labor market of cultural and media industries · at 2001 shows that people in hong kong and taiwan...
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Labor Market of Cultural and Media Industries
Tadashi Yagi, Doshisha University
January 12, 2005
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1. Introduction
Until the 1980s, Japanese companies expanded their markets by producing
cheap and high quality products. In the 1990s, Chinese companies have been improving
the quality of their products through the rapid accumulation of both physical and human
capital. Using low and rich labor resources, and high quality equipments, Chinese
companies have increased their competitive power in the global market. Responding to
worsening market conditions, Japanese companies have been shifting factories from
Japan to China, and the de-industrialization of the Japanese economy has brought about
serious unemployment issues.
Confronted with this drastic change in economic environment, Japanese
companies and Japanese governments are forced to seek a new industry model. When
we consider such a new industry model, the experiences of France and Italy are highly
suggestive. France increased her cultural influence through strategic cultural policy,
and increased brand value of her products. The amount of central government’s
expenditure in the field of cultural policy is around three times of that of Japan, and the
ratio of the expenditure to GDP is around ten times of that of Japan1. It is believed that
the brand value of France increased the competitive power of various kinds of French
products in broad fields. In the same manner, with the rich cultural resources and the
accumulation of skills of craftsman, Italian cultural influence in global markets plays an
important role for the creation or expansion of markets for Italian products.
As is shown in the above example, cultural factor is increasing its importance
for improving the competitiveness of economy in “knowledge intensive society”. This is
the main reason why we need to study the cultural and media industries. The cultural
and media industries affect the competitiveness of manufacturing and other industries
through deepening cultural influences in global markets. Thus, the competitiveness of
cultural and media industries affects the competitiveness of other industries.
One of the important factors which affect the competitiveness of cultural and
media industries is the quality of artists and creators. Whether the quality of artists and
creators is developed via market mechanism depends on the characteristics of labor
1 According to the website of Japanese Agency of Cultural Affair, the ratio of budget for cultural policy in the total government budget is around 0.1%, while it is around 0.94% in France.
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market of the industries. The purposes of this paper are to investigate the market
structure of cultural and media industries and to examine whether the artists’ and
creators’ quality is developed through market mechanism by analyzing the labor supply
behavior of artists and creators.
The composition of the paper is as follows. Section 2 analyzes the market
structure of cultural and media industries. This section is important because the analysis
on labor markets of the industries is based on the analysis of market structure of the
industries. Section 3 analyzes the artists’ and creators’ labor supply behaviors in a model
with an uncertainty in demands. This analysis reveals how artists and creators respond
to changes in product market structure, and effects of labor policies.
2. The structure of cultural and media industries
2.1 The foundations for policy intervention to the industries
Cultural and media industries include industries, in which copyrights are
produced, such as movie, music, game, animation, TV, publishing, and performing arts
industries. In this sense, Throsby (2001) expresses these industries as “copyright
industry”. The term “copyright industry” is quite neutral to “art” and “entertainment”.
But, in reality, “entertainment” tends to dominate “art” in the market, because
“entertainment” attracts consumers more easily. That is, the development of cultural and
media industries does not necessarily lead to the improvement of artistic level of the
industries. The dominance of low quality programs of private TV channels would be a
well know example, and the larger market size of popular music compared with
classical music illustrates that high quality music in artistic sense does not attract
market.
One of the reasons for this kind of “market failure” rests on the fact that
understanding arts requires people some kinds of education. That is, it is often the case
that only educated people can enjoy “art”. On the other hand, any people can enjoy
entertainment. The problem is whether the policy for promoting “art” is necessary or not
for the nation. In general, the answer would be “yes.” For the national identity and
dignity, “art” has an important role. In addition, “art” can be a treasury of man-kind for
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long centuries. However, how much extent should a government supports “art” is a
difficult problem. If the promotion of “art” improves the quality of cultural and media
industries in the long run, the expenditure for “art” can be justified not only from the
reasons mention above but also from the positive externality of these industries on
economy as a whole.
In considering policies for cultural and media industries, expansion of market
size in short run is not an appropriate policy target. To improve the competitiveness of
the industries, policies for improving the artistic quality of the industries should be
implemented as far as “art” is a foundation of the industries. In this sense, the analysis
on labor market of artists and creators has an important meaning, and policies for
improving the quality of artists and creators should be examined.
2.2 The current situation of cultural and media industries in Japan
Annual growth rate of cultural and media industries in the world will be 6.5% in
2006 according to the report “Current situation and problems of cultural and media
industries” (METI (2004)). This growth rate is higher than the expected growth rate of
world GDP. The reason why METI is paying their strong attention to these industries is
rested not only on this expected high growth rate of these industries but on the fact that
they have some positive externalities to economy as a whole. One example is the
“Korean boom” in Japan caused from a TV drama, and the other example is the
“Japanese animation boom” in the world. The “Korean boom” was partly brought about
by Korean government’s policy for promoting their film industry. The Korean boom
improved the image for Korea and Korean products in Japan, and Japanese animation
boom increased the number of people who are interested in Japan. Actually, the number
of Japanese learner in foreign countries increased around twice from 1990 to 1998 (see
METI (2004)).
The other famous and important example is the export of American lifestyle to
the world through Hollywood movies. This created the markets of American goods and
fashion in the world. A survey on Asian consciousness of life researched by Hakuhodo
at 2001 shows that people in Hong Kong and Taiwan watches Japanese dramas more
than western dramas, and listens to Japanese music more than western music(See METI
(2004)). The same survey also shows that consumers in these countries evaluate
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Japanese manufacturing products more cool and more sensible. These results give us an
evidence for the positive externality of cultural and media industries, which means that
cultural penetration into the market brings about the expansion of the market.
More directly, some companies are utilizing these industries in marketing
strategy. One typical example is the “product placement (PP)” method. Placing a
product in Hollywood movies gives consumers the similar image of the movie on the
product2. It is reported that the effect of branding product by product placement in
movie is strong twice as much as that in TV. Not only companies but also local
governments are utilizing film production as a tool of advertising cities for attracting
tourists, and some governments are subsidizing film production.
