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Economics of the Cultural

IndustriesExamine changes in capitalism, and especially cultural economics over time

Explore the nature of the cultural commodity

Look at the nature of the cultural production process

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Learning Objectives

Identify three main similarities and three main differences between industrial consumer good and cultural consumer good production

Key Q: what is special about the cultural industries? (Hes: pages 17-22)

Key Q: within the cultural industries, what are some key differences?

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Part One: Changes in Capitalism

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Review of Hesmondalgh

Chapter 2 examined some of the basics in the issue of transition to a new form of cultural capitalism, concurrent with the shift to the so-called information economy Is there a radical shift?

Chapter 3 highlights the reasons for the ‘shift’ thesis ( however continuous and not discontinous) Especially impact of the big recession of the 70s

( starting what Hesmondalgh calls the Long Downturn)) Rise of neoliberal thinking: growth of world trade Accelerated with fall of communism in Eastern Europe

around 1990 Chapter 5 explores the complex professional

capitalist form of organization

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Decoding Hesmondalgh

- Defines his approach- Political economy from a cultural

industries perspective - Particularly likes the theories Miege

( page 22): why?- Notes what Cultural Studies Has to Offer

( page 38-41)- Starts from an epistemological position of

realism- Realism: the assumption that there is a

material world external to our cognitive one which is accessible to understanding

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Defining Hes’ Approach

- NOT Neoclassical Economics- Wants to ask questions beyond what efficiently

satisfies want- Determining human needs and social justice

- NOT Liberal Pluralist- Does not posit a competitive universe of policy

interests- Wants to look at power over time; structured forms of

inequality- Not only procedural

- Hesmondalgh the Humanist:- “we need to rethink how massive presence of entertainment in

people’s lives affects not only our notions of how democracy works, but also how we think about other aspects of human life, including ourselves as feeling, emotional beings”

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Defining Hes’ Approach

- Indebted to Raymond Williams- Aligns with political economy which places a

greater emphasis on ethics and normative questions

- Aligns with critical political economy- Characteristics:

- Holistic- Historical- Look at the balance between private and public- Ask questions of justice equity and public good ( page 32)

- An organic, historical thinker in the tradition of media historian John Thompson in Media and Modernity

- Note: he rejects the dichotomy of political economy versus cultural studies ( page 41)

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Hesmondalgh on the Cultural Industries

- Likes Miege and Garnham and others because they are better dealing with:- Contradiction between structure and agency and

contradictions within industrial segments- Specificity- Tensions between production and consumption- The sociology of creation- Popular contents like entertainment- Historical variations in cultural production

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The Historical Trajectory

Like many historians, asking himself: what, if anything is unique about contemporary capitalism and cultural production after 1980?

Looks for patterns of continuity and change What is at issue:

Discussions of fordism and post fordism Is there a radically different transformation of capitalism

underway?

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Fordism and Post Fordism Compared

Fordism Mass Production Unionized Labour Standardization Market aggregation

Centralization Technology of Production

Concentration

Post Fordism Flexible Production

Casual Labour Individualization/ Niches/Segregation Decentralization Technology of Consumption

Coordination: Networks

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Historical Changes in Capitalism

Shift away from manufacturing and resource sectors to service Rise in cultural employment Rise in advertising as a proportion of GDP

Internationalisation Owners of business invest abroad to spread fixed costs, and exploit lower labour in LDCs

Removal of trade barriers Emergence of international networks

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Changes 2 The Networked Economy

New methods of interfirm networking, especially to lower costs of R & D

New strategic alliances Changing work: flexible, part time workers

Implications of Cultural Industries Propagate neo liberalism Appeal to changing values, rising leisure Growing discretionary budgets

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Changes 3Rise in demand for computer innovationImplication of military, and transnational corporations

Key innovations: miniaturization, mobility, taping

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PostFordism Today Transition uneven Thesis of radical transformation disputed by

many scholars Both continuity and change

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Hesmondalgh’s Bottom LineCannot ignore the broader economyCannot ignore continuityArgues there is not, as yet radical change in the modes of cultural productionDisputes myth of new technologiesDisputes power shake up of the Internet

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Mapping the Historical Trajectory: Four Periods

of Cultural Economic Production

Once again, begins with Williams who identified three historical moments or eras in cultural production

Hesmondalgh introduces a fourth eraPatronageMarket ProfessionalCorporate ProfessionalComplex Professional

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Patronage ( 1400-1800)

Where rulers or aristocracy support the artists

Prevalent from middle ages to 19th century as the dominant form of social relations between symbol creators and wider society

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Market Professional ( 1800-1940)

When works offered for sale, creative production becomes a market, offered through intermediaries which make

more money need middle class to emerge with both the

time and money to acquire cultural products Characterized by:

More complex division of labour Small to medium size enterprises (SMEs) Mostly contained geographic markets Higher levels of competition Viable public studios

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Corporate Professional (1950s

-1980s) Increasing agglomeration into very large companies

Oligopoly power more creators become employees commissioning of works more professionalized New technologies, new techniques for marketing

It is this period the Frankfurt school Critiques as the emergence of the mass society

Shift to commercial dominance/eclipse of public sector

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Complex Professional

(1980s+) Defined by Increasing division of labour in production of texts

Hesmondalgh prefers this concept Features new relations of small, independent, and large companies, together with free lance workers

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Historical Contrasts

Before Creative stage carried

out by individuals

Creator/Owner simple diadic relationship

Large degree of autonomy

After Now carried out by a

project team with various roles

Craft/Creator; Owner/Manager now differentiated

High degree of autonomy; BUT control tightens in later stages of cultural production

