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Creative Economy: What It Is And How It Originated?

Friday, February 11, 2022

Startup Jedi

We talk to startups and investors, you get the value.

Creative economy is now often called the new reality or even the next stage of human development. Bold predictions are supported by facts and figures: the number of players is growing, billions are invested not only in startups working with "creators", but also in content creators directly. By 2024, the global creative economy market could reach $1T. So, Founders club startup studio decided it’s a phenomenon worth talking about, so let’s get started, shall we?

What is creative economy?

Creative economy is the economy of the "next generation", where the main capitalized value is new ideas. It is the economy based on innovation, novelties and creative products.

Sometimes the term "creative economy" is used in a narrower sense as the name of the industry where independent authors (creators) make money from the unique content they create.

Actually, the definitions do not contradict each other: all kinds of content creators, writers, bloggers and musicians take an important place in the economy of ideas. In a sense all their work is also a unique idea.

An innovative product does not have to be a new technology: it can be something familiar positioned from a new angle, in a new context. In other words, something that will surprise future consumers.

Key Concepts of Creative Economy

Now creative economy in its fullest sense exists in developed countries (like the USA and Western Europe) with a stable economic situation and a high standard of living. The USA with its Silicon Valley and developed production can be safely called the locomotive of creative economy. But Asian countries are also gradually being drawn into the niche. They have an important competitive advantage, large audience. For example, TikTok, which can be called the #1 platform for creative content creators, is owned by the Chinese ByteDance

To better understand what creative economy is, let's have a look at some of its core concepts.

Creative business is an organization that uses innovative ideas and intellectual capital as the main source of making income. Most startups are creative businesses.

Creative class is a social stratum whose main activity is to create and promote. It is an extremely heterogeneous community — nevertheless, all these people are the driving force of the creative economy.

Creative tools includу all kinds of services that help create, distribute and monetize content. For instance:

Creators are those who develop unique ideas (or unique content). They play a major role in creative economy. But besides them, there are other players in this business:

  • those who promote content (special agencies, Tik-Tok houses, intermediaries);

  • those who help monetize ideas (these can be both direct investors and intermediaries who help find sponsors).

What is the essence of creative economy

The "core" of creative economy is the creators, people who produce unique ideas or content. A supporting infrastructure is being developed around them:

  • services for working with content/ideas;

  • a team that supports you on the way from idea to implementation

  • organizations that help develop an idea/learn how to create content (accelerators, incubators and others);

  • professional communities;

  • organizations that help distribute content/promote ideas (marketing agencies, targetologists, SMM specialists, and others);

  • investors (sometimes the audience can act as an investor, as, for example, on crowdfunding platforms or Patreon).

The rest of the world is a potential consumer of a creative product: whether the idea / content will receive support and interest hundreds (maybe millions?) of people depends on the efforts of the creator and the supporting infrastructure. If everything works out, the idea will grow, and so will monetization.

There are many prerequisites for the emergence of the creative economy, including the improvement in the standard of living and well-being in many countries, and a trend towards everything unique — as opposed to the same "serial" goods that have flooded the world. Add to this the growth of the startup industry, which has proven how valuable an idea can be over the past 20 years. Perhaps overabundance of information in the digital world is one of the premises. We have shorter attention spans, we forget faster, we constantly need to remember new information, we need information that will surprise us.

One way or another, the market of ideas is growing on all fronts: the volume of venture investments in startups at the Pre-seed stage (that is, in fact, in one idea) is growing, and so is the market of influencers and content producers. Yes, according to AIB Russia, in Russia, the Influence Marketing market grew by 63.3% over the year and amounted to ₽11.1B. And in the world, according to SignalFire, tеhere are over 50 million people who call themselves creators, with $20.85M in donations to creators last year on Patreon alone.

Major corporations (like Meta and TikTok) are setting up their own incentive funds for top content creators, and investing in bloggers is gaining momentum. The United Nations has also declared 2021 the International Year of Creative Economy for Sustainable Development.

How did we get to where we are?

To a certain extent, creative economy has almost always existed. Talented "creators" who brought their ideas to life in the form of inventions, poems, or simply their own view of current events occasionally managed to monetize their activities. But it wasn’t until 10-15 years ago that creative economy came to systemic development and the formation of its own market.

Since the early 2000s, the growth rate of creative services (advertising, product development, the music industry, and others) has been increasing by 17% annually. Thanks to economic growth, more and more people understand that ideas are not something opposite to material well-being, but, on the contrary, that they can bring a lot of income. In the last 3-5 years, creative economy has been talked about as an important market trend and a new stage in the development of society.

In 2021, venture capital investors invested more than $2B in 50 startups that focus on working with content creators. According to Influencer Marketing Hub, by now the volume of the global market for creative industries is about $104.2 billion. And by 2024, the volume of creative economy in the world may exceed $1T. The numbers are just impressive.

How to make money in creative economy?

There are many opportunities to make money in this area. You don’t have to have visionary talent and brilliant ideas. Here are the main areas to make profit in the creative industry:

  • Generating ideas. Founders of start-ups, writers, musicians and directors follow an extremely difficult, but incomparable path of developing and implementing their own ideas.

  • Creating unique content. This is done by bloggers who regularly create unique content that is interesting to their audience. Content can be anything: from Instagram photos to video reviews of movies, from small notes about daily life to works of art.

  • Producing. Producers do not act as creators, but rather as organizers who help ideas find their way, open up and get monetized.

  • Developing a personal brand. Sometimes the very content that is in demand and interesting can be your own personality. And when a certain audience volume is reached, you can do anything from chips ads to creating your own cryptocurrency Whatever you choose will be commercially successful. The difficulty is that such success requires titanic work and a number of coincidences.

  • Working in the creator's team. You don’t have to be a founder yourself. Instead you can work in a startup team (or in a blogger’s team), using your best skills to develop an idea.

  • Idea distribution. Here we are talking about working in the supporting industry that helps spread and promote ideas. This includes advertising, marketing, SMM, PR, and so on.

  • Selecting investments for ideas. The services of consultants and intermediaries are gaining popularity. These are the people who help the creator find reliable sources of financing.

Creative Economy Growth Drivers

General transition to online. The fact that most people go online on a daily basis provides many opportunities for the growth of the creative industry: this is a huge audience, daily content consumption, and the need for new ideas.

Flexible Ideation Process. With the development of such diverse technologies as AI, virtual reality, NFT, opportunities for creative content creation and innovation are increasing.

Monetization of ideas and creativity. Every year there are more and more ways to monetize ideas and unique content, and the volume of investment in ideas is growing — not only in technological ideas, but also purely artistic ones.

Emergence of market leaders. While creative economy market is still shaping and the rules are being determined, there are already leaders — both among supporting services for content production, and among creators. This competition naturally leads to the development of the entire market.

***

What will creative economy bring us? Creators never had it easy: one of the classic themes in literature and cinema is the conflict between economically unprofitable sincere creativity and profitable soulless craft. We know many names of people who managed to emerge victorious from this conflict, but how many remained unfulfilled? Moreover, sometimes creators only gained fame after death: a vivid example of this is Van Gogh, who sold only one painting during his lifetime.

Well, it seems that the creative economy is finally able to resolve this conflict and give the world an unprecedented variety of ideas. And if you have had a slightly crazy but very interesting idea for a long time — maybe it's time to try it out?

11 Feb 2022

 

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