. But in this case it really does seem as though the owners of television networks are getting a subsidy at the expense of much-needed investment in aged care infrastructure.

Why AFACT’s piracy statistics are junk

Yesterday, the Australian Federation Against Copyright Theft (let’s call them AFACT or perhaps ‘Big Content’ for short) lost their appeal in the long-running and important copyright infringement suit against Australian ISP iiNet. As usual, some of the best commentary can be found by Stilgherrian (who really does need a second name, don’t you think?):

If you came in after intermission, you’ll pick up the plot quick enough. AFACT said iiNet’s customers were illegally copying movies, which they were, but iiNet hadn’t acted on AFACT’s infringement notices to stop them. AFACT reckoned that made iiNet guilty of “authorising” the copyright infringement, as the legal jargon goes. iiNet disagreed, refusing to act on what they saw as mere allegations. AFACT sued.

In the Federal Court a year ago, Justice Dennis Cowdroy found comprehensively in favour of iiNet. It was a slapdown for AFACT. AFACT appealed, and yesterday lost. Headlines with inevitable sporting metaphors described it as  two-nil win for iiNet.

But read the full decision and things aren’t so clear-cut.

One of the three appeals judges was in favour of AFACT’s appeal being dismissed. Another was also in favour of dismissal, but reasoned things differently from Justice Cowdroy’s original ruling. But the third judge, Justice Jayne Jagot, supported the appeal, disagreeing with Justice Cowdroy’s reasoning on the two core elements — whether iiNet authorised the infringements and whether, even if they had so authorised them, they were then protected by the safe harbour provisions of the Copyright Act.

There’s plenty of meat for an appeal to the High Court, and that’s exactly where this will end up going. Wake me when we get there.

As I argued today, also in Crikey, it’s ironic that Big Content seems to be about the only business lobby group in the country arguing for more regulation and red tape.

But the copyright case also comes in the wake of an interesting little micro-controversy about piracy statistics, released by AFACT late last week. Aided by an economics consultancy and a market research firm, AFACT released an impressive-seeming report that claimed that movie piracy was costing Australia $1.4 billion and 6,100 jobs a year.

Electronic Frontiers Australia made some pretty valid criticisms of the research, including the following:

1. The assumption that 45% of downloads equal lost sales is unproven and insufficient evidence is provided to support it. The survey method cited is better than assuming 100% of downloads are lost sales, but there is better analysis in other studies – for example this piece by Lawrence Lessig. If the study was correct, sales of DVDs and attendance at cinemas would be much more reduced than the reported industry figures. In fact, the movie industry is making record profits.

2. It can’t be ignored that downloads have an advertising effect both on the product downloaded and future releases. To the extent sales may be lost, these must be offset against other gains from advertising.

3. Gross revenue is not the relevant metric, due to variables such as investment in capital, distribution and costs of sales. Many of the movies downloaded may not have been available to view or buy in Australia. Profit is the metric of importance, but this is never studied.

4. Flow-on effects to other industries are wholly speculative, and lost tax on profits assumes the entities pay Australian company tax on sales pro-rata to revenue, which is not intuitive or evidenced. It also assumes that money not spent on movies is lost to the economy, instead of helping to create jobs in other sectors.

5. Peer to peer file sharing is merely the latest in a sequence of technologies since the 19th century which have been claimed to be the ruin of the creative arts. See chapter 15 “Piracy” by Adrian Johns (University of Chicago Press 2009) – the copyright owners said the same thing about copies of sheet music, tape recorders, every iteration of personal recording system and indeed public radio. However, “home piracy” acts not only as a loss to industry but also as a boon to distribution, bypassing censorship and limitations on sales by official outlets.

6. The report suffers, as have other industry-funded studies, from “GIGO”. With an assumption that “downloads = losses” unproven, all conclusions estimating the size of the loss are equally unproven. What if a vibrant sharing culture increases total sales for media respected as quality by consumers, but reduces sales of hyped media? (Research has shown that the biggest downloaders in fact spend more on entertainment than non-downloaders.)

7. The call-to-action of this report is obviously to “crack down on piracy”, shifting the cost of file-sharing from the industry to the taxpayer via increased law-enforcement. No industry, let alone the foreign-dominated entertainment industry, deserves a free ride for its business model. If instead, the industry noted that the report says 55% of downloads created a market for sales, much of which is unsatisfied due to current restrictive trade practices, then its future profitability would be in its own hands.

