the berlin creative industries

Dieter Puchta, Friedrich Schneider, Stefan Haigner, Florian Wakolbinger, Stefan Jenewein

The Berlin Creative Industries

GABLER RESEARCH

Dieter Puchta, Friedrich Schneider, Stefan Haigner, Florian Wakolbinger, Stefan Jenewein

The Berlin Creative Industries An Empirical Analysis of Future Key Industries

RESEARCH

Bibliographic information published by the Deutsche Nationalbibliothek

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie;

detailed bibliographic data are available in the Internet at http://dnb.d-nb.de.

1st Edition 2010

All rights reserved

© Gabler Verlag | Springer Fachmedien Wiesbaden GmbH 2010

Editorial Office: Stefanie Brich

Gabler Verlag is a brand of Springer Fachmedien.

Springer Fachmedien is part of Springer Science+Business Media.

www.gabler.de

No part of this publication may be reproduced, stored in a retrieval system

or transmitted, in any form or by any means, electronic, mechanical, photo-

copying, recording, or otherwise, without the prior written permission of the

copyright holder.

Registered and/or industrial names, trade names, trade descriptions etc. cited in this publica-

tion are part of the law for trade-mark protection and may not be used free in any form or by

any means even if this is not specifically marked.

Umschlaggestaltung: KünkelLopka Medienentwicklung, Heidelberg

Printed on acid-free paper

Printed in Germany

ISBN 978-3-8349-2311-0

Preface

The Creative Industries have recently come into the focus of urban developmentstrategies and economic policy. The driving force behind that was, amongst others,Richard Florida with his bestseller “The rise of the creative class and how it’s trans-forming work, leisure, community, and everyday life”.

The Creative Industries are increasingly dynamic and growing three times fasterthan the economy in total. With respect to the economic value added, the Creative In-dustries in Germany are absolutely comparable to the automotive industry.1

Nonetheless, for entrepreneurs it is often still easier to find financing opportuni-ties for property, real estate and assets than for ideas and intangible assets. Thus, In-vestitionsbank Berlin has been researching possibilities to finance the CreativeEconomy since several years.

Many who are engaged in spurring the development of cities and regions, how-ever, come across various different definitions of the term “Creative Industries” andseveral approaches which cannot be exactly distinguished from one another. Thismight cause confusion.

It is thus a primary aim of this study to pick up and survey the different ap-proaches and to offer a thorough classification and a clear definition of the term“Creative Economy”. A second aim is to work out the implications of the differentapproaches and definitions for those who are engaged in spurring the CreativeBranches. Creative Enterprises have very specific business concepts and might thusneed alternative financing models. This poses a challenge to both economic policyas well as funding bodies, which they have to accept. Moreover, since metropolitanareas are considerably attractive for creative people, the study specifically featuresthe Berlin creative market and gives a quantitative impression of it.

It would be a great pleasure for us if this study could contribute to an increasing-ly efficient, effective and target-oriented furtherance of the Creative Industries,which ultimately are of great importance for the economic and social development.Creative Industries have to be fostered and financed creatively!

Prof. Dr. Dieter Puchta

1 See, for example, Puchta, D. (2009). Kreative Finanzierung – Innovative Finanzierungslösun-gen für die Kreativwirtschaft. In: Grüner, H., Kleine, H., Puchta, D., Schulze, K. (Hg.). Kreativegründen anders! Existenzgründungen in der Kulturwirtschaft. Transcript Verlag, Bielefeld2009, pp. 40.

Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

List of Figures/List of Focus Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

List of Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Part 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2 The Notion of Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.1 Anglo-American and Continental-European Approach . . . . . . . . . . . . 242.1.1 Anglo-American Approach following R. Florida . . . . . . . . . . . . . . . . . 242.1.2 Continental-European Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252.2 Horizontal and Vertical Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262.3 Technological Sectors as Part of the Creative Industries . . . . . . . . . . . . 272.4 Creative Class or Creative Industries? . . . . . . . . . . . . . . . . . . . . . . . . . 272.5 A Variety of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282.6 Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

3 On the Theory of Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . 31

3.1 Characteristics of the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . 313.1.1 Uncertain Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313.1.2 Creativity as a Value in Itself . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323.1.3 A Mix of Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323.1.4 Differentiability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333.1.5 Differentiation of Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333.1.6 Time is a Critical Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333.1.7 Durable Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333.1.8 Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343.2 Differences between Creative and Traditional Industries . . . . . . . . . . . 343.2.1 The Degree of Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343.2.2 Type of Actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353.2.3 Types of Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3.2.4 The Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353.2.5 The Creative Industries as a Cross-Sectional Area . . . . . . . . . . . . . . . . 363.2.6 Investment Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.2.7 Labor Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363.2.8 Innovation as a Driving Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

4 An International Overview on the Creative Industries . . . . . . . . . . 41

4.1 The United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414.2 Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424.3 The Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434.4 Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444.5 Austria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444.6 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454.6.1 North Rhine Westphalia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464.6.2 Schleswig-Holstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474.6.3 Hessen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484.6.4 Saxony-Anhalt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484.6.5 Hamburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484.6.6 Berlin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494.6.7 Cologne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494.7 International Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504.7.1 European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504.7.2 UNESCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514.7.3 WIPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514.8 Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Part 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

5 From Theory to Empirics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

5.1 Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575.2 The Mapping of Economic Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

6 The Berlin Creative Industries at a Glance . . . . . . . . . . . . . . . . . . . . 59

7 The Creative Industries in Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

7.1 Details of the Cultural Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637.1.1 Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637.1.2 Film industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657.1.3 Private Broadcasting Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687.1.4 Music, Visual- and Performing Arts . . . . . . . . . . . . . . . . . . . . . . . . . . . 707.1.5 Journalists and News Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

8 Contents

7.1.6 Museum Shops and Art Exhibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 757.1.7 Retailing of Cultural Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767.1.8 Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787.1.9 Design Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807.2 Details of the Creative Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817.2.1 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817.2.2 Software- and Games Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827.3 Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

8 Excursus: Differences among Research Results . . . . . . . . . . . . . . . . 87

8.1 Possible Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878.2 Working off the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Part 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

9 Value Added and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

9.1 The Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939.2 Simulation Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 969.3 Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 979.4 Simulation Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989.4.1 Regional GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989.4.2 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009.5 Targeted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1019.5.1 Regional GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1029.5.2 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

10 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Part 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

11 Instruments to Foster the Creative Industries . . . . . . . . . . . . . . . . . 109

11.1 Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11011.1.1 Monetary Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11011.1.2 Non-monetary Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11111.2 Specifics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11211.2.1 Low Capital Endowment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11311.2.2 Lack of Debt Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11311.2.3 Low Funding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11311.2.4 Uncertainty of Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11411.2.5 Ideas Instead of Machines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11411.2.6 Pre- and Interim Financing, Sustainability . . . . . . . . . . . . . . . . . . . . . . 115

Contents 9

11.2.7 Lack of Knowledge on Funding Possibilities . . . . . . . . . . . . . . . . . . . . 11511.2.8 Lack of Commercial Comprehension . . . . . . . . . . . . . . . . . . . . . . . . . . 11611.3 Types of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11611.3.1 Credit Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11711.3.2 Mezzanine-Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11811.3.3 Venture Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11911.4 Tentative Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

12 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12712.2 Results of this Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12712.3 Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Appendix A – Economic Sectors in Detail . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Appendix B – Differences in Research Results . . . . . . . . . . . . . . . . . . . . . . . . 140

Appendix C – Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

10 Contents

List of Figures

Figure 1: The 3-Sector Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Figure 2: The Creative Economy in the Form of a Matrix . . . . . . . . . . . . . . . . . 28

Figure 3: Creative Industries, their Branches and Economic Sectors . . . . . . . . . 57

Figure 4: The Berlin Creative Industries – Enterprises, OPEs and Employees . 84

Figure 5: The Berlin Creative Industries – Enterprises and Revenues [mn. “] . 85

Figure 6: Berlin Economic Simulation Tool BEST – Flow Chart . . . . . . . . . . . 93

Figure 7: Share of Additional Jobs for the Different Economic Sectors . . . . . . 101

Figure 8: The Creative Economy in the Form of a Matrix . . . . . . . . . . . . . . . . . 128

List of Focus Boxes

Focus box 1: Reversed Causality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Focus box 2: Berlinale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Focus box 3: XXHome – A Completely new Service-Channel . . . . . . . . . . . . . 70

Focus box 4: Month of Photography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Focus box 5: Aedes, the First Architectural Gallery in Europe . . . . . . . . . . . . . 79

Focus box 6: LETS – Local Exchange Trading Systems . . . . . . . . . . . . . . . . . . 111

List of Tables

Table 1: An International Overview of the Creative Industries . . . . . . . . . . . . 52Table 2: Creative Industries at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Table 3: Creative Industries at a Glance – Enterprises and Revenues . . . . . . . 60Table 4: Creative Industries at a Glance – Employees . . . . . . . . . . . . . . . . . . . 61Table 5: Publishing – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Table 6: Publishing – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . . 64Table 7: Publishing – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Table 8: Film Industries – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Table 9: Film Industries – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . 66Table 10: Film Industries – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Table 11: Private Broadcasting Industries – Classification . . . . . . . . . . . . . . . . 68Table 12: Private Broadcasting Industries – Enterprises and Revenues . . . . . . . 69Table 13: Private Broadcasting Industries – Employees . . . . . . . . . . . . . . . . . . . 69Table 14: Music, Visual and Performing Arts . . . . . . . . . . . . . . . . . . . . . . . . . . 70Table 15: Music, Visual and Performing Arts – Enterprises and Revenues . . . . 71Table 16: Music, Visual and Performing Arts – Employees . . . . . . . . . . . . . . . . 72Table 17: Journalists and News Agencies – Classification . . . . . . . . . . . . . . . . 74Table 18: Journalists and News Agencies – Enterprises and Revenues . . . . . . . 74Table 19: Journalists and News Agencies – Employees . . . . . . . . . . . . . . . . . . . 74Table 20: Museum Shops and Art Exhibitions – Classification . . . . . . . . . . . . . 75Table 21: Museum Shops and Art Exhibitions – Employees . . . . . . . . . . . . . . . 76Table 22: Retailing of Cultural Goods – Classifications . . . . . . . . . . . . . . . . . . 76Table 23: Retailing of Cultural Goods – Enterprises and Revenues . . . . . . . . . . 77Table 24: Retailing of Cultural Goods – Employees . . . . . . . . . . . . . . . . . . . . . 78Table 25: Architecture – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78Table 26: Architecture – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . 79Table 27: Architecture – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Table 28: Design Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Table 29: Design Industries – Enterprises and Revenues . . . . . . . . . . . . . . . . . . 80Table 30: Design Industries – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Table 31: Advertising – Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Table 32: Advertising – Enterprises and Revenues . . . . . . . . . . . . . . . . . . . . . . 82Table 33: Advertising – Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Table 34: Software and Games Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82Table 35: Software and Games Industries – Enterprises and Revenues . . . . . . . 83Table 36: Software and Games Industries – Employees . . . . . . . . . . . . . . . . . . . 83

Table 37: SenWTF – Creative Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87Table 38: This Study – Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Table 39: Working off the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Table 40: Overview – Revenues and Employees . . . . . . . . . . . . . . . . . . . . . . . . 90Table 41: Weights of Technologies and Economic Sectors . . . . . . . . . . . . . . . . 96Table 42: Scenario 1 – Assumed Investment Amounts . . . . . . . . . . . . . . . . . . . . 97Table 43: Scenario 2 – Assumed Investment Amounts . . . . . . . . . . . . . . . . . . . . 98Table 44: Scenario 1 – Additional Regional GDP in the years 2008 until 2012 99Table 45: Scenario 2 – Additional Regional GDP in the years 2008 until 2012 . 99Table 46: Scenario 1 – Additional Jobs in the years 2008 until 2012 . . . . . . . . . 100Table 47: Scenario 2 – Additional Jobs in the years 2008 until 2012 . . . . . . . . . 100Table 48: Targeted Investment – Scenario 1 – Additional Regional GDP . . . . . 102Table 49: Targeted Investment – Scenario 2 – Additional Regional GDP . . . . . 102Table 50: Targeted Investment – Scenario 1 – Additional Employment . . . . . . . 103Table 51: Targeted Investment – Scenario 2 – Additional Employment . . . . . . . 103Table 52: Additional Regional GDP and Additional Employment . . . . . . . . . . . 105Table 53: Segmenting the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 116Table 54: Properties of Mezzanine-Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119Table 55: Difficulties in the Access to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . 124Table 56: Financial Instruments and their Attributes . . . . . . . . . . . . . . . . . . . . . 125Table 57: Enterprises, Revenues and Employees in the Berlin Creative

Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129Table 58: Range of Revenues and Number of Employees in the Berlin Creative

Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130Table 59: Investment, Additional Employees and Additional Berlin Regional

GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131Table 60: Segmenting the Creative Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 132Table 61: Economic Sectors of the Branches of the Berlin Creative Industries . 137Table 62: Different Treatment of Economic Sectors . . . . . . . . . . . . . . . . . . . . . 141Table 63: Sensitivity Analysis 1 – More Weight to the Production Sector . . . . . 145Table 64: Sensitivity Analysis 1 – Scenario 1 – Additional Berlin Regional GDP 146Table 65: Sensitivity Analysis 1 – Scenario 2 – Additional Berlin Regional GDP 146Table 66: Sensitivity Analysis 1 – Scenario 1 – Additional Jobs . . . . . . . . . . . . 147Table 67: Sensitivity Analysis 1 – Scenario 2 – Additional Jobs . . . . . . . . . . . . 147Table 68: Sensitivity Analysis 2 – More Weight to the Service Sector . . . . . . . . 148Table 69: Sensitivity Analysis 2 – Scenario 1 – Additional Berlin Regional GDP 148Table 70: Sensitivity Analysis 2 – Scenario 2 – Additional Berlin Regional GDP 148Table 71: Sensitivity Analysis 2 – Scenario 1 – Additional Jobs . . . . . . . . . . . . 149Table 72: Sensitivity Analysis 2 – Scenario 2 – Additional Jobs . . . . . . . . . . . . 149

14 List of Tables

List of Abbreviations

BEST Berlin Economic Simulation Tool

DCMS Department for Culture, Media and Sports

DFFF Deutscher Filmförderfonds (German Film Fund)

ERDF European Regional Development Fund

ES Economic Sector

GDP Gross domestic product

IBB Investitionsbank Berlin

ICT Information- and Communications Technology

NACE Nomenclature générale des activités Économiquesdans les Communautés Européennes

OPE One-person enterprise

SenWTF Senatsverwaltung für Wirtschaft, Technologie und Frauen(Senate office for Economy, Technology and Women)

SME Small and medium-sized enterprises

VC venture capital

WIPO World Intellectual Property Organization

About six million people have been employed in the European Union Creative Indus-tries by 2003. The Creative Industries realized total revenues of “ 650 bn. and ac-counted for ca. 2.6% of the European Gross Domestic Product (GDP). Both labormarket as well as economic growth has been above average (KEA, 2006).

1 Introduction

It has been a widely accepted consensus that arts and culture follow, due to, amongstother reasons, their public good properties, and other regularities than traditional profit-oriented economic branches. Subsidies and promotion have been justified most fre-quently by pointing at the meritorious character of the products and services providedby arts and culture. As such, the cultural branches have been given access to publicfunding due to them being viewed as qualified for such subsidies by social- and cul-tural policy makers. Moreover, it has been widely accepted that measurement criteriafor market economies cannot be applied to arts and culture. These circumstances leadto a somewhat stepmotherly treatment of arts and culture in economic policy debates.

In the recent past however, the economic potential of arts and culture has beendiscovered and recognized which made both branches a considerable subject of eco-nomic policy. In the course of these discussions, the central criterion of creativity hasbeen identified as the defining feature of those two branches. However, since cre-ativity is an important input to other, more traditional branches too, the branches ofarts and culture have been extended by those traditional branches which place cre-ativity in a dominant role. As such, it is common practice nowadays to allude to the“Creative Industries”. These industries encompass all the branches to which creativi-ty is an important input factor.

Caution is advised, however, with respect to integrating various branches andsectors into the Creative Industries, since the classic cultural branches should not berelegated to the fringe in course of the integration (Söndermann, 2007). This is acentral concern in the scientific discussion, and it is a clear challenge for economicpolicy makers to assure that within the Creative Industries some branches are sup-ported at the cost of other sectors.

In its first part this study discusses the term “Creative Industries”, and systemati-cally presents its scope and the different approaches towards defining the term.

In the following, the study turns towards the economic theory of Creative Indus-tries. Uncertain demand, input- as well as product differentiation and creativity asa value in itself are essential questions this study discusses at length. Moreover, weinvestigate the issues of the relevant types of actors, market types as well as optimalinvestment patterns.

Part 1 of this study is closed by an overview on the existing literature and the Eu-ropean dimensions of the Creative Industries. We will assert in this context that thereis no generally binding definition of the Creative Industries, which considerably lim-its the international comparability of Creative Industries bulletins (cf. Chapter 8.) Inthe recent past though, we observe, both on national as well as supranational level(especially by the European Union and UNESCO), some attempts and endeavor tofind consensus on the definition and scope of the Creative Industries. The authors ofthis study go along with that endeavor and categorize the Berlin Creative Industriesinto nine cultural and two creative Branches.

Building on the results of part 1, part 2 features the quantitative dimensions ofthe Berlin Creative Industries. With respect to the size of its enterprises, we willshow that the structure of the Berlin Creative Industries is comparable to other Ger-man cities. The Berlin Creative Industries feature a high number of one-person en-terprises. Of more than 20,000 people being employed in the Creative Industries,about three quarters have one-person enterprises. They realize a total turnover of“ 1.4 bn., which is 20% of the total Creative Industries’ turnover. With a share ofmore than 14% of the total revenue of all Berlin enterprises, the Creative Industriesare a truly important economic factor in the capital city.

Another way to document their economic significance is to compare employ-ment statistics. Almost 80,000 are employed in the Creative Industries. In the courseof this study we give, in addition to documenting the detailed statistics for the cultur-al and creative branches, a separate estimation of the scope of clandestine employ-ment within the Creative Industries.

In part 3 we employ the regional macroeconometric model BEST, developedby Kollmann et al. (2006), which models the Berlin economy in a multi-equationalapproach, to simulate the effects of economic policy measures in the Creative Indus-tries’ environment on economic growth and employment. To be more specific, weinvestigate which targeted subsidies for and promotion of the Creative Industrieswould trigger with respect to the Regional Gross Domestic Product and employ-ment. We do so by using the venture capital Fund “VC Fonds KreativwirtschaftBerlin” of Investitionsbank Berlin as an example for an instrument targeted at foster-ing the Creative Industries. The money this fund provides for investment is the start-ing point of the further simulations. Since it is the goal that the funds provided by In-vestitionsbank Berlin are supplemented by private investment money of at least thesame amount, we develop two different scenarios in order to appropriately considerthis approach.

Part 4, the last part of this study, discusses the possibilities of monetary further-ance, which could support creative enterprises in their development and boost theireconomic potential. In this context we specifically dwell on the issues of borrowedcapital in general as well as small- and micro credits. Moreover, we go into the issuesof mezzanine-capital and venture capital.

On the one hand, we discuss these issues recognizing the special role and basicdifferences between the Creative Industries and more traditional branches.

18 1 Introduction

On the other hand we dwell on the specific circumstances and difficulties facedby Creative Industries enterprises. The most frequently observed of those difficultiesare thin capitalization, lack of securities, relatively little borrowing requirements andthe difficulties in ex ante evaluating the expected success of artistic and culturalprojects. Moreover, we discuss the scope and importance of non-monetary further-ance as well as the challenges which sponsors and supporters are likely to face. Weultimately discuss and present some appropriate approaches towards finding solu-tions to the problems raised above and in part 4.

Considering its growing economic relevance, the potentials of economic growthand notable effects on the economic value added we conclude that it is rewarding tosupply the Creative Industries with creative furtherance.

1 Introduction 19

Part 1

2 The Notion of Creative Industries

The scientific literature uses various different concepts of Creative Industries. Thus,a generally and widely accepted definition is unavailable, and studies on creative in-dustries make use of several different approaches towards the topic. Which approachis used depends on the historical context, the object of investigation or the specificquestions to be answered. Eventually, the borders set by the availability of data andmeasurability in general might play a role as well.

Below we present an overview on the different approaches and definitions of thecreative industries the international literature uses. We do so by arranging the differ-ent concepts into an encompassing system.

Systematizing is non-trivial since we face a variety of interpretations for thedifferent concepts. Furthermore, a multitude of other terms come quite close to theconcept of creative industries. Thus, considerable overlapping among the terms isinevitable.

The scientific and non-scientific literature most frequently use the followingterms (Wiesand, 2006 and own amendments):

� Cultural Industries� Cultural Industries Cluster� Cultural Goods� Creative Economy� Creative Sector� Creative Industries� Creative Class� Creative Capital/Creative Capital Theory� Copyright Industries� ICT – Economy (information- and communication technology)� Content-Economy, Media-Economy

In order to dissolve this – at first glance confusing – diversity of concepts, we exten-sively discuss the term of creative industries and will finally have a clear idea ofwhat it means.

To begin with, we contrast the notions of

� Anglo-American versus Continental-European approach as well as the� horizontal versus vertical approach

and ask up to which extent the technological sector can be considered as being partof the Creative Industries.

We close the chapter by confronting the opposing notions of “Creative Class”and “Creative Industries”.

2.1 Anglo-American and Continental-European Approach

The term creative class, which dominates studies from the Anglo-American re-gion, uses a wider and more inclusive definition of creative industries than theterm “Cultural and Creative Economy”, which is most frequently found in Euro-pean studies. Thus, the share of creative employees among the labor force is inAnglo-American studies typically higher than in continental-European studies.

First of all we introduce both the Anglo-American1 and Continental European ap-proach as two basically opposing views. The basic distinction between those twodifferent approaches is a recurring topic in the literature and as such enters the multi-tude of studies and surveys on the topic. While according to the Continental-Euro-pean approach circumvents the Creative Industries by drawing on branches and sec-tors of the economy, the Anglo-American approach uses professions and activities.Thus, one could speak about an economic (Continental-European) and a sociologi-cal (Anglo-American) approach (cf. Figure 2).

An additional distinction between the two approaches lies in the limitedness ofthe concept. While creative industries in the Anglo-American approach subsumes arather broad mix of jobs and professions, resulting in a wider definition, the Conti-nental European context traditionally uses narrower concepts with a lower number ofbranches and sectors being included.

2.1.1 Anglo-American Approach following R. Florida

Richard Florida’s (2002) bestseller The Rise of the Creative Class and how it’s trans-forming work, leisure, community and everyday life is the activator and catalyst forboth an increasingly intensive international academic discourse as well as intensivedebates and discussions among economic- and regional policy makers on the topicof creative industries.

According to Florida the Anglo-American approach uses, as noted earlier al-ready, a comparably wide definition of creative industries. Florida himself uses theterm “Creative Class” instead of “Creative Industries”. The distinguishing criterionon who counts as a member of the creative class is the type of activity someone fol-lows. Members of the creative class work innovative, are capable of identifyingproblems and develop appropriate solutions, and through this they find new ways tocombine and apply the available knowledge In contrast, people working outside thecreative class most frequently do routine-jobs and ordinary activities. FollowingFlorida, the creative people can be distinguished into three subgroups (Fritsch and

24 2 The Notion of Creative Industries

1 The United Kingdom has an exceptional position and cannot be denoted as being Anglo-American by all means. (Cf. the discussion in the United Kingdom on using the term “Cre-ative Class” outlined below). Thus, we first and foremost subsume by the term “Anglo-Ameri-can” the United States and, though not in all applications, also Canada and Australia.

Stützer, 2007). Alongside the “Bohemians” Florida distinguishes between the “high-ly creative” and the “creative professionals”.

� “Highly creative” people are innovative: This group is dominated by scientistsand people doing scientific activities (physicists, chemists, mathematicians, com-puter scientists, readers, people being employed in scientific and public adminis-tration, among others)

� Among the “Creative Professionals” we attribute consulting and organizationalspecialists, finance and marketing experts, lawyers, specialists in administration,jobs in social- and health care and others. “Creative Professionals” work in skill-intensive areas.

� Among the “Bohemians” we eventually subsume authors and writers, performingand visual artists, artistic jobs in entertainment and sports as well as models. “Bo-hemians” represent the artistic part of the creative class.

A central conception in this context is that enterprises and companies follow the cre-ative class. This view poses a strong antipode towards the approach coming from de-velopment theory, which assumes that people move into regions where companiesoffer jobs and resources are available (Kröhnert, 2007).

2.1.2 Continental-European Approach

2.1.2.1 Cultural and Creative Economy

European Studies and scientists use definitions of creative industries that differ fromFlorida’s concept. In Continental Europe – and here predominantly in Germany –one basically speaks of the “Cultural and Creative Economy”. Within this approach,the cultural economy is a subset of the Creative Economy2 – the “Creative Indus-tries” extend the “Cultural Industries” by affirmative technologies (Ratzenböck etal., 2004).

“The notion of “culture in a wide sense” is the common characteristic within theconcept of cultural economy” (Söndermann, 2007). The cultural economy subsumesthe publishing business, the film industries, visual and performing arts, literature,journalists as well as architects and designers.

“Creativity” plays, as the name suggests, a central role in the concept of “Cre-ative Economies” The creative economy includes the already mentioned branches ofthe cultural economy3 as well as the advertising business and software and games-industries (Söndermann, 2007).

2.1 Anglo-American and Continental-European Approach 25

2 “Creative industries can be viewed as the Cultural Industries defined in a wider sense” (Feselund Söndermann, 2007).

3 The term “Cultural Economy” refers more to the chain of economic value added, whereas theterm “Creative Economy” is viewed – next to its focus on creativity, in close relationship withthe intellectual property issue (Keywords patents, copyright).

2.1.2.2 The 3-Sector Model

The 3-sector model divides the Cultural and Creative Economy into a private, apublic and a charitable sector. By employing such a grouping, economic policymeasures can be targeted more accurately.

An additional characteristic of the Continental-European approach is the basic divi-sion of the Cultural and creative sector in three areas of a 3-sector model, whichdates back to the 2003’s first bulletin on the Cultural Economies in Switzerland.

The first area of the Cultural and Creative Economy is the private sector, targetedon making profits. The second sector is the public sector and the third one is an inter-mediate, charitable sector. The literature points out and shows that this distinction isessential and should be further used and become visible in future studies, since thosesectors differ in tasks, appropriate measurement scales and problems (Wiesand,2006). The distinction is particularly relevant for economic policy considerations,since employing it can considerably increase their accuracy.


Figure 1: The 3-Sector ModelSource: Bulletin on the Cultural Economy in Switzerland (2003)

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

��

2.2 Horizontal and Vertical Approach

The variety of definitions of the Creative Industries is not the only distinctive featureamong terms and contexts described above. Studies and surveys on the Creative In-dustries differ in a further direction in whether they capture the topic following ahorizontal or a vertical approach.

The horizontal approach uses selected criteria to classify the jobs an activitiesbelonging to the Creative Class (cf. amongst others, Kröhnert et al., 2007), it essen-tially views several branches as being “creative”.

By contrast, the vertical approach, which is, as already noted, related to the chainof economic value added, aims at measuring the share of creativity along the chain ofeconomic value added. In doing so, the area of creative economy is divided into thesubsectors “supply of intermediate inputs”, “production”, “reproduction” and “dis-tribution” (Ratzenböck et al., 2004; Traxler et al., 2006).

2.3 Technological Sectors as Part of the Creative Industries

If, and to which extent Technological industries should be counted among the Cre-ative Industries is controversially discussed in the literature and depends not least onwhether patents, copyrights and similar indicators are involved in capturing the term“creativity”.

Using patents and copyrights etc. (cf. Figure 2 – approach related to exploitationrights) results in a strong expansion of the Creative Industries into the technologicalsector. On the other hand, an approach involving patents etc. leads to an underrepre-sentation of essential cultural and artistic businesses (Ratzenböck et al., 2004).

In this context the literature does not only use the term “Cultural and CreativeEconomy” but in addition the – particularly in Anglo-Saxon studies widely discussed– concept of “Copyright Industries”. In this context, “Cultural Economy” representsthe core, “Creative Economy” the extension of the core with Software and Games-Industries. Beyond that, Copyright Industries include the whole information- andcommunication technologies (the so-called ICT-Economy) (Söndermann, 2006).

The most comprehensive topic to be found in the literature is the term “CreativeEconomy”, which is most frequently used in the Anglo-American region. It extends the“Creative Industries” about the research and development sector (ICG culturplan,2007). John Howkins views the “Creative Industries” and “Creative Economy” respec-tively as the sum of the following four economic sectors – Copyright Industries, PatentIndustries, Branding Industries and design industries (cited in: Cunningham, 2002).

Alongside the approach based on exploitation rights, one could also use a moreproduction-oriented approach to define the Creative Industries. The focus of such anapproach lies in the distinction between content and technology (cf. Figure 2).

