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Creative Industries: A Typology of Change

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 Creative Industries: A Typology of Change

Candace Jones, Mark Lorenzen, Jonathan Sapsed

Final version FORTHCOMING IN

OXFORD HANDBOOK OF CREATIVE INDUSTRIES

Editors Candace Jones, Mark Lorenzen and Jonathan Sapsed

Abstract

Creative industries experience a variety of changes, which are driven by differing

forces. However this variety may be understood by considering two dimensions:

semiotic codes; the signifiers of symbolic value that consumers derive from products,

and material base; the formats, fabrics, and physical human activities underpinning

these products. We characterize four types of change, based on high and low change

combinations with semiotic codes and material base: Preserve, Ideate, Transform and

Recreate. This framework is applied to a range of creative industries, from mature

sectors like museums, architecture and fashion, through the many transitions of film

production, to contemporary digital advertising and online content creation. We show

how each of the change types appear to have different drivers related to public policy,

demand, technology and globalization, offering an alternative classification

framework to guide creative industries scholars, practitioners, and policy makers.

Key words: creativity; creative industries; globalization; policy; material base;

semiotic codes; symbolic value; technology
Introduction

Even if there are elements of creativity in most human endeavor, not all

industries are organized principally to take advantage of and capture the market value

of human creativity. Creativity is a process of generating something new by

combining elements that already exist (Boden, 1990; Romer, 1990; Runco and

Pritzerk., 1999; Sternberg, 1999) and hinges upon individuals’ and organizations’

capability and willingness to engage in non-routine, experimental, and often uncertain

activities. Creativity is enacted in the individual (Kaufman and Sternberg, 2013),

within teams (Gilson, 2013) and within networks (Cattani, Ferriani, and Colucci,

2013). Such individuals, teams and networks, as well as the business firms that profit

from them, are typically attracted to those geographic locations that offer the best

milieus for them to co-exist and interact, and as a result, particular cities tend to be

more characterized by human creativity than others (Lorenzen and Andersen, 2009;

Florida, Mellander and Adler, 2013). Thus, creative industries engage not only

individuals, firms, and cities, but also national and international governmental policies

to support and protect national cultures and economic sectors (Bakhshi, Cunningham

and Mateos-Garcia, 2013).

To craft and capture value, creative entrepreneurs and organizations may

generate new business models (Svejenova, Slavich and AbdelGawad, 2013) and also

translate various forms of capitals such as symbolic and economic (Townley and

Gullege, 2013). They also organize creative products, performances and services

around projects, develop roles and routines that enable them to successful complete

their products and enhance learning (DeFillippi, 2013), particularly since creative

industries are permeated by paradoxes and managerial challenges that can undermine

value creation and value capture (DeFillippi, Gernot and Jones, 2007). The desire to

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capture value from creative individuals and products generates dynamics of stardom

for individuals (Currid-Haskett, 2013), labor market inequalities for most talent

(Menger, 2013), sunk costs for firms (Bakker, 2013) and laws and international

agreements such as copyright (Kretchmer, 2013; MacMillan, 2013). There is a

significant effort on defining and measuring performance in creative industries,

including artistic, commercial, managerial and social (Hadida, 2013).

The creation and pursuit of value alters cultural landscapes and generates

economic development. Creative industries transform cultural landscapes when

creatives play with semiotic codes—the structure and relations among symbolic

elements—to infuse new ideas and meanings into creative products (Barthes, 1977,

1990). For example, bebop jazz in the 1940s, miniskirts in the 1960s, or the waves of

Modernist architecture throughout the 20th century not only changed how creative

artifacts were produced and consumed, but also importantly cultural meaning. Jazz

was no longer only music to dance to, but was to be listened to and taken seriously,

miniskirts symbolized the new freedoms of the Sixties, while Modernist buildings

celebrated technical scale and challenged implicitly the primacy of the Church. These

symbolic values were recognized and converted to economic values. As engines of

economic development, creative industries have remarkable growth in terms of

product offerings and turnover, and new business models (see for example, DCMS,

2007, 2014; European Commission, 2001; HM Treasury, 2005; OECD, 2006;

UNESCO, 2006), which vary dramatically depending on national context

(Christopherson, 2004, 2008; Hesmondhalgh and Pratt, 2005; Ye, 2008; Economist,

2013a). Although definitions differ, it is clear that the economics of creative industries

generate spillover effects across the wider economy (Cunningham and Potts, 2013).

The combination of changes in semiotic code and material usage reflect and drive

3
cultural change and economic value, encompassing both the tangible and the

intangible. Thus, creative industries are cultures of development, playing a significant

role in how both the social and economic life of nation states develop and change

(Pratt, 2013).

It is evident that while some degree of change is inherent to all creative

industries, they change at different paces, ranging from minor ripples to a “gale of

creative destruction” (Schumpeter, 1942). Understanding the nature of change of

creative industries is central to understanding (and propagating) their potential for

development and transformation. In the following, we provide a framework for such

understanding. In order to do so, we first define creative industries by focusing on

creative products (Hirsch, 2000). By ‘products’ we mean the artifacts and offerings of

creative industries including physical items, performances, services and deliverables

to clients (we use the term product to denote all these). We identify two key

dimensions of creative products that may undergo change: semiotic codes and

material base. Next, we identify four primary drivers of change: demand, public

policy, technology and globalization. Finally, we identify four primary types of

change in the creative industries—Preserve, Ideate, Transform and Recreate—as

particular combinations of change in semiotic codes and material base. Throughout

the chapter, we provide examples of how particular creative products and industries

are characterized by these different change types, and how this has differential effects

on business models, industry organization, and ultimately cultural transformation and

economic growth.