It is meaningful to summarize the market size of cultural and media industries
based on the figures given by METI (2004). First, the box office of film industry in
Japan is 1.8 billion dollar, and the second largest market in the world. The ratio of
domestic and foreign films is around 3 to 7. Thus, the trade balance of film is negative
in large amount. The sales amount of video software is 4.5 billion dollar, and around 2.5
times as large as the box office. The market size of animation is around 2 billion dollar,
but the derived demands such as game, TV, movie, and character goods would soar up
around ten times. The competitive power of Japanese animation in the world market is
quite high, and around 60% of TV animation in the world is Japanese.
Concerning music market, Japan is the second largest market in the world, and
the total production amount of music CDs in 2002 is 4.5 billion dollar. In addition, new
business such as music sales for cell phone through internet is arising, and the new
market is created. Japanese music industry is expanding his market in Asia, but he is
facing some problems such as a pirate CD and parallel import.
Japanese game industry produces largest amounts in the world. The Japanese
domestic market size of hardware in 2002 is 1.5 billion dollar, and that of software is
3.1 billion dollar. Export amount of hardware from Japan in 2002 is 5.9 billion dollar,
and that of software is 2.1 billion dollar. However, Korean game industry is catching up
to Japanese game industry, and is going ahead in game using internet. In addition,
Microsoft is entering into the game industry. Because of these factors, domestic
2 The recent movement of PP is reported in NIKKEI newspaper: evening issue (Dec. 11, 2004).
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production amount of Japanese game industry is in declining trend.
Market size of publishing industry is decreasing. Compared with the peak size at
1998, the size as of 2002 is 13% smaller. Annual sales amount of book is 86 billion
dollar, and that of magazine is 108 billion dollar. The distribution structure of book
publishing industry is changing, and around 1000-1300 number of small and medium
size book stores is closing annually, and around 500-600 number of large size book
store is opening annually.
2.3 The changes in environment surrounding the cultural and media industries
The most important change in the environment surrounding the cultural and
media industries is the diversification of media. Popularization of broadband internet as
well as CATV and satellite broadcast has a strong influence on these industries.
Especially, the development of internet technology makes the video on demand business
technologically possible and economically profitable. Thus, the competitiveness of
these industries depends on the technology of producing and distributing software or
contents. According to the report issued by the research group on the vitalization of
cultural and media industries, Japanese technology level related with these industries is
superior in camera, DVD, VTR, semiconductor memory for cell phone, and 3D image
(see METI (2001)). On the other hand, the technology level of USA is superior in CG,
non-linear image editing, and media conversion.
As the technology of media distribution develops drastically, an infringement of
copyright is becoming a serious problem. For example, Napster lost a case on the
infringement of copyright through the free music exchange system via internet at
February 2001 in the U.S. After the case of Napster, other peer-to-peer file conversion
technologies such as Gnutella and Winny were developed, and the developer of Winny
was arrested in Japan.
Contrary to these cases, a U.S. federal circuit court of appeals ruled in favor of
peer-to-peer software makers at August 2004, stating that the companies behind the
Grokster and Morpheus services are not liable for copyright infringement due to the
actions of their users3. Judge Stanley Thomas for the unanimous panel in the case called,
3 See http://www.eff.org/IP/P2P/MGM_v_Grokster/030425_morpheus_win_pr.php.
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officially states that "from the advent of the player piano, every new means of
reproducing sound has struck a dissonant chord with musical copyright owners, often
resulting in federal litigation…The introduction of new technology is always disruptive
to old markets, and particularly to those copyright owners whose works are sold through
well established distribution mechanisms. Yet, history has shown that time and market
forces often provide equilibrium in balancing interests, whether the new technology be a
player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke
machine, or an MP3 player. Thus, it is prudent for courts to exercise caution before
restructuring liability theories for the purpose of addressing specific market abuses,
despite their apparent present magnitude.4" This judge states that a law should not
hamper the development of new technology because of the infringement of copyright.
For the artists, however, this judge is quite severe in the sense that they need to develop
a new business model by utilizing a new distribution technology.
It is not certain whether the judgment for the above case is commonly applicable
to other peer-to-peer technology or not. In addition, we can observe a movement of a
new legislation for protecting artists in the parliament of the U.S. The most important
thing is that the new technology should be utilized so that the right of artists is protected
without sacrificing the consumers’ convenience.
2.4 The global competitiveness of cultural and media industry and market creation
The global competitiveness of Japanese cultural and media industry is greatly
different depending on the field. The fields such as cartoon, animation and game have
strong competitiveness, while the fields such as film and music have inferior
competitiveness. The reason why we need to care about the global competitiveness is
that it is necessary to promote the domestic industries in order to bring up a domestic
creator. The transport cost and marginal cost of supplying products in cultural and
media industry is quite low, and the occupation of the market advances rapidly in global
level. Thus, the method of protecting domestic market from foreign competitors is quite
limited. It is one example that Hollywood film has conquered a Japanese market.
Shrinking domestic market shrinks the opportunity of domestic creators, and
4 http://www.ca9.uscourts.gov/ca9/newopinions.nsf/E9CE41F2E90CC8D788256EF400822372/$file/ 0355894.pdf?openelement
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deteriorates the quality of creators, which leads to the decline of the domestic industries.
The exception is the live performance of performing arts such as theater, musical
and live music concert. In these fields, it is possible to divide the domestic market and
foreign market because transport cost of artists and stage tools is enormous amount. It is
one example that Japanese musical is isolated from foreign musical such as Broadway
in New York. In such a case, Japanese creators can be relatively protected from foreign
competitors.
One of the important points for improving the competitiveness in the long-run is
the development of creators and producers. Without the high quality producer, artists
cannot find the opportunity of exhibiting their talents in global level. Strong
competitiveness of the industry attracts high quality creators and producers, and
provides them with the earnings opportunities. This promotes the development of their
talents. On the other hands, the decline of competitiveness may cause vicious cycle; that
is, the weak competitiveness shrinks earnings opportunity of producers and creators,
and thwarts the development of their talents. In this sense, the policies for improving the
talents of creators and produces should be considered.