2.4 Creative Class or Creative Industries?

Defining the term Creative Industries by patents and copyrights bares the dangerof under-representing essential cultural and artistic sectors.

Richard Florida’s definition of the Creative Class is, as noted earlier already, basedon jobs and activities, not on economic sectors. Creative jobs and activities are nor-mally done by creative people. As such, Florida’s definition seems, at first glance,

2.4 Creative Class or Creative Industries 27

plausible and appropriate, however, it involves problems when it comes to measuringthe Creative Class. Since jobs are classified according to the necessary educationand operational procedures, the mapping of jobs into the Creative Class tends to biasthe definition towards better educated persons. This bias results from the fact that, bydefinition, persons in branches with lower educational prerequisites are excludedfrom the selection procedure. Thus, the main problem in this context is the separa-tion of creative and non-creative jobs (Boschma und Fritsch, 2007).

European authors predominantly use the approach of capturing the Creative In-dustries by classifying economic sectors. Moreover, they use the terms “Cultural andCreative Economy” instead of “Creative and Cultural Class”.

Another distinctive feature is that while Florida’s creative class is solely built upusing statistics from sociology of employment, the terms “Cultural and CreativeEconomy” are both based on the notion of activities and enterprises and thus rely onboth organizational and entrepreneurial statistics (ICG culturplan, 2007).

2.5 A Variety of Terms

Due to reasons of accuracy, comparability with other European studies and dueto the differences in the treatment of the artistic sector, we prefer for this studythe “European definition” of Cultural and Creative Economy over the definitionbased on the “Creative Class”.

An essential reason for the existence of a variety of definitions is the fact that the dis-cussion on the topic of Creative Industries does not exclusively stem from science.The area of regional- and economic policy plays an important role in it as well. Thecreation of terms and definitions is thus most often related to the respective locationsand selected such that it fits to the available data. This explains the pragmatic consid-eration that seems to be inherent in all approaches to definition. The operationability


Figure 2: The Creative Economy in the Form of a MatrixSource: Puchta (2009)

economic approach sociological approach

Creative Industries

• music, performing arts, film, radio, TV• advertising, PR, visual arts, arts and crafts,

design, architecture, cultural heritage, print-media• software, internet, telecommunications

− related to branches and economic sectors

Creative Class

• scientists (i.e. physicists)• creative professionals (i.e. lawyers, consultants)

− jobs, activities

• ICT (information and communication technology)• Content- Economy• Media-Economy• Cultural Economy

− essentially content versus technology

• copyright• patents• branding• design

− inventions, developments that are usable and can beprotected by copyright law

production-oriented approach exploitation rights-oriented approach

with respect to economic policy needs and targets directs the selection of definitions(Ratzenböck et al., 2004).

Next to the orientation towards usability in economic policy making, anotherreason for the vast variety of definitions lies in the regionally different historical andsocio-cultural understanding of the term “Creative Economy”.

A well-arranged description of the various approaches is displayed by Figure 2.It opposes the economic, sociological, and production-oriented and exploitationrights-oriented approach in form of a matrix and thus gives a condensed view of theaspects and approaches discussed above.

2.6 Tentative Conclusions

Out of the rank growth of definitions we now need to select those that are capable ofdealing with the central questions to be answered by this study. Out of the followingreasons, the presented study relies on definitions that stand in the tradition of Euro-pean views towards the term “Creative Economy”.

Accuracy

The term “Creative Economy” is not as comprehensive as the term “Creative Class”used by Florida, which makes it better usable for the questions posed by this study –particularly the questions concerning economic potentials and possible furtherance.

Comparability

Next to international Organizations like the EU or UNESCO, several European na-tions and public institutions rely in many surveys, bulletins and studies on the Cul-tural and Creative Economy on the narrower definition we use here (cf. i.e. Deutsch-er Bundestag, 2007; Fesel and Söndermann, 2007 or Kulturwirtschaft in Berlin,2005). The German government and its ministry for economy and technology as welluse this definition of “Creative Economies” (see, for example “Initiative Kultur- undKreativwirtschaft der Bundesregierung”, 2007).

Artistic Activities

A considerable point of criticism against Florida lies in his broad definition of theCreative Class, which at the same time crowds out persons being employed in arts.Söndermann (2007) uses the word of malapropism of the artists and the creative inthe context of Florida’s definition of the Creative Class4. Out of this and other rea-sons we decided to use a narrower definition of the Creative Economy.

2.6 Tentative Conclusions 29

4 For Europeans, it is difficult to comprehend why Clerics, Controllers, bankers, dentists, arti-cled clerks or aldermen are creative jobs (cf., amongst others, Kröhnert et al. (2007), who intheir study use the definition of the Creative Class following Florida). The authors of the pre-sented study, however, deny by no means that persons working in the listed jobs are creative!

As such, we view within the presented study, following Fesel und Söndermann(2007) the following branches and economic sectors as being part of the “CreativeIndustries”. By doing so, it is possible to group them into nine cultural and two cre-ative branches.

Cultural branches

� publishing� film industries� private broadcasting industries� music, visual and performing arts � journalists, news agencies� museum shops and exhibitions of art� retailing of cultural goods� architecture� design industries

Creative branches

� advertising� software and games industries


3 On the Theory of Creative Industries

The scientific discussion on Creative Industries follows a highly interdisciplinaryapproach. While the analysis of the Creative Industries is naturally a prime subject ofinterest for economists, sociologists, political scientists, geographers, urban plan-ners etc. concern themselves with it as well. Cultural scientists focus in particular onthe Cultural Industries, which is, as discussed above, part of the wider defined Cre-ative Industries.

3.1 Characteristics of the Creative Industries

In the following, we present the theory of the Creative Industries from an econo-mist’s perspective.

The economist Richard Caves (2000) describes the Creative Industries as “indus-tries [which] supply goods and services that we broadly associate with cultural, artis-tic, or simply entertainment value […]”. He was successful in figuring out, follow-ing economic criteria, the common attributes of enterprises in the creative Industriesas well as the differences between “creative” and “ordinary” products and services.

In the following we discuss the attributes of the Creative Industries in detail.They are not exclusive, though most probably encountered among the Creative In-dustries.

3.1.1 Uncertain Demand

The utility derived from Creative Products depends strongly on subjective andintangible categories. Thus, estimating demand ex ante involves high degrees ofuncertainty.

For many products and services of the Creative Industries, no experienced data areavailable, so that the economic literature characterizes creative products as “experi-ence goods”. This means that experience on these goods is recorded only by con-sumption. Beyond that, the satisfaction a consumer derives from creative productsand services depends strongly on subjective and often intangible scales (Flew, 2002).

Following this, enterprises of the Creative Industries face higher uncertainty, be-cause the value the consumers assign to their products and demand is difficult to es-timate ex ante.

However, the fact that the value of the products will only be identifiable by thecustomers’ experiences and that thus the value of the products is unclear ex ante, af-fects the ways of cooperation of enterprises involved in the production process.

If one assumes that each part of the production process is compensated accord-ing to the share it contributed to the final product, the problem in the Creative Indus-

tries is valuing this share. Thus, contracts signed among people involved in the pro-duction process of creative products must take into account the uncertainty that mayarise in valuation. Caves (2000) alludes in this context to some “symmetrical igno-rance”, which all signatories face and therefore plays an important role in CreativeIndustries‘ contracts. The methods to solve these issues vary with the complexity ofthe respective production process. The approaches range from very informal con-tracts on the basis of handshake and trust to option contracts that allow changing theallocation of property- and decision rights as soon as information is updated and un-certainty decreased.

3.1.2 Creativity as a Value in Itself

Creative people define the quality of their job not only on wages and employmentconditions. Beyond that, the quality of the product they produce and its originali-ty play an important role.

Economic models often assume that employees base their decision on labor supplyand whether to take up a specific job on wages and employment conditions. Theproduct itself and its specific attributes however, do not play a significant role in thedecision process.

employees in the Creative Industries however, do not always behave as suggestedby rational labor economic theory. Caves (2000) notes in this context that employeesin the Creative Industries define themselves and their work to a higher extent by thequality and the attributes of the product they produce. Originality, the technical skillsassociated with a product, and the overall expression of the “created” Product playan important role for those employees.

Creative employees often find themselves in an area of conflict between creativework on the one and economically necessary activities on the other hand.

3.1.3 A Mix of Skills

Some products of the Creative Industries require different creative qualifications andspecialized employees as inputs to the production process. However, each part of theproduction process involves personal values and expectations towards the product.This might foster conflicts which have to be solved in order to successfully completethe production process.

Conflict resolution is mandatory in this context, since most often the productionprocess requires the availability of each and every factor of production. If only oneof such factors is missing, there will be no positive output.5

32 3 On the Theory of Creative Industries

5 Contrary to more traditional branches of the economy whose production can most often be char-acterized by a production function with substitutable and additively separable inputs, the Cre-ative Industries distinguish themselves by multiplicative production functions. Output is positiveif and only if all production inputs are available so that substitutability is very limited. Harvardeconomist Michael Kremer (1993) alludes to the “O-rings theory of production” in this context.

3.1.4 Differentiability

The products of the Creative Industries differ not only by objective criteria of quality,but beyond that by criteria that are not quite tangible. For instance, such productsmight differ by symbolism, aesthetics as well as the values, atmospheres and stylesassociated with the product. Those factors and criteria revoke themselves from anobjective evaluation of quality by the consumers.

From this subjective components follows that each product is, from a consumer’spoint of view, unique.

Economists allude to product differentiation in this context. It is clearly charac-teristic to products of the Creative Industries that product differentiation is carriedout to a large extent via the subjective attributes described above.

3.1.5 Differentiation of Inputs

Artists and other suppliers of creative products differentiate themselves by theirqualifications, their originality and talents. It is the mix of those attributes that is per-ceived by the customers. The creatively active are related to one another and com-pared. A qualitative ranking emerges.

Economically speaking, the creative inputs are vertically differentiated. US-So-ciologist Howard Becker (1982) asserts in this context that these rankings of artistsand their work are immanent to the process of problem solving that is characteristicfor all forms of creativity. The economic consequence is that the share of revenues iscorrelated to the ranking.

3.1.6 Time is a Critical Factor

In the course of complex projects in the creative industries where all people involvedin the production process, with all their differing qualifications are to be coordinated,time is eventually more important than outside the Creative Industries. As such wehave with respect to the selection of Creative Industries, beyond quality, a second cri-terion; availability. If you search, for example, a creative employee for a performanceto be given at a certain date, quality is a necessary, but not a sufficient requirement.

Rather, she must be available for the time in which the performance is plannedand given.6

3.1.7 Durable Goods

Many products of the creative industries are durable in the sense that they can be re-peatedly used. An orchestra can repeatedly play a once composed piece, and a onceprogrammed video game can be sold million fold.

3.1 Characteristics of the Creative Industries 33

6 Cf. the discussion on substitutability in the production process.

Many products incorporate intellectual property which can be legally protectedby patents and copyright laws, for instance.

As such, the configuration of the treaties determining the share of revenues playsan essential role. However, since the demand for creative products is, as discussedabove, uncertain, accurate estimations of the revenues is very difficult.

Thus, in coherence with patents and copyright laws, a trade-off between appro-priateness and accessibility emerges (Hölzl, 2005).

If the protection by patents is too strong, further development of the product byother enterprises is made impossible due to high transaction cost. If, however, theprotection is too weak, the value of the patent is diminished, and incentives to createand invent new products are decreased.

3.1.8 Uncertainty

Uncertainty with respect to demand as well as the production process can be viewed asan embracing issue among the characteristics of Creative Industries discussed above.

Thus, Söndermann calls the Creative Industries in this context a high risk area(2007).

3.2 Differences between Creative and Traditional Industries

If one investigates the Creative Industries with respect to their structural particulari-ties, one finds that they differ from traditional branches of economic activity pre-dominantly by

� the degree of integration� the type of actors� the types of markets� the business models� the labor markets� the investment patterns� the driving growth

and should thus be viewed as a

� Cross-sectional area.

3.2.1 The Degree of Integration

Compared to traditional industries, the Creative Industries stand out by a high degreeof integration. The integration can come in informal nature – networks, events andinformational fora – as well as in formal nature – i.e. in form of a cluster.

By the strong degree of integration and usage of ICT (information- and commu-nication technology), creative people are gearing towards global activities. At the


same time though, creativity requires initiatives and organization on a local level. Assuch, the Creative Industries are punched globally as well as locally – they are essen-tially “glocal” (KEA, 2006).

3.2.2 Type of Actors

Comparing the Creative Industries in different countries shows that the structures aresimilar and that there is some kind of international structure. However, there arelarge differences within the Creative Sector.

One-person enterprises (OPE) and micro enterprises are clearly the most domi-nant part of the Creative Industries.7 However, the backbone of these industries withrespect to employment and the economic value added are the small- and medium en-terprises (SME).

Alongside those types of actors we find some big players who demand and takeup the products of the SMEs. (Söndermann, 2007).

Leadbeater (1999) describes the relations and sharing of work among the differ-ent types of actors in a similar way: “Creative Industries […] are driven […] not bytrained professionals but cultural entrepreneurs who make the most of other people’stalent and creativity. In creative industries, large organizations provide access to themarket, through retailing and distribution, but the creativity comes from a pool of in-dependent content producers”.

3.2.3 Types of Markets

High fix costs in the Creative Industries lead to oligopolistic markets.

Some branches of the Creative Economy can be characterized by high fix costs. Thefilm- and game industries are a prominent example. This leads to the formation ofenterprises which have an appropriate size and are capable of bearing those fix costs.Ultimately, this leads to oligopolistic markets (Marcus, 2005).

At the same time, we observe on the one hand a clear tendency towards strongervertical integration (ranging from production to distribution) and, on the other hand,the tendency towards outsourcing certain activities to other creative enterprises.

3.2.4 The Business Models

Following Puchta (2009) we can distinguish between three generic business modelswhich are characteristic to enterprises of the Creative Industries. These are

� the project approach� the service approach and� the approach towards asset accumulation.

3.2 Differences between Creative and Traditional Industries 35

7 Micro enterprises make a share of 75% of the enterprises of Germany’s Creative Industries(Söndermann, 2007).

Within the project approach, enterprises supply whole packages of products andservices, while in the service approach the customers essentially buy workinghours.

The approach towards the accumulation of assets ultimately involves the accu-mulation and exploitation of intangible assets.

3.2.5 The Creative Industries as a Cross-Sectional Area

The Creative Industries are, above all, cross-sectional areas. They are built up fromdifferent branches of the production-, the service and the commercial sector. (Sön-dermann, 2007). As such, the production of computer games, for example, requiresbeyond software and programming skills, artistic and creative know-how and skills(Puchta, 2009).

3.2.6 Investment Patterns

It is typical for the Creative Industries that they show a strong tendency towards in-vesting in intangible assets like research and development or ICT (Flew, 2002). Inthis respect, they clearly distinguish themselves from traditional branches of eco-nomic activity which might be an important reason for the difficulties enterprisesfrom the Creative Industries encounter when searching for investment and financingof projects and economic activity.

Part 4 of this study deals at length with difficulties in financing the CreativeIndustries and discusses potential approaches towards finding solutions for thisproblem.

3.2.7 Labor Markets

The inequality of income is higher on the creative labor market than on otherlabor markets. Monetary incentives are less important, and the educational levelis higher.

Since, as discussed already, the Creative Industries are heterogeneous with respect totheir structure, the discussion of labor markets indicates a differentiation between ar-eas involved in culture and areas apart from culture.

The labor market in areas apart from culture (i.e. the advertising business or thesoftware and games industries) does not fundamentally differ from labor marketsoutside the Creative Industries.

The labor markets in cultural areas are, however, somewhat special since theyhave the following common criteria (Marcus, 2005):

� dominance of part-time employment� high frequency of employees having multiple jobs


� unequal distribution of income Few people with high income and many with anincome below the average

� employees incurring higher risks than employees of other professions� Little response to pure pecuniary incentives: “Arts for the sake of arts” and the

assumption that not only monetary incentives, but acceptance and appreciationfor one’s work play an important role in the decisions of creative employees. AsO’Connor (1999) formulates, “Making money and making culture are one and thesame activity”.

� Higher level of education compared to the average of the total labor force. Some50% of the employees in the Creative Industries have graduated from University,compared to some 25% of the total labor force (KEA, 2006).

Note in this context that the employment conditions in some branches of the CreativeIndustries are clearly precarious and repeatedly the subject of political discussions. Theissue of the so-called new self-employed (“Neue Selbständige”) and their social securi-ty as well as the discussion on health insurance for artists are two prominent examples.

3.2.8 Innovation as a Driving Force

Innovation is the basis and primary source of economic growth in the Creative Indus-tries.8 In order to make the potential of innovation thrive however, social, cultural aswell as institutional innovations are necessary (Flew, 2002). The social environment aswell as the social attitude towards innovation, risk etc. is thus playing an important role.

Excursus – Talent, Technology and Tolerance

Talent, Technology and Tolerance essentially determine where creative peoplelocate.

The stream of thought focusing on the environment as a central issue for creativepeople was first formulated by Richard Florida. His bestseller The Rise of theCreative Class and how it’s transforming work, leisure, community and everyday life(2002) makes a considerable – though often controversially discussed contributionto the literature on the Creative Industries.9

The starting point for his analysis is the assumption that regions with a highershare of creative people have higher potential growth rates, which seems to be sup-ported by some empirical investigation results. Thus – so the argument – such re-gions will be economically more successful in the future than regions with only alow share of creative people.


8 This is certainly not only true for the Creative Industries. In contrast to more traditional indus-tries though, innovation plays, in comparison with other inputs, a more dominant role in theCreative Sector (Flew, 2002).

9 As discussed above, Florida uses the term “Creative Class” instead of “Creative Industries”.

In this context, Florida investigated how an environment should be like andwhich factors are essential in order to attract creative people.

He identified three criteria:10

� talent� technology� tolerance

Those three factors – called the 3 Ts for short – ultimately determine where the cre-ative people will locate.

Since enterprises are looking for creative employees, they locate plants andheadquarters in such “creative” regions. Essentially, this means that enterprises fol-low the employees and not vice versa.

By using this approach, Florida distinguishes himself from the established as-sumption that employees locate where employment opportunities are.

Thus, in the future the economic success of regions will massively depend onhow and to which extent they are successful in efficiently and sustainably identifyingand fostering the inventive abilities of the “Creative Class”. (Keuper et al., 2008).

In this way, innovative and modern economic policy should aim at providing thenutrient for talent, technology and tolerance, in order to “harvest” economic growthin the future.


10 In order to measure the extent of those three factors, Florida developed some appropriate in-dices. In the meantime, more indices have been established which are capable of better imag-ing the European particularities. Talent could, for example, be measured by counting thenumber of people who graduated from university. Technology could appropriately be meas-ured by the number of patents and the share of R&D expenditure. Tolerance is often meas-ured using the share of immigrants in the total population, the share of votes for right-wingparties in elections, the agreement with xenophobic statements or the share of people beingemployed in arts (Kröhnert et al., 2007).

If one views the “3 Ts” as an indicator for a region’s attractiveness for creative peo-ple, one ultimately has to spend a view words on the causality issue. Cause and ef-fect are not always clearly identifiable. Do artists locate in a town, because toleranceis high there, or is tolerance high because of the many artists located there? The cor-relations which Florida documents in his work might be statistically significant, butthey say nothing about the direction of causality (Berry, 2004). From a statistician’spoint of view, a high index can both be a cause as well as an effect of high economicgrowth. Even more, it is not possible to exclude that both scales are in fact depend-ent on a third, unobservable scale. Statistically, causality can only be refuted, thoughnever proven (Bortz, 1993).

Focus box 1: Reversed Causality

Finally however, we must note that Florida is being criticized by the scientificcommunity on his methods. The strongest point of criticism is that he finds statisti-cally robust correlations, which essentially does not allow concluding on causalityissues (cf. Focus box 1).

In this study we abstain from giving a comprehensive criticism and critical ac-claim on the work of Florida, since this is not the main point of investigation. Thegentle reader is thus referred to a short and inspiring review on Florida’s The Rise ofthe Creative Class by Glaeser (2004).


4 An International Overview on the Creative Industries

In the following we give an overview on both national as well as international studieson the Creative Industries. Since in the recent past a vast amount of such studies hasbeen published we are by no means able to analyze all studies, but will present thosewhich clearly influenced the current discussion on the topic in the scientific commu-nity. Above all, studies from the United Kingdom are major contributions to and cat-alysts of the ongoing debate. Another focus of the following chapter is the situationin Germany.

4.1 The United Kingdom

The United Kingdom has, in terms of the gross national product, the largestCreative Sector worldwide. The country is the first reference in the European dis-course on Creative Industries.

According to some estimation, the United Kingdom has, in absolute terms, thegreatest Creative Sector of all countries of the European Union and, in terms of grossnational product, most probably the greatest of the world (Hutton, 2007). The UnitedKingdom’s role as a cutting edge in identification of and debating on the CreativeEconomy is indisputable. There, already ten years ago, the potential of the CreativeIndustries with respect to employment and economic growth has been discoveredand elaborated on. The United Kingdom is thus – even in the discussion going on inContinental Europe – the benchmark in the discussion on the Creative Economy,which has become more and more intense both in economic policy as well as in thescientific community. At the same time, the United Kingdom is the reference forother countries in case they are developing potentially successful recipes for the Cre-ative Industries. The so-called “Creative Industries Mapping Document”11 definesthe following 13 areas of the Creative Industries (DCMS, 2008):

� advertising� architecture� (retailing of) arts and antiques� computer- and video games� arts and crafts� design� design-Fashion� film and video

11 Developed and published by the department for culture, media and sport, first edition 1998,amended 2001).

� music� performing arts� publishing� software� TV and radio

As a first and predominant criterion for the mapping of branches of economic activi-ty to the creative industries we mention the usage of creativity in production as wellas supply of products and services. A second criterion is the protection of productsby copyright rules (KMFA und IKM, 2006). The department for culture, media andsports (DCMS) defines the Creative Industries as industries which heavily rely onindividual creativity, qualification and talent. They have the potential to bring aboutwelfare and jobs by creating intellectual property (DCMS, 2008). Moreover, we areable to assert that the definition of Creative Industries in the United Kingdom ismore consistent than definitions used in other countries. There is much less discus-sion on the limits and borders of the term “Creative Industries” in the United King-dom than in many other countries.

It seems that the issue of Creative Industries-issue has left its infancy and has al-ready arrived in the social mainstream of the country.

4.2 Australia

Australia has a somewhat exceptional position because here, scientists and policymakers have followed a different approach towards the problem of identifying theCreative Industries. Given the assumption that many of the traditional branches ofart can be transferred into the concept of Creative Industries, a categorization in“core-arts” and “arts-related industries” seems appropriate. In this context, the map-ping into one of the two categories will be based on product quality and the relativeshare of cultural and non-cultural goods involved in production (Mayerhofer, 2002).

This “Cultural industries-model” can be visualized using concentric circles ema-nating from the “core-arts” (music, dance, theatre, visual arts, arts and craft, film)and going up to the “arts-related industries” (books and magazines, TV, radio, news-paper an even more remote economic branches like design, architecture, tourism andadvertising). This approach dates back to Guldberg and Throsby (O’Regan, 2001, inMayerhofer, 2002) and found its implication with respect to economic policy as ear-ly as the 1990s in Australian cultural policy.

It is typical of the Australian understanding of cultural policy that the CulturalEconomy has long been viewed as being part of the cultural policy. The scientificdiscourse views the term “Creative Industries” as a means to overwhelm the dichoto-my between arts and the economy, which can be interpreted as a sign to make theterm more democratic. As such, creativity is the common denominator of arts andthe economy (Cunningham et al., 2003, in Ratzenböck et al., 2004).

42 4 An International Overview on the Creative Industries

4.3 The Netherlands

Depending on the definition used, between 19% and 35% of Dutch employeesbelong to the Creative Class.

In the Netherlands, we observe some studies and scientific contributions dealing ex-tensively with Richard Florida and his theory of the Creative Class since a couple ofyears. Representing those studies we mention in this context the study of Marlet andvan Woerkens of 2004. This study is of primary interest since the authors select twodifferent definitions of the Creative Class and evaluate how the selection of defini-tions influences the results.

Since both authors are aware of the difficulties involved in identifying and quan-tifying the Creative Class, they adopt in a first step the definition of Florida andshow that the share of creative employees with respect to the total labor force inthe Netherlands is 35%. In a second step, they select an alternative definition whichthey view in a European context more appropriate. It is narrower than Florida’s defi-nition. By employing this alternative definition, the share of the Creative Class of thetotal labor force falls from 35% to 19%. Using this alternative definition is not abouterasing certain jobs from the definition. Rather, the authors try to measure the sup-posedly true share of creative people in the various branches of the Creative Class(Marlet und van Woerkens, 2004)12. Viewing the results of this study clearly showshow sensitive conclusions on the Creative Class are, with respect to the selection ofits definition.

In another study (üNN GmbH, 2007), which compares the Netherlands and Ger-many and which is essentially of qualitative nature, the authors define the CreativeIndustries as those branches of economic activity whose products are based predom-inantly on creative work or are essentially creative work, and whose market valuedepends essentially on the creative input (üNN GmbH, 2007). More specifically, theauthors define the Creative Industries as the branches of classical arts, media and en-tertainment, architecture, design and advertising. The categorization in Creative-and Non-creative Industries results within this study from the understanding of therespective branches, in particular the artistic-aesthetic branch on the one hand andthe purposeful-profane branch on the other hand. By employing this definition,knowledge-based branches are not mapped into the Creative Class (which althoughis the case in Richard Florida’s studies).

4.3 The Netherlands 43

12 Florida, for example, views all managers with university degrees as being part of the CreativeClass, while in the Dutch study, the share of managers being part of the Creative Class is, ac-cording to definitional amendments, only 56%. An essential conclusion drawn by the authorsis that the “… Creative Class is theoretically much the same as Human Capital.” (Marlet andvan Woerkens, 2004).

4.4 Switzerland

The Swiss Creative Industries have been analyzed in, among other studies, two “Bul-letins on the Creative Economy” (2003 und 2007) as well as a special report onZurich (2005). In contrast to other European countries, the discussion on the Cultur-al and Creative Economy is very recent in Switzerland. However, it takes place on aquite high level. As such, the Bulletin of 2003 is, with respect to certain points in it,seminal for the subsequent debates on the topic in Europe.

The three sector model we cited earlier in this study is from the first bulletin onthe Creative Economy of 2003 (Weckerle und Söndermann, 2003). It is frequentlycited in the scientific literature and discussion. This model divides, as noted earlieralready, the Cultural and Creative Sector into a private, a public and an intermediatesector. Since then, the international discussion has adopted the view that the term“Creative Industries” compasses the private, profit-oriented sector. According to thesecond bulletin on the Creative Economy, Switzerland counts the following 13 par-tial markets as being part of the Creative Economy (Weckerle et al., 2007):

� music industries� books market� arts market� film industries� broadcasting� market for performing arts� design industries� architecture� advertising industries� software- and games industries� arts and crafts� press and publishing� audio-engineering market

4.5 Austria

In recent years some Austrian institutions started to intensively concern themselveswith the Creative Economy. Next to some political institutions like the chamber ofcommerce there are various research institutions that investigate the Creative Indus-tries. The connection between the economy on the one hand and science and researchon the other hand was most prominently expressed in this context by the foundationof a private university for Creative Economics, the “New Design University” in thecapital of Lower Austria, St. Pölten. According to the first Austrian bulletin on theCreative Economy (KMFA und IKM, 2003) the following branches are part of theCreative Economy.


� cultural heritage� performing arts� audiovisual branch� visual arts� books and press� transversal branches (i.e. cultural initiatives, dance schools etc.)

With respect to the identification of the Creative Industries, Austria is pursuinga special approach in the sense that it uses the LikusKreativ©-scheme (“Länder-InitiativeKulturStatistik”), which is based on the three sector model from Switzer-land, but uses a definition which is more focused on the content. In contrast to theSwiss example, “Austria” views, next to the private sector, the public and intermedi-ate sector as being part of the Creative Economy as well.13 By doing so, the scope ofthe definition of the term “Creative Economy” used in Austrian studies is differentfrom the scope of the definition in other European countries. For Austria, there aretwo bulletins on the Creative Economy (2003 und 2006) at the moment, as well assome studies focusing on specific provinces or branches.

4.6 Germany

Structural breaks and the declining competitiveness of the old industries havebeen a major motivation for debating and investigating the Creative Economy.

By now quite a large number of studies and bulletins on the German Cultural and Cre-ative Economy has been published. In particular, the federal states and larger townshave issued reports on their Creative Economy.14 This does, on the one hand, underlinethe importance of the Creative Economy and the fact that economic policy makershave to concern themselves with the topic, on the other hand although, it is a sign ofconfusion with respect to the concept of terms and definitions (Söndermann, 2006).

publishing bulletins on the Creative Economy was not motivated by benevolenteconomic- and regional policy makers. Rather, the de facto power of economicchange and structural breaks was responsible for raising the awareness of policymakers for the Cultural and Creative Economy.15

4.6 Germany 45

13 Note again in this context that there is no clear borderline between the three sectors of theCreative Economy (private, public and intermediate). The borderline is rather blurred (Mandlet. al., 2006).