Defining Creative Industries and Focusing on Creative Products

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 There are numerous studies that attempt to define which industries should be

seen as principally creative, varying in whether they include fine arts, cultural heritage

and information technology as part of creative industries. There has been significant

debate about the shift in language from cultural to creative industries (e.g., Garnham,

2005; Galloway and Dunlop, 2007). We suggest that research on the arts (Frey, 2000;

Ginsburgh and Throsby, 2006) and the cultural industries (Horkheimer and Adorno,

1944; Hirsch, 2000; Throsby, 2001; Hesmondhalgh, 2013) can be seen as subsets of

creative industries because they depend on creativity and derive value from this

creativity. The best-known lists are UNESCO (1986), DCMS (2001, updated 2013,

2014), WIPO (2003), Americans for the Arts (2005), KEA European Affairs (2007)

and UNCTAD (2008). From these lists, it is not easy to identify the underlying

dimensions for what is included or not as a creative industry. We provide an overview

of these in Appendix 1. Our goal is to provide simple yet comprehensive dimensions

for identifying and classifying creative products and industries. This enables scholars

and policymakers to make much-needed differentiation.

Measuring the exact size of the creative industries has proven to be a point of

contention (for discussions, see Howkins [2001] and Throsby [2010]). Most scholars

focus on creative products, which enable scholars and policymakers to trace creative

processes (Hirsch, 1972). It is products by which artists generate new meanings and

experiences and are judged as creative; it is the product which peers, critics and

consumers experience. In short, products link artists to audiences. Thus, we focus on

creative products in our discussion on creative industries.

Creative products: Semiotic codes and material base

5
 We highlight two key dimensions of creative products—semiotic codes and

material base—that underpin art worlds and define institutions (Becker, 1982;

Friedland and Alford, 1991); the symbolic and material shape our aesthetic

experiences, enable us to categorize creative products and generate market niches.

Importantly, these two dimensions can accommodate and capture diverse creative

products.

The first dimension, semiotic codes, highlights the primacy of creative

product’s symbolic nature and by such codes artists give meaning to their work and

shape how audiences interpret it (Barthes, 1977, 1990; Caves, 2001; Granham, 2005;

Hirsch, 1972, 2000; Lampel, Lant and Shamsie, 2000). The pattern among symbolic

elements comprises a semiotic code that is called a style in the visual arts or genre in

music and literary art worlds; these patterns are the basis for classifying creative

products (DiMaggio, 1987; Lena and Peterson, 2008). Semiotic codes vary in their

stability and change: in some creative products there are established conventions that

are refined such as classical music whereas in other creative products semiotic codes

experience dynamic change such as in fashion. When semiotic codes change, this

creates high uncertainty about which products will be selected and their success

(Caves, 2000). Artists mitigate this uncertainty by working within a genre or style:

categories for which there is an established community, audience or market niche

(Hsu, Hannan and Koçak, 2009). When artists or firms marry or move across many

genres, they may attract multiple audiences but they risk confusing these audiences

and lowering the perceived integrity of their creative product (Hsu, 2005). By

working within a genre, the artist or producer is selecting tried and tested concepts

and constraints from the infinite variety available. Semiotic codes and the degree of

6
change in their symbols and structural patterns are at the heart of how we classify

creative products.

The second dimension, material base, includes not only materials that give form to

creative products, but also technologies and socio-technical systems that enable the

production and consumption of creative products (Douglas and Isherwood, 1979;

Bijker, Hughes and Pinch, 1984; Pinch, 2008; Miller, 2010). Material base in creative

products is quite diverse, ranging from the body in dance and music, to mediums such

as molten glass and paint, to tools such as musical instruments or paint brushes, to

technologies such as computers, synthesizers, cameras and sound systems, and

increasingly important: the digital format. The material base of creative products

entails distinct ecosystems of knowledge that is reflected in patent categories, as well

as types of suppliers, artists and consumers. The degree of change in the material base

of creative products varies dramatically from refining existing materials with an

emphasis on quality such as in museums and classical music to disruptive innovation

that substitutes materials such as the shift from analog materials and printed paper

hardcopy to digital softcopy in film, music and publishing that has dramatically

changed products, business models, and industry structures. When radical innovation

in the material base of creative industries occurs, it engenders disruption because

former suppliers and distributors based on those material systems are rendered

obsolete and new firms, organizational forms and industry structures arise to replace

them (Schumpeter, 1942). The material base of creative products is central to cost

structures, knowledge reflected in patent rights, competitive dynamics such as

substitution (Anderson and Tushman, 1990; Barney, 1991) and organizational

structures such as vertical integration versus networks (Jones, Hesterly and Borgatti,

7
1997; Djelic and Ainamo, 1999). Thus, material base and changes in the material base

shapes the dynamics of creative industries.

The combination of semiotic code and material base elicits aesthetic responses

from audiences (e.g., peers, gatekeepers and consumers) that drive choices about what

creative products to purchase or showcase and how much to value them (Charters,

2006; Hagveldt and Patrick, 2008; Hoyer and Stokburger-Sauer, 2012). These

judgments can be quite contested and fraught with competing demands such as to

screen for “excellence” or facilitate access (Granham, 2005). Semiotic codes and

material base are used to classify creative products that populate creative industries,

creating distinct niches, which vary on their conformity to conventions and the degree

of protection from market forces (Anand and Croidieu, 2013). By understanding

semiotic codes and the material base, we can better categorize creative products and

better discern appropriate business models, supplier networks and industry structures.

By understanding the changes in semiotic codes and the material base, we can

understand the different types of change in the creative industries. But before we can

do that, we need to consider the different drivers of such change.

Four drivers of change in creative products and creative industries

Inherent to creative products and industries, change is often initiated by one of

four primary drivers: demand, technology, policy and globalization.

