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Culture and CommerceThe Value of Entrepreneurship in Creative Industries$

Mukti Khaire

Print publication date: 2017

Print ISBN-13: 9780804792219

Published to Stanford Scholarship Online: January 2018

DOI: 10.11126/stanford/9780804792219.001.0001

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Power and Unpredictability

Power and Unpredictability

Key Challenges Facing Producers

Chapter:
(p.145) 7 Power and Unpredictability
Source:
Culture and Commerce
Author(s):

Mukti Khaire

Publisher:
Stanford University Press
DOI:10.11126/stanford/9780804792219.003.0007

Abstract and Keywords

Because they operate at the cusp of culture and commerce, which are two very different worlds, producers face significant operational challenges that increase the uncertainty they face and decrease their power balance in the ecosystem. In particular, producers—both creator firms and producer firms, albeit to varying degrees—are constrained by the power wielded over them by cultural norms, by intermediaries, and by creators. The locus of these tensions is the product that producers bring to the market and about which they can neither create nor harbor illusions. Entrepreneurship—pioneer entrepreneurship and otherwise—as a producer is therefore exceedingly difficult and should be undertaken only by highly motivated, dedicated individuals.

Keywords:   power, uncertainty, product quality

A new star—or new stars—may emerge. That’s not only unpredictable; it’s somewhat out of [their] hands. All they can do is put the best people in position and let them do their jobs. Good things are very likely to follow.

—Margaret Sullivan1

Gabrielle “Coco” Chanel, the iconic founder of the House of Chanel, created what are now considered the classic fixtures of a modern woman’s wardrobe—the little black dress, Chanel No. 5 perfume, and the cardigan jacket—all of which were dramatic departures from the norms of women’s fashion during the first half of the twentieth century when these designs were first introduced.2 Despite the revolutionary nature of her designs, Chanel’s work prevailed to such an extent that, when she passed away in 1971, her firm had been successful and well known for more than fifty years. Her aesthetic—modern, simple but stylish, and minimalist—changed the way women dressed in the twentieth century. Both customers and fashion writers heaped lavish admiration on her designs, which spawned many imitations.

Although the firm was in a reasonably healthy financial state at the time of Chanel’s death, ten years later in 1981 the House of Chanel was struggling to regain its cultural dominance and financial strength. Certainly, it is natural for a fashion firm to lose its direction to a certain extent after the founding designer leaves, especially when the founder is someone of Coco Chanel’s stature. However, it is notable that even a firm with a very strong reputation and good designers at its helm struggled after losing its original iconic designer. Despite the firm’s long-term success and cultural impact, after Chanel’s death it received little to no benefit of the doubt from stakeholders—including consumers and fashion journalists/reviewers—on account of its association with the acclaimed Coco Chanel. Its brand and reputation may have kept the firm (p.146) alive, but they were insufficient to support the thriving success to which the firm was accustomed.

The case of Coco Chanel and her firm exemplifies the challenges that are common to all producers in creative industries. Due to the nature of creative industries and creators, the characteristics of (markets for) cultural goods, and consumers’ resistance to novel cultural goods, producers operate in environments of extreme uncertainty and must typically forego substantial control over their destinies. Of course, firms in other industries also face constrained agency and limited influence over how they are perceived and evaluated by audiences and stakeholders, including customers. In the creative industries, however, the constraints are particularly severe because (among other factors) consumer tastes are inherently volatile and subjective,3 intermediaries have a strong effect on markets for cultural goods but are beyond the influence of producers,4 and cultural products have high symbolic value.5 Fundamentally (as described in Chapter 6), producers in creative industries are subject to challenges that result from their position at the cusp of the cultural and commercial worlds, which are in tension with each other.6

Because the realms of culture and commerce have distinct conventions of worth and therefore different criteria for quality and success, actions that are appropriate in one realm are not necessarily acceptable in the other. Creators and producers in creative industries, as a result, inhabit an institutional system in which cultural capital and economic capital are seemingly at odds with each other, if not in full and direct opposition.7 For example, writers (creators) and publishers (producers) of “popular” books that sell well in the mass market are frequently and rather disdainfully perceived as “sellouts” by their counterparts who produce literary or avant-garde works and receive critical acclaim and awards but generally do not make large amounts of money from their “highbrow” works, which are not widely popular. This phenomenon extends beyond books and the publishing industry; consider the disparity between the social status and financial wealth of opera singers and pop icons, or movie stars and stage thespians. As clarified in Chapter 6, producers, especially, cannot afford to lose sight of the fact that their very existence involves dealing with creators and their artistic works in juxtaposition with the vagaries of the marketplace. Operating at the edge of two worlds—culture and commerce—that are driven by contradictory institutional logics, producers must try to satisfy the requirements of both realms to maintain their standing as firms in the market for cultural goods. Producers, therefore, face constant (p.147) dilemmas regarding which demands they should attempt to meet, what trade-offs their decisions will entail, and whether those trade-offs can be mitigated in any way. For reasons described next, the locus of these tensions is the product—the cultural good at the core of producers’ existence, the selling of which is producers’ raison d’être.

Managing the demands of both the cultural and commercial worlds entails paying close attention to broader societal norms of value, appropriateness, and desirability and how these play out in markets, both of which are significantly shaped and defined by intermediaries. Thus, intermediaries have significant control over producers’ access to both cultural and financial resources, and this power imbalance is at the core of the tensions and challenges that producers face. Because the reactions and assessments of intermediaries are unpredictable, producers have a lot at stake every time they bring a product to market. Accordingly, producers must offer products of only the highest quality, created by the most talented creators. Thus, producers (and their profits) are perennially subject to the unpredictability generated by the power of three external forces—norms, intermediaries, and creators—that lead to the operational challenges that are outlined in this chapter.