In addition to the development of quality of creators and producers, policies
should be implemented for various issues, such as 1) improvement of legislation and
rules and 2) improvement of infrastructure for strengthening competitiveness.
Concerning the first issue, the protection of copyright in foreign countries is the urgent
problem to be solved. Currently, the prevalence of pirate products is a serious problem
mainly in Asian region. In 2001, Copyright Information Center in Japan (CRIC)
investigated the actual situation of the violation of copyright in foreign countries5. The
Association of Copyright for Computer Software in Japan (ACCS) established a
committee for solving foreign problems at 1997. This committee investigated the
violation of copyright in foreign countries, established the cooperative relationship
concerning measures, and supports the right execution activity of the members.
According to the commercial piracy report of International Federation of the
Phonographic Industry (IFPI), the illegal sales amount of music in the whole world was
4.5 billion dollar in 2003. This amount is around 35% of the total music sales amount.
5 The information written in Society for the Study of Media Contents Industry (2001) is quite useful for writing this section.
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Asian governments are getting sensitive to this problem recently, and started to
strengthen the control of pirate discs. In December 2003, Chinese government
abandoned a million of pirate discs in public at Beijing after the overall scale inspection
to the visual and music markets. However, the effectiveness of prosecuting the trader
who violates the copyright for decreasing the infringement is limited in a society where
broadband technology is prevailing. The measure for discouraging an incentive such as
the price reduction of regular products is necessary for protecting from the infringement.
In addition, the pirate disc business is an important financial resource for the
underground economy in developing countries. In this sense, applying new technology
such as Source Identification Code (SID) that can identify the producer of pirate disc is
necessary for this problem6.
The next issue concerning the foreign market is the price difference between
domestic market and foreign market. World Intellectual Property Organization (WIPO)
Copyright Treaty, Article 6 defines “Right of Distribution” as follows: (1) Authors of
literary and artistic works shall enjoy the exclusive right of authorizing the making
available to the public of the original and copies of their works through sale or other
transfer of ownership. (2) Nothing in this Treaty shall affect the freedom of Contracting
Parties to determine the conditions, if any, under which the exhaustion of the right in
paragraph (1) applies after the first sale or other transfer of ownership of the original or
a copy of the work with the authorization of the author. In this definition, “the
exhaustion of the right” is important point. From this point, a domestic producer cannot
prohibit the foreign trader from exporting the products re-produced in foreign countries
to Japan, once a domestic copyright owner licensees the foreign producer to reproduce
the product. Since the price of re-imported product is far cheaper than the domestic
price, the re-imported products hart the domestic market.
As for “the exhaustion of the right,” the idea that the right will exhaust in the
first distribution is dominant in worldwide. However, there are two ways of interpreting
the range where “the exhaustion of the right” is applied. One interpretation is the
exhaustion of the right is limited only domestically (domestic exhaustion), and the other
interpretation is that the right exhausts all over the world once the product is distributed
6 See http://www.jiten.com/dicmi/docs/s/10655.htm.
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in one country (international exhaustion). The former interpretation is favorable for the
license owner because he can prohibit a foreign trader to distribute products in domestic.
This, however, admits the range of the distribution right more widely than the present
practice in Japan, and has negative effect on the smooth circulation of the products. EU
takes the interpretation that the right exhausts within EU area, and the U.S. takes an idea
of “international exhaustion” with admitting the right of import separately. It is
necessary for us to consider the optimal strategy for advancing to foreign market
without harming domestic market. Admitting the import right would be a promising
measure for this purpose.
The second issue to be discussed for the improvement of global competitiveness
is the development of infrastructure. The infrastructure to be discussed here includes
international exhibition, international festival, and cultural influence in foreign market.
Recently, the number of international exhibition and festival for introducing Japanese
cultural and media products is increasing. For example, "Exposition of Japanese
Cultural Industry" by sponsoring of the MITI of Japan was held in Seoul, and the
popular culture in Japan like music, the movie, and the animated cartoon, etc. was
introduced in 1999. "Japan-South Korea exchange festival" sponsored by JETRO with
the backup of MITI started from fiscal year 2000 in South Korea. As a privately
organized festival, there is “Tokyo International Film Festival” sponsored by Tokyo
International Film Culture Promotion Foundation. This festival plays a role of world
trade fair market of film industry by using competition method, and aims to promote a
new talent who bears future filmdom. The point that should be paid attention is that
"Wind of Asia" section that intends to activate and spread the Asian movie in the world
plays the role of locating Japan as a base of the film industry in Asia. As is shown in
these examples, rating products by international standard is the most important part for
creating market of cultural and media industries.
Concerning film and music industries, authorizing an international festival held
in Japan is limited except for Asian market. This implies that creating market of
Japanese music and film industries in Europe and the U.S. through the festival in Japan
is quite restricted. For example, international jazz festivals in Japan are not authorized
enough to attract many foreign musicians. In the interview to a Canadian jazz pianist, I
got the comment on this as follows: “The evaluation to Japanese jazz musicians is not
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high in average because the creativity and originality are not distinguished in spite of
their excellent techniques. They are just copying western jazz, and ignore the Japanese
cultural elements. The originality and creativity rooted on the individual cultural
elements are effective for differentiating their music in the market.” This comment
expresses various difficulties for creating market of Japanese music in Europe and the
U.S. It is well known that pure Japanese traditional music has only a negligible size of
market in Europe and the U.S. That is, just an individual culture cannot be accepted by
foreign markets, and this differentiation does not lead to the market creation. In this
sense, the existence of producer who coordinates foreign artists and Japanese artists for
collaboration project is important. By utilizing the producer, it becomes possible to
develop a new music that contains Japanese cultural element with including the taste of
western people. In addition, it is necessary to deepen the cultural influence of Japan in
foreign countries for appealing the Japanese cultural elements in foreign market. This is
one reason why the cultural influence is an important social infrastructure.