8. Repeated studies have demonstrated that the entertainment industry vies for money and commitment of time with all other forms of entertainment. The Internet, computer games and mobile telecommunication applications take “eyeballs and dollars” away from DVD and CD sales, but also sports arenas, sales of board games and printed works. Magazines are also suffering from a reduced value proposition with the Internet, and some forms of entertainment and some businesses in the industry will no doubt find it difficult to remain vibrant. Change is consumer-driven, and it’s futile for the industry to try to hold fast to a business model and methods of content distribution which are dying with or without fierce law enforcement of copyrights.

Unsurprisingly, AFACT  have responded, attacking EFA’s arguments.

Notably, AFACT replies that:

“The study does not assume that ‘downloads = losses’. As stated above, some 32 per cent of respondents said that they viewed an authorised version of a movie after watching the pirated version. As a result, 32 per cent of ‘all pirate views’ were removed from the ‘lost revenue’ calculations and were treated as ‘sampling’.”

This is a valid argument. AFACT has indeed removed these later viewings from their lost revenue calculations. But, as I’ll explore below, this doesn’t mean that AFACT’s methodology is sound.

AFACT’s other replies are far less persuasive. Take this line:

“It should be clearly noted that in almost all of these cases government or technology provided a barrier to prevent continued rampant infringement. In the case of public radio, legislation provided statutory copyright royalties. VHS and cassette tape may have been efficient technologies for recording, but in terms of cost and quality (analog degrades with time) they proved not to be efficient for distribution at that time. Laws were also designed to prevent mass distribution of pirated VHS tapes. Solutions, whether legislative, technological or otherwise are currently required to prevent or deter the unfettered digital distribution of pirated versions of copyrighted content.”

Not to put too fine a point on it, this is a rubbish argument. Statutory copyright royalties for broadcasters were not barriers to listeners – they were income streams to publishers. And, in fact, as EFA point out, radio proved to be such a powerful marketing tool for music labels that record companies regularly resorted to payola and other measures to get their songs on high-rating radio stations. This argument is a classic tautology: because AFACT believe that regulatory barriers are necessary to prevent infringement, they argue that the reason previous technologies didn’t lead to “rampant infrignement” was because they were strictly regulated. You don’t need a degree in logic to spot the flaw in this argument.

So who’s right?

On the whole, EFA has the better of the exchange. Indeed, there are plenty more holes you can pick in AFACT’s methodology if you wish. To start with, let’s examine their laughable “Annex 1″ in the full report. This purports to explain how ABS input-output tables are used to generate a final figure for total piracy impact in terms of lost sales and job losses.

I’d like to say I carefully checked their methodology for its econometric accuracy. Unfortunately, I can’t – because the authors at Oxford Economics and Ipsos don’t publish their equations; nor do they publish their raw data.

Just as an exercise, I downloaded the ABS input-output tables and attempted to match the ABS data to the AFACT report. It’s impossible. The data tables in the AFACT report which might allow that kind of scrutiny are missing.

What Annex 1 does tell us is that Oxford Economics and Ipsos have made all sorts of behind-the-scenes calculations to do with the exact value of the multipliers they use and the precise allocation of various ABS industry data to various categories of their assumptions. But they don’t tell us how these figures were arrived at. To get a flavour of the opacity of the modelling, here’s their full explanation of two of the the multipliers they use:

Type II multipliers of 2.5 (Gross Output) and 1.1 (GDP) were estimated. This covers activity in the Australian motion picture exhibition, production and distribution industries as well as TV VOD, internet VOD, downloads of motion pictures and the retailing of these motion pictures

There is no further explanation of how the numbers of 2.5 and 1.1 were “estimated” and no equation which shows us what they multiply. Hence, it is literally impossible to verify, cross-check or otherwise scrutinise these figures. Indeed, the full report contains no true methods section. In other words, the academic credibility of these figures should be zero.

This rubbish is just another example of how lobby groups use consultants-for-hire to create vocal scare campaigns based on fictitious figures. It’s junk modelling, ordered up for the express purpose of industry rent-seeking.