Producers: Constrained by the Power of Norms, Intermediaries, and Creators

The Power of Norms

To understand the power of norms, it is necessary to revisit the elements of market creation (discussed in Chapter 1)—commerce, commentary, culture, and consumption. The framework emphasizes that prevailing cultural norms, which define the appropriateness and desirability of cultural goods, play a large role in shaping consumer preferences and, therefore, their purchase decisions. However, cultural goods are expressions of spontaneous, novel ideas or concepts that may or may not fit well within the current norms of society—the creativity and vision of artists sometimes leads them to express thoughts and ideas that may not be fully accepted or even understood by society. For example, imagine producers in the 1950s screening a (hypothetical) film depicting same-sex relationships in a positive light. Because such a film would not mesh with the social norms regarding appropriateness at the time, producers would likely find it difficult to gain a sizeable audience; that is, the film would not perform well in the market, earning limited, if any, revenues. Executives at a (p.148) film studio could adopt one of two approaches to such a project: they could pass on the film, recognizing that it would face hostility and resistance and perform poorly in the market, or they could produce the film, knowingly sacrificing the prospect of making a profit but hoping to shape people’s thinking about homosexuality and marriage.8 As illustrated by this example, because innovative creative works often contradict prevailing norms, they are unlikely to fulfill the financial goals of firms, and thus they pit the cultural imperative against the business imperative. This opposition creates a dilemma for producers: always choosing to produce crowd-pleasing works makes sound business sense but will likely lower producers’ prestige and status in the cultural world; at the same time, persistently producing cutting-edge artistic works could well put the firm out of business if consumers are not ready to favorably receive such works.9

At the core of a producer’s dilemma is the reality that artists hold a mirror (or prism) up to society to respectively produce either works that reflect prevailing cultural norms or works that redirect these norms toward a new perspective.10 In response, producers must decide whether to pursue a product strategy determined by the pull of markets (based on consumers’ prevailing tastes and societal norms) or one determined by the push of the singular vision of the creator. A producer that chooses to do the former and reflect prevailing norms is safe from a business perspective because this strategy ensures that the work produced by the firm will be easily accepted by the market and society. The producer can, therefore, expect to earn revenues from sales. In contrast, producers that choose to redirect norms assume the risk of minimal consumer acceptance of the firm’s creative works. This choice may lead to recognition, prestige, and/or awards but does not ensure revenues.11

This trade-off is best demonstrated by examples from the film industry. Mainstream movies seemingly hew to a known formula for popularity and audience acceptance, incorporating elements that are predictable crowd pleasers. In contrast, so-called independent films made by individuals with a singular vision and voice and little regard for audience tastes may shift societal beliefs and norms in new directions but usually make far less money. Reflection and redirection of norms are not binary extremes, however, but rather exist on a continuum, and the two can sometimes overlap (as described in the following paragraph). Firms should never produce goods that neither reflect nor redirect societal norms, because such goods would bring neither cultural prestige nor financial viability.

(p.149) Products that both reflect and redirect cultural norms sound paradoxical, but firms can balance reflection and redirection within the same product by redirecting norms in a more palatable and less aggressive manner. In other words, a firm can present unconventional ideas in a conventional manner in the hopes of lowering audiences’ resistance to the new ideas. This strategy is particularly visible in network TV shows in the United States; hits such as Will & Grace and Friends, although often criticized for their reliance on unimaginative sitcom tropes, have been acknowledged, in some circles, as particularly impactful vehicles that, precisely because of these nonthreatening tropes, managed to normalize socially marginal and taboo issues such as homosexuality, out-of-wedlock childbearing, and fertility treatments.12

This dual approach is similar to the framing strategy of pioneer entrepreneurs described in Chapter 2 (portraying a product as novel enough to stimulate consumers’ interest but familiar enough to quell their anxiety).13 Of course, as with optimal framing, the use of this approach raises the issue of managers potentially interfering with the creator’s creative process. However, such manipulations are often performed by creators themselves, as in the example of Indian fashion designers (described in Chapter 2). Filmmakers, too, like creators of television shows, may adopt such balancing tactics, aware that audiences are not particularly keen on watching movies or TV series that are raw and disturbing but are more willing to accept radical ideas presented in small, possibly sugarcoated doses. Importantly, there is a fine line between explicitly reverse engineering or manipulating a creative work to meet imagined consumer preferences and empowering a creator to optimally balance conventional and unconventional elements of the work. Although stories abound of studio executives clashing with directors over the treatment of a particular film idea or story element, and it is true that some give-and-take is possible and necessary, there are also heroic examples of creators having stood their ground and managers having had the wisdom to let them present their ideas in the way they want to.14 The latter approach allows a creator to produce high-quality work that both pushes artistic boundaries and has a substantial cultural and financial impact.

Another way producers can balance the reflection and redirection of norms is to focus on a conventional idea but with an unconventional treatment (for example, a traditional love story that features a homosexual couple rather than a heterosexual couple or a mainstream film with a strong female heroine). Such products may make some profits, but their audience will likely (p.150) be small. Finally, sometimes creators focus only on redirecting norms—they present an unconventional idea in an unconventional manner. This type of cultural good entails the most financial risk because potential consumers may not be able to overcome their anxieties about a product that challenges their worldview. However, even though creators of such works may struggle to gain economic capital, they often have a strong influence on other creators (for example, such creators are often described in terms such as “a directors’ director” or “a writers’ writer”).