14 Discussing the bulletins of all the German federal states and towns is beyond the scope of thisstudy. Thus, we must abstain from discussing a number of German reports on the CreativeEconomy (i.e. those featuring Mecklenburg-Western Pomerania, Bremen, Bavaria, LowerSaxony and Aachen).

15 German studies frequently use the term “Cultural Economy”, but, with respect to the scope andcontent, we find this term in close relationship to the definition of the “Creative Economy”.

It is thus far from coincidence that the first federal state to issue a bulletin on theCultural Economy was North Rhine-Westphalia (1992). It was this federal state ofGermany that experienced a great structural break due to the dominance of old in-dustries. In the new federal states in Eastern Germany, the motivation for engagingin and investigating the Creative Economy is an economic necessity as well. Thesearch for the potential of employment, which is imminent to the Cultural and Cre-ative Economy is a driving force there. In the east, structural policy is not as much inthe foreground as it is in North Rhine-Westphalia, however, the ultimate aim is thesame: securing regional welfare and employment (Söndermann, 2006.)

It is truly essential that German studies employ the term “Creative Economy”,which is not as inclusive as the term “Creative Industries” used in Anglo-Americanstudies, since the term “Creative Economy” does not encompass non-culturalbranches and information technologies. Moreover, according to the definition byMichael Söndermann, the “Creative Economy” does not even encompass the non-profit branch of the cultural sector (KMFA und IKM, 2003.)

In the following, we select some of the multitude of bulletins on the German Cre-ative Economy and discuss them in detail below. A particular focus of the discussionwill be the scope of the terms’ definitions. We have selected the presented reports ac-cording to their actuality and the literature they cite.

4.6.1 North Rhine Westphalia

North Rhine-Westphalia published the first German bulletin on the CulturalEconomy.

North Rhine-Westphalia was the first German federal state to issue a bulletin on theCultural Economy. This first bulletin is from 1992, since then, four more bulletinshave been presented. The first bulletins of the “Consortium on the CulturalEconomies” employ the term “Cultural Economy” and define it as encompassing thefollowing three areas. First, “culture in a narrower sense” (books, music, musicals,freelance artists), second, “culture in a wider sense” (architecture, Design) and third,“additional branches with high relevance for culture and the media” (i.e. culturalconstruction industries and cultural tourism) (Wiesand, 2006).

With respect to the scope of definitions however, we have been observing achange in the recent years. As such, the current fifth bulletin in the Cultural Econo-my of the federal state of North Rhine-Westphalia of 2007 takes into account that theterm “Cultural Economy”, which has been central to many previous German studies,has come under pressure due to international comparison. Thus, the fifth bulletintries to enlarge the definition of the “Cultural Economy” by some aspects andbranches of the “Creative Economy”. Essentially, it arranges the terms by offering amapping of three categories.


� “Cultural Economy” (music, literature-, books-, press-, and arts markets, designindustries, Film and TV-Industries, theatres, architecture and advertising)

� “Core of the Cultural and Creative Economy” (freelance artists, writers, journal-ists, artists, restorers; publishing Industries, music publishers, sound studios,film- and TV production; concert halls, movies, varietés, cabaret; retailing ofbooks, CDs, musical instruments, objects of art; event managers; architecture anddesign, advertising design)

� “Creative Economy” (procurement of advertising, publishing of software, soft-ware consultancy and software development)

Besides, the term “Cultural Economy” includes branches that are preceding and fol-lowing the branches of the Cultural Economy itself. For example, manufacturing ofmusical instruments (preceding branch) or copying of sound- and image carriers(following branch) are part of the Cultural Economy (Arbeitsgemeinschaft Kultur-wirtschaft NRW, 2007). It is a common and identifying criterion of North Rhine-Westphalia’s bulletins on the Cultural and Creative Economy that they include onlyprofit-oriented branches. Summing up, we assert that the fifth bulletin has broughtabout a symbiosis of the Cultural and the Creative Economy.

4.6.2 Schleswig-Holstein

The first bulletin on the Cultural Economy in Schleswig-Holstein has been pub-lished in 2004 and deals with the following branches (Schleswig-HolsteinischerLandtag, 2004):

� music market� books- and literature market� arts market� arts and crafts, design� performing arts� film� radio� TV and entertainment electronics� socioculture� administration, management of and research on culture� cultural construction and monument protection� Cultural Economy and tourism

Even though the statistical data of the bulletin are mainly on the profit-oriented sec-tor, the underlying definition is fairly wide. The term “Cultural Economy” is definedas encompassing both the profit-oriented as well as the public branch of it. The con-sideration of Cultural construction and tourism as being part of the Cultural Econo-my is unique to the Schleswig-Holstein bulletin and has to be noted therefore.

4.6 Germany 47

4.6.3 Hessen

The federal state of Hessen has published its first bulletin on the Cultural Economyin 200316. It is characteristic for the approach used in it, namely that the public sectoris considered as a part of the Cultural Economy.

The term “Cultural Economy” is defined in a wider sense. This results in encom-passing the Cultural Economy in a narrower sense (persons and enterprises who areprimarily and mainly concerned with production, processing and distribution of cul-tural goods or directly contribute to procurement of artistic and cultural products) aswell as further activities apart from the first element of the chain of economic valueadded (Cultural Economy in a narrower sense). Among those further activities, wefind the distribution of cultural goods by wholesale trade, copying of cultural goodsin the sense of mass production, the press market as well as big parts of applied arts,architecture and public administration of culture. Furthermore, the definition in-cludes branches more remote to the term “culture” or branches that are mixed withnon-cultural activities (i.e. translation bureaus or maintenance of TV, radio, andsound devices) (Piesk und Werner, 2003).

4.6.4 Saxony-Anhalt

Two bulletins on the Creative Economy have been published for Saxony-Anhalt(2001, 2006). The second bulletin distinguishes itself from the reports on otherfederal states by prefixing a comprehensive theoretical part which presents and dis-cusses the various approaches towards treating the Cultural Economy and their moti-vation.

The second bulletin uses a definition which divides the Creative Economy intonine sectors of the Cultural Economy and two creative Sectors (see the discussionabove). This definition seems to gradually establish itself in European studies on thetopic. In one point although, the bulletin on Saxony-Anhalt reclines to studies fromthe Anglo-American region.

Next to the term “Cultural Economy”, the bulletin uses the German term“Kreativwirtschaft”. The latter has a wider definition than the former and is used toconstruct an even more encompassing term, “Creative Economy”, which includes,unlike narrower definitions, the copyright-based industries.

4.6.5 Hamburg

The bulletin on the Cultural Economy of Hamburg identifies six partial markets be-longing to the total cultural market:


16 Another bulletin published in 2005 explicitly focuses on sponsoring of culture and patrons inHessen. Although it does not deal with the problems concerning the scope of the term “Cul-tural Economy” anymore.

� music� performing arts� visual arts� applied arts� cultural heritage� literature

In succession, each of those partial markets is specified in detail. The music market,for example, encompasses producers and reproducers of sound carriers, music clubsand bars, manufacturers of musical instruments, retailing of music, orchestras,choirs, event managers as well as the procurement of artists and concert halls. Incontrast to the bulletins on other federal states, it has to be noted that some sectorswhich are commonly considered to be a part of the Cultural Economy are not includ-ed here. As such, the bulletin does not consider advertising and public relations,broadcasting and TV as well as the print media and multimedia industries (Institutfür Kultur- und Medienmanagement, 2006).

4.6.6 Berlin

The bulletin on the Cultural Economy of the capital city of Berlin defines the term“Cultural Economy” as all self-employed and profit-oriented enterprises that pro-duce, market, distribute or retail cultural products and services or conserve culturalgoods (Kulturwirtschaft in Berlin, 2005). To be more specific, the bulletin considersthe following eight partial markets:

� books- and press market� film- and TV industries� arts market� software development/database hosts/telecommunication� music industries� advertising� architecture and cultural heritage� visual arts

For each of those markets, the bulletin defines the relevant self-employed, enterpris-es and institutions. Other than the North Rhine-Westphalian bulletin, the Berlin bul-letin views software development and advertising as being part of the Cultural Econ-omy. As such, the definition of the term used in Berlin very much resembles the def-inition of the “Cultural Economy”.

4.6.7 Cologne

Bernd Fesel and Michael Söndermann have written the Cologne bulletin on the Cul-tural Economy 2007. It has been published in March 2008. This bulletin is the first to

4.6 Germany 49

deal with the Creative Economy using a definition that seems to be currently estab-lishing itself in Continental Europe. It includes, as noted earlier already, nine culturalas well as two creative branches. More specifically, those branches are:

Cultural branches

� publishing (books-, press-, sound carrier- and music publishers)� film industries (film-, TV- and video production, rental and distribution, movies

and theatre)� private broadcasting industries� music, visual and performing arts (freelance artists, private theatres, cabaret and

varieté, Theatre- and concert agencies, stage tech enterprises)� journalists and news agencies� museum shops, art exhibitions (commercial museums and art exhibitions)� retailing of cultural goods (Music- and bookstores, galleries, art trade)� architecture (interior and garden architecture, design, surface and underground

architects)� design industries (industry-, product-, fashion-, textile design and related industries)

Creative branches

� advertising (procurement of advertising, advertising agencies)� software- and games industry (software development and games, including con-

sultancy)

It is a central element of this bulletin that it consequently uses the two terms “CreativeEconomy (Kreativwirtschaft)” and “Creative Industries” always pair wise. Anotherdistinctive feature is the mapping of the categorization of branches into a statisticalcategorization. This approach assures that the economic complex of the “CreativeEconomy/Creative Industries” can be quantitatively analyzed using statistical data(Fesel und Söndermann, 2008).

Moreover, this approach could enhance the comparability of both national andinternational studies on the topic in the future. Note finally, that Fesel and Sönder-mann view, in accordance with the 3-sector model discussed earlier, the “CreativeEconomy/Creative Industries” as the more market- and profit-oriented branch of theCultural and Creative Sector.

4.7 International Institutions

4.7.1 European Union

Spurring the Creative Industries is part of the Union’s Lissabon-strategy. It fo-cuses on the information- and communication technologies therein.

In addition to the bulletins of nations and federal states, the European Union publish-es its own studies on the Creative Economy. The motivation behind those studies is,


in addition to reasons related to economic- and labor market policy, the aim tostrengthen social cohesion within the European Union. The intellectual debate andtreatment of the Creative Economy is embedded into the so-called Lissabon-strate-gy, which has formulated in 2000 the ambitious aim to make the European Union themost competitive, dynamic and knowledge-based region of the world and to make ita region capable of combining sustainable economic growth, more and better jobsand improved social cohesion (European Commission, 2008).

Note that within this context the study “The Economy of Culture” (KEA, 2006)has been published. It uses the following definitions and scopes for the Cultural andCreative Sector.

Besides the core sectors of art (visual and performing arts and cultural heritage)the Cultural Sector encompasses the branches of film and video industries, TV andbroadcasting, video games as well as music, books and press. The Creative Sector in-stead encompasses the branches related to creation and design (i.e. fashion, productdevelopment, etc.) as well as architecture and advertising.

Moreover, some related branches like, for example, production of personal com-puters, mobile telephones etc. are attributed to the Creative Sector as well. Thosebranches are highly dependent on the creative branches mentioned before (KEA,2006).

In this context, it is noteworthy that most frequently in European Union bulletinsthe attention is drawn to the ICT-sector (information- and communication technolo-gies). This observation is further corroborated by the existence of the “Europeani2010 initiative on digital integration – participating in the information society”,which has been introduced in 2005.

4.7.2 UNESCO

A newsworthy study on behalf of UNESCO uses the distinction between Culturaland creative branches. Within this study however, the scope of the Cultural Economyis somewhat narrower and the Creative Economy encompasses, in addition to theabove mentioned branches of the Cultural Economy, the software and games indus-tries as well as the advertising industry (Fesel und Söndermann, 2007).

4.7.3 WIPO

The World Intellectual Property Organization WIPO has established a separatedepartment for the Creative Economy (Creative Industries Division) in 2005. TheWIPO views the Creative Industries as economic sectors whose activities and out-puts are closely related to intellectual property (WIPO, 2008). To be more specific, itattributes those branches that can be associated with “patent”, “trademark”, “copy-right and related rights” as well as “design patterns” (Kulturwirtschaftsbericht Sach-sen-Anhalt, 2006). “Copyright-based industries” are the central term in this context,which alludes to a somewhat limited scope, in comparison to other studies.

4.7 International Institutions 51


The remarks on the pages above show that the discussion on the Creative Industriesdiffers quite largely across nations and institutions. Not only does the significance ofthe Creative Industries in the debates among policy makers differ. In addition to that,we observe that some models and approaches are gradually establishing themselvesin the international discussion, while others remain limited to only a national rele-vancy.

Table 1 summarizes the main points of the discussion presented above.


United King-dom

• leading role in the discussion on Creative Industries• clear definition of 13 branches among the Creative Industries, documented and described in the so-called “Creative

Industries Mapping Document”• prominently accompanied by the Ministry of Culture, Media and Sports• relatively little discussion on the scope of the terms and their definitions

Australia • Cultural Economy is by tradition part of cultural policy• art is the midpoint of the so-called Cultural Industries Model• Creative Industries overwhelming the dichotomy of art and the economy

Netherlands • Debate on the “Creative Class” as defined by Richard Florida• The “Creative Class” is, according to European traditions, defined in a narrower sense than in the USA

Switzerland • Relatively young, although profound and high-level discussion on Cultural and Creative Economy• 3-Sector-Model as the central benchmark in the first bulletin on the Swiss Creative Economy – today the benchmark

for countless studies on the Creative Economy• Private and profit-oriented branch of the Creative Industries is the central item of investigation

Austria • special approach insofar as the intermediate and public sector are analyzed as well• hardly any commitment to harmonization, thus only limited possibilities for international comparisons

Germany • multitude of studies and bulletins, on national as well as federal level• intensive debate on the term “Creative Industries”, its scope and its definition• slow movement from Cultural Economy in a narrow towards Creative Economy in a wider sense• commitment to harmonization observable in latest bulletins• leading role in Continental Europe, together with Switzerland

EU • focus on Cultural and Creative Economy• part of the Lissabon-strategy which aims at making the European Union the most dynamic region of the world• information and communication technologies are viewed as being part of the Creative Economy

UNESCO • current endeavor to define the Cultural and Creative Economy• Following a general tendency, the Creative Economy is viewed as being an extension of the Cultural Economy

WIPO • Creative Industries are economic sectors focusing on intellectual property• copyright-based industries as a distinguishing feature of the Creative Industries, which alludes to a limited scope of

the term in comparison to the general tendency observable in other studies

Table 1: An International Overview of the Creative Industries

Source: Own illustration

Part 2

5 From Theory to Empirics

On the basis of the discussion above we highlight the following central elements.

Differences in Definitions

The definitions according to which the Cultural and Creative Economy are distin-guished from one another differ both in space as well as in time. It happens that,for example, one federal state attributes the software- and games industries to theCreative Economy, while another state does not.

Even in case a specific economic sector is considered as being part of the Cre-ative Economy, we have to determine whether the whole sector or only parts of it areincluded. Retailing, for example, is treated differently across studies. While someemploy, like this study, a narrower bound, some other studies use a more generousapproach and attribute vast parts of retailing to the Creative Industries.

However, the meaning of the term changes as time proceeds. As such, we ob-serve an opening of the term “Cultural Economy” towards the wider definition of the“Creative Economy” in the bulletins on North Rhine-Westphalia and Cologne. Sincethe topic is newsworthy and the international discussion is intensive, it comes withno surprise that terms and their meaning are not fixed, but constantly undergoingchange. It is clear that such differences in definitions and in the content provoke dif-ferences across empirical results.

Differences in Mappings

Sometimes one and the same economic sector is mapped into different markets. Forexample, archives and libraries are attributed to the books- and press market in Swissstudies, while they are mapped into “Cultural Heritage” in Austria. The differencesin mappings are thus concerning more the description and visualization rather thanthe content itself (ICG culturplan, 2007).

Comparability of Studies

The variation of definitions and sources of statistical data which present aggregatepictures of the economic sectors set some more or less tight limits to both the inter-national as well as the national comparability of the existing studies. Since we haveno or only rudimentary statistics on the specific properties of the Creative Economywe have to rely on the existing, though not always fully appropriate data. Further-more, we observe some national peculiarities within this data, which make compar-isons across countries somewhat difficult and feasible only with some caveats.

Clear Tendency

Regardless of all the differences encountered when reviewing the European studieswe observe a clear tendency towards defining the Creative Industries in a widersense than the Cultural Economy. To be more specific, the latter is simply extendedby including advertising as well as software and games industries. As such, we at-tribute, as many other studies do (Bundesministerium für Wirtschaft und Technolo-gie, 2007) nine cultural as well as two creative branches to the Creative Industries.Those are:

� publishing� film industries� private broadcasting industries� music, visual and performing arts� journalists and news agencies� museum shops and art exhibitions� retailing of cultural goods� architecture� design industries� advertising� software- and games industries

After finding and motivating an appropriate definition for the term “Creative Indus-tries”, we now turn to capturing the various economic sectors of the Creative Indus-tries by statistical data.

Thus, we now move on, after giving a lengthy discussion of terms and defini-tions, with presenting a quantitative picture of the Berlin Creative Industries. We relyon ES 200317 in this context. In doing so, we give, for each relevant economic sector,in particular the number of employees, the number of taxable enterprises18 as well astheir revenues. The goal of this procedure is to give a quantitative impression of thecurrent situation. Moreover though, we will use those insights in later reasoning.

Note again that gathering data on the Creative Industries involves difficulties, andit does so by definition. The Creative Industries are an intangible branch of the econo-my, and as such its depiction in statistical data is very limited (Söndermann, 2006).We thus have to image a modern market by using traditional statistical instruments.

56 5 From Theory to Empirics

17 Although the categorization of economic sectors has changed by January 1st 2008 from ES2003 to ES 2008, we rely on the former rather than the latter, since the new categorizationdoes not include all data in sufficient quality. The categorization of the economic sectors isbased on the European Union system of economic sectors (NACE).

18 Taxable enterprises are those with yearly revenues exceeding “ 17.500 and/or at least oneemployee who earns enough to be subject to social insurance contributions. Note that the sta-tistics on value added tax use a principle which attributes the revenues of an enterprise to theregion where its headquarters are located.

5.1 Data Sources

We classify the economic sectors according to an approach employed by StatistischesBundesamt Wiesbaden, which in this context reclines to internationally standardizedrules. For the economic sectors, we resort to a categorization using five digits19, sinceit allows for a most accurate mapping of enterprises into economic sectors.

The data on the number of enterprises and their revenues are from “Amt für Sta-tistik Berlin-Brandenburg”. All data relate to the year 2006, unless otherwise noted.

The data on part- and fulltime employees subject to social security contributionsas well as the number of marginally employed persons are from “Bundesagentur fürArbeit, Statistik-Service Ost” in Berlin and dated with September 30, 2007.

5.2 The Mapping of Economic Sectors

The primary goal of the classification of economic sectors by the federal statisticalbureaus is to map various kinds of economic activities into a widely accepted cate-gorization. Creativity however, is not the item according to which the mapping isdone.

Thus, we have, above all, to select the economic sectors relevant to this study,and to map them, in a second step, into the partial markets of the Creative Industries.We base both the selection and the mapping on the discussion presented in part 1 ofthis study.

Since vast parts of the existing literature on the Creative Industries query thenon-comparability of quantitative analysis, we recline in this context to studies em-

5.2 The Mapping of Economic Sectors 57

Figure 3: Creative Industries, their Branches and Economic SectorsSource: Own illustration

Creative Industries

cultural branches creative branches

publishingfilm indus-

tries

Privatebroadcast-ing Indus-

tries

Music,visual andperforming

arts

journalistsand newsagencies

Museumshops andArt exhibi-

tions

retailing ofculturalgoods architecture

design in-dustries advertising

softwareand gamesindustries

ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES ES

19 In case we present four-digit numbers in context with the economic sectors, we do not dis-pose of the finer aggregation in the five-digit system for the respective data.

ploying timely methods that focus on comparability. By doing so we want to makean, admittedly small, contribution to the efforts towards standardization we observein some parts of the literature.

To begin with, we give a general overview of the Berlin Creative Industries aswell as its Cultural and creative branches. In the following, we discuss and imagethose eleven branches in detail.

58 5 From Theory to Empirics

“In towns like Berlin, where industry and high qualified services are almost entirelygone, in fact only the creative sector can maintain a functioning economy (and, aboveall, guarantee enduring fascination)” (Horx, 2006).

6 The Berlin Creative Industries at a Glance

Berlin’s creative industries involve more than 20,000 taxable enterprises; they em-ploy just fewer than 80,000 people and realize total revenues of about “ 4.7 bn.

The share of enterprises being part of the Creative Industries with respect tothe total number of enterprises in Berlin is14%. The share of people employed in theCreative Industries with respect to the totalnumber of employees in Berlin, however, isonly 6.5%. The fairly low average number ofemployees per firm (lower than four) thusshows that creative enterprises are typicallysmall. The Creative Sector is obviously domi-nated by one-person enterprises (henceforthOPE) and small enterprises20, which under-lines the structure we already discussed in part1 of this study. By contrast, an average Berlincompany has more than eight employees andis thus twice as big as an average creative en-terprise.

However, if one calculates the averagenumber of employees per enterprise withoutconsidering OPEs, the average number of em-ployees per non-OPE – that is the total numberof enterprises less the number of OPEs – in-creases to 16. This difference is exceptionallyremarkable in the branch “journalists andnews agencies”. More than 98% of all enter-

20 According to the recommendation 2003/361/EC of the European Commission of May 6,2003 concerning the definition of micro enterprises as well as small and medium firms, wedefine micro enterprises as enterprises with less than 10 employees and revenues of less than“ 2 m. Small firms are defined as enterprises with less than 50 employees and a turnover lessthan “ 10 m.

enterprises in the Creative Industries

cultural branches 16,401

creative branches 4,341

share in Berlin enterprises 14.2%

revenues in th. 3333in the Creative Indutries

cultural branches 5,121,867

creative branches 2,301,897


employees in the Creative Industries

cultural branches 53,267

creative branches 26,342


Table 2: Creative Industriesat a Glance

Source: Statistisches Bundesamt Wiesbaden and owncalculations

prises in this branch are OPEs, so that concerning the number of employees in non-OPEs this branch moves from the bottom to the lead. It has 0.6 employees per enter-prise, but 25 employees per non-OPE.

Comparing Cultural and Creative branches shows that the creative branches have20% of all enterprises in the Creative Industries, but yield 30% of the total revenuesand employ 30% of all the employees in the Creative Industries.

Table 3 shows the total number of employees and the revenues per year for allnine cultural branches and the two creative branches.

60 6 The Berlin Creative Industries at a Glance

Table 3: Creative Industries at a Glance – Enterprises and Revenues

Source: Amt für Statistik Berlin-Brandenburg and own calculations

enterprises revenues [th. 3333]

total % OPEs % total % OPEs %

cultural branches

publishing 1,732 8.4 864 5.5 1,800,191 24.2 64,017 4.5

film industries 1,170 5.6 666 4.2 751,397 10.1 76,856 5.4

private broadcasting services 93 0.4 – – 200,365 2.7 – –

music, visual and performing arts 5,329 25.7 4,472 28.3 1,130,943 15.2 394,826 27.9

journalists and news agencies 2,187 10.5 2,135 13.5 150,427 2.0 120,381 8.5

museum shops and art exhibi-tions – – – – – – – –

retailing of cultural goods 923 4.4 705 4.5 357,597 4.8 151,382 10.7

architecture 2,855 13.8 2,272 14.4 529,718 7.1 216,086 15.3

design industries 2,112 10.2 1,892 12.0 201,229 2.7 121,210 8.6

creative branches

advertising 2,183 10.5 1,527 9.7 957,274 12.9 172,411 12.2

software and games industries 2,158 10.4 1,266 8.0 1,344,623 18.1 95,554 6.8

total 20,742 100 15,799 100 7,423,764 100 1,412,723 100

Table 4 shows the total number of employees as well as the number of fulltime,part-time, and marginal employees separately for each branch.

6 The Berlin Creative Industries at a Glance 61

Table 4: Creative Industries at a Glance – Employees

Source: Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

employees

total %fulltime and

part-time %marginal

employees %

cultural branches

publishing 15,902 20.0 13,379 19.4 2,523 24.0

film industries 7,565 9.5 6,550 9.5 1,015 9.6

private broadcasting services 4,383 5.5 4,246 6.1 137 1.3

music, visual and performing arts 11,523 14.5 9,158 13.3 2,365 22.4

journalists and news agencies 1,306 1.6 1,261 1.8 45 0.4

museum shops and art exhibitions 3,980 5.0 3,764 5.4 216 2.0

retailing of cultural goods 3,308 4.2 2,587 3.7 721 6.8

architecture 4,740 6.0 4,239 6.1 501 4.8

design industries 560 0.7 434 0.6 126 1.2

creative branches

advertising 9,649 12.1 7,567 11.0 2,082 19.8

software and games industries 16,693 21.0 15,884 23.0 809 7.7

total 79,609 100 69,069 100 10,540 100

7 The Creative Industries in Detail

In the following chapter we will introduce the different branches of the Berlin Cre-ative Industries in detail.

We are going to review the current situation in order to get a clear image and tohave a starting point for our discussion of appropriate economic policy measures andfurtherance in part 4.

7.1 Details of the Cultural Branches

To begin with, we will introduce and discuss the nine cultural branches out of the to-tal of eleven different branches of the Creative Industries.

7.1.1 Publishing

7.1.1.1 Statistical Classification

Publishing includes both what is called publishingin a narrower sense as well as printing. Since themapping of the different sectors into the branchesis not consistent in the literature, we discuss it indetail here.

We attribute both freelance translators as wellas translation offices to the category of publish-ing, whereas we map news agencies and syndi-cates as well as freelance journalists into the sepa-rate category of “journalists and news agencies”.Moreover, retailing is not part of publishing, butof the branch “retailing of cultural goods”. Table 5gives an overview of the publishing branch inBerlin and it mentions the classification of ES2003.

7.1.1.2 Facts and Figures

Table 6 and Table 7 give an overview of the eco-nomic significance of the publishing branch inBerlin.

There are somewhat more than 1,700 enter-prises which realize total revenues of “ 1,8 bn. In

ES 03 economic sectors

22.11.1publishing of books (excludingaddress directories)

22.11.2 publishing of address directories

22.12.1 publishing of daily newspapers

22.12.2publishing of weekly news-papers and Sunday papers

22.13.1publishing of professionaljournals

22.13.2 publishing of general magazines

22.13.3 publishing of other magazines

22.14.1publishing of recorded soundcarriers

22.14.2 publishing of music supplies

22.15.0 other publishing

22.21.0 printing of newspapers

22.22.0 printing of other media

22.23.0 further processing in printing

74.85.1 freelance translators

74.85.2 translation bureaus

Table 5: Publishing – Classification

Source: Statistisches Bundesamt Wiesbaden

total, 13,379 persons have been employed either full- or part-time, and 2,523 morehave had a marginal job in this branch. While we find 533 enterprises with 7,900 em-ployees belonging to the publishing branch defined in a narrower sense, there aresome 450 enterprises employing somewhat more than 5,000 full- and part-time em-ployees in printing. 749 more enterprises are either freelance translators or transla-tion bureaus. The latter have 414 full- and part-time employees and realize some“ 70 mn. of revenues. Thus, they account for 4% of the total revenue of the publish-ing branch.

7.1.1.3 Specifics

With 186 enterprises, publishers of books account for some 10% of all enterprises inthe publishing branch. However, those 186 enterprises employ more than 3,000 full-and part-time employees, which results in a share of 23% of all employees in thisbranch. And their revenues of “ 1 bn. account for almost 60% of the branch’s totalrevenues.

64 7 The Creative Industries in Detail

Table 6: Publishing – Enterprises and Revenues


economic sectors total % OPEs % total % OPEs %

publishing of books(excluding address directories) 186 10.7 62 7.2 1,078,999 59.9 8,675 13.6

publishing of address directories – – – – – 0.0 – –

publishing of daily newspapers 4 0.2 – – 30,198 1.7 – –

publishing of weekly newspapersand Sunday papers – – – – – – –

publishing of professional journals 26 1.5 – – 34,136 1.9 – –

publishing of general magazines 33 1.9 – – 74,161 4.1 – –

publishing of other magazines 22 1.3 11 1.3 11,168 0.6 1,835 2.9

publishing of recorded soundcarriers 16 0.9 – – 15,513 0.9 – –

publishing of music supplies 128 7.4 48 5.6 50,621 2.8 4,244 6.6

other publishing 118 6.8 – – 63,688 3.5 – –

printing of newspapers 8 0.5 – – 2,833 0.2 – –

printing of other media 387 22.3 – – 337,253 18.7 – –

further processing in printing 55 3.2 38 4.4 29,591 1.6 7,910 12.4

freelance translators 653 37.7 629 72.8 49,756 2.8 37,042 57.9

translation bureaus 96 5.5 76 8.8 22,274 1.2 4,311 6.7

total 1,732 100 864 100 1,800,191 100 64,017 100


n.b.: Those data have not been published by the Amt für Statistik Berlin due to the low number of observations and resulting privacy pro-tection restrictions.