Demand exerts an exogenous pull for change when consumers have purchasing

power and organizations’ markets expand, ramping up production and consumption

(de Vany, 2004; Lampel, Lant and Shamsie, 2000). Exogenous demand, or audience

expectations, either constrains or propels change in semiotic codes. Demand

constrains change when audiences and critics reward established genres such as in

8
film (Hsu, 2006; Hsu, Hannan and Kocak, 2009). In music, creative products “usually

have their distinguished genres purposely obscured or muted in the interest of gaining

wider appeal” (Lena and Peterson, 2008: 699). In contrast, audiences for haute

couture and haute cuisine expect novelty in creative products (Aspers and Godart,

2013; Svejenova, Mazza and Planellas, 2007), which drives fads and fashions

(Simmel, 1957). Endogenous demand occurs when artists seek novel forms of

expression; they are “mavericks” that reside at the periphery of the creative industry

(Becker, 1982), such as in music (Lena and Peterson, 2008) and painting (Crane,

1987). Their changes in semiotic codes depend on network structures of brokers

connected to the periphery and core who translate new expressions into the

mainstream (Cattani, Ferriani and Colucci, 2013; Sapsed, Grantham and DeFillippi,

2007). Endogenous demand is the basis for long term predictable change (Martindale,

1990). Fads and fashions in clothing and fabrics may appear spontaneous, but are

planned typically two seasons in advance. When exogenous and endogenous demand

combine, it alters industry structures such as the rise of art dealers in impressionism to

connect new consumers who desired new kinds of paintings with painters who sought

to alter existing semiotic codes of representation and form (White and White,

1965/1997). This meeting of consumer and producer interest is critical in many

industries that depend on continuous feedback and design and is increasingly seen in

creative industries accelerated by developments in technology (di Maria, Finotto and

Ruliani, 2013; Flowers and Voss, 2013).

Technology transforms the material base of creative products, altering processes

of production and consumption. Technological change may be driven by the internal

dynamics of creative industries or trends in the wider economy. Internal change is

seen in architecture with the rise of skyscrapers, whose development required new

9
materials (e.g., steel, reinforced concrete) and knowledge (e.g., statics), altering our

experience of cities and living patterns across the globe (Jones, Maoret, Massa and

Svejenova, 2012). Internal technological change may arise from user innovations that

drive advances in music production by lowering costs and creating value through

enhanced technological products; users are both distributed and focused around

particular communities where firms coordinate input to create new products (di Maria,

Finotto and Ruliani, 2013; Flowers and Voss, 2013). Technological change may be

driven by change in adjacent domains such as semiconductors and computer science,

which enabled creative content to be stored on chips and transferred via electronic

signals on the worldwide web, bypassing brokers who controlled the industry.

Creative industries involve extensive production networks (Coe, 2013); thus, the

substitution or alteration of a node of the network may disrupt production relations

and the network. When technological changes prompt substitution such as digital

softcopy for analog hardcopy, then we see industry disruption and the rise of

alternative organizations and ecosystems to support the new material base

(Schumpeter, 1942). These changes in material base vastly expanded who has access

to music and film products, connecting producers and consumers in new ways and

altering industry economics and structures (Hirsch and Gruber, 2013). For example,

films are increasingly distributed and produced, by Netflix rather than movie studios

and music is distributed through Apple’s iTunes rather than record labels.

Technological changes have disrupted industry business models and industry

structures by altering cost structures, accessibility, reproducibility, and scalability. In

contrast, when material base and knowledge that underpins an industry are not easily

substitutable, it creates a form of uniqueness that protects these products from market

forces, creating competitive advantage (Barney, 1991). Under these conditions,

10
technology more likely supports and extends current practices, companies and

strategies (Christensen, 1997).

Public policy, such as copyright law and public subsidy, shifts over time and

drives change. The international copyright system, designed to value creative

products, influences the different creative industries in dissimilar ways, as it allows

for collection of revenues but also potentially marginalizes individual creativity

(MacMillan, 2013) and influences the pattern of creative production, such as the role

of sampling in hip-hop music following case law that found sampled recordings to be

infringements (Kretschmer, 2013). Digitization in creative production and

consumption has diffused so widely that the enforcement of the extant copyright

system seems infeasible, yet industry and government interests have been intimately

linked in supporting it (Blanc and Huault, 2014; Dobusch and Schuessler, 2014;

Mangematin, Sapsed and Schuessler, 2014). Public policy affects the rate of change in

creative products such as classical music, ballet and opera, which rely on established

conventions that convey membership and status; as such, there is great focus on

processes that preserve and refine semiotic codes. Many Western economies have a

tradition for providing public support for creative industries with low scale markets,

and many depend on such subsidies for survival. The rationale for such government

support includes market failure and the idea of cultural and creative products as ‘merit

goods’. Objectives of policy have shifted from traditional goals like exports and job

growth to knowledge exchange and the spillovers from creative industries to the wider

economy (Bakhshi, Cunningham and Mateos-Garcia, 2013; Cunningham and Potts,

2013). The impact of institutional reform to this system is likely to be differentiated

across the creative industries, but there has been a general agenda to promote

collaboration and networking among institutions.

11
 Globalization is the liberalization of trade and investment that moves money,

people, products, technologies and ideas across regions (IMF 2000), creating new

market opportunities, but also intensifying competition, for the creative industries. For

example, the last three decades’ migration from India to Western countries has

created export markets for Indian culture, while changes in Indian trade policies

during the same period has enabled hybridization of semiotic codes—a blending of

modern western and traditional Indian themes. This has paved the way for an

international discourse and demand for Modern Indian Art (Khaire and Wadwani,

2010) as well as a Bollywood export boom (Lorenzen and Mudambi, 2013). The

combination of global exposure and export revenues from the Indian creative

industries stimulates the creation of new institutional infrastructures and ecosystems

at home, such as fashion and film schools, fashion shows and film festivals, critics

and review systems, and retail outlets and multiplex cinemas. At the same time,

falling trade barriers and the opportunity for cross-border investments also brought

about reorganization in Indian creative industries, for example the displacement of

traditional Indian clothes tailors by modern fashion companies (Khaire, 2013a) and

the corporatization of Bollywood production and distribution companies (Lorenzen

and Taübe, 2008).

Next, we use the relations between changes in semiotic codes and material base to

develop a typology of change in the creative products and industries.

A Typology of Change in the Creative Industries

We argue that the two dimensions of creative products—semiotic codes and material

base—are subject to different paces of and processes for change, ranging from slow-

paced change, dominated by artists and firms seeking to preserve semiotic codes and

12
material base, to fast-paced change, where artists and firms ideate semiotic codes

and/or transform material base. Figure 1 below illustrates four different stylized types

of change in the creative industries, which we, for the sake of simplicity, will refer to

as Preserve (slow change in semiotic codes and material base), Ideate (fast change in

semiotic codes but slow change in material base), Transform (fast change in material

base but slow change in semiotic codes), and Recreate (fast change in semiotic codes

and material base). As paces of change are, of course, continua rather than discrete

clusters, in between our types are a mix of continuity and change in either semiotic

codes or material base. Figures 2 and 3 provide some examples of how our change

typology may be applied to prototypical creative products and industries. These are

illustrative examples, showing how different types of change occur even within the

same industry, for instance between mainstream and niche products, or at varying

historical points. We observe that a few drivers of change tend to be associated with a

type of change: State policy with Preserve, demand and globalization with Ideate,

technology with Transform and a combination of globalization and technology with

Recreate. We discuss different drivers and types of change in the next four sections,

seeking to provide a more detailed account of such variations.