2.5 The problems arising in distribution and creation process
It is often pointed out that the serious problem arising in creation process of
cultural and media industries is the unjustified low payment to creators. In addition,
belonging of copyright to consignor without clarifying it beforehand and unjustified
limitation on the second utilization of products by creators become troubles in many
cases. It can be judged that an unjustified disadvantage given to the creator by using
dominant position of consignor is against the Antimonopoly Law. For promoting the
circulation of products, it is important to keep the fairness of dealing and to share the
profit to creators properly so that the relation between consignors and creators can be
sustainable in the long-run. From this point of view, Japanese government revised
“Guideline in the Antimonopoly Law on the abuse of dominant position in the
consignment business of the labor” to improve the fairness in dealing between
consignors and creators (notification by the Fair Trade Commission on March 17, 1998).
Furthermore, the government announced to apply the law on preventing a delay in
payment to subcontractor properly for the dealing between consignors and creators with
the revision of the law (June 2003). For example, the rejection of receiving a product by
a consignor or the reduction of payment to a creator in a TV program production is
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regarded as a violation of this law. It is also necessary to spread the standard form of
contract so that a consignor and a creator establish a contract in documents, and a
creator has an incentive to create high quality products.
Concerning the issues on distribution of products, there exist various problems
such as the second use of TV program in internet, application of the Antimonopoly Law
to the act of restricting competition in distribution or the act of restricting the entry to
the industry. Exceptionally, the opportunity of new entry to the ground wave television
broadcasting is already disappeared, because the allocation of frequency for ground
wave television by the license system has almost finished. This is one reason why
ground wave television broadcasting companies have dominant position to program
production companies with the large gap in company size. In addition, the case where a
supplier of products establishes a contract with the condition that prohibits a distributor
to deal with the products supplied by competitive companies is regarded as the violation
of the Antimonopoly Law7.
2.6 Development of human resources for cultural and media industries
In the cultural and media industries, it is reported in various media that the
shortage of human resource is the most serious in producer8. Especially, not the line
producer, but the general producer who plans and manages the whole process of a
project is quite scarce. The range of the general producer’s job covers the planning of
contents, developing a new concept, excavating and developing a scenario, fund raising,
negotiating and establishing a contract with domestic or foreign partners, managing
products, protecting a copyright, marketing and managing performance. Thus, the role
of general producer is important for expanding market in global level. The scarcity of
this kind of general producer is serious also in the filed that is based on Japanese
traditional arts. The exceptional case is an event of traditional Kyoto food held at
Guimet Museum in Paris. This event was produced by a producer in Kyoto, who planed
the event, coordinated the cooks of some restaurants with tradition and status in Kyoto,
raised funds, and negotiated with partners in Paris. The important part of this case is the
7 See Research Group on Digital Contents and Competition Policy (2003). 8 For example, see http://www.meti.go.jp/policy/media_contents/downloadfiles/producer/ New_Folder/proucerjinzaiikuseishimohanki.pdf
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high ability of the knowledgeable producer that makes it possible to negotiate with
foreign partners in foreign language and persuade sponsors the importance of the event.
In other word, it is not easy for the most of Japanese artists to expand their markets in
global level because it is not easy to find such a talented producer in general.
METI of Japan issued a report on human resource development of producers in
cultural and media industries (see METI (2002)). In this, the details of current education
system for producer in Europe and the U.S. are reported. The most interesting part of
the report is that European countries aim to create arts that symbolize the dignity of
European culture seriously. That is, European countries are attempting to deepen their
cultural influence in non-European countries through the cultural and media industries.
For example, French government requires for film producers to include the essence of
French culture as a condition for subsidizing the film production.
The most remarkable program of human resource development in Europe is
MEDIA program, which includes development and distribution of film and
development of human resources. This program is funded by governments of several
countries in EU, and achieved an increase in film export from 246 to 456 titles. The
program offers an education system through a joint venture school composed of 10
companies and business schools as of 2001.
Graduate schools of U.S. universities are taking the leading position in educating
producer in the world. NYU Tisch School of Arts is one of them. One of the most
desirable educational career paths for being an independent producer is the learning in
Wharton Business School of Pennsylvania University after the graduation from Tisch
School. In Tisch School, seven full-time professors teach in graduate course, and fifty
numbers of professors teach in undergraduate course. Graduate course consists of
three-year course, and students have to choose the course for producer or for director
during the second year. During the third year, students complete a graduation research.
Around 50% of undergraduate graduates enter into cultural and media industries.
Income level of the graduates varies among individuals, but some earn $250,000
annually as a producer and there exists a producer who earns $1,000,000 annually.
It is not obvious whether the education of producer in graduate course is
necessary and efficient. Professors in graduate courses have careers in the real film
production places rather than academic achievements in most cases. Lectures in
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business field are non-academic or non-systematic, but rather practical in many cases.
The report based on a hearing from professors in these schools, the most important
abilities required for producer are the creativity and the active behavior, rather than
academic ability. In addition, it is reported that the opportunity of being an independent
producer is shrinking, and less than half of the graduates can work as a producer. That is,
the labor market for directors and producers is not large enough to absorb the graduates
from the schools, and only high ranking schools can function as a school for breeding
producer substantially.
One candidate for establishing an education system for developing human
resource of producers and directors in Japan is to establish a graduate course in
management schools or business schools by collaborating with TV companies and film
companies. This system makes it possible to teach both knowledge about business field
and the latest technology actually used in the real production site. Education through the
school has some merits in training producer, such as developing general and overall
abilities both in business and creative fields and establishing a broad human network. In
addition, breeding a independent producer is important for broadening the variation of
creative activities.