Another interesting feature is the structure of freelance translators. More than650 enterprises dependently employ just 45 persons in total. Thus, almost all free-lance translators are OPEs, which is, as noted several times already, typical for manyenterprises of the Creative Industries.

7.1.2 Film Industries


Within this study we attribute the economic sectors for production of films andvideos, film distribution and supply of video programs as well as movies to the filmindustries. We do, however, not consider manufacturing of various products (sound-,image-, and data carriers and entertainment electronics), copying and reproductionof sound-, image-, and data carriers as well as retailing of entertainment electronicdevices.

Since some other studies, among them the bulletin on the Creative Economy ofBerlin (Kulturwirtschaft in Berlin, 2005) attribute the broadcasting branch to the

7.1 Details of the Cultural Branches 65

Table 7: Publishing – Employees


employees

economic sectors total %fulltime and

part-time %marginal

employees %

publishing of books(excluding address directories) 3,233 20.3 3,068 22.9 165 6.5

publishing of address directories 241 1.5 182 1.4 59 2.3

publishing of daily newspapers 2,305 14.5 2,305 17.2 0.0

publishing of weekly newspapersand Sunday papers 202 1.3 157 1.2 45 1.8

publishing of professional journals 903 5.7 851 6.4 52 2.1

publishing of general magazines 450 2.8 427 3.2 23 0.9

publishing of other magazines 192 1.2 156 1.2 36 1.4

publishing of recorded sound carriers 87 0.5 78 0.6 9 0.4

publishing of music supplies 385 2.4 353 2.6 32 1.3

other publishing 1,994 12.5 321 2.4 1,673 66.3

printing of newspapers 268 1.7 250 1.9 18 0.7

printing of other media 4,750 29.9 4,454 33.3 296 11.7

further processing in printing 433 2.7 363 2.7 70 2.8

freelance translators 60 0.4 45 0.3 15 0.6

translation bureaus 399 2.5 369 2.8 30 1.2

total 15,902 100 13,379 100 2,523 100

film industries, we explicitly point to part 1 ofthis study where we discuss and motivate our se-lection of categories which views broadcasting asa separate branch. The same is true for stage-,film-, radio-, and TV-artists who belong to thebranch of “music, visual and performing arts”.Table 8 gives a detailed outline of the variouseconomic sectors we attribute to the film indus-tries.


Table 8: Film Industries – ClassificationSource: Statistisches Bundesamt Wiesbaden


92.11 production of films and videos

92.11.1 production of films for cinemas

92.11.2 production of films for TV

92.11.3production of industry- andadvertising films

92.11.4 production of other films

92.11.5 film technologies

92.11.6 sound studios

92.12film distribution and supply ofvideo programs

92.12.1 film distribution

92.12.2 supply of video programs

92.12.3 marketing of films

92.13.0 cinemas

Table 9: Film Industries – Enterprises and Revenues



production of films and videos 1,103 94.3 666 100.0 669,165 89.1 76,856 100.0

– – – – – – – –

production of films for TV – – – – – – – –

production of industry- andadvertising films – – – – – – – –

production of other films – – – – – – – –

film technologies – – – – – – – –

sound studios – – – – – – – –

film distribution and supply ofvideo programs 18 1.5 – – 48,270 6.4 – –

film distribution – – – – – – – –

supply of video programs – – – – – – – –

marketing of films – – – – – – – –

cinemas 49 4.2 – – 33,962 4.5 – –

total 1,170 100 666 100 751,397 100 76,856 100



21 The data on the number of taxable enterprises and revenues are published only for the moreaggregated four-digit system of economic sectors due to data privacy protection reasons. Thedata on employees however, are available in the five-digit system.

Table 10: Film Industries – Employees


employees


part-time %marginal

employees %

production of films and videos

production of films for cinemas 947 12.5 827 12.6 120 11.8

production of films for TV 2,890 38.2 2,636 40.2 254 25.0

production of industry- and adver-tising films 270 3.6 252 3.8 18 1.8

production of other films 888 11.7 826 12.6 62 6.1

film technologies 282 3.7 250 3.8 32 3.2

sound studios 170 2.2 142 2.2 28 2.8

film distribution and supply of videoprograms

film distribution 187 2.5 159 2.4 28 2.8

supply of video programs 459 6.1 335 5.1 124 12.2

marketing of films 32 0.4 32 0.5 – –

cinemas 1,440 19.0 1,091 16.7 349 34.4

total 7,565 100 6,550 100 1,015 100


We can see from Table 921 and Table 10 that with respect to the revenues and thenumber of taxable enterprises, the sector representing the production of films andvideos alone accounts for 90% of the film industries as a whole. This sector employssome 75% of all full- and part-time employees working in the film industries. Whilecinemas account for only about 4% of the total number of enterprises in the film in-dustries, they employ more than 16% of the full- and part-time workers in thisbranch. If one considers the 349 marginal jobs too, about 20% of all film industriesemployees work there.

7.1.2.3 Film Industries in the Context of the Creative Industries

Relating the film industries to the Creative Industries as a whole shows that only5.7% of all enterprises belong to the film industries. They account however, forabout 10% of both the number of employees as well as revenues. Note again that theliterature uses various different approaches towards categorizing and classifying the

film industries. Thus, a comparison of those figures involves some caveats andshould be handled with care.22

7.1.2.4 Outlook

The Berlin film industries have experienced a positive development during the re-cent years, such that revenues are expected to grow by 24% from 2005 to 2008 (In-vestitionsbank Berlin, 2008). This makes the film industries one of the most success-ful and fastest growing branches within the Berlin Creative Industries. New supportprograms like the “Deutsche Filmförderfonds” (DFFF) by the German governmentaim at sustainably spurring this development and guaranteeing competitiveness ofthe film industries in an international context.


“Berlinale” is one of the greatest Film Festivals of the world and has as such becomethe epitome of the German film industries. 2008 saw the 58th edition of this event,featuring more than 380 international films from about 60 different countries. Apartfrom the presentation of the movies, the festival has become a distinguished tradeshow within the international film industries (Investitionsbank Berlin, 2008). Nextto the direct economic impulses in February, the month featuring “Berlinale”, thisevent affects the Berlin film industries as a whole and thus the Creative Industries aswell.

Focus box 2: Berlinale

22 For example, an investigation by Investitionsbank Berlin (Investitionsbank Berlin, 2008)maps the TV sector into the film industries. By doing so, this study finds about 2,000 taxableenterprises with 12,600 employees subject to social security contributions. If one includesfreelancers, the selfemployed and marginal employees, one finds about 36,000 employees inthis branch.

7.1.3 Private Broadcasting Industries


As noted earlier already we treat the private broad-casting industries as a separate branch of the Cre-ative Industries and do not attribute it to the film in-dustries. Table 11 shows that the private broadcast-ing industries contain the Broadcast Stations aswell as the Production of Radio- and TV-programs.Freelance stage-, film-, radio- and TV-artists aremapped into the branch “music, visual and per-forming arts” and are thus not considered here.

Table 11: Private Broadcasting In-dustries – Classification



92.20.1 broadcasting stations

92.20.2 production of radio- and TVprograms


Berlin has 16 broadcasting stations which realize in total about the same revenuethan 77 enterprises operating in the production of radio- and TV-programs. Althoughthe former have more than 3,000 employees, which is about twice as much as the lat-ter. The private broadcasting industries have 137 marginal employees who accountfor only 3% of the total number of employees in this branch.

7.1.3.3 Specifics

The business organization of the private broadcasting industries is somewhat strik-ing. While the Creative Industries as a whole have on average a small structure offour employees per enterprise, the private broadcasting industries have a medium tolarge structure. Table 12 and Table 13 show that the 93 enterprises of this branchhave on average more than 45 full- and part-time employees, and the average is evenhigher when viewing the broadcasting hosts separately. Those have more than 187full- and part-time employees on average.

As such, the enterprises of the private broadcasting industries are of above aver-age size in comparison to the Creative Sector as a whole. This can also be document-ed by regarding revenues. An enterprise of the private broadcasting industries real-izes about “ 2,15 mn. on average and is thus six times as big as an average CreativeIndustries enterprise. In this way, the private broadcasting industries are – with re-spect to both the number of full- and part-time employees as well as revenues – anexception within the predominantly small-scale Creative Industries.



Table 12: Private Broadcasting Industries – Enterprises and Revenues



broadcasting stations 16 17.2 – – 101,752 50.8 – –

77 82.8 – – 98,613 49.2 – –

total 93 100 – – 200,365 100 – –

Table 13: Private Broadcasting Industries – Employees

employees


part-time %marginal

employees %

broadcasting stations 3,047 69.5 3,003 70.7 44 32.1

production of radio- and TV programs 1,336 30.5 1,243 29.3 93 67.9

total 4,383 100 4,246 100 137 100


7.1.4 Music, Visual- and Performing Arts


The cultural branch “music, visual- and performing arts” is generally defined in avery wide sense. Many economic sectors to be found in it although, could be definedas arts in a much narrower sense. The variety within this branch ranges from free-lance artists of various types, theater- and concert managers, photography and sculp-ture to manufacturing of musical instruments.


Cubico Media TV GmbH operates the niche channel XXHome, which representsboth a TV-channel as well as a platform for TV and the web. XXHome is the firstservice-channel to deal with housing, gardening and do-it-yourself matters. By em-ploying special-topic days, magazines and documentaries the channel shows in aninformative way how one’s home can be made more beautiful (XXHome, 2008). Ad-ditional information accompanying the programs can be drawn from the trailer aswell as be downloaded from the web. Moreover, there are community features inwhich the audience can broadcast own videos and receive mobile offers via SMS orMMS.

Focus box 3: XXHome – a Completely new Service-Channel

Table 14: Music, Visual and Performing Arts



92.31.1 theater ensembles

92.31.2ballet groups, orchestras,chapels, choirs

92.31.3 freelance visual artists

92.31.4 freelance restorers

92.31.5freelance composers andprocessors of music

92.31.6 freelance writers

92.31.7freelance stage-, film-,radio- and TV-artists

92.31.8 freelance artists

92.32.1 theater- and concert managers

92.32.2operas, theaters, concert hallsand similar institutions

92.32.3 varieté and cabaret

92.32.5technical support for culturalservices

92.33.0 showmen and amusement parks


92.34.1 Dance schools

92.34.2supply of other cultural andentertainment services

74.81.1 photography

74.81.2 photo laboratories

55.40.3 discotheques and dance halls

71.40.3 libraries and reader circles

26.70.1 sculpture and masonry

28.52.3 artist blacksmiths

36.22.2manufacturing of adornmentfrom noble metal

36.22.3manufacturing of gold- andsilversmith products

36.30.0 repairing of musical instruments

92.72.2

supply of other services forentertainment, recreation andleisure

Note at this stage that the existing literature maps some sectors of this branch in-to the film industries or the private broadcasting industries. This fact must be takeninto account in case of comparing the figures. This study views the economic sectorslisted in Table 14 as being part of the “music, visual- and performing arts”-branch.


Table 15: Music, Visual and Performing Arts – Enterprises and Revenues

employees


part-time %marginal

employees %

theater ensembles 1,344 11.7 1,201 13.1 143 6.0

ballet groups, orchestras, chapels,choirs 505 4.4 494 5.4 11 0.5

freelance visual artists 162 1.4 110 1.2 52 2.2

freelance restorers 129 1.1 116 1.3 13 0.5

freelance composers and processorsof music 13 0.1 9 0.1 4 0.2

freelance writers 46 0.4 16 0.2 30 1.3

freelance stage-, film-, radio- andTV-artists 315 2.7 217 2.4 98 4.1

freelance artists 8 0.1 4 0.0 4 0.2

theater- and concert managers 1,096 9.5 589 6.4 507 21.4

operas, theaters, concert halls andsimilar institutions 3,885 33.7 3,543 38.7 342 14.5

varieté and cabaret 88 0.8 71 0.8 17 0.7

technical support for cultural services 849 7.4 679 7.4 170 7.2

showmen and amusement parks 170 1.5 95 1.0 75 3.2

dance schools 141 1.2 77 0.8 64 2.7

supply of other cultural andentertainment services 354 3.1 248 2.7 106 4.5

photography 291 2.5 231 2.5 60 2.5

photo laboratories 278 2.4 199 2.2 79 3.3

discotheques and dance halls 400 3.5 139 1.5 261 11.0

libraries and reader circles 34 0.3 27 0.3 7 0.3

sculpture and masonry 154 1.3 128 1.4 26 1.1

artist blacksmiths 111 1.0 106 1.2 5 0.2

manufacturing of adornment fromnoble metal 112 1.0 88 1.0 24 1.0

manufacturing of gold- and silversmithproducts 12 0.1 5 0.1 7 0.3

manufacturing of musical instruments 138 1.2 115 1.3 23 1.0

supply of other services forentertainment, recreation and leisure 888 7.7 651 7.1 237 10.0

total 11,523 100 9,158 100 2,365 100



Table 16: Music, Visual and Performing Arts – Employees



theater ensembles 16 0.3 4 0.1 16,047 1.4 584 0.1

ballet groups, orchestras, chapels,choirs 60 1.1 7 0.2 38,744 3.4 2,921 0.7

freelance visual artists 629 11.8 595 13.3 56,129 5.0 50,834 12.9

freelance restorers 137 2.6 121 2.7 12,955 1.1 7,577 1.9

freelance composers andprocessors of music 230 4.3 198 4.4 31,284 2.8 17,766 4.5

freelance writers 719 13.5 709 15.9 50,184 4.4 49,091 12.4

freelance stage-, film-, radio- andTV-artists 1,699 31.9 1,649 36.9 140,366 12.4 133,152 33.7

freelance artists 89 1.7 75 1.7 5,246 0.5 4,551 1.2

theater- and concert managers 133 2.5 51 1.1 178,162 15.8 8,084 2.0

operas, theaters, concert halls andsimilar institutions 20 0.4 5 0.1 53,909 4.8 295 0.1

varieté and cabaret 12 0.2 3 0.1 2,820 0.2 160 0.0

technical support for culturalservices 436 8.2 397 8.9 66,835 5.9 29,718 7.5

showmen and amusement parks 57 1.1 48 1.1 12,643 1.1 9,715 2.5

dance schools 82 1.5 57 1.3 10,191 0.9 5,959 1.5

supply of other cultural andentertainment services 87 1.6 56 1.3 41,852 3.7 4,126 1.0

Photography 401 7.5 357 8.0 46,768 4.1 32,383 8.2

photo laboratories 38 0.7 22 0.5 21,651 1.9 2,600 0.7

discotheques and dance halls 51 1.0 37 0.8 18,746 1.7 5,845 1.5

libraries and reader circles 4 0.1 – – 1,766 0.2 – –

sculpture and masonry 62 1.2 38 0.8 14,420 1.3 6,206 1.6

artist blacksmiths 20 0.4 12 0.3 26,078 2.3 958 0.2

manufacturing of adornment fromnoble metal 35 0.7 – – 10,624 0.9 – –

manufacturing of gold- andsilversmith products 84 1.6 – – 7,545 0.7 – –

manufacturing of musicalinstruments 43 0.8 31 0.7 65,189 5.8 22,301 5.6

supply of other services for enter-tainment, recreation and leisure 185 3.5 – – 200,789 17.8 – –

total 5,329 100 4,472 100 1,130,943 100 394,826 100




5,329 enterprises operating in music, visual- and performing arts make more than25% of the Creative Industries enterprises and thus the relatively largest share ofit. Slightly fewer than 1,700 – cf. Table 15 – or one third of those enterprises belongto the Economic Sector of “stage-, film-, radio- and TV artists”. Freelance writersand freelance visual artists together account for some 10% of the total number of en-terprises belonging to this branch.

Operas and theaters, concert halls and similar institutions alone employ morethan 3,800 people and are thus responsible for a third of all employees belonging tothis branch. With respect to the number of enterprises although, those 20 enterprisesaccount for only 0.4%. Theater ensembles are in a similar situation. These 16 enter-prises account for 11.7% of all employees, although only for 0.3% of all enterprises.Together, those two sectors thus have 36 enterprises and employ slightly viewer thanhalf of all the employees belonging to the branch of music, visual and performingarts.

7.1.4.3 Specifics

It is truly remarkable that this branch employs that many people. We observe 9,158full- and part-time employees as well as additional 2,365 marginal employees. Thus,the share of marginal employees within the branch is 20%.

4,472 out of 5,329 enterprises are OPEs; they thus account for about 84% of theenterprises belonging to this branch. When regarding this ratio together with thenumber of full- and part-time employees, we see that the total number of 9,158 em-ployees is working for the remaining 16% of enterprises. Within this group, operas,theaters, concert halls as well as similar institutions are the dominant sources of la-bor demand. The few enterprises of those two economic sectors (27 Non-OPEs) ac-count for 5,229 employees. This results in an average number of 194 employees perenterprise. With yearly revenues of “ 0.4 bn. the OPEs account for about 35% ofthe total turnover of “ 1.13 bn. realized in the branch.

November 2008 saw the Third European Month of Photography. 120 galleries, mu-seums and cultural institutions took part in this event and provided a dense programof exhibitions, vernissages, events, symposia and workshops. The European Monthof Photography is celebrated in Berlin as well as Paris, Vienna, Bratislava, Luxem-bourg, Moscow and Rome. (European Month of Photography, 2008).

Focus box 4: Month of Photography

7.1.5 Journalists and News Agencies


We treat, as noted earlier already, the cultural branch “journalists and news agen-cies” as a separate part of the Creative Industries. Other bulletins however, attributeit to the books-, and press market. (cf., for example, Kulturwirtschaft in Berlin,2005). Table 17 shows the economic sectors belonging to this branch. There are twoof them.


Table 19: Journalists and News Agencies – Employees


Table 18: Journalists and News Agencies – Enterprises and Revenues


Table 17: Journalists and News Agencies –ClassificationSource: Statistisches Bundesamt Wiesbaden


92.40.1 syndicates and news agencies

92.40.2freelance journalists and pressphotographers



syndicates and news agencies 36 1.6 20 0.9 22,292 14.8 2,266 1.9

freelance journalists and pressphotographers 2,151 98.4 2,115 99.1 128,135 85.2 118,115 98.1

total 2,187 100 2,135 100 150,427 100 120,381 100

employees


part-time %marginal

employees %

syndicates and news agencies 1.109 84,9 1.064 84,4 45 100,0

freelance journalists and pressphotographers 197 15,1 197 15,6 – –

total 1.306 100 1.261 100 45 100


As can be seen from Table 18 in connection with Table 19 , the two economic sectorsof the branch “journalists and news agencies” differ largely with respect to theirstructure. While there are 36 taxable syndicates or news agencies which employmore than 1,100 persons, we have 2,151 taxable freelance journalists and press pho-

tographers who dependently employ 197 persons. To put it differently, more than85% of the people employed in the branch work for just 1,6% of its enterprises. Withrespect to revenues although, note that 85% of the branches’ total revenues arerealized by the freelance journalists and press photographers, while only 15% can beattributed to the syndicates and news agencies. Moreover, the large number of free-lance journalists and press photographers is documented by the 10% share of the to-tal number of taxable enterprises this branch accounts for with respect to the BerlinCreative Industries as a whole.

7.1.5.3 Specifics

From the numbers below we conclude that syndicates and news agencies belong to –with 69 employees on average (excluding OPEs) – the medium-scale23 enterprises ofthe Creative Industries. The freelance journalists and press photographers howevermust be attributed to the micro-enterprises and OPEs respectively. Out of 2,151 en-terprises in the Economic Sector of “freelance Journalists and press photographers”,2,115 or 98% are OPEs. There is another ratio to document this structure. While 36syndicates and news agencies realize more than “ 0,6 mn. on average, an averagefreelance journalist or press photographer realizes less than one tenth of this value.

7.1.6 Museum Shops and Art Exhibitions

7.1.7 Statistical Classification

Table 20 lists the different economic sectors be-longing to this branch.

Note again that some of the economic sectorsdiscussed here are in other bulletins attributed todifferent cultural branches. For example, the bul-letin on the Berlin Creative Economy maps theEconomic Sector of “Libraries and archives” in-to the books- and press market, and “museumsand art exhibitions” into a “market for architec-ture and cultural heritage” (Kulturwirtschaft inBerlin, 2005). The timeliest bulletins although,tend to define museum shops and art exhibitionsas a separate cultural branch (cf., for example,Fesel and Söndermann, 2008).


23 According to the recommendation 2003/361/EG of the European commission as of May 6,2003, enterprises with less than 250 employees and yearly revenues of less than “ 50 mn. aredefined as medium-scale enterprises.


Table 20: Museum Shops andArt Exhibitions –Classification


92.51.0

92.52.1

92.52.2

92.53.1

92.53.2

92.53.3

7.1.7 Retailing of Cultural Goods


Within this study we use a fairly narrow definition of retailing as a part of the Cre-ative Industries. Thus, we intended to select thoseeconomic sectors of retailing in which the as-pects of culture and creativity are central or playa significant role at least. As can be seen from


The 3,980 employees of this branch account for a share of 5% of the total number ofpeople employed in the Berlin Creative Industries. The most dominant Economic Sec-tor within the branch is the sector of museums and art exhibitions. It is responsible formore than 50% of total employment within the branch Table 21 depicts the employ-ment structure in more detail.

Unfortunately we have no data on both the number of taxable enterprises as wellas their revenues, since those figures are not published by the statistical bureaus dueto data privacy protection reasons. There are few enterprises; and having the num-bers would enable the user to draw conclusions on specific enterprises.


Table 22: Retailing of Cultural Goods – ClassificationsSource: Statistisches Bundesamt Wiesbaden

Table 21: Museum Shops and Art Exhibitions – Employees


employees

economic sectors Total %fulltime and

part-time %marginal

employees %

libraries and archives 1,249 31.4 1,216 32.3 33 15.3

museums and art exhibitions 2,200 55.3 2,023 53.7 177 81.9

monumental protection – – – – – –

botanical and zoological gardens 507 12.7 501 13.3 6 2.8

natural preserves and zoos – – – – – –

nature- and landscape protection 24 0.6 24 0.6 – –

total 3,980 100 3,764 100 216 100


52.45.3retailing of musical instrumentsand supplies

52.47.2retailing of books, magazinesand journals

52.48.2retailing of objects of art, coins,souvenirs etc.

52.50.1retailing of antiques and antiquecarpets

52.50.2 antiquarian bookshops

Table 22, we include retailing of music, books, magazines and journals, objects ofart as well as antiques. Moreover, we view antiquarian booksellers as being part ofthis branch.24


As can be seen from Table 23 and Table 24 in connection with Table 3 and Table 4,the share of both taxable enterprises as well as employees with respect to the Cre-ative Industries as a whole is in each case less than 5%.

Concerning the number of taxable enterprises and revenues, retailing of objectsof art is the most dominant sector within the branch. In both categories – numberof enterprises and revenues – retailing of objects of art accounts for some-what less than 50% of the branch as a whole. Retailing of books and professionaljournals however has the largest share of employees – two thirds. The share oftaxable enterprises of this sector with respect to the branch as a whole is just 25%although.


Table 23: Retailing of Cultural Goods – Enterprises and Revenues


24 In retailing, the classification of Creative Industries seems exceptionally difficult. Proratingthe different branches is a feasible approach (i.e. some parts of retailing with textiles could byall means be coined as being creative and thus attributed to the Creative Industries). However,data to document the relevant shares are scare and one would have to rely on assumptions andestimations. Within this study, we completely abstain from such estimations, and our resultsconcerning the number of enterprises and employees as well as revenues are thus somewhatconservative.



retailing of musical instruments andsupplies 68 7.4 55 7.8 18,833 5.3 12,259 8.1

retailing of books, magazines andjournals 243 26.3 158 22.4 137,203 38.4 44,922 29.7

retailing of objects of art, coins,souvenirs etc. 420 45.5 329 46.7 173,454 48.5 76,485 50.5

retailing of antiques and antiquecarpets 135 14.6 115 16.3 18,374 5.1 12,252 8.1

antiquarian bookshops 57 6.2 48 6.8 9,733 2.7 5,464 3.6

total 923 100 705 100 357,597 100 151,382 100

7.1.8 Architecture


Table 25 lists the economic sectors we consideras being part of the architectural branch.


Table 25: Architecture – ClassificationSource: Statistisches Bundesamt Wiesbaden


Table 24: Retailing of Cultural Goods – Employees

employees


part-time %marginal

employees %

retailing of musical instruments andsupplies 144 4.4 102 3.9 42 5.8

retailing of books, magazines andjournals 1,940 58.6 1,679 64.9 261 36.2

retailing of objects of art, coins,souvenirs etc. 999 30.2 664 25.7 335 46.5

retailing of antiques and antiquecarpets 158 4.8 94 3.6 64 8.9

antiquarian bookshops 67 2.0 48 1.9 19 2.6

total 3,308 100 2,587 100 721 100


74.20.1superstructure- and interiorarchitects

74.20.2urban-, regional-, and land useplanners

74.20.3 gardening and landscaping


Table 26 and Table 27 give a detailed overview on the facts and figures relevant forthis branch. A share of 13% of all Berlin creative enterprises belongs to it. Total rev-enues are somewhat more than “ 0.5 bn. or more than 7% of the total revenue real-ized by the Berlin Creative Industries.

Within the branch, urban-, regional-, and land use planners have an exceptionalposition. Although there are only 148 of such taxable enterprises, which amount to ashare of 5% of all architecture offices, they employ more than a third of the peopleworking in the branch. 56% of the enterprises in this Economic Sector are OPEs.The remaining 65 non-OPEs have on average 22 employees. More than 85% of thetaxable architecture offices are in the sector of superstructure and interior architec-ture, although (2,480 enterprises). More than 80% of those are OPEs, and the re-maining non-OPEs dependently employ 6.4 people on average.

The 227 garden- and land use planners realize about 6% of the branch’s total rev-enues and are responsible for some 6% of total employment. With respect to thosefigures, they lie somewhat behind the branches we mentioned before.

2,272 out of the branch’s 2,855 enterprises are OPEs, and, with a share of some-what less than 80% a dominant part. They realize yearly revenues of “ 216 mn.,which is about 40% of the total revenues realized in the branch.



Table 26: Architecture – Enterprises and Revenues



2,480 86.9 2,012 88.6 453,681 85.6 193,620 89.6

148 5.2 83 3.7 44,815 8.5 7,623 3.5

227 8.0 177 7.8 31,222 5.9 14,843 6.9

total 2,855 100 2,272 100 529,718 100 216,086 100


Table 27: Architecture – Employees

employees


part-time %marginal

employees %

superstructure- and interior architects 3,008 63.5 2,632 62.1 376 75.0

1,459 30.8 1,375 32.4 84 16.8

gardening and landscaping 273 5.8 232 5.5 41 8.2

total 4,740 100 4,239 100 501 100

Aedes was opened in 1980 and thus the first gallery for architecture in Europe. Sincethen, Aedes has become one of the internationally most successful institutions forcommunication of culture within architecture, urban planning and related content.The spectrum ranges from exhibition series, symposia and lecture series to publica-tions and has made Aedes a name for itself in both the national as well as interna-tional community. The purpose of Aedes is in putting the culture of construction andarchitecture into the center of public interest and to introduce architectural visions,sustainable urban concepts as well as urban and landscape planning. In more than350 exhibitions and the accompanying catalogues many noteworthy architects andtoday’s Pritzker-laureates have introduced their work long before achieving world-wide reputation (Aedes, 2008).

Focus box 5: Aedes, the First Architectural Gallery in Europe

7.1.9 Design Industries


We see the Economic sectors listed in Table 28 asbeing part of the Creative Industries.


Table 28: Design IndustriesSource: Statistisches Bundesamt Wiesbaden


74.20.1superstructure- and interiorarchitects

74.20.2urban-, regional-, and land useplanners



Table 29 and Table 30 show that there are only 434 full- or part-time employees and126 marginal employees in the two sectors belonging to the design industries.

Thus, less than 1% of all people employed in the Berlin Creative Industries areworking in the design industries. On the other hand although, the branch is charac-teristic for the Creative Industries since it has a large number of OPEs. There are1,892 of them; they thus account for some 90% of the total number of enterprises inthe branch. Thus, the dominant part of enterprises has no dependent employees.


