Art
GUEST ARTICLE: The Funding Drought: The UK's Creative Industries As An Investment Opportunity
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There is said to be a shortage of funding for the UK's creative industries, whether this applies to film, music or other branches of the arts. But gaps create opportunities, so the author of this article argues.
There is, so it is claimed, a dearth of funding for the creative industries in the UK – a term relating to fields such as music or the visual arts. In recent years, for example, there has been a trend of funds being created to raise money for the “gap financing” that had been previously available to film distributors from banks. As banks have pulled in their horns because of tighter capital standards, this has left a void which hopefully new, non-bank actors can fill.
Writing on the subject of how the UK’s creative industries are an attractive opportunity is David Glick, who is founder and chief executive of Edge Investments. The editors of this publication are pleased to share his opinions and invite readers to respond.
In an environment of market volatility and low interest rates,
investors are increasingly looking to alternative asset classes
and sectors to maximise their returns. This means that the most
overlooked and misunderstood industries are sometimes the most
attractive.
Take the creative industries sector currently on an outstanding
growth trajectory. This sector is the fastest growing in the UK,
now worth £79 billion per year to the economy, generating
revenues of more than £8 million ($12.2 million) an hour; the
creative economy represents 10 per cent of UK gross domestic
product. Globally, the sector is worth £1 trillion, and can boast
of a growth rate of 6 per cent per annum.
The creative industry, which is predominantly made up of small
and medium sized companies who create, manage and commercialise
intellectual property in sectors such as television, radio,
computer games, music, advertising and fashion, is particularly
attractive thanks to the scalable revenues which these companies
can achieve. For example, Mirriad uses patented computer vision
technology to digitally insert advertising into visual content at
the point of transmission. Fixed costs are low and think of the
scale of content that it can be applied to – whether that’s
classic films from the 1930s or tailoring the latest James Bond
to a different geography.
Within the creative economy, many of these sub-verticals are
experiencing explosive growth; for example, the UK's independent
television production industry is now worth more than £3 billion
- quadruple the industry’s value only nine years ago.
Britain is learning to shout about the achievements of their
creative industries sector from film to 3D printing in
architecture. For example, the UK is one of only three countries
in the world (along with the USA and Sweden) to be a net exporter
of music. The Grand Theft Auto video game series has topped well
over 100 million sales and was created by Rockstar North in
Edinburgh. And whilst the success of the Harry Potter franchise
and films are well known; less so is the fact that thirteen of
the top 35 global box office films of all time are based on the
works of British novelists.
It is unsurprising therefore, that Britain punches above its
weight when it comes to the creative industries. Sadly, this
global benchmark of innovation has been overlooked as an
opportunity for investors to deploy capital and share in
entrepreneurial success. So why is this and where does the
opportunity lie?
Investors are starting to realise that the sector is not just the
domain of high risk angels. In fact, it has emerged that the
failure rate of creative industries start-ups is far below that
of tech and other sectors. In addition, in many cases these are
the companies pioneering new business models that require a
little more thought and investigation by potential investors.
However, the fact that the creative industries are underserved
and overlooked by the traditional finance providers presents a
real opportunity for the investment community. By their nature,
many of these companies may start with a small number of
employees, and a high degree of entrepreneurial flair. There is a
real gap to fill, and a genuine need to support and assist
creative businesses to grow and, of course, share in their
success.
Investors can provide the crucial capital and mentoring resources
to stimulate growth and innovation at these firms – and generate
exciting returns for themselves.
It certainly helps that the UK government is backing the creative
industries through the tax credits for film, high-end television,
animation, theatre and video games in its first step to making
Britain a creative powerhouse but it’s private sector investors
who need to seize the opportunity.
Now is the time for businesses, entrepreneurs, and investors to
mobilise the necessary capital to make Britain a global hub for
the creative industries and fuel further growth.