Insert Figures 1, 2 and 3 about here

Preserve: Slow change in semiotic codes and material base

The lower left quadrant in Figures 1, 2 and 3 depicts the most conservative

and stable type. It combines a semiotic code based on aesthetic conventions and

traditional material base. Prototypical organizations that seek to preserve semiotic

codes and material base tend to rely more heavily on State policy, including

performing arts such as classical music, ballet, opera and those that collect, conserve

and/or house creative products such as museums, galleries, antique arts dealers,

13
auction houses, collectors and heritage parks, Indeed, heritage appears on four of the

six definitions of creative industries (e.g., UNESCO, Americans for the Arts, KEA

and UNCTAD). An increasingly important creative industry is that of art and

antiquities markets, which have globalized, expanding to the Middle East and to

China, generating new consumers, institutions and practices (Dempster, 2013).

Organizations and creative products characterized by this type of change are valued

for the extensiveness and quality of their performances and collections; museums are

heralded for the number of items by an iconic painter or within an art movement; the

programme of a concert hall or opera house includes a heavy dose of iconic

composers, even if it mixes popular tunes into its repertoire. The number and nature

of this mix becomes a source of contestation with accusations of focusing on money

not art (Glynn and Lounsbury, 2005).

Although the prototypical organizations that represent this change type are

listed above, other creative industries can form niche specialties in processes that

preserve creative products and techniques. These specialty organizations desire not

only to focus on and preserve aesthetic conventions, but also deepen the quality of

extant material base, and the knowledge to maintain that material base. For example,

artisans and craftspeople specifically work within semiotic and material traditions and

some artists, such as medieval musical troupes, or architects who specialize in

historical styles, focus on learning and retaining traditional techniques. For instance,

Cram and Goodhue in 1914 built St. Thomas church with traditional stone and

construction methods, even when modern materials and methods were available

which delayed construction time and increased costs (Jones and Massa, 2013).

Perhaps because of this, in contrast to other creative industries, digital technologies

have complemented rather than disrupted or supplanted the industries, and changes in

14
material base have been modest. For example, digital banners enable operas to be

understood more widely, but alter neither the aesthetic conventions nor traditional

materials (e.g., props, costumes, staging) of performances.

To explore the change type depicted in this quadrant of the figure, let us

consider museums, as exemplified in Figure 3. The purpose of museums has been and

continues to be debated, whether primarily they are to educate, provide access or

preserve cultural treasures and evidence of ideas; these distinct purposes have been

present since their founding (DiMaggio, 1982). Today many museums are thriving

with average attendance numbers across museums doubling from two decades ago—

from 23,000 to 55,000 visitors globally. Clear ‘blockbuster’ museums focus on

contemporary art such as Tate Modern in London, Pompidou Center in Paris and

Museum of Modern Art in New York (Economist, Dec 21st, 2013b, p. 3, 7). The

reasons for this resurgence are several. First, museums are primarily located in cities

which are in a state of dramatic re-population and economic growth (McKinsey

Reports 2011 2012 April, and 2012 June). Cities are the centers of creativity and

those employed in creative industries, fueling innovation-based economic growth

(Florida, 2002; Florida, Mellander and Adler, 2013) and, largely educated and

affluent, providing a necessary clientele for museums. Second, by constructing iconic

new museums, a city or state seeks to generate tourism and spark urban renewal,

called the ‘Bilbao effect’ after Frank Gehry’s design for the Guggenheim museum in

Bilbao, Spain. Third, museums in Western countries expanded their services and

accessibility such as the British Museum hosting sleep-overs for children and working

with digital experts to amplify participation and engagement in exhibits. Fourth,

museums are a means by which governments in both developed and emerging

economies desire to showcase their culture; iconic new buildings are powerful

15
material and symbol to do so. In fact, China in 2009 upgraded culture to a strategic

industry, and is building museums rapidly to enact this strategy, often with a lack of

appropriate artifacts to populate museums and with unclear purposes (Economist, Dec

21st, 2013b).

The business models and revenue capacity of heritage-focused creative

industry organizations depend heavily on State support, patrons and paying visitors.

Given the recent economic challenges of many states, nations and cities, museums

had to increase their visitors to attract revenues. For example, even though museums

focus on traditions in semiotic codes and maintaining the material base of creative

performances and products, the most successful museums have embraced some

degree of innovation in their business models such as crowdsourcing ideas for

exhibits, using information technology to engage visitors in displays as well as

offering 3-D models of popular artifacts on the web so that they can be experienced

remotely and extend the access of the museum beyond its physical walls (which is a

material change and extends into the next type of change). Museums are proliferating

their brands, for example the Louvre opening satellite museums in Lens and Abu

Dhabi with the plan to rotate the collection among the sites. Critics argue that such

aggressive corporate strategy is inappropriate for a protector of cultural heritage (New

York Times, 9.1.07); yet, it illustrates how Preserving is not a static activity even if

semiotic codes and material base are largely untouched. Preserving is still a source of

industrial change. Hence, the ability to attract visitors to museums or heritage sites is

a key indication of their health and revenue, and the ability to generate identification

with patrons. As developing nations grow wealthy, a museum that enhances

accessibility and engages visitor interest through using technology to support unique

16
experiences and providing special exhibits by partnering with other museums will be

critical to creating a thriving city and culture.

Ideate: Fast change in semiotic codes and slow change in material base
The upper left quadrant in Figures 1, 2 and 3 represents a type with fast-paced

changes in semiotic codes (Barthes, 1977, 1990) while maintaining the material form

expressing creative products. Examples of creative products that represent this change

type are haute couture/fashion, haute cuisine, wine, theater, advertising and fine art.