( source: Hesmondalgh, 54)

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Contrasts Continued

Before Regular wages Multiple, competitive

companies usually in one industry

Internationalisation of narrow elite markets followed trade flows/imperial centre periphery relations

Highly regulated( eg: role of US state in film.. Page 52)

After Royalties Concentration and

oligopoly– firms now in multiple industries( conglomeration)

Successive waves since 19th century of:

Cultural forms Technologies Industries/Texts Capital

Intensification( H:63) Growing business self-

regulation

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Importance of the “Long Downturn”

50s to 70s Period of global economic boom Characterised by central role of the State ( welfare

state) Twin Recessions (1974-1975; 1979-1982)

OPEC energy crisis triggers economic stagnation High inflation Fiscal crisis of the state

80s-90s Neo Liberal Economic Adjustment Dismantle state monopolies Seek to contain wage costs Increase in mobile money/investment/labour substitution Shift to service sector Deregulation

Effects: accelerates emergence of oligopoly; internationalisation

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Internationalization Waves of investment and trade in film, then

sound recording, then television After the 1970s the US dominates the complex

professional era in creative production US cultural industries benefit from:

Large domestic market where cultural producers can recover their costs at home, and lower costs abroad to gain price advantage for entry to foreign markets

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Recurrent Historical

Continuities Miege:

Creative labour is underpaid Tends to bear full costs of creative risk: foregoes secure work

Why? Permanent oversupply of non-professional cultural workers in reservoirs

These ‘amateurs’ take other work to subsidise artistic activities

Wages kept down by transferability from other cultural industries

So, historically, successive job markets where most creative workers are under employed to underpaid– limited penetration of guilds, and where there are guilds, guilds tend to be technical

BUT, complex professional/contemporary era is increasingly characterised by several ‘vastly overpaid’ supernumeraries

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Recurrent: Cont’dCreative workers and distributors struggle to negotiate rewards via contract to set royalties: now overseen by Copyright Law which is increasingly international in focus

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The Bottom Line Hesmondalgh downplays the proposition we are in a

radical, transformative shift in the cultural industries 1. Large size of cultural industries still does not approach

the size of the world’s largest corporations… not yet the new core

2. The distinctive feature of this period is the emergence of the cultural industry networked economy: Large and small are increasingly interdependent and mutually

entangled in complex networks of licensing, financing,and distribution

But this a change in form, not power 3. There is greater challenge to the US in international

markets ( Bollywood, Latin America, Hong Kong) but these not new: Hollywood hegemony rises and falls, but new production centres do not yet approach the size and power of the US market control– significant inequality of access remains

- 4. Increasing rate of technological innovation, but Internet is increasingly commercialized and a supplement to other media… thus WHAT IS THE AUTHOR’S CONCLUSION?

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Hesmondalgh’s Conclusion:Less than

Radically Transformative?

- There is sufficient continuity to undermine the suggestion that we have entered a new era of cultural production.

- Rather, we should think of the last twenty years as representing a new phase within the complex professional era,

- Which is marked by greater competition,balanced by oligopoly in complex arrangements and greater centrality for the cultural industries within advanced industrial economies as a whole ( h: 260).

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Part 2 The Nature of the Cultural

Commodity

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Why Cultural Commodities are Unlike Others

- Nature of the Product- Nature of Labour- Nature of the Production Process- Anatomy of Marginal Cost- Substitutability - Nature of Demand- Nature of Pricing- Type of Consumption

Source: Peter S. Grant and Chris Wood, “Curious Economics” in Blockbusters and Trade Wars, 2004, p. 45.

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•Nature of Product An ordinary product is:

A material thing serving a utilitarian function

A cultural product is: An immaterial thing ( an idea) Serving a symbolic function If it is advertising supported: what is commodified in trade is the audience, not the content

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Labour

An ordinary product:To reduce/rationalize costs of production, a business will

always seek a) to reduce material and labour input costs and b) substitute technology for human labour

A cultural productCannot achieve ‘perfect’ substitution of technology for labour:

always human labour intensive

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Nature of Production Process

Ordinary CommodityAssembly Line, RoutinizedEach Unit Requires Significant Resources

Cultural CommodityExpensive, One time ProcessCraft Line, Non RoutinizedEach Subsequent Unit Requires Trivial Resources to replicate

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Marginal Cost of Unit of Production

Ordinary CommodityVery High

Cultural CommodityVery Low

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Substitutability

Large Degree of Substitutability Between Competing Brands

Limited Substitutability: Copyright Law Protects Monopoly on Each Product

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Predictability of Demand

Demand Predictable: Amenable to Standard Curve Plotting ( Risk can be quantified)

Demand Difficult to Predict: Limited Forecast Plotting ( Risk much harder to quantify)

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Time Line of DemandDemand for Product Continues until next product cycle:

measured in years

Demand Drops Sharply after introduction until replaced: product cycle measured in weeks or months

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Nature of Pricing

Ordinary Product:- subject to supply and demand- Assumes ‘perfect’ competition- Pricing tends to be non-discriminatory

- Cultural Product- Limited supply if using scarce technology: eg. spectrum,

limited bandwidth- Assumes period of monopoly over intellectual property - Pricing tends to be discriminatory

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Nature of Consumption

Ordinary Product Exclusive: destroyed/discounted in consumption

Cultural Product: Non-Exclusive Original (book) may be consumed or read, but after it is

available to others Attributes of a Semi-Public Good

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Who Determines Demand

Ordinary Product Ultimate end consumer

Cultural Product Books and Movies/DVDs: ultimate consumer Television and Magazines ( advertising supported): advertiser

determines demand ( ie demand is intermediate/)