Crikey’s Bernard Keane explained it helpfully for us in relation to climate lobbying in 2010:

This what you do:

1. Commission a report from one of the many of economics consultancies that have broken out like a plague of boils in the past decade.  This should feature modelling demonstrating the near-apocalyptic consequences of even minor reform.  Even if your industry is growing strongly, you should refer to any lower rates of future growth as costing X thousands of jobs, without letting on that those jobs don’t actually exist yet, and might never exist due to a variety of other factors.
2. Dress up the report as “independent”, slap a media-friendly press release on the top and circulate it to journalists before release, with the offer of an interview of the relevant industry or company head.
3. Hire a well-connected lobbyist to press your case in Canberra.  When the stakes are high, commission some polling to demonstrate that a crucial number of voters in crucial marginal seats are ready to change their vote on this very issue.

The diffusion of the printing press in Europe, 1450-1500

These maps are just too pretty not to re-post. They come from Jeremiah Dittmar’s fascinating new paper, Information Technology and Economic Change: The Impact of the Printing Press.

The diffusion of the printing press, 1450-1500. Source: Jeremiah Dittmar.

There’s a good summary of the paper at Vox, but the take-home message is probably in two parts. Firstly:

• First, the printing press was an urban technology, producing for urban consumers.
• Second, cities were seedbeds for economic ideas and social groups that drove the emergence of modern growth.
• Third, city sizes were historically important indicators of economic prosperity, and broad-based city growth was associated with macroeconomic growth (Bairoch 1988, Acemoglu et al. 2005).

And secondly:

I find that cities in which printing presses were established 1450-1500 had no prior growth advantage, but subsequently grew far faster than similar cities without printing presses. My work uses a difference-in-differences estimation strategy to document the association between printing and city growth. The estimates suggest early adoption of the printing press was associated with a population growth advantage of 21 percentage points 1500-1600, when mean city growth was 30 percentage points. The difference-in-differences model shows that cities that adopted the printing press in the late 1400s had no prior growth advantage, but grew at least 35 percentage points more than similar non-adopting cities from 1500 to 1600.

The worsening woes of the (recorded) music industry

From the Guardian‘s inestimable Charles Arthur comes a must-read post on the gloomy future of the record industry. Because it’s so good, I’ve re-posted here in full:

Bad news for the music industry. And it comes in threes.

First, Warner Music (which might be thinking of buying EMI from Citigroup?) reported its numbers for the fourth calendar quarter of 2010(which is actually its fiscal first quarter). Oh dear. Total revenue ($789m) down 14% from 2009, down 12% on constant currency basis (ie allowing for exchange rate fluctuation); digital revenue of $187m was 24% of total revenue (yay!), up 2% from last year (oooh), but sequentially down by 5%, or 7% on constant currency.

Operating income before depreciation and amortisation down 20% to $90m, from $112m a year ago. All of which led to a net loss of $18m, compared to a net loss of $17m a year before. In other words, things are still bad there. And it’s still got some heavy gearing: cash is $263m, long-term debt is $1.94bn. Warner might want to buy EMI, but it would put a hell of a strain on it. And the music business isn’t exactly looking like a place where you’d want a bank putting your money.

Second, Fred Wilson, a venture capitalist who spends upwards of $60 per month – and by his estimate around $2,000 annually – on music and music subscriptions was forced to turn pirate in order to get hold of the new Streets album:

“searched the Internet for the record. It was not even listed in iTunes or emusic. It was listed on Amazon US as an import that would be available on Feb 15th, but only in CD form. I’m not buying plastic just to rip the files and throw it out. Seeing as it was an import, I searched Amazon UK. And there I found the record in mp3 form for 4 pounds. It was going to be released on Feb 4th. I made a mental note to come back and get it when it was released. I got around to doing that today. I clicked on “buy with one click” and was greeted with this nonsense “

Which was Amazon saying that because he wasn’t in the UK, he couldn’t buy it. Unable to find a VPN that would let him masquerade as a Briton, he took the next step:

“So reluctantly, I went to a bit torrent search. I found plenty of torrents for the record and quickly had the record in mp3 form. That took less than a minute compared to the 20+ minutes I wasted trying pretty hard to buy the record legally.

“This is fucked up. I want to pay for music. I value the content. But selling it to some people in some countries and not selling it to others is messed up. And selling it in CD only format is messed up. And posting the entire record on the web for streaming without making the content available for purchase is messed up.”