The Power of Intermediaries

The norms that exert power over producers are defined and intersubjectively disseminated chiefly via the discourse of market and nonmarket intermediaries. As a result, intermediaries exert considerable influence over producers’ strategies and fortunes. Without the value-constructing discourse of intermediaries, producers would most likely be unable to effectively reach the consumer market and achieve financial viability. Although producers’ advertisements, brochures, catalogs, press releases, and other publicity-seeking activities can and do emphasize the quality and value of the goods producers are selling, their transparent economic interest in amplifying the monetary value of their goods reduces the impact of their discourse.15 For instance, many filmgoers have learned that “no movie is as good as its trailer,” and therefore, when consumers make a decision about whether to watch a film, the trailer is less influential than a positive review by an independent and trusted film critic. As mentioned in Chapter 6, producers are aware of the importance of intermediaries’ discourse, as shown by their frequent use of excerpts from reviews in film posters and trailers. Problematically, however, producers can neither accurately predict the reactions of intermediaries nor influence intermediaries to say positive things about the product. At most, producers can use intermediaries’ discourse creatively within their promotional materials, for example, by quoting laudatory words or phrases from reviews out of context. In the end, producers have no option but to accept intermediaries’ evaluations of their products.

The power of intermediaries is most visible and most extensive in the so-called highbrow sectors of the creative industries such as modern art, literary fiction, and opera. The reasons for this are twofold. First, creative works in these categories are more complex and are imbued with greater symbolism than works that are typically considered entertaining and simple—“popular” (p.151) novels, mainstream “genre” films with crowd-pleasing formulas, “pop” music, and so forth. Thus, consumers rely more heavily on critical discourse to interpret complex cultural goods than to understand “popular” goods.16 These putative lowbrow works are easily understood and appreciated by individuals because the works meet consumers’ need for entertainment and/or escape from quotidian troubles and concerns. These works do not need to be decoded or explicated by market intermediaries; instead, the consumption of these cultural goods is guided by individuals’ tastes and dispositions, which are based on the discourse of nonmarket intermediaries such as teachers and informal influencers like friends.17

The second reason intermediaries have such extensive power in the so-called highbrow sectors is that creators themselves usually crave cultural recognition from reputed critics, and they are aware that such recognition is typically not forthcoming for crowd-pleasing populist works. The case of Jennifer Weiner demonstrates as much. A writer of light-hearted romances, Weiner has enjoyed much commercial success as well as the adulation of female readers but has not been taken very seriously by the literary community or critics. This lack of consideration has led her to publicly allege that female writers are not given commensurate respect because the topics they write about, although important to their readers, are not considered weighty enough for consideration by serious intellectuals.18 Thus, both consumers and creators grant intermediaries a significant degree of power, and producers bear the brunt of it.

In this situation, producers face certain trade-offs as they decide how to appeal to potential consumers. To circumvent intermediaries and maintain an advantageous business position, producers can appeal directly to consumers by producing popular goods that provide consumers with amusing diversions and do not require the instruction provided by expert intermediaries. By choosing this approach, however, producers may lose their credibility and status in the cultural realm, even as they may maintain a highly favorable financial position. Society’s contrasting impressions of independent and mainstream filmmakers reflect this duality: the former are generally considered “artists” or “auteurs” (with these labels carrying positive connotations) whereas the latter are viewed as “entertainers.” Producers, therefore, determine their priorities and goals based on the motivations of the firms’ founders and/or managers and act accordingly.

(p.152) Even if creators and/or producers of less complex cultural goods do not care about artistic prestige or the approval of reputed critics and award-granting organizations (that is, intermediaries that instruct and include), they are still likely to need intermediaries that provide information (that is, intermediaries that introduce) to introduce their products to consumers. The offerings of these producers might, however, be subject to fewer evaluations, especially if the works are brought to market as part of a series (such as the Twilight novels or James Patterson’s crime procedurals featuring Alex Cross) that has an established following. Similarly, adaptations of already beloved works for another medium—film adaptations of books, for instance, or theatrical adaptations of films—have ready-made audiences; even though the adaptation may be unfavorably compared to the original, it is likely to attain reasonable commercial success without needing much help from intermediaries.19

Fundamentally, the powerful position of intermediaries means that producers in creative industries can neither harbor nor create illusions about the quality of their products. If producers wish to ensure the approval of intermediaries, they must strive to produce goods of excellent quality and hope that these goods secure the attention and approval of intermediaries while avoiding any blatant attempts to curry favor with influential intermediaries. The only way to secure intermediaries’ approval is by offering goods that merit it—it is difficult to game a properly functioning system. Further, producers cannot anticipate the reactions of intermediaries or produce only goods that align with intermediaries’ past revealed preferences, both because those preferences may change and because skillful and principled creators will not create works that meet specific requirements, that is, create “to specs.”20 High quality, then, is the only recourse for producers hoping to generate cultural approval (which, in turn, could lead to higher revenues); as a result, good taste (as defined by the prevailing cultural discourse) is a critical qualification for individuals who make decisions regarding the goods to be produced.21

The Power of Creators

The quality of the product, which is the direct manifestation of the creator’s creativity and talent, is as important (or more important) to a creative firm’s success as branding, marketing, and advertising—hence the adage about being only as good as one’s last (created or produced) work of art.22 To produce goods of excellent quality that will earn intermediaries’ approval, producers (p.153) must have access to highly talented creators. Thus, creators possess a certain degree of power in their interactions with producers.