Processes of hybridizing semiotic codes are at the core of Ideation and driven by the

demand for novelty that underpins creativity: new combinations and recombinations

of existing semiotic elements. While combination is present across the framework and

is thought to be the core process of creativity in science (Simonton, 2004), technology

(Arthur, 2009), the arts (Sapsed and Tschang, 2014), and innovation (Schumpeter,

1942), it is here recombination is most intensive. These recombinations are signaled

by semiotic shifts that may trigger disputes over the appropriateness of labels given

the stability of the material product such as in wine (Anand and Croidieu, 2013). The

material base, while stable, is enacted in unique ways—whether through novel

ingredients and menus, a new fashion season or ad campaign or a new blend of grapes

and labeling of wine. Given this dynamism in the semiotic codes, order depends on

established materials for expressing creative products, such as the texture, color and

fall line of cloth in fashion or the ingredients and their combinations to create tastes

and menus in haute cuisine, which remain relatively stable over time, even if the

knowledge needed to perform that role has been dynamic. With hybridizing and the

rapid change in semiotic codes, a challenge is being perceived as authentic rather than

17
imitative in one’s aesthetic expression (Jones, Anand and Alvarez, 2005; Peterson,

1997).

Ideate is exemplified by music and haute couture, which produce hybrid

semiotic codes to meet the desire for novelty and opportunities offered by

globalization. Electronic music artists have exploited sampling and synthesized sound

technology to produce ever more variations of digital genres, combining established

rhythms with new forms. Dubstep, for example, combined UK Garage music with

elements of Jamaican reggae and Jungle to create an underground South London style

that was ultimately adopted by mainstream artists like Britney Spears, Rihanna and

Snoop Dogg, a typical sequence for new music genres (Lena and Peterson, 2008). In

fashion, styles may be recycled but also given new names to highlight their novelty

(Godart and Galunic, 2014). Fashion seasons offer systematic opportunities and a

stable order to combine and recombine semiotic elements (e.g., new design motifs, as

well as combinations of pants, vests, skirts, blouses, Barthes, 1990). Indeed, the

modularization of semiotic elements enabled their recombination and was central to

fashion becoming a creative industry rather than only a craft of tailors (Djelic and

Ainamo, 1999). Fashion shows also organize the industry through providing

collective events that draw together designers, critics and firms from around the world

to make sense of new trends and opportunities (Schüßler and Sydow, 2013).

Globalization also drives change in semiotic codes within fashion. For example, in

India, globalization has fostered cultural change—expressions of individual identity

and taste married with traditional motifs and materials—as well as roles, where the

primary role of the tailor for customized clothes has been substantially reduced by the

rise of designers in fashion houses in certain market segments (Khaire, 2013a,

2013b). Fashion, which has resisted digital technologies, now has a digital fashion

18
week, uses Facebook, Twitter and blogging sites to position and supplement brand

images and is analyzing tweets and re-tweets to spot fashion trends (Sedghi, 2013).

Although the critic, as an intermediary, still plays a role in assessing the industry and

quality of creative products, though as mentioned above, fashion is trending toward

more instantaneous and democratic feedback via twitter feeds. These trends are

imitated by others, both other fashion houses and also diffused to the firm’s ready to

wear operations, prompting the search for new semiotic combinations for the elite

class and creating cycles of fads and fashions (Crane, 1990; Godart and Galunic,

2014; Simmel, 1957).

Changes to business models in these creative industries are centered typically

on entrepreneurs. The entrepreneur’s identity and passion drives product creation and

their names are often attached to their products such as the early Coco Chanel, Liz

Claibourne and Ferran Adrià. Entrepreneurial producers rely on a small set of clients

and patrons to support new creative products. The products tend to be small batch or

limited season, and since they are aimed at a relatively small set of elite customers,

they are expensive. These businesses enact distinct but complementary business

models: restricted access and diversification. With restricted access, producers tend to

engage in creative exploration. For example, in haute cuisine, Adrià limited servings

at E-bulli to six months and used the other six months to experiment and create new

dishes (Svejenova, Mazza and Planellas, 2007). In fashion, industry conventions such

as Spring and Fall seasons limit product life, but also offer complementary products

such as skirts, jackets, blouses (Siggelkow, 2001, 2002). Through diversification,

creatives build their brand such as TV cooking shows and cookbooks for chefs

(Svejenova, Slavich and AbdelGawad, 2013) or perfume, accessories and cosmetics

for fashion houses. Although there are commonalities for business models, these are

19
enacted in distinct ways depending on the historical and institutional legacies in which

these companies were founded. For example, haute couture is organized as a “the

“umbrella holding” company in France, the “flexible embedded network” in Italy, and

the “virtual organization” in the United States” (Djelic and Ainamo, 1999: 622).

Transform: Slow change in semiotic codes and fast change in material base

The lower right quadrant of Figures 1, 2 and 3 highlights a change type with

fast-changing forms of material base of creative products. Technological innovation

often disrupts existing industries (Tushman and Anderson, 1990; Christensen, 1997)

and once a new technology is established, older technologies become obsolete and

tend to disappear whereas with semiotic codes, old codes can be reimported and re-

used as classic designs. For example, the shift in the material base from analog to

digital technology has dramatically altered the landscape previously occupied by film,

music and publishing. The digital format not only allows for easy replication and

distribution over telecommunication lines, but also privileges technology and

communications companies, who hold expertise in manipulating digital systems and

information; they have become the new intermediaries between artists and consumers.

For example, download services like Apple’s i-Tunes now dominate music CD sales.

Google provides access to music (google play), video (youtube) and publishing

(google books). Spotify shares music. Netflix not only distributes but produces

content-first episodes, and now movies, that can be rented, streamed and even

watched all at once (rather than weekly) (Taylor, 2013).

Integrated entertainment companies—publishing, movie and music

conglomerates—exemplify this change type and provide insight into how and why

mass markets tend to have slow changes in semiotic codes, but experience dramatic

20
changes in material base. First, audience expectations constrain work within accepted

genres (Hsu, 2005; Hsu, Hannan and Ocak, 2009). Thus, entertainment firms

reproduce their past products and offset their risks of lowered revenues by sticking

with already-successful properties within established genres, such as blockbusters

franchises (Christopherson, 2008), which entail enormous sunk costs (Bakker, 2013).

