By Isabelle Durant, Acting Secretary-General of UNCTAD

This year we are celebrating the international year of the creative economy for sustainable development. Yet, many are unaware of what encompasses the creative economy and its importance for prosperity.

What is the creative economy?

The “creative economy” is not a concept that can be easily defined as human ingenuity can be at the source of any economic activity. This is why UNCTAD and the United Nations Development Programme (UNDP) consider it as an “evolving” concept based on creative assets with a potential to generate economic growth and development. It comprises a diverse set of knowledge-based economic activities, such as advertising, architecture, arts and crafts, design, fashion, film, video, photography, music, performing arts, publishing, research and development, software, or broadcasting. It thus lies at the interface between human creativity, ideas, culture, IP, knowledge and technology.

Certainly, the creative economy is large. Cultural and creative industries contributed to around 3% of global GDP and created employment opportunities for 29.5 million people in 2013.[1]  The World Intellectual Property Organization (WIPO) estimates suggest that copyright industries, intrinsically linked with creative industries, contributed over 5% to global GDP and generated 4-7% of national employment.[2]

Prior to the coronavirus crisis, this sector was one of the fastest growing in every region of the world.[3] Exports of creative goods and services grew at an average annual rate of 7.3% between 2003 and 2015, outpacing growth of many other industries.

Trade in creative goods - with design, fashion and film as main components - is largely driven by China. With US$168.5bn creative goods exports in 2015, it topped the exporter ranking, recording four times the exports of such goods by the US. Trade in creative services is harder to measure due to limited data available for developing countries. What we know is that it is growing fast owing to the expansion of the digital and sharing economies.

Covid-19 has been a blow

The Covid-19 pandemic has been a severe blow to various segments of the creative economy. Lockdown and confinement measures have brought several sub-sectors to a near halt, such as performing arts and cultural activities. In places without social safety nets or financial support measures, securing daily income has become a challenge for countless musicians, actors and photographers.

Moreover, the crises is likely to cause a lasting effect on the economy by reducing consumer spending and disposable income, further dissuading consumption of cultural and creative products and services.

A study estimating the impact of the crisis on cultural and creative industries in the EU indeed found that, in 2020, the total turnover of these industries fell by €199bn, a decline of 31% from 2019.[4]  Music and the performing arts sectors in particular recorded staggering losses of 75% and 90% respectively. 

Despite the disruption caused by the pandemic to these sectors, other parts of the creative economy demonstrated remarkable resilience and dynamism. This was the case particularly for digitizable activities, such as streaming or video gaming which have surged during this crisis.

Building a sustainable, inclusive and equitable future

The creative economy can be an engine for economic diversification, economic growth and innovation, and provides an avenue to make our economies more resilient. But it is also much more. It has features that make it a powerful instrument for building sustainable, inclusive and equitable economies and societies.

Factors of production used for many creative industries are essentially “human” – ideas and knowledge – rather than natural resources, factories or machines. These industries have relatively low barriers to entry. This can open opportunities for many women, youth and vulnerable groups who typically face greater constraints to access capital.

The relatively equitable access opens the door for empowerment and entrepreneurship in many countries, particularly developing countries. Yet, to reap the benefits, their critical productive resources – ideas, knowledge and technology – must be adequately regulated and the value-added activities must take place in developing countries. For instance, when the majority of African music is produced in London or Paris, it comes as no surprise if profits fall on Europe and jobs are not created in Africa.

With adequate policies and regulations in place, the sector also has the potential for supporting balanced urban and regional development and preserving and promoting cultural heritage and diversity. Moreover, the creative economy has features that make it environment-friendly although one needs to be mindful of a potentially high carbon footprint of its digital component (e.g. streaming).

Tapping the sector’s full potential

IP rights play an important role in supporting a thriving creative economy as they protect creativity (see table below) and control the commercial exploitation of the products of scientific, technological and cultural creation. The ability to develop and use such products is indeed a key driver of economic growth and for international competition, especially for the production and trade of technology-intensive goods and services. Developing countries thus need to build capacity to develop and fully utilise the IP system to promote their creative industries.

