Creative entrepreneurship

Creative entrepreneurship is the practice of setting up a business – or setting yourself up as self-employed - in one of the creative industries. The focus of the creative entrepreneur differs from that of the typical business entrepreneur or, indeed, the social entrepreneur in that s/he is concerned first and foremost with the creation and exploitation of creative or intellectual capital. Essentially, creative entrepreneurs are investors in talent – their own or other people’s.

The most renowned creative entrepreneurs have combined creative flair with entrepreneurial ability to build multimillion-dollar business empires. Examples include Rupert Murdoch, Madonna and Richard Branson.

History

Although, technically, creative entrepreneurs predate the industrial revolution – artisan jewellery making dates back to 7000 BCE and there were professional poets (scôps) in Pre-Norman Britain – the subject of creative entrepreneurship is a relatively new area.

Since the mid 20th century, commentators have observed the move towards a knowledge economy or information society where the old rules of manufacturing-based business no longer apply, or at very least need to be reconsidered (Machlup 1962; Drucker, 1969; Lyotard, 1984). But the creative sector, an intrinsic part of the knowledge economy, has received relatively little attention.

In recent years, due to significant economic growth in the sector (prior to the 2008/9 downturn), there has been a surge of interest in the creative industries, and the issue of creative entrepreneurship has been pushed to the fore. In parallel with (and no doubt partially motivated by) general enthusiasm from policy makers and support agencies, creative entrepreneurship has grown as an academic discipline, Creative entrepreneurship courses are becoming widely available, and seem increasingly popular with students.

A new body of work has emerged with writers such as Richard E. Caves,[1] John Howkins,[2] Richard Florida[3] and Chris Bilton[4] all championing the creative industries and addressing the specific skills needed to succeed in them.

In 2001, the Harvard economist and academic, Richard E. Caves, made the following observation:

“The preferences or tastes of creative artists differ in substantial and systematic (if not universal) ways from their counterparts in the rest of the economy where creativity plays a lesser (if seldom negligible) role.”[5]

Caves listed seven basic economic or “bedrock” properties that he believes distinguish creative activities from other sectors of the economy:[6]

  • Demand is uncertain
  • Creative workers care about their product
  • Some creative products require diverse skills
  • Differentiated products
  • Vertically differentiated skills
  • Time is of the essence
  • Durable products and durable rents

The body of Caves’ work makes a division between “artists” and “gatekeepers” and focuses on the issue of contracts between the two. In his analysis, it is the “gatekeepers” (art dealers, agents, managers, publishers) who “decide whether the prospective value of [an artist’s] creative output warrants the cost of humdrum inputs needed to place it before final buyers”.[7]

Today, with the onset of Long Tail economics, Caves’ division of labour might be seen as increasingly irrelevant: the artist can take his/her product direct to market via the Internet and is no longer dependent on a third party to negotiate access; thus his/her entrepreneurial and business abilities are ever more crucial.

Definition

The policy consultant and author, John Howkins, observes how the French economist and journalist, Jean-Baptiste Say, coined the term ‘entrepreneur’ in the late Eighteenth Century to describe a person who unlocks capital tied up in land and redirects it. Howkins makes this observation on the creative entrepreneur:

“Entrepreneurs in the creative economy…operate like Say’s original model entrepreneur but with an important difference…they use creativity to unlock the wealth that lies within themselves. Like true capitalists, they believe that this creative wealth, if managed right, will engender more wealth.”.[8]

Howkins goes on to observe that, despite lack of recognition from economists and politicians, and traditional lack of support from society (although this is changing), creative entrepreneurs tend to be bright and to value their independence above all else. The freedom to manage their own time and abilities compensates for the unpredictable nature of their working environment, and irregularity of their income:

“These people instinctively think for themselves, instinctively network, instinctively keep several balls in the air at once. They are the shock troops not only for new ideas about our culture but for new ideas about working in it.” [9]

Contribution to the economy

In 2007, the UK's creative sector was growing twice as fast as the rest of the economy and generally considered to be equally important to the financial sector,[10] which, at the time, was the driving force of the UK's gross domestic product.

Now, as then, the majority of people working in the creative industries tend to be self-employed – either freelance or running their own business. These people have the potential to be a key driver of the creative economy, but few see themselves as ‘creative entrepreneurs’.

Figures show that only a handful of self-employed creatives in the UK have gone on to start a company or employ other people - the US, by contrast, has a relatively high number of business start-ups. (Howkins, 2001)

As Howkins and others (Caves, 2000; Davies, 2007) observe, there has generally been a lack of support for creative entrepreneurship in the UK.

Specific skills

Creative entrepreneurs need to master specific skills: an understanding of intellectual property is essential, combined with the ability to manage cashflow, key talent and the creative process effectively.

