Living on pop music and film

We are always going tobe either subcontractors to America, or exploiters of niche opportunities

HOW COULD Britain export more culture, on the lines of the United States?

The question arises because culture and entertainment have now become America's largest export, passing all the conventional sorts of manufactured products. We do not have a serious balance of payments problem here (unlike the US, we were in surplus during the first half of this year) but it is pretty clear that we cannot safely rely on exports of manufactured goods to carry us through a global recession. Yesterday the trade figures for September showed a widening trade gap, largely because of weakness in key markets in east Asia. Unless you believe that the world market for goods is suddenly going to improve - a heroic belief looking around the globe just now - we will have to find something else to sell.

Culture is the obvious product. At present, Britain is second to the US as a cultural exporter. In fact it is the only large developed country aside from the States that is a net exporter of "intellectual property" - the inverted commas are because when most people think of intellect, pop music does not immediately spring to the front of their minds - costume drama maybe, Louise Werner no.

That is wrong, for pop music is the segment of the global market for cultural products in which the UK is strongest. Our market share varies from year to year, but we usually have about 20 per cent of the world market, against less than 5 per cent in films and TV. It ought to become the model for other forms of cultural exports.

The scale of the prize is evident from the US: gross exports of more than $60bn (pounds 35bn) of software and entertainment in 1996, and a surplus of nearly $22bn that year. I have not yet been able to unearth the 1997 figures, but it would be astonishing if they were not larger still. By contrast, we have net exports of the equivalent of just over $1bn - which does not sound so much, but at least we are net exporters, not net importers like everyone else.

Global trade in software and entertainment seems likely to sizzle upwards in the next five years because the world suddenly has two new technologies to market and distribute these products: the Internet and digital TV. While no one can predict precisely how fast these two technologies will become the main channels for trade in intellectual and cultural products, it is very clear that both are experiencing explosive growth. Insofar as we can predict anything sensible about the impact of these technologies, we can say that they will vastly increase the world market for entertainment and software. America will remain the principal gainer from this, but the UK is the only other country which is likely also to be a winner.

So what should we do to ensure that we get our slice of the cake?

There is one general barrier and three specific ones holding back a surge in the UK's cultural exports. The general barrier is the fact that, unlike the US, Britain does not seem to have generated a popular culture that is obviously and naturally attractive to global youth. This is not just a Hollywood thing. Look at Coca-Cola or at McDonald's, physical products that sell because US culture is embedded in the product. People are not just buying fizzy sugary water, or fried mince in a bun. They are buying the experience, in miniature, of the US itself.

We cannot do that. Some aspects of our culture are clearly attractive to the rest of the world: the global mega-rich flock to London, buying houses and flats that the locals can't afford, going to the theatres, eating in the restaurants, and generally making it their playground.

But it is culturally interesting to see how the London economy has grown much faster than the national average over the last five years. What it is producing is upmarket and hard to export; you cannot put it in a can and drink it. And whether we like it or not, I don't see this situation changing.

So in cultural terms we are going to have to be, in the main, sub-contractors to the US. We can be literally sub-contractors for products such as films, as we are now; but we will also have to be sub-contractors in the sense that we produce something that is quite like American culture, but is manufactured with more of an eye on exports and less of an eye on the domestic market.

Two examples may make this clearer. The segments of the entertainment and software markets where Britain has the largest market share are pop music and software for video games - I have seen estimates that we have 30 per cent of the world market for the latter, but that is a soft number. In both cases we produce products that are quite close to American culture but not quite of it. Think Liam, think Lara: neither Gallagher nor Croft sounds American, but they both sort of behave like Americans. Costume drama they are not.

If sub-contracting shows the way through the general barrier, I suspect that it will have to help in three specific ones, too. In film, TV and software, there are particular problems faced by the UK. In film, we have no really big UK, or even European, studio; and we have no indigenous distribution mechanism. So most of the really successful British films have been co-productions with the US. The Full Monty is a good example: the Brits had to take their clothes off; the Americans got half the money for it.

In TV we have only one company of global significance, and that is the BBC. But because of its unusual ownership structure it is hard for the Beeb to be as effective a competitor against the US networks, including Mr Murdoch's empire, as it might be. The BBC has the advantage of having greater stability of revenue than any other large media group in the world. But it has, as a price for that, less flexibility in the application of that revenue.

And software? It is, thanks to Microsoft, going to be largely an American game. We are always going to be either sub-contractors to the US, or exploiters of niche opportunities. Nothing wrong with that: the fact that Bill Gates should be putting money into the Cambridge science park should help to develop an even larger cluster of software/applications skills. I suspect that over the next 10 years the dominance of Microsoft will tend to decline, and that that decline will create new opportunities in software generation. It is utterly impossible to see where those opportunities will be: if you cannot pick winners in hardware (we tried with Inmos) it is even harder in software. But we can create a climate where venture, and venture capital, are encouraged.

It would be nice to be able to say: "Here is a great opportunity for Britain, built on exploiting a known comparative advantage, and we do this and this to take advantage of it."

Sadly, the world does not work like that.

Yes, there is the opportunity, but taking advantage cannot be achieved by top-down planning. It has to come from bottom-up enterprise.

There is a role for government, though, both local and national. I have been fascinated by the way in which the various enterprise agencies in Scotland have been switching emphasis from attracting new inward manufacturing investment to encouraging indigenous industries, often in services. Expect much more of that from local government, for this is something that has to happen at a local or at least a regional level.

National government, for its part, can remove roadblocks. Talk to people in the movie industry; they have to cope with lots of small frustrations that their competitors in the US (or Ireland) do not face. It is not so glamorous to push through detailed changes in tax regulations as it is to host parties for celebs in Downing Street. But the key to exporting more of our cultural products, as in exporting more of anything else, is detail, detail, detail.

It is partly a question, to borrow Harold Macmillan's phrase, of playing Greece to America's Rome. That should be the big, strategic objective. But it is also a question of applying a little grease to a somewhat creaky export structure so that it runs a bit more smoothly.