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Creative Industries in Sofia CREATIVE INDUSTRIES IN SOFIA December 2018 investsofia.com 2018 Ноември om c estsofia. v n i 2 2 Prepared for Sofia Investment Agency by the Institute for Market Economy December 2018 Creative Industries in Sofia December 2018 Content 1. Introduction ........................................................................................................................................ 4 2. Creative Activities as a Subject of Research ....................................................................................... 4 3. Scope and Definition of the Creative Industries Sector ...................................................................... 5 4. The Role of Creative Activities in Sofia’s Economy ............................................................................. 6 5. Employment in the Creative Activities in Sofia ................................................................................. 11 6. Wages and Labour Productivity in the Creative Activities in Sofia ................................................... 14 7. Investment Activity in the Creative Industries .................................................................................. 16 8. Exports in the Creative Sector ........................................................................................................... 17 9. Conclusions ....................................................................................................................................... 18 Creative Industries in Sofia December 2018 1. Introduction The activities based on a creative process or the so-called creative industries occupy an increasing share of the developed economies. These are activities, where the main ‘input’ material is the knowledge and abilities of the workers, and the product is most often intangible. The present study aims to examine the current state and the trends in the creative sector in Sofia and to outline the opportunities for its future development. The analysis shows that creative activities play an increasingly important role in the economy of Sofia, mainly due to the rapid development of programming, advertising, radio and television activities and production and distribution of films and television programs. According to the latest data, creative industries are responsible for about 6% of Sofia's economy in terms of output. Some of these activities are subject to outsourced services, which explains the notable share of exports in their total output. As a result, an increasing number of persons are employed in areas that can be attributed to the creative industries, totalling nearly 33 000 people. Salaries in those industries grow significantly faster than the average for the city. In recent years, there has also been a significant increase in investment in these sectors. 2. Creative Activities as a Subject of Research In recent years, creative activities enter more frequently the focus of economic analysis and are already recognized as a distinct area of research. The United Nations Conference on Trade and Development, UNCTAD, has published regular reports on global developments and trends in the sector for years. The latest edition of 20161 indicates that creative activities play an increasingly important role in the international trade of goods and services, especially in the developing world. According to UNCTAD's estimate, the total volume of the global market for the output of creative activities for 2012 was USD 547 billion. The developing countries are the main global exporters of creative products and services; exports grew three times in the 10 years up to 2012. The main exporters among the developing countries are China, Hong Kong, India, Turkey and South Korea, while Europe is the leading region among the developed countries, with the five largest exporters being Germany, France, Switzerland, the Netherlands and Belgium. The UNCTAD report also notes that the period since the beginning of the millennium has been particularly successful for the creative sector, and that its market size has almost doubled within ten years2. This growth largely results from the rapid development of the creative industries in the developing countries. In terms of sector segmentation, almost half of the output of the creative activities is in the field of design, followed by publishing (15% of world exports) and audio-visual (12%). In addition to general observations, the report also includes profiles of a number of countries, with Bulgaria among them. According to UNCTAD, the export of the creative sector in Bulgaria in 2012 was worth USD 358 million, but only a year earlier it reached more than USD 700 million. The export of the country is concentrated almost entirely in design and more specifically in interior and fashion design. The report notes that Bulgaria's film industry shows one of the fastest growth rates 1Complete report at https://unctad.org/en/PublicationsLibrary/webditcted2016d5_en.pdf 2Despite its publication in 2016, UNCTAD's publication covers the period between 2003 and 2012. Creative Industries in Sofia December 2018 among European countries. Expectedly, the main trading partners in the sector are from the EU - Italy is the top one with exports of BGN 53 million in 2012, followed by Germany and France. Similar results can be found in a research publication by Galina Zaharieva from D.A. Tsenov Academy of Economics (2016)3, which focuses on the role of creative activities in the Bulgarian economy as a whole, again through the prism of foreign trade. Zaharieva notes that the sector is in the focus of a number of strategies and programs at both European and national level – a fact which should influence its positive development. Among the trends she outlines is the rise in video games publishing, which in 2015 accounted for 23% of the total exports of the sector. Tomova and Andreeva from the Observatory of Economy of Culture Foundation (2011)4 focus on the development of the creative activities in Sofia. According to their analysis, at the end of the last decade the creative industries accounted for up to 7.5% of the total value added in Sofia, but at the same time the city concentrated almost 80% of the added value of the sector in the country. At the time of this study, software and video games, as well as cultural heritage, marked the greatest growth. In addition, 54 000 people were employed in creative activities in Sofia at that period. According to Tomova and Andreeva's analysis, the leading group of companies were the micro- companies. 3. Scope and Definition of the Creative Industries Sector The necessary starting point for the exploration of creative activities is the clear definition and differentiation of the sector. The definition used by UNCTAD is quite appropriate to begin with: "Creative industries are both knowledge-intensive, and labour-intensive, especially those with a high concentration of creative inputs, as occurs, for example, in theatre or film production." 5 Particularly typical for the creative activities is the absence of processing of materials into products, unlike in most production processes. The main ‘input’ materials are the knowledge, abilities and creativity of the authors, used to create a new product.6 This definition is quite useful to distinguish the creative activities from a statistical point of view. Based on this, the specific industries are derived from the current Classification of Economic Activities, presented in Table 1 below. This selection does not stand out to be exhaustive. Some of the creative activities might have been excluded; however, the selected activities represent the best approximation, provided by the present classification system. 3See https://dlib.uni-svishtov.bg/handle/10610/2981 4See https://www.president.bg/docs/1352301215.pdf 5See the report cited in note 1. 6More detailed description at https://www.northernperiphery.eu/files/archive/Downloads/Project_Publications/97/Marketing_Material/De fining_the_Creative_Industries.pdf Creative Industries in Sofia December 2018 Table 1. Economic activities in the scope of creative activities in NACE-2008 NACE Code-2008 Name of the position 58.11 Book publishing 58.21 Publishing of computer games 59.1 Motion picture, video and television programme activities 59.2 Sound recording and music publishing activities 60 Programming and broadcasting activities –e.g. radio and television broadcasting 62.01 Computer programming 71.11 Architectural activities 73.1 Advertising activities 74.1 Specialized design activities 74.2 Photographic activities 90 Creative, arts and entertainment activities Source: NACE-2008 As seen from the table, there isn’t an explicit category, integrating all of the above, other than ‘creative activities’. Taken separately, the different activities vary to a great extent and cannot be unified by a more precise term than this one. 4. The Role of Creative Activities in Sofia’s Economy The National Statistical Institute does not provide assessment of GDP by economic activity at district level. Therefore, the current study analyses the output of the specific activities as an indicator of their size and share in the economy of Sofia. In 20167, creative activities combined accounted for 5.9% of the economy of the Capital, or BGN 3.3 billion out of the total BGN 55.5 billion production output for Sofia. In recent years, creative activities are gaining importance in the economy of the city with their share growing by 0.7 percentage points since 2012 or by BGN 0.8 billion in real terms. However, the distribution
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