Well, you could argue that an inability to actually wait for the few weeks, perhaps a month, before he could hear the songs via a licensed US label was what’s messed up. Is there no other music in the world that he can hear first? Nobody else? True, it would make sense if contracts were signed so that everything happened at once. But the record industry is still rather like the book industry: because it generates most of its money from physical things, it organises itself around those things.

And finally to Mark Mulligan, music analyst at Forrester Research.Writing on the Midem blog, Mulligan points out that “Digital music is at an impasse” because “it has not achieved any of its three key objectives”, specifically:

1 – to offset the impact of declining CD sales
2 – to generate a format replacement cycle and
3 – to compete effectively with piracy.

Mulligan notes that

“the divergence between emerging consumer behaviour and legitimate music products is widening at an alarming rate. And consumers are voting with their feet: Forrester’s latest consumer data shows digital music activity adoption is flat across ALL activity types compared to 1 year previously (in fact the data shows a slight decline).”

The hope on the part of the music business that the iPod, and the iTunes Store, and then digital music stores of all sorts, would be its saviour has turned out to be false. As Mulligan notes,

“all music activity is niche, except for video. Just 10% of Europeans and 18% of US consumers pay for digital music. Only music video has more than 20% adoption (and only in Europe at that): YouTube is digital music’s killer app.”

(If you are, or know, any young teenagers you”ll know that this is absolutely true. YouTube, and of course in Europe also Spotify. The problem with Spotify being, in the eyes of the record companies, that it simply doesn’t pay them enough. Whereas in Spotify’s eyes the record companies have for too long demanded too much.)

Mulligan adds that the “transition generation” – the 16-24 year-olds – aren’t the future. Instead, the future lies with the 12-15 year olds.

“In fact, when you look closely at the activities where 16-24′s over-index [do more than other age cohorts], you can see that their activity coalesces around recreating analogue behaviours in a digital context. The 16-24′s started out in the analogue era. They are the transition generation with transitional behaviours.

“The 12-15 year olds, though, don’t have analog baggage. All they’ve known is digital. Online video and mobile are their killer apps. These Digital Natives see music as the pervasive soundtrack to their interactive, immersive, social environments. Ownership matters less. Place of origin matters less. But context and experience are everything. The Digital Natives are hugely disruptive, but their disruption needs harnessing.”

So why does this matter, asks Mulligan? Because

“current digital music product strategy is built around the transition generation with transition products to meet their transitional needs and expectations. Neither the 99 cent download and the 9.99 streaming subscription are the future. They are transition products. They were useful for bridging the gap between analogue and digital, to get us on the first step of the digital path, but now it’s time to start the journey in earnest. We’d be naïve to argue that we’re anything close to the end game yet. But the problem is that consumer demand has already outpaced product evolution, again.”

It’s time, he argues, for the music companies to deal with the world as it is, rather than as it used to be or as they liked it. Many in the business will tell you that that is exactly what they are doing; and nothing that Mulligan says in any way detracts from the (real) efforts that are being made by many record executives, who are not as clueless or uninformed as many would like to think. Instead, they’re frequently dealing with institutional and sector-based inertia that’s hard to get moving. Plus if Simon Cowell can discover a singer on a talent show and propel her to the top of the UK and US album charts (the first British act since the Beatles to achieve that), selling millions of CDs, well, is his strategy so wrong and everyone else’s somehow so right? Realities like that give even the most digital executive pause.

Back to Mulligan, who points out that

“the digital natives have only ever known a world with on-demand access based music experiences. …And the experience part is crucial. In a post-content-scarcity world where all content is available, experience is now everything. Experience IS the product. With the contagion of free infecting everything the content itself is no longer king. Experience now has the throne.”

So what’s needed? He thinks future music products need “SPARC” (no, not the Sun processor architecture). Digital music products, he says, must be:
• Social: put the crowd in the cloud
• Participative: make them interactive and immersive
• Accessible: ownership still matters but access matters more
• Relevant: ensure they co-exist and joint the dots in the fragmented digital environment
• Connected: 174m Europeans have two or more connected devices. Music fans are connected and expect their music experiences to be also.

His parting shot: “Music products must harness disruption, that isn’t in question. What is, is whether they do so quickly enough to prevent another massive chunk of the marketplace disappearing for good?”

I think Warner may have answered that already, actually.