2.7 Importance of national identity in cultural and media industries
Deepening the understanding of Japanese culture has positive effects on the
expansion of foreign market of Japanese cultural and media industries. This also makes
it possible for Japanese companies to differentiate their products by using the Japanese
cultural elements with the expansion of Japanese cultural influence, and has positive
effect on the expansion of market for various kinds of industries including
manufacturing. The strategically designed cultural policy of France after the world-war
II is well known example. In the end of 1990s, British government started a new
strategy “Branding New Britain” based on this kind of idea. This aimed to strengthen
the competitiveness of British industries by deepening the influence of British culture in
foreign countries. Britain Abroad Task Force is established to advertise British national
identity. This institute issued CD-ROM about cultural and media industries, technology,
architecture, fashion, business, finance, higher education, law system, language, and
variety of culture in Britain, and constructed a web-site “Planet Britain”. In addition, TV
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documentary programs “The Edge”, “London Fashion Week”, and “Style Tribes” are
broadcasted in 120 countries in the world.
At this moment, the similar strategic policy for deepening Japanese cultural
influence in foreign countries is not taken in Japan. The main method of deepening
cultural influence in foreign countries is the cultural exchange program. There are the
following methods of conducting international cultural exchange.
(1) Dispatch by the Japan Foundation of the Ministry of Foreign Affairs. (Actual results
in 1998.)
a.. The dispatch person,
a-1. Specialist short-term dispatch
(i) Dispatch for introducing Japanese culture (13 groups, 70 persons, 163,570,000
yen)
(ii) Dispatch aids for introducing Japanese culture (39 groups, 147 persons,
22,920,000 yen)
a-2. Japan-Europe special exchange program
(i) The intellectual leader dispatch (1 group, 10 persons, 25,150,000 yen)
(ii) Grass roots exchange dispatch (auspices) (1 group, 25,890,000 yen)
(iii) Grass roots exchange dispatch (aid) (12 groups, 252 persons, 25,220,000 yen)
(iv) The intellectual leader dispatch aid (Japanese culture introduction) (7 groups,
30 persons, 53,020,000 yen)
(2) Person dispatch and invitation by the Agency for Cultural Affairs
a.. Person dispatch and invitation in the field of art and culture.
a-1. Art fellowship
(i) Artist training abroad program (In 2000, 587,000,000 yen. 74 persons for one
year dispatch, 13 persons for 2 years dispatch, 2 persons for 3 years dispatch,
47persons for special dispatch)
(ii) Overseas invited artist training program (In 2000, 90,000,000 yen, 33 persons)
a-2. Invitation program of overseas excellent artist (In 1999, 28,000,000 yen, 31
persons)
b. International exchange program
b-1. Promotion of international art exchange (Art Plan 21) (1,363,000,000 yen)
b-2. Asia art festival (48,000,000 yen)
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b-3. National cultural exchange project (111,530,000 yen)
(i) Asian cultural exchange project (38,000,000 yen)
(ii) Internationalization project for traditional cultural activities (10,000,000 yen)
(iii) International exchange project for local culture (27,000,000 yen)
(iv) Japan-China high school student cultural exchange project (22,000,000 yen)
(v) Japan-South Korean high school student cultural exchange project (14,000,000
yen)
b-4. International exchange project for movie culture (6 works, 24,000,000 yen)
(3) Cultural exchange by local governments
Mainly, subsidies are directed to overseas sister city exchange programs. In
addition, subsidies are paid to excellent local artists to appear in prominent art festivals.
(4) Cultural exchange by organizations such as universities.
(5) Cultural exchange by private foundations, and support by private companies (e.g.
the Massena activity).
(6) NPO, and international cooperation.
(7) Self-financed performance trips by artists and players
Based on the hearing from some artists, the international cultural exchange
programs subsidized by the government have some problems. One is the insufficient
review of the programs. It is necessary to evaluate the effectiveness of various methods
for deepening cultural influence in foreign countries as far as tax is used for the
programs. The basic reason why subsidy is justified rest on some positive externality
generated from cultural exchange. In this sense, it is important to study the effective
methods for achieving the purpose both in empirical and theoretical ways. For example,
the effective method of exporting Japanese traditional culture to foreign countries
differs depending on country or region. A certain producer who organizes the cultural
exchange program states that people in East Europe prefers pure original traditional
Japanese culture to the localized traditional Japanese culture, while people in West
Europe prefers the localized traditional Japanese culture to pure original traditional
Japanese culture. The academic research on this issue has not been conducted yet as far
as I know, and the necessity of academic approach is increasing.
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2.8 Development of city through the development of cultural and media industries
The importance of cultural and media industries for the development of urban
city is increasing. One important example is “Silicon Alley” in New York City, where
these industries are agglomerated. According to the report of Yukawa (1999), the
cultural and media industries are the fastest growing industries in New York, and the
size of industry reached to 2.8 billion dollar, i.e., the growth rate during 18 months from
April 1996 to October 1997 is 56%.9 Full-time employee increased 50% from 1995 to
96, and the number is 28,500. Total amount of salary payments increased 78% during
the same period. It is shown like this that the effect of job creation is considerably big in
New York.
The area of Silicon Alley locates in the southern part of 41st street in Manhattan,
and around 42.5% of cultural and media industries of New York City are agglomerated
in this area. Silicon Alley originates to Flatiron and SOHO districts, and these districts
are famous for the place where artists such as painters gather. Along with the
development of internet business, the demand for artists who can create artistic and
sophisticated design for digital contents such as website page has been increased. Then,
Silicon Array became famous by expanding the business to the field of re-engineering
or supporting business using internet technology.
Labor market and the employment system in Silicon Alley are strongly related to
the way of executing business of cultural and media industries. For example, in the case
of creating digital contents of internet media, a company hires freelancers when the new
project is undertaken. It is efficient for the company to utilize the freelancers with
specific skills suitable for the project. There are two types of freelances. One type is a
full-time freelancer who moves various companies in the tile of consultant by project
unit. The other type is a part-time freelancer who works as a side-job. The composition
of workers in cultural and media industries located in New York City as of 1997 is as
follows: 57% is full-time employee, 20% is part-time employee, and 23% is freelancer.