Howkins (2001) lists 11 rules for successful creative entrepreneurs. These rules include: invent yourself, prioritise ideas over data, be nomadic, learn endlessly and, most importantly, have fun.[11]

From the beginning of time, ideas about protecting what one creatives have existed.[12] The ancient Greeks were some of the first to appear to be entrepreneurs of intellectual property as poets like Simonides asked for money for their poems.[12] Today, in starting and running any business, an entrepreneur faces legal situations and challenges.[13] Creative entrepreneurs specifically face legal aspects like business formation, intellectual property, contracts, and employment status issues when freelancing.[14][15][16] Being highly successful in a specified area, often creative entrepreneurs lack business or legal skills and knowledge.[17] It is important to understand these legal skills in order to start a thriving creative business, protect oneself, and avoid litigation as an entrepreneur.[18]

Business structure for creative entrepreneurs

Working as a self-employed freelancer is one way to do business as a creative entrepreneur.[18] See the section below for more information about freelancing. If the creative aims to start a business that involves a larger amount of capital, for example an agency, looking at the various business structures is important in starting your entrepreneurial journey.[18] The advantages of setting up certain forms of companies are that some structures allow legal protections that can shield individual entrepreneurs and/or offer different forms of taxing.[18]

Sole proprietorship

A sole proprietorship is a business owned by one individual.[19] This is the simplest business structure since anyone can claim to be a sole proprietorship just by beginning to do business.[19] It also can be the most risky.[19] Tax purposes separate the difference between a sole proprietorship and other types of businesses.[19] In a sole proprietorship, the business is looked at and taxed exactly like the individual who runs it.[19] This means that the individual’s personal assets are at risk and there is full liability placed on the entrepreneur personally.[19] The creative entrepreneurs must consider if this structure will put them at risk or if they are willing and able to assume personal liability in case of any harm or lawsuit brought against the sole proprietorship.[19]

Partnership

A partnership is a business structure including two or more people or partners who own the business together.[19] Creatives who have partners in their work may consider filing in this way if they plan on sharing assets and profits and losses in their venture.[19] There are multiple types of partnerships that can be explored more here.[19] Basically, in a general partnership, the partners personally and in their business share liability as well as profits and losses in the company.[19] In a general partnership, both partners are personally liable for the company as well as other partners' debts.[19] In terms of taxing, each partner reports their own personal profits and losses from the company.[19] Partners can not only be people but other businesses or entities.[19] Creatives who work with a partner they trust may consider this option.[19]

Limited liability company

A limited liability company (LLC) is a business structure that is taxed like a partnership and offers the legal protections of a corporation, that is, it shields the owner from personal liability for debts.[19] Since the LLC is an entity separate from the owners, it can be favorable for creative entrepreneurs who have a substantial business but do not want or need the full title of a corporation.[19] The LLC can still have an unlimited number of members and offers flexibility in how taxes and incomes are allocated as in a partnership.[19] The LLC also gives name protection to the business.[19] This option can be favorable for certain creatives if they want to feel separate and personally protected from any debts that their business may acquire.[19]

Corporation

A corporation is an entity that is separate from its owners and offers them protection from liability of the actions of the company.[19] It offers much freedom in the amount of shareholders and stocks it can issue.[19] The biggest difference in a corporation is it is a taxable entity by itself, with no taxes being reported on any owners' personal statements.[19] One aspect to a corporation is that the entity itself is taxed once and the dividends given to the shareholders are taxed again.[19] A corporation may be a favorable option for a creative entrepreneur starting a larger business who wants to issue unlimited stocks and have many shareholders.[19]

Intellectual property in the United States

Intellectual property laws in the United States are important for creative entrepreneurs because they are agreements between creatives and the public that allow them to contribute their creativity to the world while legally protecting their unique ideas.[20] Intellectual property is not constituted by real things but intangible assets such as ideas or innovations.[20] Creative entrepreneurs benefit from protecting their intangible business ideas and creative products.[20] Protecting one’s creativity through intellectual property law ultimately protects the financial interests of entrepreneurs and saves them from losing money by being copied.[21] Some believe that since the creative industry is so diverse, intellectual property law is not dynamic enough to adequately cover the breadth of this field.[22] The two main areas of intellectual property creative entrepreneurs see are copyrights and trademarks.