My commentary: after reading this, if you were a music industry executive you’d probably want to slash your wrists. But things may be both worse and better than it seems  for the big music publishers. Here’s why.

Firstly, experience can be excluded, branded and sold. The predominant form of musical experience today is not the download but the live music festival or concert. Large multinationals are already aggressively into this space (think LiveNation) and we should expect this to continue. Secondly, experience can be a good as well as a service: that is, really well produced and packaged vinyl can be an experience (although only a niche experience – but then again, all music is niche now anyway). Finally, certain aspects of the music market are not being disrupted in the same way as downloadable songs – for instance, royalty streams where the end customer is large enough to warrant legal pursuit by collection agencies.

On the other hand, in some ways, things really are as bad if not worse than the Forrester report suggests. Free music is not going away, and today’s teenagers really don’t expect to pay for it. That battle is over. So the future for recorded music may really be truly non-excludable and free. That’s a challenge that no-one in the industry seems willing to face up to, even those advocating streaming or subscription models. Finally, the recent history of the music industry suggests that music publishing executives – indeed, musicians themselves – struggle to understand the new paradigm, even twelve years after Napster.

Ben Davis on the rise of art news and the crisis of art criticism

Clement Greenberg. Image: Chicago Art Criticism

At ArtInfo.com, Ben Davis has a thoughtful and I think largely accurate description of the rise and rise of news media about the visual arts industry over the past decade – at the expense of art criticism:

The expanding market for “art news” coincided with the ballooning of the more commercial side of the art world in the ’00s: the explosion of art fairs (Art Basel Miami Beach debuted in 2002, Frieze in 2003), the rise of the “ego-seum,” the hunger of corporations to tap high-culture cachet (Takashi Murakami’s team-up with Louis Vuitton was in 2003), the triumph of art-as-investment, and the “emerging artist” wave that saw galleries harvest kids fresh out of school (Alex McQuilken’s “Fucked,” a video of the 19-year-old artist having sex made while she was at NYU, famously sold out at the 2002 Armory Show). But everything about “theory-crit” requires the reader to buy the idea that the academy is the most important tastemaking center. Thus, the commercial explosion created a space where all the stuff about the market and the social scene, institutional moves and their political ramifications, actually feels more relevant than the most “serious” criticism.

And there’s the rub, of course. Art news is more relevant than art criticism in the year 2011, because almost no-one reads or takes art criticism seriously. What mattes in the art world nowadays is the money, in the way that what matters in publishing and in Hollywood are best-sellers and blockbusters. Critics will remain interesting, insightful and even incisive, but the days when a powerful critic such as Clement Greenberg could effectively ignite and then police an entire art movement are, at least for the foreseeable future, probably over.

Some thoughts on cultural innovation and cultural policy, via the Victorian election

I’ve been away from the blog for the last little bit, but the break has given me the opportunity to do some sustained reading and thinking about some of the bigger philosophical issues that revolve around the ideas of “new work”, originality and innovation, and what these might tell us about cultural policy and the everyday experience of creating and experiencing art.

Rather than mount an entire academic paper’s worth of argument here, I’m going to take things from the particular and work my way back to the general … which might well be putting the cart before the horse, but should chart a course for you (and me).

Let’ s tart off with a bit of real-world cultural policy: today’s announcement by the Victorian Labor Party that it plans to amalgamate all of Victoria’s “cultural” agencies into a new mega-department called “Creative Victoria”:

“Under Creative Victoria, cultural organisations and industries currently overseen by Arts Victoria and those relating to screen, digital games and design that reside with the Department of Innovation, Industry and Regional Development will be brought under the one banner.”

Those who’ve studied a bit of the recent history of cultural policy will know this is thoroughly reminiscent of the formation of the Department of Culture, Media and Sport by Tony Blair’s government in 1997 – the administrative move which is generally considered to have started the whole “creative industries” ball rolling.  There is now a pretty deep literature about the DCMS, it’s lofty intentions, actual actions and the sociological and theoretical underpinnings of the move. A few of the best papers have even been covered here in this blog – Phillip Schleshinger’s paper on think-tanks, Justin O’Connor’s literature review, Toby Miller’s anti-creative industries critique, and Nicholas Garnham’s “From Cultural to Creative Industries” paper of 2005.

As Garnham observes in his paper,

… the use of the term “creative industries” … draws its political and ideological power from the prestige and economic importance attached to concepts of innovation, information, information workers and the impact of information and communication technologies drawn from information society theory.

