What do we know about the impact of coronavirus on the creative industries?

Given the wide variation in how the products of the creative industries are made and consumed, the effects of Covid-19 are very different. And given the diversity of ways of working across the industries, so too are the measures needed to counteract the damage.

There is a wide disparity between the various creative industries in terms of how their products are made and how they reach the consumer – and so the Covid-19 pandemic has affected each differently. Moreover, labour markets within the industries are diverse with a mixture of employment, self-employment and freelancing among creators, performers and other workers – so that a range of measures is needed to counteract the effects of coronavirus.

What are the creative industries?

The term ‘creative industries’ is an amalgam of disparate cultural and creative activities of varying levels of industrialisation combined into a ‘sector’ for national income accounting and policy purposes. There are big differences between component activities – from the performing arts to software and games.

This means that there is also disparity in the impact of lockdown and other protective measures on the various components of the sector. Some have benefitted, some are relatively unaffected and others have become untenable even with the support measures granted by the government. Those measures have supported enterprises and individuals in for-profit and non-profit activities in receipt of subsidies for cultural and artistic purposes. The economy-wide measures protecting workers apply to all the creative industries, while those put in place by the Arts Council of England and Creative Scotland target the arts and other cultural industries in their respective nations.

The UK’s Department for Digital, Culture, Media and Sport (DCMS) defines the creative sector as: advertising and marketing; architecture; crafts; design and designer fashion; film, TV, radio and photography; information technology (IT), software and computer services; publishing; museums, galleries and libraries; music, performing and visual arts. So defined, they constitute just over 5% of GDP, of which well over half is due to the categories film, etc. and IT, etc., with music, etc. contributing 0.5% (DCMS, 2016).

A glance at the list immediately suggests wide disparity between these activities: in the extent of industrialisation; whether they are capital or labour (and human capital) intensive; for-profit or non-profit enterprises; the extent of government intervention, through direct or indirect subsidy or by regulation (such as broadcasting rules or copyright law); and their cultural role or significance. All of the creative industries have been affected one way or another by digitisation.

As the underlying economic organisation of production and labour markets is very different in each case, they have been differentially disrupted by coronavirus. But industrial processes and changing tastes have long had an impact on these industries; for example, there has been substitution between live and recorded music since the turn of the 20th century.

The growing use of digital means of access by the public has significantly altered the organisation of both production and consumption, making even complex performing arts, such as opera and symphony concerts, available in a far greater range of venues via the ‘simulcasting’ of live performances from opera houses and concert halls all over the world to local cinemas and via the internet (Towse, 2019). It has also enabled visual artists to sell their work directly over the internet.

These changes challenge the long-held distinction between the live arts and the plastic arts, and the belief or credo that art must be experienced ‘direct’. The changes have been significant for the impact of lockdown, which in turn has propelled acceptance of new, digital ways of accessing the arts and culture with implications for the means by which creators and performers earn a living.

There is also the question of whether these changes displace or stimulate demand for live performance. Bakshi and Throsby (2014) find evidence for the latter, but the experience of the arts under lockdown may have changed that conclusion.

How does the labour market operate?

The origin of the term ‘gig economy’ lies in the labour market for artists, particularly performers and those in the music industry. Research on artists’ labour markets in cultural economics has found that performers may be employed, self-employed, freelance and unemployed in the arts over the course of a year and with fluctuations year by year: for some, the career span is short (dancers) while others may continue working into old age (conductors).

Creative artists (writers, composers, visual artists) are mostly self-employed, but they also experience periods without work on their chosen art. All but the top few have to take on non-arts work (teaching, restaurant work, etc.) to fill the gaps in earning a living from their arts work (Towse, 2019).

‘Complex’ industries, such as film and video games, employ some artists and hire in others for specific tasks straddling both. This mish-mash of arrangements fits uncomfortably with the institutions of the wider labour market, such as unemployment benefits, and also at present with the government’s provisions for those unable to work due to lockdown (see below).

Related question: How is coronavirus affecting the self-employed?

In most arts labour markets in ‘normal’ times, the supply of labour hugely outstrips demand, with the obvious result that there is downward pressure on rates of payment. Surveys have found that many artists earn below the national average or even below median income. By contrast, the few very successful ones – the superstars – earn very high incomes, although for how long over their career span has not been researched.

Another characteristic of the labour market is that supply is completely open to anyone who can take a photograph or record a song, as many do, distributing the work online (although amateur activity pre-dated the internet). It is difficult to know whether this displaces professional supply; analogously, the same applies to the illegal use of copyright works – are they substitutes or complements for ‘originals’? (The present view of economists is that the latter is more likely – see, for example, Waldfogel, 2018).

What is the role of copyright?

One of the unifying features of the creative industries is their relationship with copyright. Copyright law sets out to enable creators and performers (whether individuals or enterprises) to control the use of their work and thereby charge for it with the benefit of stimulating output that is accessible to consumers and other users (such as the industries).

There are some exceptions that affect artists’ earnings from royalties; for example, work done in the course of employment belongs to the employer. Hence, it matters what type of contract the creator or performer has.