Table 29: Design Industries – Enterprises and Revenues

enterprises revenues [th 3333]


industrial design 147 7.0 120 6.3 19,188 9.5 10,005 8.3

studios for textile-, adornment-,furniture- and other design 1,965 93.0 1,772 93.7 182,041 90.5 111,205 91.7

total 2,112 100 1,892 100 201,229 100 121,210 100


Table 30: Design Industries – Employees

employees

economic sectors Total %fulltime and

part-time %marginal

employees %

industrial Design 98 17.5 74 17.1 24 19.0

studios for textile-, adornment-,furniture- and other design 462 82.5 360 82.9 102 81.0

total 560 100 434 100 126 100

However, more than 2,100 enterprises of the branch account for more than 10%of all creative enterprises in Berlin. Their relative revenue is lower though –“ 0.2 bn. or about 2.7%.

22.5% of all the branch’s employees are not subject to social security contribu-tions. Thus, this branch has, of all Cultural and creative branches in Berlin, the high-est share of marginal employment.

Non-OPEs employ 2.5 persons on average, such that the branch is, apart fromOPEs, dominated by micro-enterprises.

7.2 Details of the Creative Branches

As noted earlier already, 20% of all enterprises in the Berlin Creative Industries arebelonging to either one of the two creative branches. In relative terms however, thosetwo creative branches contribute more to both total employment and total revenuesof the Creative Industries. As such, both creative branches together account for athird of the total revenues as well as a third of total employment of the Berlin Cre-ative Industries.

Another distinctive feature is the structure of the enterprises. While enterprisesof the cultural branches employ 3,2 persons on average, the enterprises of the cre-ative branches have on average 6,2 employees. Thus, the average number of employ-ees is larger in the creative branches than in the cultural branches, however, it is low-er than the average number of employees in the German Economy as a whole. Here,we observe an average firm size of eight employees.

7.2.1 Advertising


We define the advertising branch as consisting ofthe economic sectors of advertising design, thedistribution and procurement of advertising me-dia and PR-advisory.

7.2 Details of the Creative Branches 81

Table 31: Advertising –Classification



74.40.1 advertising design

74.40.2distribution and procurement ofadvertising media

74.14.2 PR-Advisory


Somewhat more than 2,000 taxable enterprises realize total revenues of about“ 1 bn., and thus account for a share of some 12.9% of the total revenues realized bythe Berlin Creative Industries as a whole. Advertising design is by all means themost prominent sector, it outperforms the distribution and procurement of advertis-ing media and PR-advisory with respect to the number of enterprises, revenues aswell as the number of employees.


Table 32: Advertising – Enterprises and Revenues


Another striking feature of the branch is the high share of marginal employees.We observe 7,567 full- and part-time employees and 2,082 more marginal employ-ees, which results in a marginal employees‘ share of 21.6% of all people being em-ployed in advertising. For direct comparison, the relevant share in the Berlin Cre-ative Industries as a whole is 13,2%. Table 32 and Table 33 show the details.

7.2.2 Software- and Games Industries


The software and games industries constitute thesecond creative branch, next to advertising. Ascan be seen from Table 34, the Software andGames industries contain the economic sectorsof publishing Software, Software consultancy,Development and programming of web-presen-tations, Other software development as well asthe economic sector of “online provision of data-bases, books etc.”.



advertising Design 1,640 75.1 1,126 73.7 708,703 74.0 125,277 72.7

distribution and procurementof advertising media 378 17.3 280 18.3 208,539 21.8 37,557 21.8

PR-Advisory 165 7.6 121 7.9 40,032 4.2 9,577 5.6

total 2,183 100 1,527 100 957,274 100 172,411 100

Table 33: Advertising – Employees


employees


part-time %marginal

employees %

advertising design 6,456 66.9 5,145 68.0 1,311 63.0

distribution and procurementof advertising media 2,923 30.3 2,190 28.9 733 35.2

PR-Advisory 270 2.8 232 3.1 38 1.8

total 9,649 100 7,567 100 2,082 100

Table 34: Software andGames Industries



72.21.0 publishing of software

72.22.1 software consultancy

72.22.2development and programmingof web-presentations

72.22.3 other software development

72.40.0online-provision of databases,books etc.


In the software and games industries we observe – cf. Table 35 and Table 36 – with2,158 only slightly fewer enterprises than in the advertising industries. However,those 2,158 enterprises realize yearly revenues of “ 1.34 bn. – some 40% more thanthe advertising industries. With respect to the number of employees the situation issimilar. While the advertising industries employ, as noted earlier already, 7,567 full-and part-time workers, the software and games industries have more than twice theamount – 15,884. If one takes into account the marginal employees, the ratio some-what changes in favor of the advertising industries. Nonetheless, the number of em-ployees in the software and games industries is considerably higher than in the ad-vertising industries.

Comparing the software and games industries with the Berlin Creative Industriesas a whole shows that the software and games industries are with 15,884 full- andpart-time employees as well as a share of 23% of the total number of employees in

7.2 Details of the Creative Branches 83

Table 35: Software and Games Industries – Enterprises and Revenues




publishing of software 9 0.4 3 0.2 27,327 2.0 148 0.2

software consultancy 431 20.0 312 24.6 106,495 7.9 28,059 29.4

development and programming ofweb-presentations 356 16.5 214 16.9 150,583 11.2 12,599 13.2

other software development 1,309 60.7 718 56.7 855,054 63.6 53,380 55.9

online provision of books, databasesetc. 53 2.5 19 1.5 205,164 15.3 1,368 1.4

total 2,158 100 1,266 100 1,344,623 100 95,554 100

Table 36: Software and Games Industries – Employees


employees


part-time %marginal

employees %

publishing of software

software consultancy

development and programming ofweb-presentations

other software development

total 16,693 100 15,884 100 809 100

the Creative Industries as a whole the largest and most dominant branch of the BerlinCreative Industries. With respect to revenues, the software and games industries arewith “ 1,34 bn. or a share 18,2% the runner-up behind the cultural branch of pub-lishing. (with revenues of “ 1,8 bn. and 24,4% respectively).

Moreover, the software and games industries are characterized – similar to theadvertising industries – by enterprises of above-average size. We observe a share ofOPEs of somewhat less than 59%. Thus, the share is even lower than in the advertis-ing industries. Those 1,266 OPEs contribute only 7% to the total revenues of thebranch. The remaining 41% of non-OPEs employ some 19 workers on average, andthe economic sector of software consultancy has the largest enterprises, with 31 em-ployees on average.


The ratio of the revenues of the Berlin Creative Industries with respect to the BerlinRegional GDP is about 9%. If one compares this figure to the nation-wide ratio inGermany, which is 5.2%, the importance and economic relevance of the Creative In-


Figure 4: The Berlin Creative Industries – Enterprises, OPEs and Employees

dustries in Berlin becomes visible. Thus, Berlin can by all means be denoted as a“creative city”.

More than 20,000 enterprises, 15,799 of them OPEs, realize yearly revenues ofabout “ 7,4 bn. and employ some 80,000 people.

The structure of micro- and small enterprises which has been observed by manybulletins on the Creative Economy elsewhere and discussed extensively in part 1 ofthis study is characteristic for the Berlin Creative Industries. One-person enterprisesare the dominant type; they account for 76.2 percent of all enterprises in the Culturaland creative branches.

Figure 4 summarizes the key data by employing a portfolio-diagram. However,the branches “museum shops and art exhibitions” as well as “Private broadcastingindustries” cannot be depicted due to missing data. On the x-axis, we draw the num-ber of enterprises excluding OPEs and on the y-axis we put the number of OPEs. Thesize of the bubbles within the diagram represents the relative share of employees(full- and part-time as well as marginal jobs) of the respective branch with respect tothe number of employees in the Berlin Creative Industries as a whole. Journalistsand news agencies, for example, have a high share of OPEs among the total numberof enterprises. Moreover, since the bubble representing it is relatively small, it is re-sponsible for only a relatively low share of total employment in the Creative Indus-


Figure 5: The Berlin Creative Industries – Enterprises and Revenues [mn. “]

advertising

publishing

software and gamesindustries

private broadcastingindustries

music, visual and performingarts

journalists and newsagencies

filmindustries

design industries

architecture

revenues [mn. 2 ] enterprises

2,000 1,000 0 1,000 2,000 3,000 4,000 5,000

retailingof culture

tries. By contrast, publishing has many non-OPEs and comparably few OPEs, and itemploys a considerably high share of all the creative employees.

If one draws attention to the revenues yielded by the Berlin Creative Industries in2006 (cf. Figure 5), it becomes clear that few branches account for a high share of it.Again, the value for museum shops and art exhibitions cannot be displayed due tomissing data. Among the most dominant branches are publishing, the software andgames industries, advertising as well as music, visual and performing arts. Compar-ing the revenues of each of the Cultural and Creative branches to the number of itsenterprises shows that private broadcasting industries, the film industries as well asadvertising yield the highest average revenues per enterprise.

Knowledge of the structure of the cultural and creative branches is essential forfinding an efficient way to further and treat them with economic policy measures.The figures shown in this part of the study are thus the starting point for the discus-sion and subsequent selection of appropriate means to support the enterprises of theBerlin Creative Industries.


8 Excursus: Differences among Research Results

8.1 Possible Reasons

In 2005 the “Senatsverwaltung Berlin25” issued the bulletin on the “Creative Econo-my in Berlin – Development and Potentials”. This bulletin is the first and as yet onlycomprehensive report to deal with and quantitatively capture the Cultural and Cre-ative Economy in Berlin.

Drawing on this first bulletin, the Senate Office for Economy, Technology andWomen (SenWTF) has issued further studies on the topic. These studies divide theBerlin Creative Economy into eight branches – cf. short-info of SenWTF.

Table 37 shows that those eight branches encompassed 22,629 enterprises whichrealized total revenues of “ 18.5 bn. in 2005. In total, they have been employingmore than 167,000 people.

Table 37: SenWTF – Creative Economy

Source: Statistisches Landesamt Berlin and DIW, Description SenWTF

enterprises revenues [th. 3333] employees

Berlin Creative Economy as of 2005

books- and press market 4,800 4,522,005 27,074

film- and TV industries 1,986 2,535,195 35,997

arts market 5,401 1,799,915 17,481

software / telecommunications 2,732 6,613,604 27,871

music industries 1,515 1,033,338 13,564

advertising / PR 2,103 907,106 17,857

architecture and cultural heritage 2,874 650,698 10,120

performing arts 1,218 518,106 17,623

total 22,629 18,579,967 167,587

Comparing these descriptions and results with ours immediately shows that boththe definitions as well as the results differ.

As discussed extensively earlier, this study uses a categorization of nine culturalas well as two creative branches to classify the Berlin Creative Industries. Thoseeleven branches feature more than 20,000 enterprises which realized revenues ofsomewhat less than “ 7.4 bn. and employed about 80,000 people in 2006. In order to

25 The Berlin Senate Office for Economy, Technology and Women (formerly the Senate Officefor Economy, Labor and Women) is the editor of this bulletin.

facilitate comparison with Table 37, Table 38 summarizes the results of this study sothat they can be captured at one glance.

Since for some parts there are considerable differences, we show and discuss atthis stage some possible reasons for the deviating results.26

For sure, one of the most important reasons is the lack of a binding definition ofthe Creative Industries; a problem we discussed at length in part 1 of this study.While we recline to the international scientific discussion and classify the CreativeIndustries, as noted earlier already, into nine cultural as well as two creative branch-es, the Senate office editors follow in their short-info an – as they call it – “pragmaticapproach”. This results in the fact that the two studies to be compared here partlyconsider different branches and thus yield different results. For example, we do notconsider telecommunications as being part of the Creative Industries, while the Sen-ate Office does so.

In addition to the deviating consideration of branches, there is an additionalsource of differences in the consideration of economic sectors which is different aswell. Retailing is a prominent example for those differences. We consider only fairlysmall parts of the retailing sector as being “creative”. While both studies, for in-stance, consider retailing of objects of art as belonging to the Creative Industries, re-tailing of clothes is denoted “creative” only in the study of the Senate Office, but notin this one.

88 8 Exkursus: Differences among Research Results

Table 38: This Study – Creative Industries

Source: Amt für Statistik Berlin-Brandenburg, Bundesagentur für Arbeit, Statistik-Service Ost and own calculations

enterprises revenues [th. 3333] employees

cultural branches

publishing 1,732 1,800,191 15,902

film industries 1,170 751,397 7,565

private broadcasting industries 93 200,365 4,383

music, visual and performing arts 5,329 1,130,943 11,523

journalists and news agencies 2,187 150,427 1,306

museum shops and art exhibitions – – 3,980

retailing of cultural goods 923 357,597 3,308

architecture 2,855 529,718 4,740

design industries 2,112 201,229 560

creative branches

advertising 2,183 957,274 9,649

software and games industries 2,158 1,344,623 16,693

total 20,742 7,423,764 79,609

26 Appendix B contains a detailed list of the economic sectors considered in this context.

However, there are, in addition to differences in the definition of branches andeconomic sectors, further reasons for deviating results.

First, using different data sources could cause different results. For this study, weexclusively employ data from official statistics like those on Value-added tax or em-ployment. The Senate Office however supplements those official data by primarydata it gathered on its own. Moreover, the Senate Office regionalized the data con-taining revenues of superregional enterprises according to the share of employmentthese enterprises had in the respective regions.

Second, deviations could result from a different treatment of definitions. For ex-ample, within this study we consider only the employees subject to social securitycontributions as well as marginal employees as being employees. The Senate Officehowever, considers the self-employed and freelancers as being employees as well.

Finally, we have to consider the reference period of the respective studies.

8.2 Working off the Books

Research of the recent years shows that working off the books plays an importantrole; even in developed countries. Thus, we give at this stage some estimation on thescope of clandestine employment as well as black-market revenues within the BerlinCreative Industries.

On the basis of disaggregate numbers for Berlin we assume that in addition to thenumber of employees documented in official statistics, there is clandestine employ-ment accounting for 11% of official employment.

If we consider in this context the numbers of employees in the Berlin Creative In-dustries published by the Senate Office for Econ-omy, Technology and Women and take into ac-count that not all of those employees are workingfulltime, we assume 14,748 persons27 – in full-time-equivalents – work off the books in theBerlin Creative Economy.

In order to estimate the revenue generated byclandestine employment within the Creative In-dustries, we use the average revenue per officialemployee within all branches of the Berlin Cre-ative Industries as an approximation and assumethat the average revenue from working off thebooks is lower due to differences in productivity

8.2 Working off the Books 89

27 The total number of employees is multiplied by 0.8 in order to derive the number of fulltimee-quivalents.

Table 39: Working off the Books

Source: SenWTF and own calculations

official revenues[th. 3333] 18,579,967

black revenues[th. 3333] 1,308,030

official employees 167,587

clandestineemployees[fulltime-equivalents] 14,748

and other factors. On the basis of those assumptions, we yield average yearly rev-enues per worker in the Creative Black Economy of about “ 88,70028.

Employing the approach described above results in additional estimated rev-enues of “ 1.3 bn. in the Berlin Creative Economy. Thus, its yearly revenues in-crease from some “ 18.6 bn. to “ 19.9 bn. in total (cf. Table 39).

Table 40 reviews the results of this study as well as those of the bulletin issued bySenWTF. Moreover, it shows revenues and the number of employees on the basis ofthe statistics published by SenWTF and with consideration of clandestine employ-ment.

90 8 Exkursus: Differences among Research Results

Table 40: Overview – Revenues and Employees

Source: own description§ … Since we use fulltime-equivalents of clandestine employees, the given number represents the lower bound of the number of employees.

The differences in the results shown by the tables result strongly from the reasonsdiscussed above.

28 (“ 18.6 bn./167,587 employees)(1–0.2).

Part 3

9 Value Added and Employment

In part 2 of this study we have shown that the Creative Industries are an importantand considerable sector within the Berlin Economy. In order to be able to investigatethe potential of funding, sponsorship and support as part of economic policy, we willnow analyze to which extent investment in the Creative Industries will boost the eco-nomic value added and employment.

In order to exemplify our analysis we will refer to the venture capital Fund “VCFonds Kreativwirtschaft Berlin”29 provided by Investitionsbank Berlin throughoutthe chapter. This fund aims at providing capital for creative projects and is anticipat-ed to be available until 2015. The investors plan to supply the Berlin Creative Indus-tries with capital of “ 3,75 mn. per year. In addition to Investitionsbank Berlin, theEuropean Regional Development Fund (ERDF) will contribute to the venture capitalFund. Moreover, the investors plan to supplement every venture capital holding byadditional private investments of at least 100% of the fund’s money, so that the totalvolume of provided capital is “ 7,5 mn. (Keuper et al., 2008).

Here, we will estimate the economic effects of such an engagement. It is in thiscontext reasonable to assume that the investment throughout the years will result inadditional income that is considerably higher than the capital expenditure. More-over, we expect increasing employment or a reduction of unemployment respective-ly.

We will perform our investigations by employing the Berlin Economic Si-mulation Tool BEST. This tool is essentially a regional macroeconometric modelwhich has been developed by Kollmann et al. (2006) on behalf of Investitions-bank Berlin. It images the Berlin Economy and will be described in the followingsection.

9.1 The Model

The Berlin Economic Simulation Tool BEST is a regional macroeconometric modelwhich images the Berlin Economy by means of a system of multiple equations. Itsproperties make BEST the ideal tool to analyze the effects of the economic activitiesof Investitionsbank Berlin. As such, it is suitable to investigate the consequences ofissuing venture capital within the VC Fund “Kreativwirtschaft Berlin“.

29 In addition to it, Investitionsbank Berlin offers, amongst others, unbureaucratic small-scaleloans up to a sum of “ 10,000 (BerliNews, 2008) as well as micro-credits fed by the KMU-Funds up to a sum of “ 25,000.

Each simulation performed by BEST is essentially a comparison between twoscenarios. The benchmark scenario is the status quo, a situation without any invest-ment capital provided. It is typically called the “business-as-usual scenario”. Thesecond scenario is a situation involving an exogenous change of various macroeco-nomic variables. The results of such changes – which are, from a macroeconomistspoint of view – denoted as “economic shocks” (Kollmann et al., 2006) – are simulat-ed by BEST. The economic effects calculated by BEST always relate to a compari-son with the business-as-usual scenario.

To be more specific, BEST consists of a system of several multivariate equationsto be econometrically estimated as “seemingly unrelated equations“30. Within thisapproach, the following variables imaging the Berlin Economy are exogenous to themodel:

� population� net exports� interest rate� average wage in Germany� public expenditure

while the following variables are determined endogenously within the model

� gross value added� gross investment� consumption� consumer price index� employment� wage level� unemployment rate� capital cost� public revenues

All variables are, if possible, gathered and reported separately for the economicsectors of Agriculture, Production, Construction and Services (Kollmann et al.,2006).

The simulations are based on the variables described above for the years 1991 to2004. For later points in time, BEST allows for constant extrapolation as well as ex-trapolation according to a linear trend. For our simulations, we extrapolate the dataaccording to the linear trend.

The interactions between the different variable are depicted in Figure 6.

94 9 Value Added and Employment

30 The seemingly-unrelated-regressions-model dates back to A. Zeller and is thus called theZeller-Estimator. It takes into account possible correlations among the error terms in the pop-ulation which, increases the efficiency of the estimator. (Stocker, 2008).

9.1 The Model 95

Fig

ure

6:B

erli

n E

cono

mic

Sim

ulat

ion

Tool

BE

ST

– F

ow C

hart

Sou

rce:

Kol

lman

n et

al.,

200

6

net

exp

ort

s

key

inte

rest

rat

e

net

tran

sfer

s

pu

blic

ou

tlay

sp

ub

lic d

ebts

wag

es G

erm

any

po

pu

lati

on

mig

rati

on

wea

lth

GD

Pca

pac

ity-

uti

lizat

ion

/o

utp

ut

gap

inve

stm

ent

infl

atio

n/

pri

ces

dis

po

sab

lein

com

e

pu

blic

rev

enu

esb

ud

get

def

icit

wag

esu

nem

plo

ymen

tra

te

emp

loym

ent

pro

du

ctio

n(g

ross

val

ue a

dded

)

con

sum

pti

on

Use

r co

sts

of

cap

ital

9.2 Simulation Approach

The simulation model BEST allows for the following differentiations with respect tothe analysis of the effects of investment into various branches on the economic valueadded and employment. First, it allows determining the distribution of the total in-vestment sum among the economic sectors of

� agriculture� production� construction and� services

Secondly, it allows for determining the respective weights of the following technolo-gies

� administration/event management� education� employment� low- and medium-technology� research/high-technology

Table 41 shows the weights for economic sectors and technologies we used in oursimulations. Since for the analysis of effects on the value added and employment inthe Creative Industries, not all economic sectors and technologies are relevant, weabstain from displaying two out of five technologies as well as two out of four eco-nomic sectors. The weights for the technologies of education and employment aswell as for the economic sectors of agriculture and construction are set to zero andnot included in the table. We assume that an investment into the Creative Industrieshas no or just negligible effects on those technologies and economic sectors and wethus do not consider them in the following analysis.

Table 41 shows that, for example, the cultural branches realize a share of 69%of the total revenues of the Creative Industries (cf. Table 3). We assume that in the


Source: Own calculations and assumptions§ … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries.

69.0 20 60 20 50 50

31.0 20 40 40 30 70

Table 41: Weights of Technologies and Economic Sectors

cultural branches the distribution of weights among technologies is 20% for admin-istration/event management, 60% for low- and medium technologies and 20% forresearch/high-technologies. Moreover, we assume that 50% of the output of the cre-ative branches emerges from the production- and 50% from the service-sector.

The weights for the creative branches are to be interpreted analogously. Thosetwo branches realized 31% of the total revenues observed in the Berlin Creative In-dustries. In contrast to the cultural branches, we assume that 30% of the output of thecreative branches emerges from the production- and 70% from the service sector.The weights for technologies were set to 20% for administration/event management,and 40% for low – and medium technologies as well as research and high-technolo-gies respectively.

9.3 Scenarios

As noted already, Investitionsbank Berlin plans to provide “ 3.75 mn. per year until2015 by its venture capital Fund “VC Fonds Kreativwirtschaft Berlin”. The goal is tosupplement the investment capital by additional private investment of at least thesame amount. Thus, we can formulate the following scenarios.

In scenario 1 we estimate the effects triggered by the investment of Investitions-bank Berlin, without regarding possible private supplements. We investigate the ef-fects on the economic value added and employment. Thus the basis for the simula-tions is capital expenditure of “ 3.75 mn.

Within scenario 2 we account for private supplements. Since it is the goal thatthey amount for at least 100% of the capital expenditure of Investitionsbank Berlinand ERDF, we base our simulations on total capital expenditure of “ 7.5 mn., whichis twice the investment amount assumed in scenario 1.

For both scenarios we assume that the investment amounts would, unless invest-ed into the Creative Industries, not be invested into alternative projects in Berlin.Moreover, we assume that the investment amounts of “ 3.75 mn. and “ 7.5 mn. re-spectively are distributed among the cultural and creative branches according to therelative revenues of those branches. Thus, by using this approach we implicitly as-

9.3 Scenarios 97

Source: Own description

investment amounts [mn. 1111]

branches 2008 2009 2010 2011 2012

cultural branches 2.59 2.59 2.59 2.59 2.59

creative branches 1.16 1.16 1.16 1.16 1.16

total 3.75 3.75 3.75 3.75 3.75

Table 42: Scenario 1 – Assumed Investment Amounts

sume that there is a higher demand for venture capital in branches with higher thanin those with lower revenues. Table 42 and Table 43 show for both scenarios the as-sumed investment amounts separately for the cultural and creative branches. BESTis capable of simulating the effects of investment for at most five upcoming years,such that we show the assumed amounts for the years 2008 until 2012.

9.4 Simulation Results

The calculated effects on the economic value added as well as employment can becategorized into primary and secondary effects.

The primary effects are connected directly to the investment amount, which is inthis context “ 3.75 mn. and “ 7.5 mn. respectively.

The secondary effect however, occurs because the additional income generatedby the primary effects partly flows back into investment and consumption; creating acycle. Thus, within this second step, demand increases again and generates more in-come and more employment. This is the so-called multiplier effect.

From Table 44 to Table 47 we learn the respective sums of primary and second-ary effects. As noted earlier already, BEST can perform simulations for the upcom-ing five years, such that we can show the values for economic value added and addi-tional employment for the years 2008 until 2012 in the tables. Note again that the av-erage values shown in the tables must be interpreted as the differences in regionalGDP and employment with respect to the business-as-usual scenario. They cannot becumulated.

9.4.1 Regional GDP

Within scenario 1 we consider only the investment amount provided by Investitions-bank Berlin and ERDF. The provided capital of 3.75 mn. per year yields an addition-al Berlin Regional GDP of “ 5.0 mn. (cf. Table 44) already in the first year of invest-ment. Since, however, in the following years the secondary effects resulting from in-vestment in the past years come into place, the total effect on the economic value


Source: Own description

investment amounts [mn. 1111]

branches 2008 2009 2010 2011 2012

cultural branches 5.2 5.2 5.2 5.2 5.2

creative branches 2.3 2.3 2.3 2.3 2.3

total 7.5 7.5 7.5 7.5 7.5

Table 43: Scenario 2 – Assumed Investment Amounts

added steadily increases over time. Thus, in the years 2008 to 2012 we expect theBerlin Regional GDP to rise by “ 9.3 mn. per year on average, compared to a situa-tion where no investment takes place (the business-as-usual scenario).

Moreover, Table 44 includes the relative shares of the additional Berlin RegionalGDP which result from investment in either the cultural or the creative branches. Theassumed investment amount of “ 2.59 mn. (cf. Table 42) which feeds the culturalbranches thus increases the Berlin Regional GDP by “ 6.4 mn. per year on average.The remaining capital, to be invested in the creative branches, (“ 1.16 mn. withinscenario 1) generates an additional GDP of “ 2.9 mn. per year.

If the capital provided by Investitionsbank Berlin is doubled by additional privateinvestment so that the Berlin Creative Industries are fed with a total volume of“ 7.5 mn. (scenario 2), we expect the Berlin Regional GDP to rise by “ 10.0 mn. al-ready in the first year of investment, (cf. Table 45). In the following years, the in-crease in regional GDP will soar up to an amount of “ 24.6 mn. in 2012 because ofthe secondary effects coming into place. Within the simulation period, we expect theBerlin Regional GDP to increase by “ 18.7 mn. per year on average.

9.4 Simulation Results 99

Source: BEST

additional regional GDP [mn. 1111] in…

branches 2008 2009 2010 2011 2012average

2008 – 2012

cultural branches 3.4 5.5 6.7 8.0 8.5 6.4

creative branches 1.6 2.5 3.0 3.6 3.8 2.9

total 5.0 8.0 9.7 11.6 12.3 9.3

Table 44: Scenario 1 – Additional Regional GDP in the years 2008 until 2012

Source: BEST



2008 – 2012



total 10.0 16.1 19.3 23.2 24.6 18.7

Table 45: Scenario 2 – Additional Regional GDP in the years 2008 until 2012

The relative shares in Berlin Regional GDP growth resulting from either the cul-tural or the creative branches are consistent with the shares in capital provided to thebranches. For example, the cultural branches receive 69% of the capital provided byInvestitionsbank Berlin and private investors, and the GDP growth resulting from in-


Source: BEST

additional jobs in…


2008 – 2012

cultural branches 19 40 51 46 43 40

creative branches 9 18 23 21 18 18

total 28 58 74 67 61 58

Table 46: Scenario 1 – Additional Jobs in the years 2008 until 2012

Source: BEST



2008 – 2012



total 55 116 148 134 122 116

Table 47: Scenario 2 – Additional Jobs in the years 2008 until 2012

vestment in the cultural branches accounts for 69% of total GDP growth within thescenarios we assumed (cf. Table 43 and Table 45).

9.4.2 Employment

As discussed intensively already, the money provided by Investitionsbank Berlin andprivate investors increases the Berlin Regional GDP within the period of investiga-tion. Going along with this effect on regional GDP is, however, an additional effecton employment. Investment into the Berlin Creative Industries increases employ-ment or decreases unemployment respectively.

In scenario 1 within which we consider only the capital provided by Investitions-bank Berlin and ERDF, we expect that on average 58 fulltime jobs, each lasting forone year, are created through both primary as well as secondary effects of invest-ment. (cf. Table 46). Since however, the secondary effects grow over time and comeinto place later, the effect of investment on employment in the first year of investiga-tion is only half as big as in the following years.

If we consider private investment in addition to the capital investment of Investi-tionsbank Berlin and ERDF, we expect 116 jobs on average, each lasting for oneyear, to be created through investment in the Berlin Creative Industries of “ 7.5 mn.per year in total (cf. Table 47).

Figure 731 shows the estimated distribution of additional employment in the eco-nomic sectors of services, construction and production within the simulation period.In the first two years of investment, we find more than 75% of the total number ofnew jobs in the service sector and 10% each in the construction and production sec-tor. In the following years which see a steadily growing importance of the secondaryeffects of investment, the impact shifts from the service sector towards constructionand production. However, even in those years about half of additional employmentmust be attributed to the service sector.