Garnham puts his finger on the critical point: that creative industries policy is a political idea that can be traced to ideas championing the economic value of creative innovation. Richard Florida and Australia’s CCI centre, while they would not see themselves as fellow-travellers, are indeed partly responsible for promoting to policy-makers these ideas.

Innovation is one of the key terms here, because it the mechanism through which this school of thought connects creativity to economic growth. A case in point is Paul Stoneman’s recent book Soft Innovation. A ‘soft innovation’ is roughly an aesthetic innovation that can be fitted into existing neoclassical concepts of ecocnomic innovation, such as the so-called “technological, process and product” (or “TPP”) innovation defined and insitutionalised by bodies such as the OECD. Stoneman is an economist, and his project aims to carve out a meaningful space for aesthetic innovations in the cultural industries (like books, films and games) in the existing economic theory of innovation. (This poses a few problems, because his models are neoclassical ones which assume things like perfect comeptition, rational consumers and markets that always clear … that doesn’t sound much like the music industry in the era of The Pirate Bay to me.)

Another line of research comes from the CCI’s Jason Potts, who sees the creative industries from an evolutionary economic perspective in which the act as a kind of meta-industrial economic cluster that provide transformative innovations to the broader economy … a sort of storm-cell generating constant gales of Schumperterian creative destruction, if you will.

Both Potts and Stoneman are interested in innovation in a specifically economic sense, which is interesting in itself. They are not overtly interested in, for example, the social consequences or preconditions of cultural innovation, and you would be hard-pressed to fit them into any kind of sociological understanding of innovation such as the social production of art or the social reception and consumption of art.

This matters, because by the time these ideas get bowdlerised and compressed into an election promise, cultural policy begins to force ideas of art and culture into a highly reductionist framework. As they are understood by governments, the value of the creative industries then begins to look like large matrices of employment and income data, and probably of a less-nuanced nature than the gold-standard data like that collated by Peter Higgs.

What we could expect in Victoria under this policy, then, is some sort of gradual skew of cultural policy away from ideas of participation and access, and towards economically-validated special pleading for various well-connected organisations and firms within the creative sector, much as Garnham described happened in Britain. Festivals and “flagship” performing arts organisations are probably best-placed to benefit from this skew, because of their media profile and the social capital they enjoy amongst well-connected board members. Paradoxically, independent artists and small collectives might also benefit, perhaps, out of a general realisation that they provide essential seed-beds of start-ups necessary for the generation of “innovation” – understood as bringing a cultural product to market, of course. Community arts organisations and service agencies may not find the new paradigm as easy to manage.

I’m going to sketch out some more ideas about what I think are some of the problems of innovation theory as it is being applied to cultural policy in a future post.

Foremost among them will be the contention that we need to rescue the idea of innovation from the economists, because the creation of new ideas and artworks often occurs outside markets, for anti-rational reasons, and produces harms as well as benefits. Indeed, there is a strong case that can argued in analogy from theories  in science and technology studies that ideas like “innovation” and “new work” are themselves socially constructed and open to contestation, resistance and subversion – one reason perhaps that Rosalind Krauss famously described “the originality of the avant-garde” as a “modernist myth“.

The Times paywall: what do the numbers tell us?

The preliminary numbers on The Times paywall are in … and no-one quite knows what to make of them.

Paid Content argues that while web readership has fallen off a cliff (as expected), the modest number of ongoing subscribes offers some hope for the future.

Roy Greenslade says its early days but the numbers probably don’t add up:

I am told that iPad numbers are “jumping around” all the time.

But there has been no attempt to counter my source’s view that there has been a measure of disappointment about online-only take-up.

Many people who tried out access in the early weeks have not returned. However, it is also true to say that some daily subscribers have been impressed enough to sign up on a weekly basis.

And it is also the case that the Sunday Times‘s iPad app has yet to launch. It is hoped that this will boost figures considerably, though I have my reservations about that.

I think, once we delve further into these figures, they will support the view that News Int’s paywall experiment has, as expected, not created a sufficiently lucrative business model.