New genres or novel combinations, such as Country and Western music, were ignored

until a change in reporting or tracking revealed its existence as a viable revenue

stream (Anand and Watson, 2004). Second, entertainment companies focus on smaller

budget, lower quality product to fill media pipeline and pressure more peripheral

members of the industry to work faster and cheaper to contain costs (Christopherson,

2008). Ironically, their actions lower the quality and diversity of product offered to

consumers, prompting consumers to look for alternative sources of entertainment.

Their actions also exacerbate stratification and inequality, where a few artists are

stars, gaining most of the work and monetary rewards (Currid-Hackett, 2013; Menger,

2013). Third, the hybridizing benefits of globalization are quite challenging in mass

markets and semiotic codes do not travel well between various countries. For

example, USA, China and India are the largest film markets, and their film industries

have built such distinctive semiotic codes that foreign films find it notoriously

difficult to penetrate these markets (Lorenzen, 2009). Further, semiotic codes are

culturally based, which means that “Too many films are both too foreign and too

familiar for audiences abroad” (Economist, Dec 21, 2013 p. 107). Fourth, government

policy differences impede effective market development. China imposes censorship,

bureaucratic hurdles restrict access to which and how many foreign films can enter

and importantly, less creative license because China wants to use films to “inculcate

Chinese values and culture” (Economist, Dec 21, 2013, 107). In an attempt to work

21
out these globalization challenges, Hollywood filmmakers are co-financing or co-

producing Chinese films to gain a foothold in the burgeoning market, but cultural and

policy differences still constitute substantial challenges for international co-

productions, both for Chinese filmmakers and Western filmmakers. Bollywood, on

the other hand, addresses similar challenges by “springboarding” its way into the US

market by acquiring production and distribution companies there (Lorenzen and

Mudambi, 2013) similar to what the United States did in Europe during the 1940s and

1950s (Balio, 1985).

In addition to technology and information companies as new competitors to

film, music and publishing, they also offer ‘digital native’ creative products such as

videogames, developing content based on accepted genres from film such as action,

sci-fi, war and fantasy. For some thirty years these genres have been serving the

traditional ‘hardcore’ games market for videogames: young to middle-aged males.

These gamers value innovations that are tightly linked to the material base in the

processing power of consoles and their speed and ability to run video and graphics

animation (Sapsed, Grantham and DeFillippi, 2007). Each new console generation

requires ever more complex and large scale games to be produced, which means ever

greater projects and sunk costs for the developers (Bakker, 2013), leading to

concentration in this segment of the industry. Similar dynamics can be seen in the

film animation industry, which was crafted by teams of cartoonists in small

workshops and now require hundreds of artists and developers, each working on a

tiny slice of Computer Generated Imagery (CGI) on blockbusters like Avatar or The

Avengers. The work process to achieve the desired effects is described as a “digital

bricolage” coordinating digital assets, tools, resources and geographically dispersed

creative workers (Rüling and Duymedjian, 2014). The change in material base from

22
traditional animation drawing to digital tools and format has had profound

implications for organization in the industry.

Similar to entertainment industries of film, publishing and music, new media

and technology companies tend to locate in or near large cities, such as New York

City, Los Angeles, and San Francisco in the United States, and London in the United

Kingdom. These large cities have strong higher educational institutions, amenities and

life styles that attract workers in the creative industries (Florida et al, 2013), and

ecologies of specialized suppliers and freelancers that support the project-based

product development processes of these industries (DeFillippi, 2013; Lorenzen and

Frederiksen, 2005; Vinodrai and Keddy, 2013).

Traditional business models for film, music and publishing are no longer

working. First, traditional revenues sources no longer produce levels of revenue as

they did in the past. Audiences pirate and share content or access it from technology

companies. Recent reports by industry experts reveal that few movies are profitable,

only 7% of British movies made a profit (Economist, Dec 21, 2013, p. 105) and the

record industry has seen revenues decline, some estimates say by $10 billion (Spotify,

2014). Media companies threaten lawsuits for piracy and sharing (e.g., Napster) and

these practices dampen individual creativity and cultural diversity because current law

commodifies and instrumentalizes cultural outputs (MacMillan, 2013). Second, with

the digital revolution, artists in principle can produce and directly distribute their

music to consumers, bypassing mega media companies traditional brokerage role and

increasing the diversity of music available (Foster and Ocejo, 2013; Hirsch and

Gruber, 2013), although they still require marketing and promotion and there is no

shortage of digital intermediaries appearing to replace those of the old business

models. Third, new media industries’ business models have shifted from company

23
selling products to consumers to ad revenues and membership fees. Netflix and

Spotify gain revenue from membership fees rather than purchase or rental of creative

products. The average person spends $55 on music in a year whereas Spotify’s

premium members spend an average of $120 per year (Spotify, 2014). However, the

systematic data gathering by these technology-focused new media companies is

increasingly raising concerns about privacy. Nevertheless the massive data generated

by online activity has given rise to the high growth online segment of the advertising

industry, which is displacing the familiar media of TV, radio and print. Advertising no

longer depends on clever combinations the drive Ideation, but is now fused with data

analytics and Search Engine Optimisation (Sapsed et al., 2013)

Recreate: Fast change in semiotic codes and material base

The upper right quadrant of Figures 1, 2 and 3 represents fast-paced change in

both semiotic codes and in material base. These creative industries are extremely

dynamic and their artistic and material properties are tightly coupled such that

expressing new semiotic codes drives new material innovations and vice-versa,

resulting in a total recreation of products and industries. Industries that represent this

change type include parts of architecture where new materials enable the expression

of new building styles such as skyscrapers, or textile design combined with

electronics to produce ‘Smart fabrics’. These are a step beyond fashion’s use of new

materials, from rayon through to lycra, but used in largely established categories of

clothing such as sporting and athletic. Within design and consumer goods, the

introduction of plastics altered the type of chair forms and launched new furniture

styles. The semiotic code changes associated with this material base change have been

varied, on the one hand plastic furniture was first designed for high end consumers by

24
renowned practitioners such as the Bauhaus school, yet other classic designs—like the

‘stacking’ chair—were adopted by public sector institutions like schools for their

affordability. This duality of cultural meaning persists today. However in many cases,

Recreate—changes in both semiotic codes and material base—may occur more easily

because many of the innovations depend on a limited set of people to experiment. For

example, in architecture, this set includes persuading the client and collaborations

with engineers to assuage building regulators rather than satisfying a mass market.