United States copyright law applies to any creative entrepreneurs who create original artistic works.[16] Copyrighted works are in a tangible medium and demonstrate artistic expression.[16] This includes things like:

  • Literary works
  • Pictorial, graphic, sculptural works
  • Musical works
  • Dramatic works
  • Choreographed work
  • Sound recordings
  • Audiovisual recordings
  • Architectural works[23]

Copyrights are created the second a creative makes or "authors" an original work.[16] The copyright belongs to the author of the original work in many cases, yet the exception to this fact is covered under the contracts section of this article.[23] Understanding copyright laws is important for creatives because it allows them to have control over who reproduces and distributes their original authored works.[16]

Trademarks

Trademarks are legal rights to a specific mark used for commerce that must be registered with the United States Trademark Office.[16] These marks include:

  • Word
  • Name
  • Collections of letter or numbers
  • Symbol
  • Logo
  • Design[16]

A trademark's purpose is to prove the quality and authenticity of a mark.[16] The mark must be distinctive in order to be trademarked so consumers can easily distinguish one business from another.[24] Creative entrepreneurs who have a business with a mark should consider this protection in order to combat deceptive rip-offs of their product or business name.[16]

Licensing

A license in the creative industry is a contract that allows the rights to reproduce or use a creative work. The person buying the license pays for the right to use the work. Licensing is different from assigning a copyright to another person. It is important to know the difference between the two so one can work out a license rather than giving away full rights to a creative work if they still want ownership of a work. Aspects to consider in selling a license are as follows:

  • The amount of money and how to charge it[18]
  1. A fixed rate can be written into the contract so the license is charged to the buyer with a flat amount of money.[18] On the other hand, royalties are ongoing charges every time the creative’s work is used for reproduction.[25] They are usually a percentage of the profits from the individual selling the licensed work.[25] The creative can choose how they wish to bill the license in the contract.[19]
  • How the creative allows the license to be used[19]
  1. In the contract, the creative can stipulate how the work can be used or reproduced in order to have control over their work when it is not in their hands.[18] This helps protect the creative's work while allowing the creative to get the money they deserve from the use of their work in the world.[18]
  • How long the time period lasts [18]
  • The territory where it can be used[18]

Enforcing intellectual property rights

Although legal action is never wanted by creative entrepreneurs, it is unavoidable at times.[26] If you notice a firm or individual using a mark or creation that closely resembles your work, or conversely if you create a work that resembles another’s, legal action may need to be taken.[26] The creative entrepreneur must weigh the benefits and the drawbacks of litigating.[26] The decision comes down to the amount of money the intellectual property infringement would cost the creative over the amount of money it would cost to litigate.[26] Looking ahead, getting proper legal protections from the beginning, and knowing the consequences of improper use of intellectual property can help mitigate losses for creative entrepreneurs.[26]

Enforcement example

An example of a copyright infringement of a creative entrepreneur is the case of S. Victor Whitmill v. Warner Bros. Entertainment Inc.[27] This was between a tattoo artist who created a highly famous tattoo on the face of boxer Mike Tyson.[27] Mr. Whitmill and Tyson agreed that the artwork belonged to him, therefore Mr. Whitmill had a copyright.[27] In the movie the Hangover II produced by Warner Brothers Entertainment Inc., an actor in the film had the exact same tattoo as the one Mr. Whitmill created for Mike Tyson.[27] Mr. Whitmill sued Warner Brothers for copyright infringement of his original artwork.[27] The ruling denied Mr. Whitmill a preliminary injunction.[27] In the end, Mr. Whitmill and Warner Brothers settled through mediation, but the tattoo still remained in the movie.[28]  

Freelancing in the creative industry

The freelance industry is one way to make money as a creative today. According to the Bureau of Labor statistics, twenty-five percent of art, media, and entertainment jobs are projected for self-employed workers by 2026.[29] Factors like more companies hiring independent contractors, the Internet, and the increasing solo support industry add to the opportunity for freelancers to succeed today.[15] The business skills needed to be a self-employed creative worker include understanding legal wording of contracts and the employment status and rights of an independent contractor.

Contracts

Creative entrepreneurs must understanding legal contracts in order to obtain fair agreements with partners for their work and talents. Having a written contract for the work a freelancer performs protects the freelancers from being over-used or not paid for their efforts.[14] Including at the least a scope of work, price, timeline, and termination provision can help protect a freelancer in a contract.[14] In addition to writing contracts with clients, it is crucial that a creative entrepreneur can understand the implications when entering into an agreement to work for a company. The work-for-hire clause is a rule that states if a creative is an employee of a company or signs a work-for-hire agreement with a company, the copyright they produce belongs to the company and not the creative.[16] This exception to the copyright rule occurs frequently and results in creatives not owning the rights to their work, so understanding this clause is important when reading an agreement.[16]