Clay Shirky argues the paywall means a retreat from broad-based newspaper-style publishing to narrowcast newsletter publishing:

One way to think of this transition is that online, the Times has stopped being a newspaper, in the sense of a generally available and omnibus account of the news of the day, broadly read in the community. Instead, it is becoming a newsletter, an outlet supported by, and speaking to, a specific and relatively coherent and compact audience. (In this case, the Times is becoming the online newsletter of the Tories, the UK’s conservative political party, read much less widely than its paper counterpart.)

Murdoch and News Corp, committed as they have been to extracting revenues from the paywall, still cannot execute in a way that does not change the nature of the organizations behind the wall. Rather than simply shifting relative subsidy from advertisers to users for an existing product, they are instead re-engineering the Times around the newsletter model, because the paywall creates newsletter economics.

As of July, non-subscribers can no longer read Times stories forwarded by colleagues or friends, nor can they read stories linked to from Facebook or Twitter. As a result, links to Times stories now rarely circulate in those media. If you are going to produce news that can’t be shared outside a particular community, you will want to recruit and retain a community that doesn’t care whether any given piece of news spreads, which means tightly interconnected readerships become the ideal ones. However, tight interconnectedness correlates inversely with audience size, making for a stark choice, rather than offering a way of preserving the status quo.

This re-engineering suggests that paywalls don’t and can’t rescue current organizational forms. They offer instead yet another transformed alternative to it. Even if paywall economics can eventually be made to work with a dramatically reduced audience, this particular referendum on the future (read: the present) of newspapers is likely to mean the end of the belief that there is any non-disruptive way to remain a going concern.

 

Strong Aussie dollar hammers Australian screen production

Pop star Rihanna in uniform on the shoot of Peter Berg's Battleship. The big-budget movie was scheduled for production in Australia but was moved to Louisiana owing to the strong Australilan dollar and attractive production subsidies from the US state.

When Alex Burns and I set out to examine the past two decades of Australian screen policy, we concluded that the biggest influence on the success or failure of the Australian film industry was macro-economic factors like currency fluctuations – and not the perceived quality of Australian writers or directors.

You can read that paper – “Boom and Bust in Australian Screen Policy: 10BA, the Film Finance Corporation and Hollywood’s ‘Race to the Bottom‘” in the August issue of Media International Australia, reposted by Alex in proof version here.

Recent developments have only reinforced our findings. Yesterday, for instance, the Australian Financial Review published a feature-length article about the serious trouble posed for that the export-intensive parts of Australian screen industry by the strong Australian dollar, which briefly reached parity with the US dollar last week.

You can’t read the AFR article (by Brook Turner, entitled ‘Dollar dampens local film production’) online, so I’ve transcribed important sections below:

 

 

 

For the first  time in decades there are no major American films being made in Australia, and none in the pipeline, a clear sign of the devastation the dollar has wrought on a $2.3 billion business.

NSW hasn’t had had a major US  film since Wolverine wrapped at Fox Studios in mid-2008, Victoria since Don’t Be Afraid of the Dark in September last year, Queensland since Narnia last November. The Sunshine State is hanging in thanks to local production and Steven Spielberg’s 13-part, $150-million TV dinosaur epic Terra Nova. But there are fears that may go the way of films such as Green Lantern and Battleship, which migrated back to the US with their $US150 million budgets ass the dollar rose, as estimated $200 million loss to the Australian industry.

“This is unprecedented”, Ausfilm’s chief operating officer Tracey Vieira, said this week from Los Angeles, where she has the job of enticing US production to Australia. “We have always had a good momentum of production inquiry about filming in Australia; I’ve never been in a position where we haven’t had a US production that is seriously considering Australia. And there’s nothing in sight.”

Ausfilm hass asked the federal government to at least double Australia’s production offset – a 15% tax rebate on local expenditure on foreign films – to bring it into line with North American, UK and European competitors as part of the government’s independent film sector review, due later this year.

The article reinforces the problems faced by Australia’s screen industry, which features anaemic levels of locally-financed production and is heavily reliant on “runaway production” from Hollywood studios. As we pointed out in the paper, Australia’s foreign-financed production is highly vulnerable to currency fluctuations and “race to the bottom” competition from other jurisdictions offering their own generous production subsidies.

The long-tail of publishing

The following post first appeared on the website of The Wheeler Centre for Books, Writing and Ideas, on October 4th 2010.

When was the last time you bought a CD?