The few creators with a known track record of skill and a good reputation among intermediaries are extremely valuable to producers, which contributes to the “winner takes all” nature23 of creative fields. These creators are in a much better position than the average creator (or new unknown creators) with respect to negotiating with producer firms; consider, for example, the travails of new writers, whose completed manuscripts land in the slush piles of editors at major publishing houses, in contrast to the multimillion dollar advances offered to established writers for their as-yet-unwritten books. The majority of creators, in contrast, have little to no power in the creator producer relationship (if the winner takes all, the losers have nothing), first because they almost always need producer firms to bring their works to an audience24 and second because creators are numerous, which lowers their bargaining power.

Creators within Creator Firms

In creator firms, creators bring their own creations to market by founding a firm with a business partner. The case of the House of Chanel’s dependence on Coco Chanel, the creator and founder of the firm, demonstrates a problem common to all creator firms: although a founder’s departure often leaves firms somewhat adrift, the situation is exacerbated in the case of creator firms in creative industries.25 Despite Chanel’s excellent reputation and the wide reach of the firm’s promotional materials, the designs from the House of Chanel—and therefore its revenues—suffered in the absence of the firm’s founder. Creator firms such as fashion houses typically face the challenge of associating with high-quality creators only on the occasion of succession, that is, when either the founding creator or her or his successor must be replaced by another individual.26 Although the infrequency of succession may suggest that the need to associate with high-quality creators is less challenging for creator firms, these firms’ near-complete dependence on a single individual can make succession events potentially fatal. The difficulty of such a transition is exacerbated by two somewhat contradictory needs: the firm must remain true to both the quality of the work and the image of the firm established and nurtured by the departing founder/creator but must avoid installing a “clone” of the previous creative director. The need to balance these opposing objectives is another consequence of the importance of intermediaries, who typically do not hesitate to critique firms for either producing stale noninnovative works (p.154) that rehash the tried-and-tested ideas of the previous creator or for departing (too) far from the ideas and work that made the previous creator successful—especially if the firm’s innovations are hollow ideas with only shock value.

The following passage provides a clear example of these points; the excerpt is from an article about the two designers—Maria Grazia Chiuri and Pierpaolo Piccioli—at the helm of the design firm Valentino, named after its founding designer, Valentino Garavani:27

When they first took over the collection, Ms. Chiuri and Mr. Piccioli were described as “very Valentino,” which was meant as a compliment, at least in the eyes of Mr. Garavani’s loyalists, if not critics who wanted to see something new. There was red, there was lace, there were cocktail dresses. Having designed accessories for Valentino for a decade, they understood, perhaps better than anyone, the codes of his house. Alesandra Facchinetti, a former Gucci designer, had immediately succeeded Mr. Garavani, but she was fired after two seasons of going too far in her own direction. (Ms. Facchinetti has recently joined Tod’s as creative director.) Replacing any designer is like walking a tightrope; replacing Mr. Garavani is like walking on a thread. Ms. Chiuri and Mr. Piccioli have managed to do that better than anyone might have imagined, and they are now coming into their own. Their most recent collections have included designs that are often regal and conservative in appearance, like church dresses, with high collars, but with lively filigree or floral lace patterns. It looks nothing like Valentino of old, and no one has complained.

The excerpt also shows that when firms search for a replacement for the chief creator, they tend to interpret certain traits or characteristics of a creator/creative product as indicators of talent or quality. Some of these indicators include the reputation of the creator, past sales performance of the creator’s works as well as the works of similar others, and the creator’s alignment with prevailing tastes and norms (or in the case of truly innovative work, the “appetite” among intermediaries and consumers and the potential for market creation). As a consequence, creators with a track record of critical acclaim and/or consumer appeal are highly sought after by producers and can often be the subject of feuds among rival producers. Such fighting over creators occurs in both creator firms, as when fashion designers move between firms, and (as described next) producer firms, as when publishers or agents engage in a bidding war in pursuit of a sought-after author. For instance, when the phenomenally successful writer J. K. Rowling, author of the famed Harry Potter (p.155) series, announced her intent to switch agents in 2011, there was extensive speculation as to who would be the new agent,28 with many vying to occupy the spot.29

Creators in Producer Firms

Although creator firms usually need to establish a partnership with a high-quality creator only on succession, producer firms face the challenge of associating with and acquiring the works of talented creators on an almost constant basis. Further, unlike creator firms, which sell only the products of the founding creator, producer firms sell the products of creators of their choice. Although this scenario may seem more advantageous than that of creator firms, producer firms must also take on content risk—the risk that a work that the firm acquires (at some not insignificant cost) will not sell. Because the demand for creative works is uncertain, it is difficult for producers to assess this risk ex ante, and thus it is important for them to have access to as many creators as possible in order to mitigate such content risk.