There are, however, several challenges.

Piracy and the lack of efficient royalty collection mechanisms cause developing countries not only to lose from individual payments and profits, taxable income and resulting public funds, but also to lose domestic and foreign investments.

Some developing countries do not have sufficiently strong legal and administrative mechanisms by which enforcement, the collection and distribution of royalties, can take place systematically.[6]  These constraints do not only exist in terms of legal and regulatory frameworks but also in the capacity to implement them.

A key challenge emanates from the fact that the creative economy is increasing its reliance on digital technologies. Electronic platforms, file sharing and music streaming, among others, have led to new business models. The big challenge is how to apply the IP system to the digital context.

IP regimes were originally developed for the analogue age. Their fundamental purpose is to strike an appropriate balance between the interests of creators and inventors on the one hand, and users and consumers on the other. This has become much more difficult in the digital environment. For example, electronic copies of original works may be reproduced in an unlimited amount, potentially threatening traditional business in publishing, printing, and bookselling. In addition, digital copies can be easily shared across national borders, while IP rights are limited by national jurisdictions.

It has also given rise to multiple questions, such as:

• How can IP rights be enforced in the digital environment to avoid IP infringement without curtailing the legitimate use of copyright limitations and exceptions, or overburdening innovative, and small content hosting platforms?
   
• How can the rights of consumers and competitors be transferred from the analogue to the digital context? For instance, someone who purchases a patented or copyrighted physical product is free to resell it to third parties. It is also possible that someone who legitimately acquires a digital copy of a song or a movie may equally illegitimately “sell” it to others, considering the possibility of unlimited electronic copying and public distribution.
   
• Do we need new categories of IP rights to enable small scale developing country creators to draw better benefits from business models such as content streaming, where currently the economic reward is minimal?

The multilateral IP framework provides countries with considerable flexibility on how to design their IP laws in the digital context but provides only very limited guidance on the above issues. Technical cooperation in IP and development is therefore needed to assist developing countries in shaping the digital future of their creative industries.

The digital world also has its own challenges. Digital entrepreneurs in many developing countries face various barriers to scaling up their activities, ranging from unreliable access to electricity and internet connectivity, to the dominance of global digital platforms in most product categories. Broader national e-commerce strategies are needed to identify solutions.

Finally, there is a need to improve data collection and analysis for this industry, especially for creative services. As long as we cannot measure the contribution, the sector will remain indiscernible and policy will not reflect and support the development of it.

Summary

The recognition and understanding of the importance of the creative economy has been gathering momentum. In its acknowledgement, the UN declared 2021 as the International Year of the Creative Economy for Sustainable Development.[7]  Its power to create jobs, innovate, contribute to social inclusion and cultural diversity are certainly better understood today than ever before, maybe due to the devastating impact of the Covid-19 crisis. While many of us are eager to share a cinema, concert or museum experience, the disruption has forced us to adapt and unleash new creativity. And we will need more creative thinking and innovation for the full recovery and beyond. UNCTAD, as the designated UN agency for the promotion of the creative economy, stands ready to engage and join forces with partners in these efforts.

[1] EY (2015). The first global map of cultural and creative industries. UNESCO, Paris.

[2] WIPO (2015). Guide on Surveying the Economic Contribution of Copyright Industries – 2015 Revised Edition.

[3] UNCTAD (2018). Creative Economy Outlook: Trends in international trade in Creative Industries and Country Profiles, UN, Geneva and New York.

[4] EY (2021). Rebuilding Europe - The cultural and creative economy before and after the COVID-19 crisis. Brussels.

[5] Spennemann, C. (2019). Presentation on “Intellectual Property Rights in the Creative Economy 

[6] Kabanda, P. (2014). The Creative Wealth of Nations: How the Performing Arts Can Advance Development and Human Progress. Policy Research Working Paper; No. 7118. World Bank Group, Washington, DC.

[7] UN resolution 74/198: International Year of Creative Economy for Sustainable Development, 2021, UN, December 2019

Read the original article in the Intellectual Property Magazine