Thus, audience expectations, such as those in film, music and publishing, which dilute

innovations to appeal widely, are not so present in this context given the different

client base and revenue models. Indeed the final ‘audiences’ for buildings, their actual

occupants, often disagree with the aesthetics and symbolism of their procurers. This

type of conservatism can lead to revivalist styles, such as New Classical and Mock

Tudor, which hide contemporary structures behind traditional façades (and belong

more closely to the Preserve change type).

Architecture exemplifies this Recreate process in creative products due to the

intimate relation among semiotic codes and material base. For instance, in order for

Frank Gehry to design and create a new genre of “deconstructivism” in buildings of

bent steel and metal shells, he had to find a new design tool which he imported from

plane design, generating "wakes of innovation" through the supply chain as others

innovated when they adopted and adapted to the new digital technology and new

material constructions (Boland, Lyytinen, and Yoo, 2007). With new materials, new

semiotic codes were created that contravened extant semiotic codes such as Frank

Lloyd Wright’s Unity Temple: a church made from reinforced concrete, had a flat

topped roof with no window openings and no spire (Jones and Massa, 2013) and Le

Corbusier’s placing large buildings on pilotis (stilts) to rise above rather than sit on

25
the ground (Jones, Maoret, Massa and Svejenova, 2012). Clearly, reinforced concrete,

a new material, was needed to sustain the weight of tall buildings. Architects’

innovations in materials and styles challenged government policy, creating new

regulations. For instance, Wright’s Johnson Wax building had nine inch diameter

reinforced concrete pillars to carry 12 ton roof which “flagrantly violated” the 30 inch

diameter requirement (Anonymous, 1937). Wright poured the column, used wire

mesh instead of the prevalent steel rods and tested it with 60 tons of weight; the

column stood and building officials issued his permit. Johnson Wax became on icon

and exemplar of new building style and material construction. Although changes in

semiotic codes and material base may take decades to fully assimilate and to alter the

built landscape, such as Modernist architecture, which took close to 70 years, these

efforts engage existing institutional infrastructures such as collaborations with

engineers, professional associations, schools and journals (Jones, Maoret, Massa and

Svejenova, 2012).

The revenue models of architecture and other forms of design are based on

client relations and diversification of client sectors, particularly given the volatility of

construction and related areas. For example, architecture firms routinely use

networks, creating partnerships with complementary areas of expertise, and target

some stable areas of the construction industry that has continued growth such as

public schools, corporate offices, aging facilities or healthcare. Thus, one client sector

can compensate for another whereas boutique firms that specialize are more likely to

whither in poor economic climate (Blau, 1984). Architectural and design firms use

network forms of governance that engender both collaborative stability and flexibility

to adapt to uncertain environments rather than internalizing skillsets such as

engineering or landscapes (Jones, Hesterly and Borgatti, 1997; Jones and

26
Lichtenstein, 2008); project-based organizing and project ecologies facilitate this

adaptability and flexibility (DeFillippi, 2013; Vinodrai and Keddy, 2013).

Discussion

Primarily addressing manufacturing industries, the Schumpeterian tradition of

understanding change (exemplified by innovation studies and the research field of

industrial dynamics), focuses primarily on the material base dimension of products

and industries. By contrast, as we also include the dimension of semiotic codes, our

framework is better suited to understand changes in the creative industries. In these

industries, disruptions of business models and industry organization arise not just

from technological change, but also from changes in semiotic codes. To distinguish it

from Schumpeterian ‘creative destruction’, we have dubbed change that encompasses

both semiotic codes and material base ‘Recreate’.

We offer two important caveats on our framework. The first caveat is that we

have not traced historical shifts and dynamics such as the relation between peripheral

and core actors that hybridize to create new semiotic codes. For example, avant garde

movements often percolate in the periphery of a creative industry, which may later be

hybridized or integrated into established semiotic codes, generating new genres or

styles and reinvigorating the industry such as painting (Crane, 1987; Sgourev, 2013)

or music (Lena and Peterson, 2008).

The second caveat is that because the change drivers policy, demand,

technology and globalization are dynamic, creative products and industries often

move between change types over time. We have shown this with the examples in

Figures 2 and 3. For instance, the film industry was characterized by Ideate, seen in

the development of semiotic codes (e.g., narrative forms and genres), when it shifted

27
from a focus on technology to content (Jones, 2001). Then, from 1920 through 1948,

it was characterized by Recreate with the introduction of sound and color as new

technologies and developed new genres that capitalized on sound (e.g., Hollywood

musicals) or grainy films shot in black and white (e.g., film noir). This period

included industrial reorganization from small production studios to a handful of

vertically integrated firms that controlled production, distribution and exhibition

(Balio, 1985). When exogenous demand dropped, government policy arose (e.g., anti-

trust regulations in 1948) and globalization, particularly protectionism, occurred from

1950s onward, these re-organized the industry into production and distribution

networks. Currently, film is experiencing Transform due to technological innovations

that are upending business models and industry organization.

During the last decades, the growth and economic promise of the creative

industries has spurred a range of public policies across Western economies, Asia, and

latterly South America, with different flavors but aimed at promoting this category of

industries for economic development (Bakhshi and Mateos-Garcia, 2013). Creativity

gives rise to cultural as well as economic value, as well as socio-economic

development potential. Depending on how they are categorized and measured creative

industries constitute a high-growth sector that faces the future and in some countries

and regions form a substantial proportion of value-added in the economy (e.g. DCMS,

2014). There is of course a lock-in effect in many of these established centres that

bestows advantages on them. The most obvious example being Hollywood as the

center of the film industry (Storper, 1989), and yet Bollywood emerges as a contender

in the scale of its activity (Lorenzen and Mudambi 2013). Local film production

clusters are also appearing elsewhere across the globe (Lorenzen, 2009; Coe, 2013).