Producers must avoid both false positive and false negative assessments of potential in their quest for talented creators. In the former case, producers are liable to lose the money spent on discovering and supporting the creator and marketing the creative work if the creator’s work is not respected or appreciated by intermediaries and/or consumers. Further, they may lose a certain degree of credibility as identifiers of (popular or critical) winners. However, as long as their reputation as a discerning producer is not permanently damaged, most producers are willing to incur this risk and chalk up any losses as the cost of doing business. The latter mistake is more serious; it occurs when a producer assesses the potential of a creator’s work as negligible when it is actually substantial, thus losing the revenues that the creator’s work would have produced. A well-known example of a false negative assessment is the case of J. K. Rowling, who was reportedly turned down by twelve publishing houses before Bloomsbury (UK) decided to take a chance on her book Harry Potter and the Philosopher’s Stone, which eventually became the foundation of the Harry Potter series, the biggest publishing success in history.30 Although Rowling’s case is an extreme example, a quick comparison of the costs of publishing a book to the total revenues from the sales of a typical New York Times best seller (not counting additional potential revenue streams such as licensing for films or merchandise) demonstrates why producers are far more worried about false negative assessments than false positives. Producers often use (p.156) structural means, such as having a strategically diverse portfolio of creators and/or works (Chapter 8 explores this strategy in detail), to mitigate their dependence on talented creators and lower the cost of mistakes.

The Process of Finding High-Quality Creators

As a consequence of their extreme reliance on creators, producers strive to identify indicators of quality. However, absent a clear track record or objective measures of quality, such indicators are difficult to detect or even define. To successfully identify high-quality creators, managers in the creative industries—particularly those that form the interface between the market/firm and the creator, such as editors (at publishing houses), A&R (artists and repertoire) managers (at music firms), and creative executives (at film or TV studios)—must have superb discernment and taste. These individuals must also be able to nurture, support, and communicate seamlessly with creators. Because these skills are difficult to teach, skillful managers are critical assets of the firm who, much like creators, must be nurtured and supported. When their tenure at the firm ends, replacing such managers is almost as challenging as replacing the creative head of a firm.

In creative industries, the replacement of key creative individuals is often accomplished via different means than in other industries—creator firms tend to prefer hiring a replacement from within the firm, choosing someone who was trained and mentored by the departing creator. However, although a successful editor or manager is just as important as a successful creator, replacements for these positions are often hired from outside the firm. This outside hiring strategy is the result of hiring practices in the creative industries and the inherent competitive pressures. A typical career path in the creative industries involves a long “apprenticeship,” during which, ostensibly, a young employee is mentored and hones the intangible skills needed for the job. Because there are no clear markers of the required abilities, firms employ a brutal elimination process; firms tend to hire more people than necessary at the lowest levels with the intention of culling those who do not demonstrate the required abilities over time. Given this lengthy and expensive process of skill development and assessment, someone trained at a reputed firm, under the supervision of a respected editor or manager, is extremely valuable to firms that are striving to catch up with the industry leader. Such well-trained individuals, therefore, have an advantage over others if and when they decide to look for another job; this eventual advantage is a major reason young employees (p.157) are willing to suffer ignominy and uncertainty in the early years of their career. Moreover, the lengthy process these apprentices endure and the paucity of the monetary compensation or nonmonetary appreciation they receive make it easy for other firms to lure them away with the promise of a promotion. When that happens, the apprentice’s original firm may look outside the firm for a replacement, thus setting in motion a chain of events that ripples through the entire industry.31

The resulting cross-fertilization across firms may have certain benefits: best practices are transferred, ideas are pressure-tested in new environments and subsequently refined, and fresh perspectives are introduced, with a resulting net positive outcome for firms, creators, and society. Naturally, these benefits are much more significant for creator firms, where the movement of the main creative talent across firms leads to more direct cross-fertilization as the creative abilities of a new creator are juxtaposed against the “house style.” The movement of creators across producer firms, often denigrated as “talent poaching,” is more likely to generate unnecessary switching costs, both tangible and intangible, for all parties involved.

Each of these challenges created by the power imbalance between producers and the forces that shape their fortunes—norms, intermediaries, and creators—is exacerbated in the case of entrepreneurial ventures, whether pioneering a new category or not, especially new producers because they are typically quite powerless at the time of founding. At the same time, as described next, the situation may be reversed in the context of entrepreneurship in one instance: the power that intermediaries possess in market making can, in fact, turn out to be beneficial to entrepreneurs in the producer role, especially in the case of pioneer producers.

Entrepreneurship in an Environment of Power Imbalances

New Producer Firms: The Challenge of Gaining Access to Creators

All new ventures are at a considerable disadvantage relative to existing firms, especially in terms of the tangible and intangible resources that are necessary for success. In the case of new producer firms in creative industries, the most pressing concern is gaining access to creators. Newly founded producer firms operating in existing categories of cultural goods (a new publisher of romance (p.158) novels, for example) must compete with larger, more powerful incumbents that have plentiful resources, most important being a reputation that attracts the best creators and the most visibility in the marketplace. Most new producer firms, therefore, much like new ventures in other industries, can hope only to dance between elephants’ feet, which is to say that they can and should attempt to occupy niches in the marketplace where consumers, creators, or both are underserved. For instance, despite significant concentration in the publishing industry, which consists of five very large firms (“The Big Five,” previously “The Big Six” before the merger of Random House and Penguin), there are scores of independent publishers.32,33

For society, a diverse set of organizations that bring a similarly diverse range of ideas to the marketplace is a central cause (and effect) of a vibrant and open culture that allows dialogue and debate (even if the new producers are not pioneering a new category). This is true across creative industries; consider, for example, the importance of independent film studios or small avant-garde galleries or theater companies, which take risks on ideas and works that have uncertain and unproven demand. Large producers with much more to lose might be unwilling or unlikely to take such chances, leaving the door open for new adventurous firms (that thusly “dance between elephants’ feet”). Many of these risky ventures eventually contribute to mainstream culture, as in the case of the American Repertory Theater (A.R.T.) in Cambridge, Massachusetts, whose innovative productions have found their way to Broadway and the Tony Awards.34 Independent producers that are new and/or small, therefore, often serve as research laboratories for larger, more risk-averse producers, precisely because these firms, in their quest to start up and survive, occupy the interstices in the ecosystem.