9.5 Targeted Investment

Within the scenarios discussed above we assumed that the total investment amountsof “ 3.75 mn. and “ 7.5 mn. is distributed among the cultural and creative branchesaccording to the relative size of the revenues they realize. The following tables, how-

9.5 Targeted Investment 101

30 The distribution of additional employment over the economic sectors is identical in the Sce-narios 1 and 2. Thus, we do not show an additional diagram for scenario 2. Note, however,that by construction of the simulation model, we find additional employment in agriculturewhen simulating scenario 2. Since the effect is minor and we do not feature this sector at anyother point within this study, we do not consider it in Figure 7. Thus, the percentages do notnecessarily add up to 100.

Figure 7: Share of Additional Jobs for the Different Economic Sectors

ever, show the effects on the Berlin Regional GDP and employment under the as-sumption that the total investment capital goes into either the cultural or, alternative-ly, the creative branches.

9.5.1 Regional GDP

Table 48 shows the additionally generated Berlin Regional GDP and is to be inter-preted in the following way. Within scenario 1, an investment of “ 3.75 mn. in thecultural branches yields an estimated increase of the Berlin Regional GDP for theyear 2008 of “ 5.0 mn. Thus, the effects of investing in the cultural or the creativebranches are the same with respect to the economic value added. In the years 2009 to2012 however, regional GDP-growth increases due to additional investment as wellas multiplier effects. On average, a yearly investment of “ 3.75 mn into the Culturalor the creative branches thus yields an additional Berlin Regional GDP of “ 9.3 mn.per year.


Table 48: Targeted Investment – Scenario 1 – Additional Regional GDP

Source: BEST



2008 – 2012



g

Table 49: Targeted Investment – Scenario 2 – Additional Regional GDP

Source: BEST



2008 – 2012



g

From scenario 2 we learn that the intended additional private investment and atotal investment amount of “ 7.5 mn. per year into either the cultural or the creativebranches result in an additional Berlin Regional GDP of “ 10.1 mn. in the first yearand “ 24.7 mn. in 2012. The latter value is higher due to the secondary effects of in-vestment. On average, we expect the Berlin Regional GDP to increase by “ 18.6 mn.per year.

9.5.2 Employment

Table 50 and Table 51 are to be interpreted like Table 46 and Table 47. Within sce-nario 1 we consider only the money provided by Investitionsbank Berlin and ERDF.The assumed yearly investments result in 58 additional jobs per year on average andeach job lasting for one year if the capital is invested in the cultural branches. If itgoes into the creative branches instead, the estimated increase in employment is 57jobs per year on average; each job lasting for one year.

9.5 Targeted Investment 103

Table 50: Targeted Investment – Scenario 1 – Additional Employment

Source: BEST



2008 – 2012



G

Table 51: Targeted Investment – Scenario 2 – Additional Employment

Source: BEST

additional jobs in...


2008 – 2012



g

Within scenario 2 we expect, already for the first year of investment, 55 and 56additional jobs if the total amount of available capital is invested in the cultural- andcreative branches respectively.

Due to additional investment in the following years as well as the secondaryeffects, we expect total employment within the simulation-period to rise by 115 jobson average per year. Each of those jobs is a fulltime job with duration of one year.

Note that the simulation results depend on the assumptions over the weights oftechnologies and economic sectors. However, some sensitivity analysis which werelegate to appendix C show that changing those weights produces only slightly dif-fering simulation results.

10 Conclusions

Investitionsbank Berlin provides venture capital for the Berlin Creative Industries. Itendows its VC Fund “Kreativwirtschaft Berlin“ with “ 3.75 mn. per year. It is, how-ever, the goal to double this amount by additional private investment, so that in total,the Berlin Creative Industries will be provided with “ 7.5 mn. of investment capital.

The effects of such investment with respect to the Berlin Regional GDP and em-ployment in Berlin are estimated and investigated by the Berlin Economic Simula-tion Tool. This is essentially a macroeconometric simulation model developed byKollmann et al. (2006) on behalf of Investitionsbank Berlin. By employing this mod-el, we are able to simulate two different scenarios.

Within scenario 1 we consider only the capital amount of “ 3.75 mn. per year,provided by Investitionsbank Berlin together with the European Regional Develop-ment Fund (ERDF). Within scenario 2 instead, we consider the intended totalamount of investment capital. We assume “ 7.5 mn. of yearly available capital here,because the goal is to supplement the amount provided by Investitionsbank Berlinand ERDF with additional private investment of at least the same amount. We simu-late the effects of such an engagement on the Berlin Regional GDP as well as em-ployment for the years 2008 until 2012.

The venture capital provided by Investitionsbank Berlin and ERDF of “ 3.75 mn.per year results within the simulation-period in an additional regional GDP of“ 9.3 mn. per year on average and additional employment of 58 fulltime-jobs peryear (cf. Table 52).

If the capital provided by Investitionsbank Berlin and ERDF is supplemented byprivate investment and the total available capital is thus “ 7.5 mn. per year, we ex-pect the Berlin Regional GDP to rise by “ 18.7 mn., and employment to rise by 116fulltime jobs per year on average, as a cause of capital provision to the Berlin Cre-ative Industries.

Table 52: Additional Regional GDP and Additional Employment

Source: BEST

2008 2009 2010 2011 2012average

2008 – 2012

scenario 1

additional regional GDP [mn 1111] 5.0 8.0 9.7 11.6 12.3 9.3

additional jobs 28 58 74 67 61 58

scenario 2

additional regional GDP [mn 1111] 10.0 16.1 19.3 23.2 24.6 18.7

additional jobs 55 116 148 134 122 116

Part 4

11 Instruments to Foster the Creative Industries

After having described and quantitatively captured the Berlin Creative Industriesand after investigating the effects of investment in the Creative Industries on theBerlin Regional GDP as well as employment, we now turn to discussing appropriateways to foster and support the creative enterprises. Having access to and being en-dowed with capital are important determinants of investment decisions made by theenterprises of the Creative Industries. Naturally however, those investment decisionssubsequently determine the growth of the regional GDP as well as employment, andthe decline of unemployment respectively. A firm pattern of finance as well as easilyaccessible capital are essential requirements for making the enterprises of theCreative Industries able to prevent the Creative Class from moving away to otherregions. This in turn will make, according to Florida, both the enterprises as well asthe economic area flourish (Keuper et al., 2008).

A portfolio of products taking into account the special needs of the creative enter-prises is mandatory for making economic policy measures effective in fostering theCreative Industries. Thus, an attractive portfolio of measures must be both verticallyas well as horizontally differentiated. Vertical differentiation is, within this context, toprovide different products for the different economic sectors within the heterogeneousCreative Industries, while horizontal differentiation means adjusting the means of sup-port to the respective position of the creative enterprise within its life cycle. For exam-ple, the enterprises have to be offered appropriate instruments, taking into accountwhether they are in the start-up stage or already in a stage of expansion and growth.

Professional support on the parts of policy makers and investors requires medi-um-run planning at least. Especially in context of the Creative Industries however,where, as we will discuss below, capital is typically needed for short periods of timeonly, suspect is that policy makers predominantly apply short-run thinking only.Moreover, investors tend to aim at short-run success, especially if the investing insti-tutes are run according to market-economy rules where shareholders require contin-uous and short-term rather than sustainable success. For the creative enterpriseshowever, most often the medium- and long run is critical; they need to be able tobank on investors who show some degree of sustainability at least. Within this con-text, one could view the security of capital provision over a prespecified period oftime as an instrument of support itself (Drda-Kühn, 2007).

Since policy makers and investors have supported and financed the traditionaleconomic branches for decades, which with respect to some points differ drasticallyfrom the Creative Industries, investors are now required to acquire knowledge onand concern themselves with those new types of customers coming from the Cre-ative Industries and their specific needs. Only if the investors have acquired knowl-

edge of the special features and parameters of those Industries and the markets theyare working in, they will be able to issue appropriate and effective means of supportand capital provision. At the same time although, the creative entrepreneurs mustface their responsibility and actively concern themselves with potential supportivemeasures and furtherance they could apply for.

11.1 Instruments

There are different basic features according to which the instruments of economicsupport and furtherance could be categorized. On the one hand, it is possible to dis-tinguish between monetary and non-monetary ways of support (cf. Puchta, 2009).We will discuss this criterion of distinction in the following.

An alternative way of categorization is to draw on the distinction between sup-ply-side (direct) and demand-side (indirect) instruments. Direct instruments focuson the furtherance of stakeholders and entrepreneurs (Keuper et al., 2008), whileindirect instruments selectively foster the demand for products and services of theeconomic sector to be supported.

11.1.1 Monetary Instruments

By monetary furtherance we mean the access enterprises have to means of externalfinancing. Within the context of monetary furtherance, the public sector disposes ofa broad variety of instruments and measures it could issue in order to support the cre-ative enterprises. The range of possible measures includes allowances and awards,fully as well as partly refundable loans, financing by means of equity capital in vari-ous ways, hybrid types of furtherance, guaranties, the adoption of liabilities and taxexemptions.

Within this range, we can distinguish between non-refundable allowances on theone and roll-over instruments on the other hand. Roll-over instruments have, by con-struction, the advantage that they involve a continuous back-flow of clearance- and/or interest payments, which can be used for other supportive measures in turn.

The roll-over instruments can be categorized into three different types. Externalfinancing, provision of equity capital as well as some hybrid types (Keuper et al.,2008). Consider, for example, micro-credits, venture capital and mezzanine-capitalin this context.

Roll-over Instruments

Roll-over instruments have in the recent past generally gained in importance and havethus gradually been crowding out the previously dominating non-refundableallowances. Roll-over instruments thus are a meaningful supplement and extension ofthe variety of supportive measures, as long as they are adjusted to the needs of the en-

110 11 Instruments to Foster the Creative Industries

terprises who apply for furtherance. If the range of possible furtherance and sourcesof capital is enlarged by issuing roll-over instruments, and if at the same time the in-struments related to market-economy thinking gain in importance, we can indicate apositive development of the whole issue. Both the group of suppliers as well as thegroup of receivers of capital should be positively affected by such development.

To sum up, the directive could be formulated as “issue as many roll-over instru-ments as possible and as little non-refundable allowances as necessary”.

Note in this context, however, that the movement from non-refundable al-lowances towards roll-over instruments has not been driven exclusively by newinsights within the context of possible means of support and the development ofmodern instruments of financing. In addition, some more constraints are likely tohave been in place. For example, more restrictive rules in the context of public ex-penditure could have considerably tightened the scope of policy makers. Moreover,the rules of supra- and international institutions regarding the furtherance and sup-port within a national or regional context have massively influenced the frameworkand considerably tightened the scope of policy measures. Note finally that the ongo-ing change of paradigms towards instruments related to the market-economy hasconsiderably contributed to favoring instruments which revolve at the market andthus pay off (Puchta, 2009).

All those points have led to considerable changes in the framework within whichmodern furtherance of enterprises takes place today.

11.1 Instruments 111

In addition to the classical instruments, we observe more modern and innovativeones, like the “Local Exchange Trading Systems” (LETS), too (Hackett et al., 2000).LETS are local and non-profit networks in which products and services can be ex-changed without money. Instead, time is the predominant means of payment. Eachparticipant has a fictive account which is visible to everybody else. Hackett et al.conclude that such LETS have the potential to considerably foster growth and pros-perity within the arts and cultural community by building social capital and high-lighting future demand. Even though such alternative approaches can be sporadical-ly observed in practice, there is no evidence that such systems could be capable ofsustainably fostering the Creative Industries as a whole.

Focus box 6: LETS – Local Exchange Trading Systems

11.1.2 Non-monetary Instruments

The primary aim of non-monetary instruments of furtherance is to create an attrac-tive environment in terms of policy measures, law and bureaucracy. According toPuchta und Röder (2008) those non-monetary instruments can be viewed as beingthe political complements to the monetary instruments of furtherance and capitalprovision.

In addition to regulatory policy, the consulting of enterprises to be fostered aswell as the furtherance of cooperation play a crucial role within the context of non-monetary instruments of support. The range of such instruments includes trainingand consultancy for start-up businesses as well as established enterprises, carryingout business-plan competitions, creating and organizing networks, cooperation fora,workshops, tradeshows, lectures and similar events.

Within the context of providing optimal support, non-monetary instrumentsshould not deal exclusively with selected points within the broad range of further-ance. Rather, they should, as noted already, accompany the monetary instrumentsand extend their scope in different ways. Appropriate extensions could be, for in-stance, consultancy for start-ups, support in entering new markets or advice in thecontext of promoting sales.

Policies targeted at supporting new industries will only be successful if they arecapable of reconciling the monetary with the non-monetary aspects of furtherance ata high level. As Drda-Kühn (2008) points it out, the policies have to move away frommonetary allowances for single projects towards a more complex structure whichfeatures consultancy, the transfer of knowledge, network-building and individualqualification as its key issues. In accordance with this motion though, both the orga-nizational expenses as well as the willingness to cooperate with extraneous fieldsand people will have to increase.

11.2 Specifics

In order to find and develop instruments of furtherance which are specifically target-ed at the needs of creative enterprises, we will, in a first step, investigate the prob-lems of creative enterprises and determine in what respect they differ from more tra-ditional enterprises. In the following we thus will highlight some attributes that arecharacteristic to a broad variety of enterprises in the Creative Industries and respon-sible for the difficulties those enterprises face in borrowing capital.

In a second step, we will discuss appropriate means of financing which take intoaccount the special attributes of creative enterprises.

The creative enterprises differ from more traditional enterprises in various di-mensions. First, the composition of the employed production factors is a primarysource of differences. Creative human capital is most probably the dominant inputfor enterprises in the Creative Industries. Secondly, the two types of enterprisesclearly differ with respect to the endowment of and access to both equity and bor-rowed capital.

Thirdly, we observe differences among the creative enterprises. The variouscultural and creative branches differ largely with respect to capital endowment andaccess to capital, which results in different needs and thus in differences in the ap-propriate means of furtherance.


11.2.1 Low Capital Endowment

Many enterprises of the Creative Industries have a weak capital endowment (Puchta,2009). But since vast parts of the Creative Industries exhibit a structure of small andmicro enterprises, this is not surprising. The equity-to-asset ratio of middle-class en-terprises has been continuously declining for decades. The ratio was about 30% inthe 1960ies and only 17% on average in 2000 when being measured with respect tototal assets. Moreover, the smaller an enterprise is, the lower its equity-to-asset ratiotends to be (Bundesverband der Deutschen Industrie e.V., 2002).

The equity-to-asset ratio is, however an important signal for potential debtees,since it essentially influences the rating of the enterprise. The lower the equity-to-asset ratio, the higher is, ceteris paribus, the risk a potential debtee incurs when in-vesting. This fact results in difficulties in capital access for enterprises with a lowequity-to-asset ratio. In the recent past, those difficulties have been corroborated bybanks and credit institutions obeying to stricter rules regarding equity capital re-quirements necessary for issuing credits.

And even if an enterprise is successful in acquiring loans, a weak rating will re-sult in higher risk premier – the enterprise receives the loan, but the interest pay-ments will be higher because of the risk premier, which are taken into account whendetermining the appropriate interest rate.

11.2.2 Lack of Debt Guarantees

In addition to the endowment with equity capital, debt guarantees play a significantrole in determining the conditions for the access to credit capital. The availability ofguarantees is another distinctive feature between creative and more traditional enter-prises. First and foremost, credit institutions require that such guarantees are ratable.For certain types of assets (i.e. real estate, machines, financial assets etc.) there aremarket values which make a rating easily possible. While traditional enterprises typ-ically dispose of such assets, creative enterprises often don’t.

Even if some enterprises of the Creative Industries are able to exhibit some guar-antees, they are seldom clearly ratable since market prices for those most often intan-gible guarantees (i.e. licenses, patents, copyrights) do not exist and credit institutionsdo simply not accept them, for whatever other reason. Considering those issues it isnot surprising that 85% of the creative enterprises view themselves as badly en-dowed with guarantees and securities relevant for credit capital (medien.barometerberlinbrandenburg, 2006). The lack of relevant guarantees results in the same prob-lem as the lack of equity capital does – creative enterprises face difficulties in ac-quiring credit capital, and in case they get it, interest payments are higher.

11.2.3 Low Funding Requirements

Another criterion common to a wide range of creative enterprises are their typicallylow funding requirements. For, say, pre-financing of orders, the average funding re-

11.2 Specifics 113

quirement was below “ 25,000 in 62% of the analyzed cases. Moreover, the durationof the required financing is comparably short in most cases. Differing with respect tothe very purpose, most financing is needed only for one year or for periods up tothree years (medien.barometer berlinbrandenburg, 2006). This segment of small-scale and essentially short-run credits is, however, not sufficiently covered by thecredit institutions, and there are no appropriate instruments within it. In this context,the recent past saw the development of so-called “micro-credits” which are especial-ly targeted to the peculiarities of low-volume financing.32

We see a similar image for financing of alternative purposes (i.e. investment inmarketing, procurement of licenses or the appearance at trade shows). Most often,creative enterprises demand small-scale and short-run financing.

11.2.4 Uncertainty of Success

In most cases, creative enterprises need capital for the development of own productsand projects, for pre-financing of orders they receive or for financing marketingand sales. However, the financing of investment, machines or office equipmentplays only a minor role in the Creative Industries (medien.barometer berlinbranden-burg, 2006). The potential success of the features we have listed above is difficult toestimate, though. Whether at the end of some product development there will be amarketable product, whether some project will be successfully completed orwhether some marketing strategy will increase sales is highly unclear at the begin-ning and estimation of success involves a lot of uncertainty. Moreover, in many cas-es there are no experienced data and characteristic figures available so that deter-mining the potential success of an investment becomes most often a non-trivialtask. Thus, it comes with no surprise that 67% of the surveyed creative entrepre-neurs view the uncertainty of success as a major obstacle with respect to acquiringcredits (medien.barometer berlinbrandenburg, 2006).

The fact that on the one hand, most often start-up businesses are in need of creditcapital, and that on the other hand we see many creative enterprises currently beingin their growth stage is further exacerbating the estimation of potential success. Bothof those types of enterprises face high risks and their potential is thus difficult to de-termine (Puchta, 2009).

11.2.5 Ideas Instead of Machines

A fact closely related to the uncertainty of success is that creative enterprises seldomneed financing for machines. Rather, human capital is the dominant factor, whereas


32 Investitionsbank Berlin, for example, uncomplicatedly issues micro-credits up to “ 10,000for start-up businesses of the Creative Industries (BerliNews, 2008). Further small-scalecredits up to “ 25,000 from KMU-Fund supplement the supply within this product group.

in more traditional branches, financing clearly focuses on production plants, ma-chines and real estate (Puchta, 2009). The investors however, still aim at financingtraditional enterprises and have therefore acquired more knowledge in estimatingrisks, evaluating potential success and providing capital for traditional forms ofproduction. Thus, in order to take account of the growing importance of the CreativeIndustries, resources have to be devoted to developing new financial instrumentswhich account for the specific needs of creative enterprises.

11.2.6 Pre- and Interim Financing, Sustainability

Even if projects are well-endowed with credit capital, some costs of preparation andconceptualization might remain; and those costs might be subject to appropriate fi-nancing. A comparable challenge is, for example, interim financing of TV-produc-tions.33 Moreover, securing the sustainability of projects could produce costs wherefinancing is needed for. Thus, note that apart from requiring capital to finance pro-duction, creative enterprises might have further borrowing requirements which arenot visible at first sight.

11.2.7 Lack of Knowledge on Funding Possibilities

One out of five creative enterprises is, according to its own declaration, lackingknowledge on appropriate funding possibilities (medien.barometer berlinbranden-burg, 2006). We are at this stage not able to determine whether this fact is an essen-tial reason for difficulties in acquiring capital and whether creative enterprises sig-nificantly differ from more traditional ones with respect to this lack of knowledge.However, we will mention two potential reasons for this deficiency.

On the one hand, only for a short time the Creative Industries are treated as com-mon industries, and they thus have not yet fully established a reputation as being keyindustries among the public opinion and economic policy makers. In contrast tomore traditional economic branches, the creative enterprises lack of an overview onappropriate funding- and furtherance possibilities, such that it is not surprising thatboth receivers and providers of capital lack knowledge to a certain degree.

On the other hand, most companies of the Creative Industries are either one-per-son-enterprises or small enterprises. It is, although, in particular for those types ofenterprises difficult to devote enough time to getting an overview on funding possi-bilities, whereas enterprises with separate finance departments obviously haveenough personnel and enough know-how to intensively concern themselves with thefunding possibilities appropriate for them.

11.2 Specifics 115

33 Investitionsbank Berlin has, together with Investitionsbank of the Federal State of Branden-burg and Medienboard Berlin-Brandenburg GmbH issued a program which provides such in-terim financing (Investitionsbank Berlin, 2008).

11.2.8 Lack of Commercial Comprehension

Over and over again a lack of commercial comprehension and knowledge amongCreative Entrepreneurs is stated. 14% of the surveyed entrepreneurs view this lack ofknowledge as an obstacle against their access to credit capital (medien.barometerberlinbrandenburg, 2006). To us it is, however, a black box why, of all types of entre-preneurs, the ones belonging to the Creative Industries lack this knowledge, and in-howfar they differ from traditional entrepreneurs with respect to this issue.

11.3 Types of Financing

After having discussed the difficulties in and the peculiarities of endowing creativeenterprises with the amount of capital they need, we now turn to describing appro-priate instruments of financing. We do so under consideration of the structural char-acteristic of the Creative Industries. Since within the Creative Industries we findvarious different types of enterprises, there is a need of various different types offunding possibilities which cover the whole range of furtherance requirements theenterprises have.

We already discussed extensively in part 1 of this study that on the one hand, theCreative Industries typically feature a structure of one-person enterprises and smallenterprises. On the other hand although, we also observe small- and medium enter-prises with differing perspectives of economic growth.34

On the basis of the classification into one-person-enterprises (micro enterprises)as well as small- and medium enterprises, the Creative Economy can be categorizedaccording to three segments. This classification is performed in order to be able toprovide each segment with targeted and appropriate funding instruments (Puchta,


34 Big corporations and players constitute the third type of enterprises. For those however, thepeculiarities concerning endowment of and access to credit capital are only contingently rele-vant, if at all. Due to this reason, and due to the fact that the number of such big corporationsis rather small, we do not consider this third type of enterprises in the following analysis. Thistype of enterprises is clearly not the most dominant target group of the economic policymeasures we discuss within this study.

Source: Puchta (2009) and own description

segment financial instrument

start-ups and one-person-enterprises micro credits and small-scale loans

small- and medium enterprises with average growth perspective credit capital and liability assumptions

enterprises with high growth- and accretion perspective venture capital

Table 53: Segmenting the Creative Industries

2009). Table 53 documents this categorization and introduces the adequate instru-ments for each segment.35

We will now elaborate on the respective instruments of financing in more detail.

11.3.1 Credit Capital

Financing by providing credit capital is probably the most dominant way of financ-ing. Due to the characteristics of creative enterprises, which have been discussed atlength already, we introduce loans as instruments based on credit capital before elab-orating on micro credits and small-scale loans.

The market offers various different alternatives of loans and subsidies connectedto loans. While loans themselves can be configured differently with respect to dura-tion, exploitability, clearance, interest payments and similar factors, subsidies can berelated to different parameters as well. Assumptions of liabilities, guarantees, inter-est allowances, interest-caps and similar features are possible ways to subsidizeloans and thus increase the attractiveness of such instruments of furtherance.

Small- and Micro Loans

Since one-person-enterprises and micro enterprises typically have – as discussedabove, quite low credit capital borrowing requirements, small- and micro loans areoften the adequate way of providing capital to them. Start-up businesses are a furthertarget group of these instruments, since start-ups from most cultural- and creativebranches typically have low capital requirements too.

By employing such small-scale instruments, providers of capital can easily ad-just to changing market determinants and thus create an attractive environment forenterprises of the Creative Industries. The Creative Industries have no or only a veryweak lobby in society, politics and administration, since they are a newer type of keyindustries. Thus, the issue is not on providing an environment where the top five orten enterprises/corporations can thrive and pull the weights of the smaller companiesin the following. Rather, the task is to create an environment in which thousands ofcultural- and creative enterprises can develop and increase their potentials of growth(Söndermann, 2007).

Small- and micro loans thus bring about significant advantages for both providersand receivers of credit capital. While the capital requirements of small- and microenterprises can be satisfied by such small-scale instruments and the basis for flour-ishing activities thus can be laid by providing such instruments, the investors faceadvantages coming from the diversification of risks within their portfolios. Due todiversification, the negative effects of loan defaults are less severe if the portfolio in-cludes many small- and micro loans than if it features few big loans. Furthermore,

11.3 Types of Financing 117

35 An alternative description is to be found in Puchta (2009). It elaborates on the capital require-ments and risk profiles we discussed in part 1 of this study.

such small- and micro loans can be operated easily and rapidly, since elaborate in-vestigations of balance sheets and risk structures are not necessary. The providers ofcapital thus have to develop the prerequisites for such fast operation – conditions,consultancy, sales and administration can be standardized to a high degree in thiscontext. Easier application, low requirements of guarantees and securities as well asinstitutionalized liability assumptions could complete the supply of small- and microloans and thus make them attractive for a vast number of creative enterprises.

The European Commission corroborates in its “European Initiative for the De-velopment of Micro-credit in Support of Growth and Employment”, which is in linewith the Lissabon-strategy for growth and employment, the significance of small-scale instruments of financing.

Even if, at first glance, the opportunities to earn money are lower with small- andmicro credits, capital providers must not ignore that the market for micro credits isflourishing (Delvaux, 2008) and thus offers significant opportunities to make profits aslong as the providers of credit capital are able to adjust to the changing environment.

Note finally that creative enterprises should be accompanied and guided by theproviders of capital even after completion of funding and financing. What is a matterof course for complex approaches like providing venture capital, should become, ina feasible scope, the norm for smaller instruments as well. Even if, at first glance, thecosts for the providers of capital increase, such accompanying measures can consid-erably reduce the risk of loan default as well as create the basis for a frictionless op-eration of further provision of capital or other cooperation. The much acclaimed“knowyour customer-principle”, which incidentally stems from the finance sector,should be implemented for small-scale instruments too.

11.3.2 Mezzanine-Capital

In the recent past banks and credit institutions have – not only since the introductionof “Basel II” and its stricter requirements concerning equity capital – been forced tobe more cautious and restrictive when issuing credit capital. Thus, the developmentof alternative forms of financing and their configuration towards marketability hasbeen spurred in the past. Providing those new instruments should allow and facilitatethe access to capital within the new environment.

“Mezzanine-capital” is a generic term for funding instruments which are, due totheir legal and economic characteristics, to be categorized according to accountingrules between equity and credit capital. They are thus viewed as hybrid forms of cap-ital. Table 54 lists the typical properties of mezzanine-capital.

Due to several reasons, mezzanine-capital can be an attractive source of capitalfor enterprises with relatively high borrowing requirements. The dominant advan-tages of mezzanine-capital over classical loans are in particular the

� large choice over alternative features,� equity capital-character and� subordination in case of bankruptcy.


Moreover, in contrast to loans, access to mezzanine-capital does not always requireguarantees and securities.

There are four dominant types of mezzanine-capital. Those are

� subordinate loans� typical and atypical dormant equity holdings� options and convertible securities� bonus-shares


Source: Förderland (2008a) and own descriptions

general properties equity-equivalent properties credit-equivalent properties

• provider of Capital is not

shareholder, no changing of

ratio of votes within the en-

terprise

• flexible configuration of con-

ditions (individual adjustment

of financing to the needs of

the enterprise possible)

• independent from legal form

• subordination (in case of

bankruptcy the provider of

capital is satisfied after other

debtees have been satisfied)

• long-run duration of capital

supply

• no guarantees and securities

• improves the structure of thebalance sheet, positive influence on rating, access tocredit capital is secured / improved

• has to be paid back

• primacy over liable equity

• continuous interest according to success

• deductibility of interest payments

as operating expenditure

Table 54: Properties of Mezzanine-Capital

To sum up, note that mezzanine-capital is, above other reasons, attractive for en-terprises of the Creative Industries due to its similarity to equity capital and the pre-dominant abandonment of guarantees and securities. In this context we explicitlypoint to the fact that the target group of mezzanine-capital consists of enterpriseswith higher borrowing requirements. For micro- and small enterprises this instru-ment is inappropriate; due to its high transaction costs, amongst further reasons.Even if the dominant share of creative enterprises has a small-scale structure and isthus not in the run for mezzanine-capital, the spectrum of instruments should not ab-stain from it, since some branches of the Creative Industries might be willing tomake use of it.