Because of the creative advantages of the periphery (Cattani, Ferriani and Colucci,

28
2013), developing countries and emerging economies may have advantages as the

center of creative industry networks become saturated and in need of fresh ideas.

Compared to other celebrated high-value added industries, such as biotech and large

scale ICTs, some creative industries have relatively low entry barriers. Those creative

industries with low finance and capital requirements offer a cheap and alluring path

for new individuals, firms, and economies to enter into the global marketplace.

Caution, however, is warranted in the creativity discourse. We should

remember that many creative industries have the capacity for cultural transformation,

but not necessarily for being economic engines. Given the high levels of creativity in

production and the nature of their demand, creative products that typify Preserve,

such as symphonies and museums are likely not to be scalable, cannot guarantee mass

audiences in spite of some notable successes, and the majority will continue to depend

on public subsidies to be viable. Many creative industries are also mature and are

vulnerable to fluctuations in the world economysome are even in decline and

disarray in the search for new business models that properly reward creative work and

its complementary business activities. Furthermore, significant entry barriers

persevere in many creative industries, in the guise of extant ownership structures,

marketing muscles, and distribution infrastructures. The digital revolution is double-

edged in how it affects creative industries; whereas some traditional content providers

struggle to make old rules work, those industries and firms that embrace the

connectivity, marketing and combinative power of the Internet appear to be

prospering. There is growing evidence that creative and IT industries are

fundamentally linked in the industrial dynamics (DCMS, 2013; Sapsed et al., 2013).

We have suggested that the key to stimulating this potential through public policy is

by understanding how changes differ across industries. Creative industries are diverse

29
and span a range of products. Not all countries and regions can be manufacture

exporters, and similarly not all countries and regional governments can make generic

creative industry policies work; however, by understanding nuance and the local

cultural advantages, there are surely profound opportunities for prosperity that

maintains cultural dignity.

Conclusion

Prior discussions and classifications have yielded confusion and competing

lists of what is or is not a creative industry. In this chapter, we have, as an alternative,

offered a framework highlighting two key dimensions of creative products—semiotic

codes and material base—and used these to classify creative products and develop a

typology of change in the creative industries. This framework warns against making

generalizations across all creative industries because the differences in their semiotic

codes and material base generate distinct change dynamics. For instance, film, music

and publishing are quite similar: they focus on mass markets, make money from their

blockbuster products, enlist brokers to spot and filter talent, and their synergies have

often made it attractive to integrate them in entertainment conglomerates. Hence the

rise of digitization changes their material base, and in a similar way. In contrast,

fashion, haute cuisine and architecture have distinctly different dynamics and a

different material base. Our framework captures and compares these differences,

along with identifying the primary drivers for each type of change. By juxtaposing

these four change types, we hope to demonstrate, on the one hand, the value of

analyzing both the semiotic and material dimensions of change, and, on the other, that

creativity does not always involve similar paces and types of change. We need to

understand when and how it does, in order to profit from such change.

30
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Figure 1 A Typology of Change in the Creative Industries

Fast change

Ideate Recreate
Semiotic Codes

Preserve Transform

Slow

change

Slow change Fast change

Material Base

46
Figure 2: Examples of Change in Advertising, Architecture and Videogames

Semio c
Codes

Ideate Recreate
Brutalism,
Adver sing e.g. Le Deconstruc vism,
For TV, radio, print Corbusier e.g.Gehry

Casual/Social
New Classical games for iOS
Low architecture High
Change Change
Blockbuster
Games shooter games
Workshop for consoles

Online search
adver sing
Transform
Preserve
Material
Base

47
Figure 3: Examples of Change in Fashion and Textiles, Museums and
Performance Arts

Semio c
Codes

Ideate Recreate

Smart
Haute Couture
fabrics

Low High
Change Change
Museums Online Access
and galleries
Online streamed
performances
Classical Music

Tex les for athle cs

Ballet and sports clothing
Transform
Preserve
Material
Base

48
Appendix 1. The most common definitions of Creative Industries

Americans
UNESCO WIPO KEA UNCTAD DCMS
for the Arts
(1986) (2003) (2007) (2008) (2013)
(2005)
Socio-
cultural
activities
Environmen
t and nature
Sports and
games
Museums
Cultural
and Heritage Heritage
heritage
collections
Printed Publishing
Press and Books and
matter and Publishing and printing Publishing
literature press
literature media
Performing
Performing arts and
Music, arts entertainmen
Music and t
theatrical Performing Performing
performing
productions, arts arts Sound
arts
operas recording
Music
and music
publishing
Visual arts
(including Visual and
arts and graphic arts Visual arts/
crafts) photograph Visual arts Visual arts
y
Photograph Photograph
Photography
y y
Motion
Motion pictures,
Film and Audiovisual
Cinema picture and Film video and
video media
video television
programmes
Programmin
Radio and Radio and Radio and Television
g and
television television television and radio
broadcasting

49
 Advertising
Advertising PR and
Advertising Functional
services communicati
creations:
Design, new on
media such Translation
as software, and
digital interpretation
content and
games,
creative Specialised
Design Design
services design
such as
Architecture Architecture
architecture
Video and Software
games advertising, publishing
Software digital Computer
and services and programmin
databases recreational g
services
Computer
consultancy
Copyright
collective Art schools Cultural
managemen and services education
t societies
Note: The terminologies are the original used in the various sources. Based on
copyrights, WIPO’s (2003) definition is the most narrow, excluding a range of event-,
education-, and heritage-based industries. By contrast, UNESCO (1986) is very broad
and includes cultural heritage, environment/nature and socio-cultural activities (such
as association and community work). However, neither this definition nor the one
proposed by Americans for the Arts (2005) incorporates recent boom industries such
as IT, software and specialized design services, which have been included in the
definitions by DCMS (2013) and UNCTAD (2008). The latter definition also includes
heritage and traditional arts and crafts (but is more operational than UNESCO (1986)
in that it focuses on industrial activities, omitting socio-cultural activities).

50
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