The difficulty of gaining access to talented creators puts new producer firms at an extreme disadvantage, relative even to new ventures in other industries, which, at the very least, have some control over the anticipated quality and production of the goods they sell. In noncreative industries, this modicum of control helps new ventures develop an overall strategy to avoid a head-on confrontation with incumbent firms in the marketplace. New producer firms in creative industries, in contrast, can do little in the way of strategic planning, other than to be different and hope to discover talented creators that have gone unnoticed for reasons other than the quality of their work. Small boutiques, independent music and book publishers, film studios, and new galleries all base their business plans on their founders’ confidence (p.159) in their discernment and ability to spot and groom talent. These firms start by signing agreements or contracts with a few creators whose work they admire and believe consumers will admire and appreciate too. Problematically, however, the reputation of producer firms matters considerably, not only to consumers but also to creators, who stand to benefit from an affiliation with a reputed producer firm. Further, well-known and/or high-quality creators are unlikely to choose to work with a new and relatively unknown producer firm. New ventures are therefore frequently left with no choice but to work with new and lesser-known artists, whose works are of uncertain quality and value, leading to the need for market-creating efforts.

Although gaining access to creators is a significant operational challenge for new producers, the power of intermediaries can prove to be a boon to these firms. Because both the creator and the producer firm are relatively unknown, the products brought to market by new ventures would have a low chance of being noticed and/or evaluated were it not for the independence of intermediaries. Independent intermediaries pay attention to producers and products without regard to status, reputation, market power, or resources and therefore help to level the playing field and consequently promote innovation and entrepreneurship in creative industries. Further, expert intermediaries remain open minded about new creations, evaluate and explicate their quality, and sometimes offer an endorsement. Thus, the existence of such intermediaries, although sometimes a source of uncertainty and fear, is simultaneously a benefaction for new producer firms. That said, new ventures do not get a free pass—being reviewed does not necessarily mean getting a good review. Therefore, the talent of a new firm’s partner creators and the quality of the produced work are extremely important to the longevity and success of new producers.

The Unique Situation of New Creator Firms

New creator firms inhabit a somewhat different situation than new producer firms. The problem of gaining access to quality creators is less pronounced. In addition, such firms do not choose which goods to offer by identifying an overlooked niche but rather are founded largely because individual creators with a particular vision wish to bring their products to market while retaining the freedom to create without intervention. To be sure, business partners of creators often frame the firm’s products in language that implies strategic thinking and design on the part of the creator, making assertions such as (hypothetically), “We noticed there was a gap in the market; there are no (p.160) stylish, unique, but affordable professional clothes for women aged twenty-five to forty,” or, “What we saw was a need for a fresh Continental take on Southern cuisine, in which the chef specializes.” This type of commentary, which is often a post hoc rationalization of the product the creator wanted to create anyway, is an instance of market making, in which creators’ business partners must engage.

Although creator firms do not face the problem of finding creators as a new venture, growth can be difficult for creator firms for a couple of reasons. A single individual (the creator founder) can produce only a certain volume of goods (whereas a producer firm can grow by working with more creators). In addition, the creator’s vision is so central to the product’s desirability in the eyes of consumers that scaling output by hiring other individuals must be undertaken with great caution, if at all. Further, the creator’s imagination and creativity may act as a bottleneck—the firm may be unable to produce additional new goods until the creator is further inspired. Even if the ideas come rapidly and plentifully, the process of manifesting these ideas in a painting, poem, novel, film, song, or other product cannot be forcibly accelerated.35

Pioneer Producers

Pioneer producers (whether new or existing firms), face a somewhat different set of obstacles than new producers in established categories. Because the works they bring to market neither fit into existing categories of goods nor align with prevailing cultural norms, pioneer producers experience norms as all-important, controlling, and constraining. In contrast, the power of creators is a nonissue for pioneer producers; whether they are creator firms or producer firms, for pioneers the creator is a known entity and the product is a foregone conclusion. However, the quality of the product is still important—novelty, even radical novelty, if unaccompanied by superior quality is not sufficient to gain the respect and favor of intermediaries.

Because norms are so important for pioneer producers, intermediaries—who have the power to change norms—play a central role in shaping the success of pioneer producers. Pioneer producers must engage in more value-constructing discourse than other producers while also engaging in strategic actions (detailed in the first two chapters of the book) to generate an optimal understanding of the product among consumers. However, even if pioneer producers successfully generate an optimal understanding of the new cultural (p.161) good, they still need intermediaries to create the market; therefore, intermediaries are very useful to pioneer producers and very powerful. Creating a market for a new category of goods requires independent intermediaries, especially expert ones; only intermediaries with both the expertise necessary to contextualize an innovation that is unlike anything seen before and the independence necessary to avoid any vested interests and withstand any pressure can adequately convey the meaning and value of new cultural goods to consumers and other stakeholders in the ecosystem.