11.3.3 Venture Capital

In addition to loans and mezzanine-capital, venture capital is a third possible financ-ing instrument.36 It is a fairly new instrument of economic furtherance which is notyet widespread. The term “venture capital” denotes the provision of liable equity

36 Private Equity is a term often used in combination with and as a substitute for Venture Capi-tal. Private Equity, however, is a superordinate concept for equity capital participation off-exchange. Thus, Venture Capital is a subset of Private Equity.

capital or means similar to equity capital. In principle, the provision is limited to aprespecified period of time and regulated in specific contracts. enterprises which arein an early stage of entrepreneurial activity and not yet listed on the stock-exchangeare primary and common receivers of venture capital. In addition to them although,enlargements of small enterprises are often financed by venture capital. It is, natural-ly, mandatory for receivers of venture capital to show, in addition to the intention ofmaking profits, a high potential of enhancing their value and growth. In addition tothat, receivers of venture capital typically have to provide an exit-perspective. It isanother characteristic however, that venture capital investors abstain from requiringguarantees and securities. The decision of providing venture capital is thus deter-mined by the potential of growth of the enterprise to be financed and, in combinationwith that, by the expected return to investment (Förderland, 2008). The returns how-ever, are highly uncertain, and the risk involved in such instruments of financing isthus very high. In an extreme case, the invested capital could be totally lost. In addi-tion to providing venture capital, the investors usually provide non-monetary supportwith management know-how and consultancy. Furthermore, investors often take ex-tensive decision making power in the enterprise they finance in order to limit theirrisk and keep it small. The returns to investment are generated by current backflows(returns) or by selling shares of the enterprise which have been acquired in course ofventure capital financing (revenues). Venture capital is, as noted earlier already, aroll-over financial market-instrument.

A possible way to categorize different types of venture capital is to distinguishbetween informal and formal venture capital. The former is private venture capitalstemming from acquaintances or private investors (business angels), while the latteris provided by more institutionalized investors. Formal venture capital can again becategorized by distinguishing private venture capital organizations, corporate ven-ture capital, venture capital provided by holdings consisting of banks, trustees andinsurances and venture capital provided by public institutions as a means of pursuingeconomic policy goals.37

Note that due to competition regulations, it is necessary to have private co-in-vestors in order to be eligible for venture capital provided by the public. The provi-sion of venture capital is, amongst other sources, granted by EU-regulations whichallow for providing capital from the European Regional Development Fund (ERDF)under certain circumstances.38 In such cases, the equity holdings of the private co-


37 The VC Fund “Kreativwirtschaft Berlin” employs minority holdings as a basic instrument,dormant equity holdings (limited duration, mandatory repayment) as well as shareholderloans (limited duration, mandatory repayment).

38 The last of such European Union Regulations were 1080/2006 (Official Journal of the Euro-pean Union, 2006), 1083/2006 (Official Journal of the European Union, 2006a) and 1828/2006(Official Journal of the European Union, 2006b). In Regulation (EC) No. 1083/2006 as of

(Continued at p. 121)

investors can take place both at the stage of the fund as well as at the stage of the sep-arate investment.

11.3.3.1 United Kingdom

London is not only the largest financial center of the United Kingdom, it is also themost important in Europe and together with New York one of the most important inthe world. It is thus not surprising that the United Kingdom is pioneering venturecapital financing within the Creative Industries. We have noted already in part 1 ofthis study that the United Kingdom is the cutting-edge in the context of identifyingand treating the Creative Industries. It seems that it is also the cutting edge in contextof supporting and financing those industries.

Creative Advantage Fund

The first experiences in employing venture capital as an economic policy-instrumentdate back to 2003. The “Creative Advantage Fund” was the first venture capital fundto have the Creative Industries as its target group. It was first issued in 2003 and hashad 70 investments in 47 creative enterprises of the West Midlands since then,among them enterprises producing and animating films, orchestras as well as enter-prises of the software- and broadcasting Industries (Creative Advantage Fund,2008). The fund invests up to GBP 250,000 (about “ 310,000) per enterprise andholds a respective share of the enterprise to be financed.

The Creative Advantage Fund is an example for venture capital to be fed by pub-lic means39 and thus being aimed at supporting and furthering the Creative Indus-


38 (Continued from p. 120) July 11, 2006 it is noted that “Cohesion Policy” has to contribute tothe enhancement of growth, competitiveness and employment and specifically take into ac-count sustainable development. The goals of this policy are “convergence of member statesand regions”, “regional competitiveness and employment” as well as “European territorialcooperation” Those goals are to be achieved by employing the structural fund and the cohe-sion fund. The regulation explicitly addresses the stiuation of small enterprises and their ac-cess to innovative financial instruments. In (41) we read that “it is appropriate to ensure thatimproved access to finance and innovative financial engineering are available primarily tomicro, small and medium-sized enterprises and for investing in public-private partnershipsand other projects included in an integrated plan for sustainable urban development”. Withinthis regulation we also find the percentage limits of public cofinancing, which depend on therelation between the regional gross domestic product and the average European Union grossdomestic product. In the specific case of Berlin, the means provided by private sources maybe co-financed by capital of the European Regional Development Fund ERDF up to anamount of 50%.

39 The means for the Creative Advantage Fund stem from the regional development agency“Advantage West Midlands”, from the European REgional Development Fund (ERDF) andfrom Arts Council England.

tries. “[…] we are a publicly-funded organization whose long term aim is tostrengthen and develop the creative industry sector throughout the West Midlands:all profits from our investments are retained and used to make further new invest-ments in the future” (Creative Advantage Fund, 2008).

In 2003 a total sum of GBP 5 mn. (about “ 6.25 mn.) has been provided for theyears 2003 – 2008. Due to the success of the fund, all of its available capital has beendistributed by July 2008 – six months before expiry of the prespecified duration of 5years. It is a goal of this fund to become self-financing in the medium-run and to beable to support new enterprises by providing capital out of the returns of current in-vestments.

Creative Capital Fund

This venture capital fund has been issued in 2005 and is aimed at the enterprises inGreater London. Since being embedded within the “Creative London Programme” itis part of an economic policy-concept. “Creative London” coaches and supports theCreative Industries in London and is part of the London Development Agency. Withinvestments of up to GBP 500,000 (about “ 625,000) per enterprise it provides up totwice the amount of capital the Creative Advantage Fund provides per enterprise.However, the amount provided by the Creative Capital Fund has to be supplementedby private means of at least the same amount. The total volume of this fund is like-wise GBP 5 mn. (about “ 6.25 mn.). It has successfully transacted ten investmentssince 2005.

The Creative Capital Fund is likewise fed by public means. The capital stemsfrom the London Development Agency on the one and the European Regional De-velopment Fund ERDF on the other hand (Creative Capital Fund, 2008).

11.3.3.2 Germany

Investitionsbank Berlin and its subsidiary “IBB Beteiligungsgesellschaft mbH” pio-neer the financing of creative enterprises in Germany. In 2007 “VC Fonds Kreativ-wirtschaft Berlin” has been issued. It is the first German venture capital fund to bespecifically targeted at the Creative Industries. It has a total volume of “ 30 mn. pro-vided by Investitionsbank Berlin together with the federal state of Berlin. By theshareholding of Investitionsbank Berlin, “VC Fonds Kreativwirtschaft Berlin” is fedpartly by capital from the European Regional Development Fund (ERDF) (IBBBeteiligungsgesellschaft mbH, 2008a). Thus, this fund shows many similarities tothe venture capital funds in the United Kingdom. “VC Fonds KreativwirtschaftBerlin” is, as the British Funds, an economic-policy instrument targeted to supportcreative enterprises.

By September 9, 2008, the portfolio of “VC Fonds Kreativwirtschaft Berlin” in-cludes the following investments (in alphabetical order).


Cubico Media TV GmbH

By providing venture capital to Cubico Media TV GmbH “VC Fonds Kreativ-wirtschaft Berlin” invested in an enterprise of the private broadcasting industries.Cubico Media TV GmbH operates the niche channel XXHome. By employing spe-cial-topic days, magazines and documentaries the channel shows in an informativeway how one’s home can be made more beautiful. XXHome offers programs on thetopics do-it-yourself, house, garden and decoration (IBB BeteiligungsgesellschaftmbH, 2008).

DFW Deutsche Fernsehwerke GmbH – TIMM TV

DFW GmbH started TIMM TV, the first TV-channel of the German-speaking region tobe especially targeted at gay men (IBB Beteiligungsgesellschaft mbH, 2008c). Withthis investment, Investitionsbank Berlin boosts its engagement in the media industries.

South&browse GmbH

South&browse GmbH produces documentaries and entertainment shows for maga-zines and various TV-channels (IBB Beteiligungsgesellschaft mbH, 2008c). DFWGmbH mentioned above emerged years ago out of a branch of South&browseGmbH, and South&browse GmbH recently took shares of TIMM TV, as did Investi-tionsbank Berlin.

Sportme GmbH

The first investment of “VC Fonds Kreativwirtschaft Berlin” was in the companySportme. It is considered as the fastest growing Web 2.0 community for activesportsmen, teams and unions. In www.sportme.de all sports aficionados find a “vir-tual home” for themselves, their sport, friends, fans and sponsors (IBB Beteiligungs-gesellschaft mbH, 2008b).


Part 4 of this study discusses various possibilities to support and further creative en-terprises. It focuses on monetary instruments. This, however, does not mean thatnon-monetary furtherance is insignificant or plays only a minor role. In contrast, it istruly essential that policy makers view the Creative Industries as future key econom-ic sectors. In this context, the commitment to the Creative Industries must result inthe creation of an optimal framework in which those industries can thrive.

Since the creative enterprises differ from enterprises of more traditional branch-es with respect to, above all, capital endowment, they face significant and specificdifficulties in the context of access to capital. Table 55 summarizes the relevant diffi-culties and peculiarities.


In the following we discuss, under consideration of those peculiarities, variousfinancing instruments and show that for each type of enterprise different instrumentsare appropriate for funding. While for start-ups and micro-enterprises the most ap-propriate financing instruments is credit capital in the form of micro credits andsmall-scale loans, enterprises with an average perspective of growth should ratherchoose credit capital in the form of loans accompanied with various elements of sup-port and furtherance. Enterprises which have a high potential of growth and are thuslikely to considerably enhance their value should go for Mezzanine- or venture capi-tal funding.

It is remarkable that the recent years have seen a paradigm change with respect tomonetary business development. While in the past one-time non-refundable pay-ments have been an essential instrument of support, policy makers nowadays moreand more choose roll-over instruments. Such instruments generate backflows whichcan be reinvested into newer projects. Moreover, modern funding instruments areclosely linked to managerial considerations which encompass the dimensions of riskand return. The federal state of Berlin clearly focuses on the extension and creationof roll-over instruments of business development.

Table 56 gives an overview of the financing instruments, their advantages anddisadvantages for the enterprises to be funded as well as the respective features forthe investors.

After discussing the various possible ways of financing and their potential fieldsof application within the Creative Industries we devote a final part to the most recentdevelopments with respect to business development with venture capital. In an ex-cursus we referred to the situation in the United Kingdom where first positive expe-riences with venture capital funds as a means to foster the Creative Industries havealready been made. However, Germany already has first experiences in this area


Table 55: Difficulties in the Access to Capital

attribute result

low capital endowment bad rating, problems with raising of credits

lack of debt guarantees difficulties with access to credit capital

low funding requirements lack of supply of appropriate financial instruments

uncertainty of success investors face difficulties in estimating risk

ideas instead of machines no guidelines for evaluation by investors

pre- and interim financing, sustainability investors face difficulties in estimating risks

lack of knowledge on funding possibilities supply of funding is not fully exploited

Source: Own descriptions

11.4 Tentative Conclusion 125

Table 56: Financial Instruments and their Attributes

financial instrument

micro- andsmall-scalecredits

creditcapital

loans

mezzanine-capital

venture capital

investor

• low risk due to a highnumber of small loans

• medium- and long runinvestment

• regular capital inflows• attractive profile of chances

and risks

• potentially strong growthin the middle class

• grouping and resale inform of certificates possible

• attractive alternative forenterprises with highfunding requirements(apart from, due to Basel II,restrictive access to creditcapital)

• attractive possibility toposition enterprise at themarket

• endorsement of productrange

• high expected returns,but high risk

disadvantage for receiver

• suitable only for low fundingrequirements

• only limited duration

• influence on capital struc-ture and balance sheets

• provision dependent on therating of the enterprise

• suitable only for medium-sized and large enterprises

• high transaction cost• plethora of alternatives• know-how intensive• higher interest payments

than in classical investmentinstruments

• suitable only for medium-sized and large enterprises

• high transaction cost• know-how intensive• partial loss of independence• granting of decision making

power to the investor• preparation to going public

or corporate sale

advantage for receiver

• easy accessible• unbureaucratic• low requirements

concerning guarantees

• well-known, classicalinstrument

• amount to be freely chosen• easily assessable flows

• big choice of financinginstruments

• equity capital character• no guarantees necessary• no granting of decision

making power to theinvestor

• independent of legal form• subordination in case of

bankruptcy

• access to equity capital• potentially high volumes• potential of large growth• various instruments

possible

too.40 Some creative enterprises in Berlin have already taken the opportunity to ac-cess venture capital to boost their development. As such, the significance of this fi-nancing instrument in technological branches seems to increase. Note in this contextthat the venture capital Fund issued for Berlin enterprises bundles capital stemmingfrom the federal state of Berlin, Investitionsbank Berlin as well as the European Re-gional Development Fund (ERDF). Moreover, private co-investment doubles themoney coming from public sources.

Since the Berlin Creative Industries can make use of the whole range of financialinstruments and business development-means, we conclude that in the recent yearsBerlin has seen the creation of an attractive environment capable of sustainably in-creasing the economic value added as well as employment with these new key indus-tries. It is essential that both the micro enterprises as well as the enterprises with highpotential of growth and value enhancement are provided with the respective appro-priate financing instruments.

Source: Own descriptions

40 “VC Fonds Kreativwirtschaft Berlin” is the first German venture capital fund to be especiallytargeted at creative enterprises.

Since the Creative Industries are still a young branch which differs with respectto certain essential points from more traditional branches, non-monetary supportplays an essential role and complements the monetary instruments in giving the Cre-ative Industries more weight and more public awareness.


12 Executive Summary

12.1 Introduction

While the German Creative Industries have been in the focus of cultural rather thaneconomic policy in the past, they are now gradually establishing themselves as a tar-get of modern economic policy. This motion is due to the increasing internationaldiscussion and consideration of those branches. The Creative Industries are new keyindustries and contribute significantly to the economic value added and employ-ment. They thus are an essential element within thriving economic regions in Eu-rope. It is not surprising that both national as well as international institutions arenow developing innovative instruments targeted at fostering the Creative Industriesand thus fostering economic growth and employment.

Despite the general difficulties in defining and clearly classifying the CreativeIndustries, we observe clear tendencies with respect to the question which economicsectors are to be attributed to the Creative Industries in Germany.

The structure of this study is as follows. Part 1 gives an extensive discussion ofthe term Creative Industries, while part 2 describes the Creative Industries in theirquantitative dimensions. In part 3 we investigate the implications and effects of in-vestment into the Berlin Creative Industries on the Berlin Regional GDP and em-ployment in Berlin. Finally, part 4 discusses various financial instruments suitable tofoster the enterprises of the Creative Industries.

12.2 Results of this Study

Part 1 of this study discusses the term “Creative Industries” and possible ways to de-fine it.

While the Continental-European approach classifies the Creative Industries ac-cording to branches and economic sectors, the Anglo-American approach primarilyuses activities and jobs to define the Creative Industries. Other issues we have raisedin the discussion are on whether and to which extent technological branches are to beviewed as being “creative” and whether indicators like patents, copyrights and thelike are suitable to encompass creative activities. Figure 8 summarizes the differentapproaches in a matrix.

In the following we introduce an economic theory of the Creative Industries. Onthe one hand, we discuss the characteristics of the Creative Industries, the most im-portant of them being uncertainty of demand, the production process and sales aswell as limited substitutability of production inputs. We explicitly consider the typi-cal products and services produced by the Creative Industries within this discussion.

On the other hand, we show to which extent and in which points the Creative Indus-tries differ from more traditional economic branches. The most significant differ-ences are found in the degree of integration, in the types of actors and labor marketsas well as in the investment patterns.

We close part 1 by giving an overview on the Creative Industries in an interna-tional context. We conclude that a generally binding definition of the term “CreativeIndustries” has not emerged so far. The recent past however, has seen some endeavoron a supranational level, in particular by the EU and UNESCO, to find consensuson the question which activities and economic sectors are to be viewed as being“creative”. We affiliate with the endeavor to bring about harmonization and classifythe Creative Industries thus in the nine cultural and two creative branches to be listedin the following.

� publishing� film industries� private broadcasting industries� music, visual and performing arts� journalists and news agencies� museum shops and art exhibitions� retailing of cultural goods� architecture� design industries� advertising� software and games industries

Drawing on this definition we attribute the economic sectors according to their offi-cial statistical classification to the respective cultural and creative branches and de-scribe their quantitative dimensions. Table 57 summarizes the results.

128 12 Executive Summary

Figure 8: The Creative Economy in the Form of a MatrixSource: Puchta (2009)

economic approach sociological approach

Creative Industries

• music, performing arts, film, radio, TV• advertising, PR, visual arts, arts and crafts,

design, architecture, cultural heritage, print-media• software, internet, telecommunications

− related to branches and economic sectors

Creative Class

• scientists (i.e. physicists)• creative professionals (i.e. lawyers, consultants)

− jobs, activities

• ICT (information and communication technology)• Content- Economy• Media-Economy• Cultural Economy

− essentially content versus technology

• copyright• patents• branding• design

− inventions, developments that are usable and can beprotected by copyright law

production-oriented approach exploitation rights-oriented approach

One in seven Berlin enterprises is operating in the Creative Industries. The ab-solute number totals to more than 20,000. Those enterprises realize yearly revenuesof about “ 7.4 bn. and employ some 80,000 people. They feature a remarkable struc-ture of micro- and small-sized enterprises. More than 76% of the Berlin creative en-terprises are one-person enterprises.

The most dominant branches are, both with respect to revenues as well as em-ployment, the cultural branches of publishing and music, visual and performing artson the one and the creative branches of advertising and software and games indus-tries on the other hand. Together, those four branches yield about 70% of the totalBerlin Creative Industries revenues. Moreover, two in three of the people employedin the Creative Industries work in one of those four branches.

Relating revenues to the number of enterprises shows that publishing, advertis-ing and two additional cultural branches – private broadcasting industries as well asfilm industries – are the branches with the highest revenues per enterprise.

In the last section of part 2 of this study we discuss the reasons for differencesamong the results of various studies on the Berlin Creative Industries. We show that,apart from deviating classifications and different consideration of economic sectorsas being “creative”, different data sources are an additional cause of deviating re-sults. These facts have to be taken into account when comparing the results of differ-ent studies.

12.2 Results of this Study 129

Table 57: Enterprises, Revenues and Employees in the Berlin Creative Industries

enterprises revenues [mn. 1111] employees

total OPEs total OPEs total

fulltimeand

part-time

cultural branches

publishing 1,732 864 1,800 64 15,902 13,379

film industries 1,170 666 751 77 7,565 6,550

private broadcasting services 93 – 200 – 4,383 4,246

music, visual and performing arts 5,329 4,472 1,131 395 11,523 9,158

journalists and news agencies 2,187 2,135 150 120 1,306 1,261

museum shops and art exhibitions – – – – 3,980 3,764

retailing of cultural goods 923 705 358 151 3,308 2,587

architecture 2,855 2,272 530 216 4,740 4,239

design industries 2,112 1,892 201 121 560 434

creative branches

advertising 2,183 1,527 957 172 9,649 7,567

software and games industries 2,158 1,266 1,344 96 16,693 15,884

total 20,742 15,799 7,424 1,413 79,609 69,069

Source: Bundesagentur für Arbeit, Statistik-Service Ost and Amt für Statistik Berlin-Brandenburg

OPE … one-person enterprise

The total range of different results with respect to revenues realized by and em-ployees in the Berlin Creative Industries can be taken from Table 58. Moreover,Table 58 includes an estimation of revenues and employment under consideration ofworking off the books on the basis of the results of the study by SenWTF


Table 58: Range of Revenues and Number of Employees in the Berlin Creative Industries

Source: Own description§ … since the estimated number of clandestine employees is denoted in fulltime-equivalents, the number shown in the table is the lowerlimit.

this study SenWTFSenWTF under consideration of clandestine

employment

revenues[th. 1111] 7,423,764 18,579,967 19,888,267

employees 79,609 167,587 182,335§

Part 3 of this study features an analysis of the effects of investment in the BerlinCreative Industries on the Berlin Regional GDP as well as employment in Berlin. Inorder to be able to estimate those effects on the economic value added as well as em-ployment, we simulate investment decisions with the regional macroeconometricmodel BEST developed by Kollmann et al. (2006). We selected the venture capitalfund “VC Fonds Kreativwirtschaft Berlin” from the spectrum of financial instru-ments offered by Investitionsbank Berlin and have bases our simulations on its vol-ume. We have developed two different scenarios.

In scenario 1 we assume that during the upcoming years the venture capital Fundwill invest “ 3.75 mn. per year into projects run by creative enterprises in Berlin. Inscenario 2 however, we assume that the investment amount is “ 7.5 mn., since In-vestitionsbank Berlin aims at supplementing the investment amount provided by it-self with private co-investment of at least the same amount so that the investmentamount of scenario 2 is twice the assumed investment amount in scenario 1.

Note that in both scenarios we assume that the investment amounts are additionalmeans. Thus, the simulation results are essentially to be interpreted as a comparisonwith a business-as-usual scenario in which the respective investment amounts wouldnot be invested – not even in other projects apart from the Creative Industries.

The simulations yield results for the years 2008 to 2012. Table 59 features theestimated effects on the Berlin Regional GDP and employment in Berlin under theassumptions of scenario 2. The additional jobs are denoted in fulltime-equivalents.

The displayed values are to be interpreted as yearly average values realized by anassumed investment amount of “ 7.5 mn. per year. Within the simulations, the totalinvestment amount has been divided among the cultural and creative branches ac-cording to their relative revenues. The cultural branches realize about “ 5.1 bn. peryear or 69% of the total revenues yielded by the Berlin Creative Industries as awhole. The creative branches together realized “ 2.3 bn.; the remaining 31% of total

12.2 Results of this Study 131

Table 59: Investment, Additional Employees and Additional Berlin Regional GDP

Source: BEST and own assumptions§ … average additional investment amount per year& … average number of additional jobs per year$ … average additional Berlin Regional GDP per year

branchesinvestment

amount§ [mn. A] additional jobs&additional Berlin

GDP$ [mn. A]

cultural branches 5.2 80 12.9

creative branches 2.3 36 5.8

total 7.5 116 18.7

revenues of the Berlin Creative Industries. Thus, “ 5.2 mn. are invested into the cul-tural branches and “ 2.3 mn. into the creative branches within our simulations. Theassumed investment yields an average additional economic value added of“ 12.9 mn. within the cultural and “ 5.8 mn. within the creative branches. Both fig-ures are to be interpreted as a comparison with a business-as-usual scenario whereno investment takes place at all.

Furthermore, the simulations show that a yearly investment amount of “ 7.5 mn.provided to the Berlin Creative Industries will create 116 additional fulltime jobs onaverage, as well as an average yearly additional Berlin Regional GDP “ 18.7 mn.

The fourth and last part of this study discusses possible ways of fostering the en-terprises of the Berlin Creative Industries on the basis of the results of Parts 1 to 3.After a more general introduction to the instruments of economic furtherance wewill elaborate on the peculiarities and difficulties the creative enterprises face withrespect to the access to equity and credit capital.

This discussion shows that in particular the

� low capital endowment,� lack of guarantees and securities,� low funding requirements,� uncertainty of success and� financing of ideas instead of machines

are critical in this context. Only under consideration of these peculiarities it is possi-ble to develop appropriate instruments of furtherance and to offer a portfolio ofmeans suitable to pursue a policy targeted at fostering the Creative Industries.

We conclude that different types of creative enterprises require different fundinginstruments and means of furtherance. On the basis of Puchta (2009), Table 60shows an appropriate approach to segment the Creative Industries.

Due to the significant heterogeneity among the enterprises of the various culturaland creative branches, an attractive portfolio of economic furtherance must feature abroad range of different instruments which take into account the specific needs ofthe respective enterprises. Thus, the spectrum of adequate financial instrumentsmust include micro- and small-scale credits for one-person enterprises, more classi-


Table 60: Segmenting the Creative Industries

Source: Puchta (2009) and own descriptions

Segment Financial instrument

start-ups and One-person-enterprises micro credits and small-scale loans

small- and medium enterprises with average growth perspective credit capital and liability assumptions

enterprises with high growth- and accretion perspective venture capital

cal loans as well as Mezzanine- and venture capital. The latter two are primarily tar-geted at larger enterprises with larger funding requirements. Note that the public sec-tor is now adopting venture capital as an instrument aimed at boosting business de-velopment. Thus, it is a fairly new instrument within this context.

This development has not least been supported by European Union developmentpolicies. This type of furtherance features capital provided by the European RegionalDevelopment Fund (ERDF) as well as capital provided by the respective nations andprivate investors. Investitionsbank Berlin is the first German institution to have ex-perience in using venture capital to foster and finance enterprises of the CreativeIndustries by issuing its venture capital Fund “VC Fonds Kreativwirtschaft Berlin”.

12.3 Outlook

In the course of its Lissabon-strategy, in March 2000 the European Union intendedto make the Europe the most competitive economic region of the world. It consid-ered the European knowledge-based as the driving force for the intended develop-ment. This underlines that the Creative Industries are to play a significant role infuture development, and fostering them will become increasingly important. TheEuropean Union shows considerable endeavor by issuing various initiatives targetedat boosting the Creative Industries and exploiting their potential of increasinggrowth and employment.

The results of this study show that the Creative Industries are a most significantand important factor within the city of Berlin. Thus, regional economic policy mak-ers are required to develop innovative instruments aimed at fostering those futurekey industries. Within this set of instruments and policies, monetary and non-mone-tary means have to be coordinated. Thus, interdisciplinary thinking is required due tothe considerable heterogeneity among the creative enterprises and the fundamentaldifferences between the Creative Industries and more traditional economic branches.New financial instruments like micro credits and venture capital are certainly an im-portant step into the right direction.

Not only to foster the creative, but to creatively foster could be the future impera-tive.

Literature

Aedes (2008). http://www.aedes-arc.de/ueber_start.htm. June 24, 2008.Amt für Statistik Berlin-Brandenburg (2008). Potsdam.Arbeitsgemeinschaft Kulturwirtschaft NRW (2007). 5. Kulturwirtschaftsbericht Nordrhein-

Westfalen. Ministerium für Wirtschaft, Mittelstand und Energie des Landes Nordrhein-Westfalen (MWME). Düsseldorf.

Becker, H. S. (1982). Art Worlds. Berkeley University Press. 199–200.BerliNews (2008). Kleingeld für Kreative. http://www.berlinews.de/artikel.php?15006 July

17, 2008.Berry, M. (2004). Melbourne – Is there a Life after Florida? lab.3000. RMIT University, Mel-

bourne.Bortz, J. (1993). Statistik für Sozialwissenschaftler. Springer-Verlag. Berlin et al.Boschma, R. A., Fritsch, M. (2007). Creative Class and Regional Growth – Empirical Evi-

dence from Eight European Countries. Jena Economic Research Papers # 66. Jena.Bundesagentur für Arbeit, Statistik-Service Ost (2008). Berlin.Bundesministerium für Wirtschaft und Technologie (2007). Initiative Kultur- und Kreativ-

wirtschaft der Bundesregierung. www.kulturwirtschaft.de February 25, 2008.Bundesverband der Deutschen Industrie e.V. (2002). Eigenkapital für den industriellen Mit-

telstand: Agenda für Politik und Gesellschaft. Positionspapier. Berlin.Caves, R. (2000). Creative Industries. Contracts between Art and Commerce. Harvard Univer-

sity Press. Cambridge, Massachusetts and London.Creative Advantage Fund (2008). http://www.advantagecreativefund.co.uk/acf-default.php?

id=288 July 15, 2008.Creative Capital Fund (2008). http://www.ccfund.co.uk July 10, 2008Cunningham, St. (2002). From Cultural to Creative Industries: Theory, Industry, and Policy

Implications. Media International Australia, Incorporating Culture & Policy # 102. 54–65.University of Queensland.

De Vaney, A. (2003). Hollywood Economics: How Extreme Uncertainty Shapes the Film In-dustry. Routledge. London.

Delvaux, Philippe – European Commission (2008). Eine europäische Initiative zur Entwick-lung von Kleinstkrediten für mehr Wachstum und Beschäftigung. Talk on April 28, 2008 atKfW, Berlin.

Department for Culture, Media and Sport DCMS (2008). http://www.culture.gov.uk/what_we_do/Creative_industries/ February 26, 2008.

Deutscher Bundestag (2007). Schlussbericht der Enquete Kommission “Kultur in Deutsch-land”. 16. Wahlperiode, Drucksache 16/7000 December 11, 2007.