The turnover rate of regular workers employed in the firms in Silicon Alley is quite high.
It is reported that around 70-80% of them turnover during 18 months. This point is an
important property for characterizing labor market of cultural and media industries. The
9 Yukawa (1999) is quite useful in writing this subsection.
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high turnover rate can be explained by the fact that the most appropriate human
resource needed by a firm varies across projects. In addition, since the workers in these
industries seek for the job that brings them satisfaction, they do not hesitate to change
their job when a project changes. There is a peculiar system for job matching in these
industries. The most reliable recruiting method is head hunting by using the private
human network built through parties or events. This is because the human resource is
the most important and crucial input resource in production and the quality of human
resource varies much among workers. Firms need to know the details of workers in
recruiting with considering the type of project. It is usual that face to face job matching
is inefficient and costs time for finding the most appropriate worker in labor market.
The merit of agglomeration arises from this point, because Silicon Alley has some
infrastructure for this kind of job matching such as parties and events, and there are
various chances for people to know each other. That is, locating an office in Silicon
Alley decreases the risk and the cost of recruiting workers.
The growth of Silicon Alley can be partly explained by this kind merit, as is
shown in the research on the competitiveness of Silicon Alley10. One of the other
important factors for the development of Silicon Alley is the rich cultural environment
and social amenity that stimulates creativity of artists. In addition, the accumulation of
educational institutes for arts and business in New York City and supports for low
income artists by the city such as preferential rental rate of office and apartments
contribute to the success of Silicon Alley.
It is important to examine the role of the city government in the development of
Silicon Alley. In 1995, Lower Manhattan Economic Revitalization Plan was passed the
city assembly. This plan was designed to vitalize the downtown area of New York City.
For this purpose, it was necessary to create new industries, and the government decided
to promote cultural and media industries, professional service, and biotechnology
industry. This plan includes the following policies: tax reduction such as Real Estate
Tax Special Reduction and Commercial Rent Tax Special Reduction, lowering the price
of electricity (Lower Manhattan Energy Program), converting the use of land (Lower
10 See Coopers and Lybrand, 1996 and 1997 New York Media Industry Survey. This survey reports the main factors of the success as follows: 1) Abundant editorial and artistic talent, 2) the uniquely-high concentration of "content providers" - advertising agencies, publishing, and broadcasting, 3) easy access
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Manhattan Residential Conversion Program), and promoting the mixed use of properties
(Lower Manhattan Mixed-Use Property Program). In addition to these policies, the city
government accumulated software industry in Information Technology District, and
organized educational seminars for venture entrepreneurs with a help of NPO. There are
some other miscellaneous useful supports from the city government, such as holding an
event for making human network, making a telephone list of related companies,
coordinating office and professional service, building a community extranet
(networking the intranet in community level), and coordinating internship program for
universities. In 1997, the city government supported a real estate program named as
“Plug’ go”, which includes the provision of office with the good computer
communication system and the preferential rental rate for cultural and media
companies.
3. Labor supply behavior of a worker in cultural and media industries
Literature related with artists is growing recently, and there are various types of
studies both in theoretical and empirical approaches (for example, Filer, Randall K.
(1990), Galenson and Weinberg (2000), Landes (2001), Rengers and Plug (2001),
Hamano (2003)). There are, however, only a few researches on the labor market of
cultural and media industries except for Robinson and Montgomery (2000) and Caserta
and Cuccia (2001). The reason why we need to pay attention to the labor market
structure of these industries rests on the following facts: 1) the increasing importance
and size of these industries in the economy, 2) there are industry specific problems
related with the labor market, 3) the degree of externality generated from these
industries depends on the labor market structure of these industries. The first point is
discussed in the above section. The second point is complicated and arguable.
Cultural industry consists of the market for popular culture such as cartoon, pop
music and sport, and market for high culture such as artistic music and painting11. These
to major corporate customers. 11 A poet of Victorian era Matthew Arnold captured the conceptual essence of high culture in his literature “Culture and Anarchy” (1869). The term "high culture" has begun to serve for referring to
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two markets have quite different properties and different impact on the cultural
influence in foreign countries or national identity. The market of popular culture and the
market of high culture are substitutes in many cases, and the market of high culture is
often dominated by popular culture. For example, the music industry is shrinking the
market of classical and jazz music by shifting the marketing resource to popular music
because of the low profitability. It is not easy for artists of high culture categories to
continue their creative activities. The important point is that the high culture is more
important for exhibiting national dignity and deepening cultural influence in foreign
countries by receiving respects. In other words, high culture has some externalities in
overall economic and social activity in the long run. In addition, the quality of popular
culture is related with the quality of high culture. Especially in training human capital,
training in the field of high culture gives a basis of training of popular culture. For
example, it is often the case that a musician educated in the field of classical music can
gain the capability of creating high quality popular music.
One of the reasons why the market of high culture is small rests on the fact that
it is necessary for the people to be educated if they want to enjoy the high culture. On
the other hand, people are not required to be educated to enjoy popular culture. The
reason why high culture is deemed to be more valuable is that high culture usually
contains various elements such as traditional and historic formalities, religious
implications, and various social and historic backgrounds. Without understanding these
elements, it is difficult to understand the culture properly. The typical examples are
Kabuki or Noh in Japan. Thus, the possibility of the inefficiency in resource allocation
through market mechanism arises in case where externality or some barrier for entering
the market exits.
The difference in market properties between these two types of cultures is
crucial in characterizing the labor market of cultural and media industries. In case of
high culture labor market, the improvement in the quality of output increases externality
effects, while the market size is limited because of some barriers for enjoying it. Thus,
the policies that stimulate the labor supply of creators can be justified. In this section,
culture which are most highly valued and esteemed by a given society's political, social, economic, and intellectual elite. Opera, yachting, and painting are associated with high culture in the U.S. Popular culture (or "pop culture") refers to the culture employed by the majority classes in a society. The popular movie, popular music, popular television are included in this category.