Paradoxically, however, there may not be any appropriate intermediaries. Intermediaries that have expertise in the new category might not exist yet, and existing intermediaries may be unwilling, for a variety of reasons, to generate any valuation discourse for the new good. Thus, as in the case of hip-hop as a category, pioneer producers often need corresponding pioneer intermediaries to succeed in creating a market, which only strengthens the power imbalance between intermediaries and pioneer producers.

For pioneer producers that do not target lay consumers (for example. literary agents), trade intermediaries play a more influential role than consumer intermediaries. These pioneers typically have greater agency and control, largely due to the interpersonal nature of their transactions. Instead of changing the minds of scores of dispersed consumers, literary agents, for instance, need only to convince an editor at a publishing house to give the (potentially strange and/or incomprehensible) new manuscript a fair read. The agent’s track record or the strength of the relationship between the editor and the agent can ease the interaction and thus the innovative novel or other work may face less resistance. Although the editor may still turn the book down, the job of the agent is less fraught and more manageable than that facing the publisher (should the editor accept the book).36 Importantly, the success of these pioneers (agents and brokers) is still governed to a certain extent by the discourse of nonmarket intermediaries even if this influence is not directly visible in their specific market transactions. Because schools and other venues of instruction that reside outside the market provide individuals with a general understanding of various kinds of cultural goods and establish a set of foundational criteria for quality, editors and literary agents often agree on whether a new style of writing or a new idea, although seemingly strange, is nevertheless of high quality. Intermediaries, both within and beyond the market, therefore, have a very real and important influence on pioneer producers.

(p.162) Summing Up and Looking Ahead

Being a producer in the creative industries is not easy. Although the business model of producers is straightforward (relative to that of intermediaries), and examples abound of strong and financially successful producers in all of the creative industries, producers may not feel all that powerful on a day-to-day basis. Producers are constrained in their operations by the power wielded over them and their fortunes by cultural norms, intermediaries, and creators. The primary operational challenges faced by producers in creative industries are the result of the fundamental tension between the cultural and commercial worlds. Society has always placed artistic expression on a pedestal of social impact, believing art to be the stimulus for and/or consequence of new ideas or viewpoints, the engine driving social and cultural change, and the conscience of society (ensuring that society is not completely controlled by the self-interested participants in markets, and politics). And, yet, today most production and consumption of art and creative works occur within the confines and rules of the market and are governed by firms that engage in economic transactions. The main question facing managers in firms, therefore, is how to meet the opposing demands placed on them by stakeholders who expect them to uphold both their fiduciary and artistic duties. Chapter 8 examines the specific strategies producers adopt to balance the cultural and financial imperatives they face.

Notes:

(1.) Margaret Sullivan. 2015. “In Big Media Town, Core Beat in Flux.” The New York Times. February 21.

(2.) Mary Lynn Stewart. 2005. “Copying and Copyrighting Haute Couture: Democratizing Fashion, 1900–1930.” French Historical Studies 28(1): 103–130; Valerie Steel. 2006. Paris Fashion: A Cultural History. Oxford, UK: Oxford University Press: 248.

(3.) R. E. Caves. 2000. Creative Industries: Contracts between Art and Commerce. Cambridge, MA: Harvard University Press.

(4.) P. Wright. 1986. “Schemer Schema-Consumers Intuitive Theories about Marketers Influence Tactics.” Advances in Consumer Research 13: 1–3; S. K. Balasubramanian. 1994. “Beyond Advertising and Publicity: Hybrid Messages and Public Policy Issues.” Journal of Advertising 23(4): 29–46; M. A. Jolson and F. A. Bushman. 1978. “3rd Party Consumer Information Systems: Case of the Food Critic.” Journal of Retailing 54(4): 63–79; C. L. Brown and A. Krishna. 2004. “The Skeptical Shopper: A Metacognitive Account for the Effects of Default Options on Choice.” Journal of Consumer Research 31(3): 529–539; P. Wright. 2002. “Marketplace Metacognition and Social Intelligence.” Journal of Consumer Research 28(4): 677–682; and M. Friestad and P. Wright. 1994. “The Persuasion Knowledge Model: How People Cope with Persuasion Attempts.” Journal of Consumer Research: 1–31. For an overall review of consumers’ beliefs about the market, see C. P. Duncan. 1990. “Consumer Market Beliefs: (p.235) A Review of the Literature and an Agenda for Future Research.” Advances in Consumer Research 17(1): 729–736.

(5.) P. M. Hirsch. 1972. “Processing Fads and Fashions: An Organization-Set Analysis of Cultural Industry Systems.” American Journal of Sociology 77(4): 639–659.

(6.) Patricia Thornton, W. Ocasio, and M. Lounsbury. 2012. The Institutional Logics Perspective: A New Approach to Culture, Structure, and Process. New York: Oxford University Press; and M. Glynn and M. Lounsbury. 2005. “From the Critics’ Corner: Logic Blending, Discursive Change and Authenticity in a Cultural Production System.” Journal of Management Studies 42: 1031–1055.

(7.) Pierre Bourdieu. 1993. The Field of Cultural Production: Essays on Art and Literature. New York: Columbia University Press.

(8.) The fact that firms in the creative industries are often managed by individuals who have motivations beyond the pecuniary places this scenario within the realm of possibility.