Dixit,Avinash K., Stiglitz, Joseph E. (1977). Monopolistic Competition and Optimal ProductDiversity. American Economic Review. 67: 297–308.

Drda-Kühn, K. (2007). Neue Förderinstrumente für die Kulturwirtschaft. In: HerausforderungKulturwirtschaft – Kulturpolitische Antworten und Strategien. Berliner Tagung November8 and 9, 2007.

Europäischer Monat der Fotografie (2008). http://www.mdf-berlin.de/. June 24, 2008.European Commission (2008). http://ec.europa.eu/employment_socil/knowledge_society/index

_de.htm. March 27, 2008.

Fesel, B., Söndermann, M. (2007). Culture and Creative Industries in Germany. GermanCommission for UNESCO. Bonn.

Fesel, B., Söndermann, M. (2008). Kulturwirtschaftsbericht Köln 2007. Cologne.Flew, T. (2002). Beyond ad hocery: Defining Creative Industries. Paper presented to Cultural

Sites, Cultural Theory, Cultural Policy, The Second International Conference on CulturalPolicy Research, Te Papa, Wellington, New Zealand.

Florida, R. (2002). The Rise of the Creative Class and how it’s transforming work, leisure,community and everyday life. Basic Books. Paperback. New York.

Förderland (2008a). http://www.foerderland.de/1346.0.html. August 4, 2008.Förderland (2008). http://www.foerderland.de/1373.0.html. July 14, 2008.Fritsch, M., Stützer, M. (2007). Die Geographie der Kreativen Klasse in Deutschland. Raum-

forschung und Raumordnung, # 65(1), 15–29. Jena.Glaeser, E. L. (2004). Review of Florida’s The Rise of the Creative Class. Department of

Economics. Harvard University. http://www.economics.harvard.edu/faculty/glaeser/files/Review_Florida.pdf. February 20, 2008.

Hackett, K., Ramsden, P., Sattar, D., Guene, Ch. (2000). Banking on Culture. New financialinstruments for expanding the cultural sector in Europe. Final report. Manchester.

Hölzl, W. (2005). Entrepreneurship, Entry and Exit in Creative Industries: An ExplorartorySurvey. In: Working Papers Series: Creative Industries in Vienna: Development, Dynamicsand Potentials. University of Economic Sciences, Vienna.

Horx, M. (2006). Die Kreative Ökonomie. In: Traxler, J., Grossgasteiger, S., Kurzmann, R.,Ploder, M. (2006). Potenzialanalyse Kreativwirtschaft im Großraum Graz. Joanneum Re-search. Graz.

Hutton,W. (2007). Staying ahead: The Economic Performance of the UK’s Creative Industries.Department for Culture, Media and Sport. London.

IBB Beteiligungsgesellschaft mbH (2008). http://www.ibb-bet.de/news.0.html?&tx_ttnews[tt_news]=178&tx_ttnews[backPid]=229&cHash=4c115275c1 June 24, 2008.

IBB Beteiligungsgesellschaft mbH (2008a). http://www.ibb-bet.de/vc_fonds_kreativ.0.htmlJuly 14, 2008.

IBB Beteiligungsgesellschaft mbH (2008b). http://www.ibb.de/desktopdefault.aspx/tabid-80/218_read-1584/ July 16, 2008.

IBB Beteiligungsgesellschaft mbH (2008c). http://www.ibb-bet.de/portfolio.0.html?&tx_list_pi1[cat0]=11&cHash=1566df559b September 3, 2008.

ICG culturplan Unternehmensberatung GmbH, STADTart Planungs- und Beratungs-büro (2007). Gutachten zum Thema: “Kulturwirtschaft in Deutschland – Grundlagen,Probleme, Perspektiven”. Berlin, Graz, Dortmund.

Institut für Kultur- und Medienmanagement (2006). Kulturwirtschaftsbericht 2006 fürHamburg. Die wirtschaftliche und gesellschaftliche Bedeutung von künstlerisch-kreativenLeistungen in der Freien und Hansestadt Hamburg.

Investitionsbank Berlin (2008). Berlin aktuell. Film- und TV-Wirtschaft. February 7, 2008.Berlin.

KEA European Affairs (2006). The Economy of Culture in Europe. Study prepared for theEuropean Commission.

Keuper, F., Puchta, D., Röder, St. (2008). Creative Industries benötigen Creative Finance –Innovative Finanzierungslösungen für die Filmwirtschaft, In: Hülsmann, M., Grapp, J.Strategisches Management für Film- und Fernsehproduktionen: Herausforderungen, Op-tionen, Kompetenzen. Oldenbourg Wissenschaftsverlag, Munich et al.

134 Literature

KMU Forschung Austria (KMFA) und Institut für Kulturmanagement und Kultur-wissenschaft der Universität für Musik und darstellende Kunst Wien (IKM) (2003).Erster Österreichischer Kreativwirtschaftsbericht. Vienna.

KMU Forschung Austria (KMFA) und Institut für Kulturmanagement und Kultur-wissenschaft der Universität für Musik und darstellende Kunst Wien (IKM) (2006).Zweiter Österreichischer Kreativwirtschaftsbericht. Vienna.

Kollmann,A., Puchta, D., Reichl, J., Schneider, F., Tichler, R. (2006). Berlin Economic Sim-ulation Tool BEST. Trauner Verlag. Linz

Kremer, M. (1993). The O-Rings Theory of Economic Development. Quarterly Journal ofEconomics 108: 551–575.

Kröhnert, S., Morgenstern,A., Klingholz, R. (2007). Talente, Technologie und Toleranz – woDeutschland Zukunft hat. Berlin Institut für Bevölkerung und Entwicklung. Berlin.

Kulturwirtschaft in Berlin. Entwicklung und Potenziale (2005). Hrsg. Senatsverwaltung fürWirtschaft, Arbeit und Frauen in Berlin und Senatsverwaltung für Wissenschaft, Forschungund Kultur. Berlin.

Kulturwirtschaftsbericht Sachsen-Anhalt (2006). Im Auftrag des Ministeriums für Wirtschaftund Arbeit des Landes Sachsen-Anhalt. Magdeburg.

Leadbeater, C. (1999). Living on Thin Air: The New Economy. Viking. London.Marcus, C. (2005). Future of Creative Industries. Implications for Research Policy. European

Commission. Brussels.Marlet, G., van Woerkens, C. (2004). Skills and Creativity in a Cross-section of Dutch Cities.

Discussion Paper Series # 04-29. Tjalling C. Koopmans Research Institute. Utrecht.Mayerhofer, E. (2002). Creative Industries – Mehr als eine politische Requisite? Creative

Industries, Cultural Districts und das Wiener Museumsquartier. Ein internationaler Ver-gleich. Vienna.

medien.barometer berlinbrandenburg (2006). 1. Halbjahr 2006. Media.net berlinbranden-burg, medienboard Berlin Brandenburg GmbH, Investitionsbank Berlin.

O’Connor, J. (1999). Cultural Intermediaries and Cultural Industries. In Verwijnen, J. andLehtovuori, P. Creative Cities. University of Art and Design publishing Unit. Helsinki.

Official Journal of the European Union (2006). Regulation 1080/2006. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:210:0001:0011:DE:PDF September1, 2008.

Official Journal of the European Union (2006a). Regulation 1083/2006. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:210:0025:0078:DE:PDF September1, 2008.

Official Journal of the European Union (2006b). Regulation 1828/2006. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:371:0001:0173:DE:PDF September1, 2008.

O’Regan,T. (2001). Cultural Policy, Cultural Planning, and Creative Industries Policy Making.CultureLink. 30-50. Toronto.

Piesk, S., Werner, B. (2003). Forschungs- und Entwicklungsgesellschaft Hessen mbH (FEH).Kulturwirtschaft in Hessen. 1. Hessischer Kulturwirtschaftsbericht. Wiesbaden.

Puchta, D. (2009). Kreative Finanzierung – Innovative Finanzierungslösungen für die Kreativ-wirtschaft. In: Grüner, H., Puchta, D., Schulze, K., Kleine, H. Unternehmensgründung inder Kreativwirtschaft – Kreative gründen anders! Bielefeld. To be published in 2009.

Puchta, D., Röder, St. (2008). Die Funktion von Förderbanken für die Internationalisierungkleiner und mittlerer Unternehmen (KMU) in Deutschland. Draft as of March 31, 2008.Berlin.

Literature 135

Ratzenböck, V., Demel, K., Harauer, R., Landsteiner, G., Falk, R., Leo, H., Schwarz, G.(2004). Endbericht: Untersuchung des ökonomischen Potenzials der “Creative Industries”in Wien. Vienna.

Schleswig-Holsteinischer Landtag (2004). Bericht der Landesregierung über Entwicklungund Stand der Kulturwirtschaft in Schleswig-Holstein. Drucksache 15/ 2573 und 2611.Kiel.

Söndermann, M. (2006). Kulturwirtschaftsberichte der Bundesländer: Viele Sprachen – ein Ziel?In: Däubler, Ch., Fesel, B. (2006). Kulturwirtschaft 2005. Friedrich-Naumann-Stiftung. Bürofür Kulturpolitik und Kulturwirtschaft. Berlin.

Söndermann, M. (2006b). Kulturwirtschaft – Was ist das? In: Däubler, Ch., Fesel, B. (2006).Kulturwirtschaft 2005. Friedrich-Naumann-Stiftung. Büro für Kulturpolitik und Kultur-wirtschaft. Berlin.

Söndermann, M. (2007). Kulturwirtschaft und Creative Industries 2007. Aktuelle Trends unterbesonderer Berücksichtigung der Mikrounternehmen. Bundestagsfraktion Bündnis 90/DieGrünen. Berlin.

Statistik Berlin Brandenburg (2008). Monatsdaten Konjunktur 6/2008. Amt für StatistikBerlin-Brandenburg.

Statistisches Bundesamt (2003). Klassifikation der Wirtschaftszweige mit Erläuterungen.Ausgabe 2003. Wiesbaden.

Stocker, H. (2008). Einführung in die angewandte Ökonometrie. http://www.uibk.ac.at/econo-metrics July 30, 2008.

Traxler, J., Grossgasteiger, S., Kurzmann, R., Ploder, M. (2006). Potenzialanalyse Kreativ-wirtschaft im Großraum Graz. Joanneum Research. Graz.

überNormalNull (üNN) GmbH Kunst Bauen Stadtentwicklung (2007). Die Struktur derCreative Industries in Deutschland im Hinblick auf Möglichkeiten zur internationalenVerknüpfung.

Weckerle, Ch., Gerig M., Söndermann M. (2007). Kreativwirtschaft Schweiz – Daten, Mo-delle, Szene. http://www.kulturwirtschaft.ch/. March 4, 2008.

Weckerle, Ch., Söndermann M. (2003). Das Umsatz- und Beschäftigungspotential des kul-turellen Sektors. Erster Kulturwirtschaftsbericht Schweiz Hochschule für Gestaltung undKunst. Zurich.

Weckerle, Ch., Söndermann M. (2005). Kreativwirtschaft Zürich. Studie In: Der privatwirt-schaftliche Teil des kulturellen Sektors im Kanton Zürich. Hochschule für Gestaltung undKunst. Zurich.

Wiesand, A. J. (2006). Kultur- oder “Kreativwirtschaft”: Was ist das eigentlich? Aus Politikund Zeitgeschichte (APuZ 34-35/2006), 8–16. Bonn.

WIPO (2008). http://www.wipo.int/ip-development/en/creative_industry/ March 4, 2008.XXHome (2008). http://www.xxhome.de June 25, 2008.

136 Literature

Appendix A – Economic Sectors in Detail

In Table 61 we list the appertaining economic sectors for each of the nine culturaland two creative branches.

Table 61: Economic Sectors of the Branches of the Berlin Creative Industries


cultural branches

publishing 22.11.1 publishing of books (excluding address directories)

22.11.2 publishing of address directories

22.12.1 publishing of daily newspapers

22.12.2 publishing of weekly newspapers and Sunday papers

22.13.1 publishing of professional journals

22.13.2 publishing of general magazines

22.13.3 publishing of other magazines

22.14.1 publishing of recorded sound carriers

22.14.2 publishing of music supplies

22.15.0 other publishing

22.21.0 printing of newspapers

22.22.0 printing of other media

22.23.0 further processing in printing

74.85.1 freelance translators

74.85.2 translation bureaus

film industries 92.11 production of films and videos

92.11.1 production of films for cinemas

92.11.2 production of films for TV

92.11.3 production of industry and advertising films

92.11.4 production of other films

92.11.5 film technologies

92.11.6 sound studios

92.12 film distribution and supplying video programs

92.12.1 film distribution

92.12.2 supply of video programs

92.12.3 marketing of films

92.13.0 cinemas

private broadcasting industries 92.20.1 broadcasting stations

92.20.2 production of Radio and TV programs

journalists and news agencies 92.40.1 syndicates and news agencies

92.40.2 freelance journalists and press photographers


138 Appendix

Table 61: (Continued)


cultural branches

museum shops and art exhibitions 92.51.0 libraries and archives

92.52.1 museums and art exhibitions

92.52.2 monument protection

92.53.1 botanical and zoological gardens

92.53.2 natural preserves and zoos

92.53.3 nature and landscape protection

architecture 74.20.1 superstructure and interior architects

74.20.2 urban , regional , and land use planners


music, visual and performing arts 92.31.1 theater ensembles

92.31.2 ballet groups, orchestras, chapels, choirs

92.31.3 freelance visual artists

92.31.4 freelance restorers

92.31.5 freelance composers and processors of music

92.31.6 freelance writers

92.31.7 freelance stage , film , radio and TV artists

92.31.8 freelance artists

92.32.1 theater and concert managers

92.32.2 operas, theaters, concert halls and similar institutions

92.32.3 varieté and cabaret

92.32.5 technical support for cultural services

92.33.0 showmen and amusement parks

92.34.1 dance schools

92.34.2 supply of other cultural and entertainment services

74.81.1 photography

74.81.2 photo laboratories

55.40.3 discotheques and dance halls

71.40.3 libraries and reader circles

26.70.1 sculpture and masonry

28.52.3 artist blacksmiths

36.22.2 manufacturing of adornment from noble metal

36.22.3 manufacturing of gold and silversmith products

36.30.0 repairing of musical instruments

92.72.2 supply of other services for entertainment, recreation and leisure

retailing of cultural goods 52.45.3 retailing of musical instruments and supplies

52.47.2 retailing of books, magazines and journals

52.48.2 retailing of objects of art, coins, souvenirs etc.

52.50.1 retailing of antiques and antique carpets

52.50.2 antiquarian bookshops


Appendix A 139



cultural branches

design industries 74.20.6 industrial design

74.87.4 studios for textile , adornment , furniture and other design

creative branches

advertising 74.40.1 advertising design

74.40.2 distribution and procurement of advertising media

74.14.2 PR Advisory

software and games industries 72.21.0 publishing of software

72.22.1 software consultancy

72.22.2 development and programming of web presentations

72.22.3 other software development

72.40.0 online provision of databases, books etc.

d

Appendix B – Differences in Research Results

In part 1 and part 2 of this study we extensively discussed that there is no generallybinding and acknowledged definition of the Creative Industries and there are nobinding rules concerning the branches and economic sectors to be attributed to it.Thus, it comes with no surprise that some of the published bulletins and studies dif-fer in their results. However, even if two studies consider the very same branches asbeing part of the Creative Industries, their research results might differ to a lesser orgreater extent. There are several potential reasons for this.

First, the two studies to be compared with one another might differ with respectto the detailed consideration of economic sectors. For example, the bulletin by theSenate Office for Economy, Technology and Women as well as this study considerthe sector of “manufacturing of gold- and silversmith products“ (ES 36.22.3) as be-ing a creative sector. The Cologne bulletin on the Cultural Economy by Fesel andSöndermann (2008), however, does not. Similar reasoning concerns the telecommu-nications branch (ES 64.30.1 to 64.30.4), which is attributed to the Creative Indus-tries only by SenWTF (cf. Table 62).

Secondly, differences among research results could stem from a deviating map-ping of the economic sectors into the respective branches. SenWTF, for instance,maps “Producing radio- and TV-programs“ (ES 92.20.2) into the film- and TV mar-ket, while this study attributes it to the private broadcasting industries. Moreover, ofsome economic sectors we and other studies consider only parts as “creative“, whichcan result in differences if the parts being considered are of different size. A promi-nent example of an industry where this procedure is applied is retailing.

Thirdly, deviating results could stem from different data sources. Some studies,for example, supplement data from official statistics on value-added tax and employ-ment by primary data they gathered on their own. Furthermore, it is a feasible proce-dure to attribute the revenues of superregional enterprises to different regions ac-cording to the share in employment each region has – instead of attributing the totalrevenues to the regions where the headquarters are located. Unlike SenWTF, thisstudy follows the latter rather than the former approach.

The interpretation of the terms used in research is another source of differences.For example, one could attribute one-person enterprises to the category of enterpris-es and/or to the category of employees.

Finally, one needs to take into account the regional classification. This study de-scribes the Berlin Creative Industries, and does not consider enterprises and activi-ties in Brandenburg.

In Table 62 we summarize which economic sectors are considered as being “cre-ative“ by the studies mentioned above. For comparison we have selected the bulletin

140 Appendix

ES is considered by …

ES Economic Sector SenWTF& this Fesel and2003 Study Sönder-

mann§

18.10.0 production of leather clothing and fireproof clothing from leather �

18.21.0 production of working- and professional clothing �

18.22.1 production of woven outerwear for men and boys �

18.22.2 production of woven outerwear for women and girls �

18.22.3 production of knitted outerwear �

18.23.1 production of woven underwear �

18.23.2 production of knitted underwear �

18.23.3 production of corsage �

18.24.1 production of sportswear and fireproof clothing �

18.24.2 production of hats and other headdresses18.24.3 production of wardrobe and wardrobe accessories for infants �

18.24.4 production of other knitted finished products �

18.24.5 production of wardrobe accessories �

19.30.1 production of sports shoes and the like �

19.30.2 production of other shoes and the like �

22.11.1 publishing of globes, books, catalogues and yearbooks � � �

22.11.2 publishing of telephone and address books � � �

22.12.1 publishing of daily newspapers � � �

22.12.2 publishing of weekly newspapers and Sunday papers � � �

22.13.1 publishing of professional journals � � �

22.13.2 publishing of general magazines � � �

22.13.3 publishing of other magazines � � �

22.14.1 publishing of recorded sound carriers � � �

22.14.2 publishing of music supplies � � �

22.15.0 other publishing (without software) � � �

22.21.0 printing of newspapers � �

22.22.0 printing of other media � �

22.23.0 further processing in printing � �

22.24.0 preliminary stage to printing and media �

22.25.0 other services related to printing �

22.31.0 reproduction of recorded sound carriers �

22.32.0 reproduction of recorded image carriers �

Appendix B 141

Table 62: Different Treatment of Economic Sectors


by SenWTF because it refers, as this study, to the city of Berlin. As a second study,we have chosen Fesel und Söndermann (2008) since many other bulletins use theclassification of Creative Industries to be found there. (KulturwirtschaftsberichtSachsen-Anhalt (2006), Kulturwirtschaftsbericht Nordrhein-Westfalen (2007)).

142 Appendix



mann§

22.33.0 reproduction of recorded data carriers �

24.65.0 production of magnetic and optic data carriers �

26.21.2 manufacturing and repairing of household articles anddecoration items of crockery �

26.21.3 manufacturing and repairing of household articles anddecoration items of clay �

26.70.1 sculpture and masonry � �

28.52.3 artist blacksmiths � �

32.30.0 production of radio devices and sound- andvideo technical devices �

33.40.3 production of cameras, projectors and the like �

36.22.2 manufacturing of adornment from noble metal � �

36.22.3 manufacturing of gold- and silversmith products � �

36.30.0 repairing of musical instruments � �

52.42.1 retailing of clothing, without special focus �

52.42.2 retailing of menswear and accessories �

52.42.3 retailing of ladies wear and accessories �

52.42.4 retailing of children’s and babies’ clothing and accessories �

52.42.5 retailing of furriers’ products �

52.43.1 retailing of shoes �

52.43.2 retailing of leatherwear and luggage �

52.45.2 retailing of entertainment electronic devices �

52.45.3 retailing of musical instruments and supplies � � �

52.47.2 retailing of books, magazines and journals � � �

52.47.3 retailing of entertainment magazines and newspapers �

52.48.2 retailing of objects of art, coins, souvenirs etc. � � �

52.48.5 retailing of watches and jewels �

52.50.1 retailing of antiques and antique carpets � �

52.50.2 antiquarian bookshops � �

52.61.2 shipping and internet retailing of textiles, clothing, shoes etc. �

55.40.3 discotheques and dance halls � �

64.30.1 broadcasting of radio- and TV-programs via cable �

64.30.2 wireless telecommunications �

64.30.3 satellite telecommunications �

64.30.4 Internet service provider, other telecommunications �

71.40.3 libraries and reader circles � �

71.40.4 video rental shops �

72.21.0 publishing of Software � �

72.22.1 software Consultancy � � �

72.22.2 development and Programming of web presentations � � �



Appendix B 143



mann§

72.22.3 other software development � �

72.40.0 online provision of databases, books etc. � �

72.60.1 procurement of information �

72.60.2 services related to data processing �

74.14.2 PR-Advisory � �

74.20.1 superstructure- and interior architects � � �

74.20.1 superstructure- and interior architects � � �

74.20.2 urban-, regional-, and land use planners � � �

74.20.3 gardening and landscaping � � �

74.20.6 industrial Design � �

74.40.1 advertising Design � � �

74.40.2 distribution and Procurement of advertising media � � �

74.81.1 photography � �

74.81.2 photo-laboratories � �

74.85.1 freelance translators � �

74.85.2 translation bureaus � �

74.87.3 auctioning �

74.87.4 studios for textile-, adornment-, furniture- and other design � � �

92.11.1 production of films for cinemas � � �

92.11.2 production of films for TV � � �

92.11.3 production of industry- and advertising films � � �

92.11.4 production of other films � � �

92.11.5 film technologies � � �

92.11.6 sound studios � � �

92.12.1 film Distribution � � �

92.12.2 supply of video programs � � �

92.12.3 marketing of films � � �

92.13.0 cinemas � � �

92.20.1 broadcasting stations � � �

92.20.2 production of radio- and TV-programs � � �

92.31.1 theater ensembles � � �

92.31.2 ballet groups, orchestras, chapels, choirs � � �

92.31.3 freelance visual artists � � �

92.31.4 freelance restorers � � �

92.31.5 freelance composers and processors of music � � �

92.31.6 freelance writers � � �

92.31.7 freelance stage-, film-, radio- and TV-artists � � �

92.31.8 freelance artists � � �

92.32.1 theater- and concert managers � � �



144 Appendix



mann§

92.32.2 operas, theaters, concert halls and similar institutions � � �

92.32.3 varieté and cabaret � � �

92.32.5 technical support for cultural services � � �

92.33.0 showmen and amusement parks � � �

92.34.1 dance schools � � �

92.34.2 supply of other cultural- and entertainment services � � �

92.40.1 syndicates and news agencies � � �

92.40.2 freelance journalists and press photographers � � �

92.51.0 libraries and archives � � �

92.52.1 museums and art exhibitions � � �

92.52.2 monument protection � � �

92.53.1 botanical and zoological gardens � �

92.53.2 natural preserves and zoos � �

92.53.3 nature and landscape protection � �

92.72.2 supply of other services for entertainment, recreation and leisure � �


Source: own description& … Senatsverwaltung für Wirtschaft, Technologie und Frauen (Senate office for economy, technology and women)§ … Fesel, B., Söndermann, M. (2008). Kulturwirtschaftsbericht Köln 2007.

Appendix C – Sensitivity Analysis

In part 3 of this study we discuss the effects of investment in enterprises of the BerlinCreative Industries on the Berlin Regional GDP as well as employment in Berlin.Those estimated effects, however, are based on the weighting of the technologies“administration/event management”, “low- and medium technology” and “researchand high-technology” as well as the weighting of the economic sectors of productionand service displayed in Table 41.

Since we have to make assumptions on the weighting of technologies and eco-nomic sectors, we have to vary our assumptions within a sensitivity analysis and de-termine whether our simulation results are sensitive towards changes in our assump-tions. The following analysis shows that this is not the case, and the results discussedin part 3 of this study can thus be viewed as being secure.

More Weight to the Production Sector

First, we assign more weight to the production sector and, since weights by construc-tion add up to one, we assign less weight to the service sector. The deviation with re-spect to the assumption displayed in Table 41 is for each of the respective branches+10% for the production sector and –10% for the service sector. Table 63 shows theparameters selected for the simulations within sensitivity analysis 1.

Appendix C 145

Source: own calculations and assumptions§ … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries

branches

weights of…

technologies [%] economic sectors [%]

revenues§

[%]

admin./event

management

Low/medium

technology

research/high

technology production service

cultural branches 69,0 20 60 20 60 40

creative branches 31,0 20 40 40 40 60

Table 63: Sensitivity Analysis 1 – More Weight to the Production Sector

Regional GDP

The simulation results yielded by the new weighting which attributes greater signifi-cance to the production sector differ only slightly from the estimated effects of in-vestment on the Berlin Regional GDP calculated by our initial simulation document-ed in part 3 of this study.

Concerning the estimated total additional Berlin Regional GDP, for example, inscenario 1 only some values deviate at the first digit by “ 0.1 mn. at most. Mostoften, this deviation is due to rounding and the actual deviation is even less. Theaverage additional Berlin Regional GPD generated by investment in the Berlin Cre-ative Industries is “ 9.4 mn. when assuming the alternative weights and thus differsonly marginally from the value of “ 9.3 mn. documented in part 3 of this study (cf.Table 64 with Table 44).

146 Appendix

Table 64: Sensitivity Analysis 1 – Scenario 1 – Additional Berlin Regional GDP

branches

additional regional GDP [mn. €] in…

2008 2009 2010 2011 2012

average

2008 – 2012



total 5.0 8.1 9.7 11.6 12.4 9.4

Source: BEST


branches


2008 2009 2010 2011 2012

average

2008 – 2012



total 10.0 16.1 19.4 23.3 24.8 18.7

Source: BEST

For scenario 2, we again see only marginal differences in the estimated addi-tion-al Berlin Regional GDP for 2010 and 2011. The calculated value for 2012 deviatesfrom the value realized with the initial weighting by “ 0.2 mn. Thus, the largest devi-ation of estimated additional Berlin Regional GDP is less than 1% of the respectiveestimated value (cf. Table 65 with Table 45).

Employment

We observe the same pattern of marginal differences between our initial simulationresults and the results yielded with the alternative weighting of economic sectors forthe estimated effects of investment on employment (cf. Table 66 with Table 46 andTable 67 with Table 47 respectively).

Appendix C 147

Table 66: Sensitivity Analysis 1 – Scenario 1 – Additional jobs

branches


2008 2009 2010 2011 2012

average

2008 – 2012



total 28 58 74 68 62 58

Source: BEST


branches


2008 2009 2010 2011 2012

average

2008 – 2012



total 55 116 148 136 125 116

Source: BEST

More Weight to the Service Sector

If, in contrast to the initial simulation, the weight of the service sector is increasedand the weight of the production sector is decreased by 10 percentage points, thesimulation results do not significantly change either.

Table 68 shows the alternative weighting we selected for sensitivity analysis 2,while Table 69 to Table 72 feature the simulation results based on the alternativeweighting. The deviations from our initial simulations are marginal both with respectto additional Berlin Regional GDP as well as additional employment.

Regional GDP

148 Appendix

Table 68: Sensitivity Analysis 2 – More Weight to the Service Sector

branches

weights of

technologies [%] economic sectors [%]

revenues§

[%]

admin./event

management

low/medium

technology

research/high

technology production service

cultural branches 69.0 20 60 20 40 60

creative branches 31.0 20 40 40 20 80

dSource: own assumptions and calculations

§ … Share of the revenues realized within the branch with respect to total revenues in the Berlin Creative Industries


branches


2008 2009 2010 2011 2012

average

2008 – 2012

cultural branches 3,4 5,5 6,6 8,0 8,4 6,4

creative branches 1,6 2,5 3,0 3,6 3,8 2,9

total 5,0 8,0 9,6 11,6 12,2 9,3

Source: BEST


branches


2008 2009 2010 2011 2012

average

2008 – 2012

cultural branches 6,9 11,0 13,3 15,9 16,9 12,8

creative branches 3,1 5,0 6,0 7,1 7,5 5,7

total 10,0 16,0 19,3 23,0 24,4 18,5

Source: BEST

Employment

Appendix C 149


branches


2008 2009 2010 2011 2012

average

2008 – 2012



total 28 58 74 66 60 57

Source: BEST


branches


2008 2009 2010 2011 2012

average

2008 – 2012



total 55 116 148 133 119 114

Source: BEST

the berlin creative industries

Documents