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we analyze the characteristics of labor market of cultural and media industries, and
examine the justification and the effect of policies for the labor market.
3.1 Basic model of labor supply behavior
The literature on the market structure of cultural and media industries are limited
except for Rosen (1981). Rosen assumed a distribution of artists’ ability, and derived a
demand function for artist with a certain level of ability. Using this demand function and
the supply function derived from a production function, market equilibrium is
characterized. In his literature, labor supply behavior of a worker in cultural and media
industries is not analyzed. The purpose of this paper is to analyze the labor supply
behavior theoretically both for the case of uniform ability and the case where the ability
is distributed. This model is different from the theoretical study of Caserta and Cuccia
(2001) in a sense that we consider the case where earning from creative activity is
uncertain, and provides with a theoretical foundation for the empirical study of
Robinson and Montgomery (2000).
Case 1: The case of uniform ability.
First, we analyze the labor supply behavior for the case of uniform ability. In this
model, we assume that the marginal cost of production is zero and the fixed cost of
production consists of labor cost used for creating content. This simplified assumption
is used for capturing the property of supply condition of cultural and media industries.
This assumption is quite plausible for the case of computer software or music
distributed through internet. From this property, the profit depends only on the sales
amount.
Denote by y and p , respectively, sales amount and price. Let ( )cf y l;
represents the probability distribution of sales amount that depends on the time spent for
creating activity cl . Profitπ is defined by
0
( ) ( )cpy c f y l dyπ∞
= − ;∫ , (1)
where c is a fixed cost of creating product. Denoting by w the market wage rate of a
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standard worker, c is defined by
cc wl= . (2)
In other words, the fixed cost of producing contents is the foregone wage income of
creator in standard labor market.
We assume a lognormal distribution as the probability distribution of sales
amount, and the mean of lognormal distribution µ and the variance of lognormal
distribution 2σ are affected by the amount of labor supply spent for creating contents.
Using the property of lognormal distribution, equation (1) is rewritten as
2( ( ) ( ) 2)c c cpExp l l wlπ µ σ= + / − , (3)
and the optimal labor supply for creating contents is given by solving the following
objective function.:
2( ( ) ( ) 2)cl c c cMax pExp l l wlπ µ σ= + / − . (4)
F.O.C. is given by
2 ( ) ( )( ( ) ( ) 2)( ) 0c c
c cc c c
d l d lpExp l l w
l dl dlµ σπ
µ σ σ∂
= + / + − =∂
. (5)
Since 2( ( ) ( ) 2)c cExp l lµ σ+ / is the average sales amounts y , the optimal labor supply
is given by cl∗ that satisfies
( ) ( )
( )c c
c c
d l d lpy w
dl dlµ σ
σ+ = . (6)
This optimality condition states that a creator increases labor supply to the point where
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the marginal expected income increase from an increase in labor supply equals the
marginal opportunity cost of increasing labor supply (w). From this condition, policies
for decreasing the opportunity cost, such as scholarship for artists, will increase labor
supply for creating contents.
Income distribution of creators is given by
2 2( ) (2 )( ( ) 1)pV y pExp Expµ σ σ= + − , (7)
which is defined at the optimal labor supply level.
By comparative static analysis, we can analyze the changes in labor supply
corresponding to an exogenous change in variance. Totally differentiating equation (6)
with respect to σ and cl , we derive
( ) ( ) ( )
( ) ( )c c c
c c c
d l d l d lyp py d
dl dl dlµ σ σ
σ σσ
∂+ + ∂
( ) ( )
( )c c
c c c
d l d lyp
l dl dlµ σ
σ ∂
+ + ∂
222
22
( )( ) ( )( ( ) ) 0cc c
ccc c
d ld l d lpy dl
dldl dlσµ σ
σ
+ + + =
. (8)
Then, we get
2 2
2
( ) ( ) ( )
2( ) ( ) ( ) ( ) 2( )
( ) ( )
( ) ( ( ) )
c c c
c c c
c c c cc
c c c ccc
d l d l d lydl dl dlc
d l d l d l d ly d ll dl dl dldldl
p pydld p py
µ σ σσ
µ σ µ σσ
σ
σ σ σ
∂∂
∂∂
+ += −
+ + + +. (9)
Recalling that the distribution of sales amounts is lognormal, y σ∂ /∂ is positive. From
equation (6), the first term of the numerator is positive. The second term of the
numerator is negative when an increase in labor supply for creating activity decreases
the variance in sales amounts. The first term of the denominator is positive from the
optimality condition (6) and the fact that cy l∂ /∂ is positive. Negative terms in the
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second term of the denominator are second derivative terms, and are negligibly small.
Thus, an exogenous increase in variance of sales amounts increases labor supply for
creating activity when the negative effect of increasing labor supply on the variance is
large. On the other hand, when the negative effect of increasing labor supply on the
variance is small, the exogenous increase in variance of sales amounts will discourage
the labor supply for creating activity. These results are interpreted as follows: When the
creator judges that their efforts will decrease the risk of sales, an increase in uncertainty
will enforce the creators to work harder. In this case, an increase in uncertainty will
improve the quality of contents. On the other hand, when the creator cannot consider
that the effort is effective for decreasing uncertainty, an increase in uncertainty will
discourage creators in making effort. In this case, an increase in uncertainty will
decrease the quality of contents. That is, an increase in competitiveness among creators
will not directly lead to an improvement in the quality of contents. An increase in
competitiveness leads to an improvement in the quality of contents only when the
consumers of market can recognize the difference in the quality of contents.
One of the important complaints heard in hearing from artists is the
discouragement from the insensitivity to the quality. This is more serious in high culture
field as far as I know. For example, one pianist complained that the market did not
evaluate the high appreciation for the excellent performance in several international
music festivals. Nothing had happened to the pianist after the appearance in the festivals,
although he received thunderous applause in the festivals. The only positive merit he
could receive was the increase in career lines listed in his curriculum vitae. Music label
does not necessarily identify the quality of performance as the market value. Music
label prefers popular music to jazz or classical music because the market value of
popular music is higher. This is a kind of market failure, and is a negative factor for
improving the quality of high culture. In this sense, income support program for high
quality artists with enough achievement will contribute to the quality of high culture.