(9.) Pierre Bourdieu. 1993. The Field of Cultural Production: Essays on Art and Literature. New York: Columbia University Press; and L. Boltanski and L. Thevenot. 2006. On Justification: Economies of Worth. Princeton, NJ: Princeton University Press.

(10.) Despite seeming similarities, this choice is different from the question of whether to produce popular or highbrow goods. The putative popular forms of cultural production can still redirect norms (as explained in the following discussion) by choosing to tackle unconventional ideas in a conventional format.

(11.) An additional challenge posed by such goods is that, in fact, not finding a market is not only a financial problem but also a cultural one; a radical, redirective work that is not widely seen (consumed) will have minimal cultural impact.

(12.) Sarika Bansal. 2012. “Soap Operas with a Social Message.” The New York Times. January 26.

(13.) A. B. Hargadon and Y. Douglas. 2001. “When Innovations Meet Institutions: Edison and the Design of the Electric Light.” Administrative Science Quarterly 46(3): 476–501; H. E. Aldrich and C. M. Fiol. 1994. “Fools Rush In? The Institutional Context of Industry Creation.” Academy of Management Review 19(4): 645–670.

(14.) Brian Stelter. 2011. “Season 5 of ‘Mad Men’ Is Delayed until 2012.” The New York Times. March 29.

(15.) R. Daniel Wadhwani and Mukti Khaire. 2015. “Valuation as a Social Process: Organizational and Managerial Implications of the Social Construction of Value.” Working paper.

(16.) Herbert J. Gans. 1999. Popular Culture and High Culture: An Analysis and Evaluation of Taste. New York: Basic Books; and Dwight Macdonald. 1960. “Masscult and Midcult: An Inquiry into American Popular Culture and the Role of the Middlebrows in the Distortion of Cultural Values.” The Partisan Review 27(2): 203–233 and 27(4): 589–631.

(17.) Pierre Bourdieu. 1993. The Field of Cultural Production: Essays on Art and Literature. New York: Columbia University Press; and Stanley Lieberson. 2000. A Matter (p.236) of Taste: How Names, Fashions, and Culture Change. New Haven, CT: Yale University Press.

(18.) Rebecca Mead. 2014. “Written Off: Jennifer Weiner’s Quest for Literary Respect.” The New Yorker. January 13.

(19.) Ben Brantley. 2014. “Those Brand-Name Musicals.” The New York Times. February 23.

(20.) Pierre-Michel Menger. 2014. The Economics of Creativity. Cambridge, MA: Harvard University Press.

(21.) Although this emphasis on quality is not unique to creative industries, the uncertainty of evaluation, the subjective qualities of the works, and the inherent absence of utilitarian features in cultural goods renders intermediaries crucial and simultaneously precludes the use of any meaningful predictive models.

(22.) R. E. Caves. 2000. Creative Industries: Contracts between Art and Commerce. Cambridge, MA: Harvard University Press.

(24.) Founding a creator firm is not always available as an option, especially in some industries, as described in Chapter 6.

(25.) Mukti Khaire. 2005. “Great Oaks from Little Acorns Grow: Strategies for New Venture Growth.” Academy of Management Annual Meeting Proceedings, August; and Heather Haveman and Mukti Khaire,. 2004. “Survival beyond Succession? The Contingent Impact of Founder Succession on Organizational Failure.” Journal of Business Venturing 19(May): 437–463.

(26.) A similar dynamic occurs in a very different context when a well-liked television talk-show host retires, a scenario that has played out several times, most recently when Jon Stewart stepped down as the host of “The Daily Show with Jon Stewart.”

(27.) Eric Wilson. 2013. “It’s Valentino’s Name, but Their Vision.” The New York Times. March 8.

(28.) Shiv Malik. 2011. “Harry Potter Author JK Rowling Leaves Her Agent.” The Guardian. July 3.

(29.) For academic research on this topic, please see Joseph P. Broschak and Emily S. Block. 2014. “With or without You: When Does Managerial Exit Matter for the Dissolution of Dyadic Market Ties?” Academy of Management Journal 57(3): 743–765.

(30.) Ian Parker. 2012. “Mugglemarch.” The New Yorker. October 1.

(31.) Harrison C. White. 1970. Chains of Opportunity. Cambridge, MA: Harvard University Press; and Aage Sorenson. 1977. “The Structure of Inequality and the Process of Attainment.” American Sociological Review 42(6): 965–978.

(32.) Mukti Khaire. “From Paperback to the Future: The Penguin Group and Book Country.” HBS No. 812-109. Boston: Harvard Business School Publishing; and The Association of American Publishers. “Book Stats.” Available at www.bookstats.org.

(33.) Although these independent publishers certainly struggle, their very existence is a prime example of the nonpecuniary motivations that drive so many individuals that enter these industries. The existence and diversity of multiple independent entrepreneurial (p.237) ventures is, however, not true of other kinds of producers, such as booksellers, in the publishing supply chain, primarily because efficiency, which accompanies scale, rather than novelty, is the key to success in these functions.

(34.) American Repertory Theater. 2015. Available at www.americanrepertorytheater.org.

(35.) Even in industries such as fashion, where several hundred copies of a given garment can be manufactured once the design has been finalized, the originality of the idea embodied in the design is not a limitless resource.

(36.) An editor and/or publishing firm that accepts such a radically novel book would also be a pioneer-producer (in addition to the agent). With the value chain being so complex and iterative in creative industries, it takes a village to bring goods to market, a situation that is only exacerbated in the case of new and unfamiliar categories of goods.