Creative Industries: Time to let loose a creative force

Janice Hughes, managing director of London-based Spectrum Strategy, a consultancy specialising in media and information technology, has spent the past two months investigating the creative industries in Britain. She talks here to Peter Koenig about her conclusions:

PK What is the current state of Britain's creative industries?

JH Basically, strong. Britain is doing well in a sector of the world economy with high growth rates and expanding markets. This sector will continue to grow as new digital technologies spur demand for more varied content across all media.

Currently, we are number one in book publishing in the world, number two in computer games, and number two in music - although, for our size, our music industry is performing twice as well in terms of exports as the US music industry.

The challenge, as one of our consultants, Anna Brown, puts it, is that our creative people are working away in basements, attics, and cottage industries. They have little capital. Consequently, they have no negotiating power. The global players who control rights and distribution mechanisms inevitably win the game.

Take one example: between 35 and 40 per cent of the computer games played worldwide were developed in the UK. But only half the computer games on the market are attributable to British-owned publishers.

The talent is here, but not the infrastructure to support it. Over the next decade, foreign film studios will spend an estimated pounds 2.5bn to make movies here. But the London Film Commission, which fields 40,000 inquiries a year, is supported in promoting film-making in the UK by a grant of just pounds 144,000.

PK What would the creative industries look like if their economic potential were maximised?

JH The creative industries generated pounds 55bn in revenues last year and accounted for 975,000 jobs. If the sector grew by only 4 per cent a year to 2007 it would then generate pounds 81bn in revenues and account for 1.5 million jobs. But there is no reason we should not set a bolder target - with a 10 per cent growth rate, the annual revenues of the creative industries would reach pounds 142bn in 10 years. The key is to identify where the profits go. In film, for example, the greatest profit lies in distribution. We should aim to capture a much higher share of the profits generated by UK talent and reinvest it in the UK. Currently, 80 per cent of UK film distribution revenues flows to Hollywood. Consequently, Hollywood loves Britain. They can cherry-pick talent nurtured here.

The same story emerges from all sectors - computer games, fashion, television, software, as well as film. We have the talent. We make heroes and heroines of our talent. What we don't do is make heroes of our creative industries' impresarios. And we need to. We need more Richard Bransons and Alan McGees.

The other thing we can do is build a creative industries management culture based on our natural strengths. Emap is a highly successful magazine publisher. But it runs like a series of connected cottage industries. Capital and information flows are controlled from the centre. But publishers and editors live and work in the milieus their magazines are covering.

PK What can the Government do to help the creative industries?

JH We need to reorganise how we think about this sector of the economy. For example, the Office of National Statistics is not set up to track new developments in the converging media, computer and entertainment industries. The role of the Government is to protect intellectual property rights, provide a framework for growth, facilitate growth, and promote exports. The Government should examine how talent reaches its audiences - are the gateways, to both domestic and foreign markets, too small?

The Government can also study the creative companies which are successful in exporting their products. The television production company Wall to Wall is tiny compared to the BBC and ITV. But pounds 3m of its pounds 10m annual turnover comes from overseas sales. Neither the BBC nor ITV come close to that in percentage terms.

Finally, we should remember that government promotion of the creative industries is not an option. The growth of global media and information technologies markets is transforming the world, creating winners and losers. Internet shopping, for example, will render traditional distribution and retail channels unrecognisable.

We need to exploit new technologies and expanding markets in ways that bring revenues back to the UK. The Government has a critical role to play in supporting our creative companies in the market place.