One young painter claimed that he wants jobs of painting, not through some
design company or advertise company, but directly from clients. He complained about
the big margin taken by the intermediary companies. One of the reasons why the
intermediary companies can take large margin is that the clients such as public institutes
have not enough information about quality of creators and are not capable of
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recognizing the quality of products. Thus, it is possible for the intermediary companies
to enjoy the premium generated from an insufficient information and incapability in
judging the quality of artists. This defect in market does not guarantee that the high
quality artists survive and low quality artists exist from the market. It is possible for the
intermediary to employ a low quality artist who can work at the low price, even where
the high quality artists are available. In this world, it is often the case that truly creative
artists have less job opportunity and have to endure low income, and finally have to exit
from market. To avoid this situation, policies that guarantee the portion of payments to
creators from intermediary companies are necessary.
Case 2: Case of heterogeneous creator
We consider the case where the ability of creator is distributed according to a
certain ability distribution, and assume that the mean and variance of sales distribution
depend on the ability. Denoting by a the ability level, income earned through the
creative activityπ is given by
0
( ) ( )cpy c f y a l dyπ∞
= − ; ,∫ , (10)
where ( )cf y a l; , is a sales distribution. Specifying the sales distribution by the
lognormal distribution, equation (10) is rewritten as
2( ( ) ( ) 2)c c cpExp a l a l wlπ µ σ= , + , / − . (11)
The optimal working time spent for creative activity is given by the solution of
2( ( ) ( ) 2)cl c c cMax pExp a l a l wlπ µ σ= , + , / − . (12)
The optimality condition for the problem is derived as
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2 2( ) ( )( ( ) ( ) 2)( ( ) ) 0c c
c c cc c c
d a l d a lpExp a l a l a l w
l dl dlµ σπ
µ σ σ, ,∂
= , + , / + , − =∂
.(13)
Since 2( ( ) ( ) 2)c cExp a l a lµ σ, + , / is an average sales amounts with ability a, i.e. ( , )cy a l ,
the optimal labor supply for creative activity ( )cl a∗ is given by solving the quation
2( ) ( )( , )( ( ) )c c
c cc c
d a l d a lpy a l a l w
dl dlµ σ
σ, ,
+ , = . (14)
Generally, the sign of /cdl da is not determined, and depended on the relative strength of
the effect of changes in ability and labor supply on the changes in the average and the
variance. The meaning of the LHS is the marginal increase in expected income from an
increase in labor supply. For example, when an increase in ability decreases the variance
of sales amounts much, this may happen. If an increase in ability shifts up the marginal
income from labor supply, an increase in ability increases labor supply for creative
activity. In this case, there exists a certain ability level for the creator to provide positive
labor supply. Define by 0a the ability level required to provide positive labor supply for
creative activity.
If the sign of /cdl da is positive for the relatively low ability creators, income
support program for creators will decrease the value of 0a . That is, the income support
program for the creators decreases the opportunity cost of creative activity, and make it
possible for low ability creators to live up with creative activity, although this support
program increases the labor supply of high quality creators. In this sense, income
support program should be designed with establishing the system of evaluating the
ability of creators. It should be reminded that, however, there is a possibility
that /cdl da is not monotonically positive.
3.2 Externality of cultural and media industries and subsidy policy
In this subsection, we consider a case where deepening cultural influence in
foreign countries through the activities in cultural and media industries have positive
94
externalities such as an increase in demand for domestic manufacturing products, and
analyze the optimal subsidy policy for cultural and media industries.
Denote by τ the subsidy per unit of labor supply of creator, then the externality
generated through the activities in cultural and media industries ( ( ))cQ l τ∗ is given as a
function of the subsidy. Social welfare is given by
( ( )) ( ( )) ( ( ))c c c cW Q l y l pV l lτ τ η τ τ∗ ∗ ∗ ∗= + − − , (15)
where η is a parameter that expresses the degree of inequality aversion. The first order
condition for the optimal subsidy is derived as
cc cc c l ccl l l pQ yl l V lτ τ τη∗′ ′+ = +′ ′ ′ ′ . (16)
The LHS expresses the marginal benefits of subsidy, and consists of the marginal
contribution to externality and marginal contribution to the income of creators. The
RHS expresses the marginal cost of subsidy, and consists of the marginal tax needed for
financing the subsidy and the welfare cost of increasing income inequality. This
optimality condition expresses that the optimal subsidy is determined so that the
marginal cost of subsidy and the marginal benefit of subsidy equals, and the optimal
subsidy depends on the degree of effect of the subsidy on labor supply, the externality,
the income of creators, and the changes in income distribution. The larger externality
effect requires the larger subsidy.
4. Concluding Comment
Cultural factor is increasing its importance for improving the competitiveness of
economy in “knowledge intensive society”. This is the main reason why we need to
study the cultural and media industries. The cultural and media industries affect the
competitiveness of manufacturing and other industries through deepening cultural
influences in global markets. Thus, the competitiveness of cultural and media industries
95
affects the competitiveness of other industries.
One of the important factors which affect the competitiveness of cultural and
media industries is the quality of artists and creators. One of the important results are as
follows. When the creator judges that their efforts will decrease the risk of sales, an
increase in uncertainty will enforce the creators to work harder. In this case, an increase
in uncertainty will improve the quality of contents. On the other hand, when the creator
cannot consider that the effort is effective for decreasing uncertainty, an increase in
uncertainty will discourage creators in making effort. In this case, an increase in
uncertainty will decrease the quality of contents. In the case where ability of creators is
heterogeneous, the analysis shows that the income support program for the creators
decreases the opportunity cost of creative activity, and make it possible for low ability
creators to live up with creative activity, although this support program increases the
labor supply of high quality creators. In this sense, income support program should be
designed with establishing the system of evaluating the ability of creators.
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