Employment status

Typically, freelancing creative entrepreneurs will be considered independent contractors. Independent contractor status for freelancers means the entity hiring them has less managerial control over the creative person and typically have a harder time firing the independent contractor unless they violate their contract.[15]Fishman, Stephen (2008). Working for yourself : law & taxes for independent contractors, freelancers & consultants. Berkeley, CA: Nolo. ISBN 9781413325812.</ref> In addition, independent contractors can have copyright ownership unless a work-for-hire clause is determined in their contract.[15] Independent contractors do not get employee benefits and do not qualify for workers' compensation through the company.[15] Independent contractors also do not have as high of a chance to get lawsuits against labor violations to litigation.[15]

See also

References
  1. Caves, Richard E, “Creative Industries: Contracts Between Art And Commerce”, Harvard University Press, 2001
  2. Howkins, John, “The Creative Economy: How People Make Money From Ideas”, Penguin, 2001
  3. Florida, Richard, “The Rise of The Creative Class”, Basic Books, 2002
  4. Bilton, Chris, “Management And Creativity”, Blackwell, 2007
  5. Caves, Richard E., “Creative Industries: Contracts Between Art And Commerce”, Harvard University Press, 2001, p.2
  6. Caves, op.cit, pp.2-10
  7. Caves, op.cit, p19
  8. Howkins, John, “The Creative Economy: How People Make Money From Ideas”, p129
  9. Howkins, op.cit, p.155
  10. ”Culture And Creativity”, British Council, 2007
  11. Howkins, op.cit, pp155-158
  12. May, Christopher; Sell, Susan K. Intellectual property rights: a critical history. Boulder, Colorado. ISBN 978-1-62637-002-9. OCLC 891385216.
  13. Hannabuss, Stuart (2017-06-19). "Art Law: A Concise Guide for Artists, Curators, and Art Educators". Reference Reviews. 31 (5): 32–33. doi:10.1108/rr-04-2017-0097. ISSN 0950-4125.
  14. Bennett, Alex (2018). A Freelancer’s Guide to Legal Entities. New York, NY: Business Expert Press. ISBN 9781947441040.
  15. Fishman, Stephen (2008). Working for yourself: law & taxes for independent contractors, freelancers & consultants. Berkeley, CA: Nolo. ISBN 9781413325812.
  16. Seiter, William J; Seiter, Ellen (2012). The Creative Artist’s Legal Guide: Copyright, Trademark and Contracts in Film and Digital Media Production. New Haven: Yale University Press. ISBN 9780300161199.
  17. Granet, Keith (2011). The business of design balancing creativity and profitability. New York: Princeton Architectural Press. ISBN 9781616890186.
  18. Branagan, Alison (2011). A Pocket Business Guide for Artists and Designers: 100 Things You Need to Know. London: A&C Black Visual Arts.
  19. Keightley, Mark P. Brief Overview of Business Types and Their Tax Treatment., HeinOnline.
  20. Poltorak, Alexander I.; Lerner, Paul I. (2011). Essentials of Intellectual Property: Law, Economics, and Strategy. John Wiley & Sons, Incorporated. pp. xv. ISBN 9780470888506.
  21. Darling, Kate; Perzanowski, Aaron, eds. (2017-02-28). Creativity without Law. NYU Press. ISBN 978-1-4798-4193-6.
  22. Carroll, Michael W. (2019), "Tailoring intellectual property rights to reduce uniformity cost", Research Handbook on the Economics of Intellectual Property Law, Edward Elgar Publishing, pp. 377–406, ISBN 978-1-78990-399-7, retrieved 2020-11-29
  23. "Chapter 1 - Circular 92 | U.S. Copyright Office". www.copyright.gov. Retrieved 2020-11-29.
  24. "Protecting Your Trademark: Enhancing your Rights Through Federal Registration" (PDF). United States Patent and Trademark Office. Retrieved 2020-11-29.
  25. "Royalty Payments for Artwork". Justia. 2019-06-05. Retrieved 2020-12-13.
  26. Lambert, Jane (2016-04-29). "Enforcing Intellectual Property Rights". doi:10.4324/9781315579603. Cite journal requires |journal= (help)
  27. The United States District Court for the Eastern District of Missouri Eastern Division. S. Victor Whitmill v. Warner Bros. Entertainment Inc. 28 Apr. 2011.
  28. Litwak, Mark. "The Hangover II: Tyson Tattoo Copyright Infringement Suit". Retrieved 12 December 2020.
  29. Roberts, Elka Torpey and Brian. "Small-business options: Occupational outlook for self-employed workers : Career Outlook: U.S. Bureau of Labor Statistics". www.bls.gov. Retrieved 2020-11-30.

Further reading
  • Howkins, John, The Creative Economy: How People Make Money From Ideas, Penguin, 2001
  • Creative Britain: New Talents for the New Economy, DCMS, 2008
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