If you’re like most young Australians, the answer is: a while ago. The advent of digital file sharing technologies has completely transformed the music publishing business. Since Napster was invented in 1999, CD sales have plunged; major record labels are struggling – butconcert and festival attendances have boomed.

Now it’s the publishing industry’s turn to feel the destructive gale of technological change. A recent article in the Wall Street Journal is only the latest of many to chronicle the declining fortunes of traditional book publishers, particularly in fields like literary fiction:

From an e-book sale, an author makes a little more than half what he or she makes from a hardcover sale. The lower revenue from e-books comes amidst a decline in book sales that was already under way. The seemingly endless entertainment choices created by the Web have eaten into the time people spend reading books.

 

Publishers and authors face declining revenues and profits in the digital world. Source: LJK Literary Agents, Wall Street Journal

 

The sea-change in the publishing industry illustrates the new economics of digital distribution. It’s a phenomenon dubbed “the long tail” by Wired editor Chris Anderson. (Anderson borrowed the term from technology economist Erik Brynjolfsson).

The long tail is illustrated in the image below. The “tail” is simply the long rightwards sloping end of the curve. Inside the long tail are all the unpopular and obscure titles that never used to get published – but that can none-the-less sell in small numbers online. Aggregated together by a business model such as Amazon’s, this vast global back-catalogue can add up to real profits. In a nutshell: falling costs of publishing and distribution have allowed an avalanche of content to find new audiences. They are small audiences, but they are real.

 

MIT economist Erik Brynjolfsson analysed sales data from Amazon and found that 30-40% of Amazon book sales are titles that wouldn’t normally be found in bricks-and-mortar stores. Source: Erik Brynjolfsson, Jeffrey Hu and Michael Smith (2006) “From Niches to Riches: Anatomy of the Long Tail.”

 

What this means for writers is beginning to emerge. The long tail contains nearly everything that isn’t a commercially-viable proposition: in other words, most writers, bloggers and poets. But these new technologies can also help once-obscure writers and bloggers to connect directly to audiences, and even allow them to make a modest but sustainable living from their craft. As technology writer Kevin Kelly has observed, artists and writers may only need “1000 true fans” to build a career, and cheap and easy access to blogging engines globally makes this easier than ever before.

The ability of technology to put publishing in the hands of writers won’t create many superstars, but we’re already seeing its potential to allow amateurs to reach meaningful readerships and journalists, academics and other literary professionals to add second strings to their bows. Increasingly, writers are making money the way musicians are: bymonetising their speeches, presentations and merchandise. Theinter-connectedness of blogs, which rely on many reciprocal links between a community of interest in a particular niche, help this process.

Bottom-line: the long tail economics of blogging might be unsettling for writers and publishers used to the old models, but it’s a trend that’s here to stay.

Is employment in the Australian cultural industries falling? John Black can’t tell us

In today’s Australian Financial Review, former Labor Senator John Black has an interesting opinion piece about Australian unemployment trends since 2008.

Black’s research company, Australian Development Strategies, has undertaken some economic modelling on the issue, published in a web paper entitled Australian Jobs Profile for 2010.

In the paper, repeated in his column for the AFR, Black makes the startling claim that:

The industry with the biggest loss in jobs – 25,000 – since November 2007 has been the media – which includes publishers, the music industry, television, the internet, web search providers, ISPs, data processors, telecommunications workers and librarians. These skilled jobs of particular interest to younger Australians have fallen by 11 percent since November 2007, despite the National Broadband Network.

I’m often in violent disagreement with Black’s political analysis, but, if true, his article uncovers an interesting point about unemployment in the Australian media and cultural industries that the gold standard Australian Bureau of Statistics data can’t capture (because it is based on Census data, held only every five years).

Unfortunately, because of the opaque nature of the report, it’s almost impossible to determine where Black has derived his figures from. There’s no methodology section to the report, and about the most detail that can be discovered is the following, buried in a paragraph on page page 3:

This paper looks at the comparison of original or raw monthly unemployment rates in 69 Labour Force regions, across Australia, and uses simple modelling to benchmark these percentage figures against our Elaborate database.

But there is no description of the Elaborate database, so we can’t really tell. It’s the opposite of rigorous. This survey tells us nothing meaningful about employment in the Australian cultural industries.

Conclusion? Australian Database Strategies might enjoy a high media profile thanks to former Senator John Black, but that doesn’t mean we should take factoids like this too seriously.