Copyright has become exceedingly, some would say excessively, complex in relation to digital output to the extent that anyone seriously trying to make money from their work requires detailed legal advice in order to enforce their rights. Rights themselves and the markets in which they operate are complex, necessitating specialised institutional organisations for obtaining permissions and paying royalties. Thus, there are high transaction costs in the creative industries for those who exercise their rights (and many choose not to).

Evidence on royalties and related earnings from copyright shows that the same pattern of the distribution of incomes is to be found as for income from other sources (Kretschmer et al, 2019). That may have changed, however, during lockdown as consumption of the arts shifted away from live to recorded work for which copyright payments are due. Given the greater use being made of recorded work in lockdown, those organisations and artists whose work is used online should earn more (unless, as may be the case, royalties are waived).

There are, however, other factors at work: creators and performers are often at a disadvantage in contracting with the large corporations that dominate many of the markets for creative goods and services. Royalty rates may be low and, furthermore, the entrepreneur (publisher, record label, opera house) may require all rights to be transferred to it in the contract.

Depending on the industry, secondary uses (for example, the broadcast of a sound recording) also attract royalties to both parties of the contract; but once the copyright has been transferred, the owner will then be the party negotiating for further uses (for example, streaming music or film). A feature of copyright that has barely been commented on is that such a deal effectively turns the copyright work into an asset over which the owner, not the creator, has the decision rights and so may be used independently of the creator or performer.

There are, therefore, many institutional arrangements in the creative industries that make it difficult to predict the role of copyright in artists’ earnings.

What are the effects of digitisation and coronavirus?

As noted above, digitisation has been adopted in almost all of the creative industries one way or another in the production and consumption of goods and services. Computers and the internet have been increasingly used for many purposes during lockdown, including the arts and entertainment.

Digitisation has to an extent eased the depredations of coronavirus for consumers by making available recorded versions of creative work of all kinds, from ballet to video games. Some of the subsidised industries have done this for free, while the commercially oriented IT-based industries, such as video games, have benefitted. Some works have been specially created to meet the situation.

The question of the ‘authenticity’ of the online cultural experience has been raised by many in the arts world (including long before digitisation). Economists are somewhat on the back foot in this – our models assume fixed tastes, though there is a body of work in cultural economics analysing consumer behaviour in the arts (Towse and Navarrete, 2020).

It will be interesting to see after the fact what the take-up of these online cultural offerings has been. Equally, it will be interesting to see how being deprived of live arts and access to other cultural experiences, such as museum visits, has altered consumption of the arts and culture in the longer run. Coronavirus offers a natural experiment.

Some of the arts and cultural organisations may survive intact: much depends on the restrictions aimed at preventing future outbreaks of coronavirus, such as social distancing. Outdoor theatre and concerts have long existed even though the season is short; but that cannot be a comprehensive or sustainable solution in the UK.

The fixed costs of theatres and concert halls, and the performing companies that play in them, are high in relation to the marginal costs that have to be paid regardless of the size of the live audience. Demand for the performing arts, as for other cultural goods and services, is highly income elastic (though relatively inelastic with respect to price); as we clearly face a severe economic recession, falling real incomes could be as damaging to demand as restrictions on the numbers allowed to congregate on and off stage.

It has been a bleak prospect for the more traditional arts: consumers may eventually be willing to pay higher prices, but ability to pay has always been anathema to the spirit of accessibility of the arts to all that has underpinned the willingness of governments to subsidise them. One solution could be to use the revenue from the digital services tax to subsidise living arts from which the services and many other industries benefit one way or another.

Government and other support packages

Support packages have been put in place through various entities. There are UK-wide government programmes to assist enterprises and individuals, which could apply to the creative industries; there are central government schemes specifically for the arts and cultural industries for England; and devolved schemes for Scotland, Wales and Northern Ireland. The arts councils in England and Scotland have their own support arrangements.

Schemes that support cultural organisations benefit employees, whether artists (performers) or those employed in backroom or front-of-house activities. If the so-called ‘crown jewels’ are to be protected as a priority, the top few (mostly the national opera, ballet and theatre companies) are likely to take a major share of available funds. Freelance or self-employed artists and other workers do not benefit from that type of scheme.

The Arts Council of England has had a scheme to support individual artists from the beginning of the pandemic and is, at the time of writing, organising another; inevitably, there were and will be many applicants and the amounts distributed so far are relatively small.

For some arts organisations and individuals, the lack of work opportunities and income during lockdown has made what was in any case a precarious way of life untenable for those who were already earning below the national average. Many will sadly fall by the wayside. It remains to be seen, however, which survive and even thrive from the increased use of home-based digital art and culture.

Where can I find out more?

A Textbook of Cultural Economics: Cambridge University Press book by Ruth Towse, used for many courses, including economics of the arts, the cultural and media industries, and the digital creative economy.

A Handbook of Cultural Economics: A widely used compilation by Ruth Towse and Trilce Navarrete of short articles by experts covering all aspects of the arts and creative industries.

Digital Renaissance: What data and economics tell us about the future of popular culture: Princeton University Press book by Joel Waldfogel explores how digital technology is upending the traditional creative industries – and why that might be a good thing.

UK authors’ earnings and contracts 2018: a survey of 50,000 writers: Martin Kretschmer, professor of intellectual property law and director of the UK Copyright and Creative Economy Centre at the University of Glasgow.