1. Please note that the statements and views of the author expressed herein may not necessarily state or reflect those of the Government of Canada or the Department of Canadian Heritage. hugh_scheuerman@pch.gc.ca OECD/ OCDE Dec. 4-5, 2006 Measuring Cultural Trade: The Canadian Case for Including Craft and Interactive Digital Media, and for Identifying Domestic Content

2. 2 Contents Culture in the Canadian economy: exports, GDP contribution, employment. Support program for cultural exporters. Uses of cultural trade data. Policy makers request domestic content measure. Data gap: Craft. Data gap: new media / interactive digital media. Data gap: downloads and other Conclusion. Questions.

3. 3 Culture in the Canadian Economy Cultures significant economic contribution in Canada was CDN$40 Billion (2002) or 3.8% of Canadas GDP. Culture directly employs about 600,000 Canadians, or about 3.8% of workforce. Culture goods and services exports total CDN$4.6 Billion; cultural imports ~$7 Billion. Culture trade data from partnership between Canadian Heritage and Statistics Canada. Sources: Statistics Canada cultural goods and services data tables; Economic Contribution of Culture in Canada. Amounts in CDN$; Exchange rate 1 CDN$ = 0.88 US$

4. 4 Trade Routes Program Department of Canadian Heritage Multi-sector program focused on building export capacity: Market entry support, In-market assistance, Market intelligence, Contributions program for international business development. Cultural sectors: film and video, broadcasting & television, publishing, music & sound recording, visual arts, new media (interactive digital media), crafts, design, heritage, and performing arts.

5. 5 Uses of Cultural Trade Data Culture trade balance, flows of culture trade for senior management in Department. International comparability and benchmarking. Used by cultural trade commissioners in posts abroad and in Canada to aid exporters, buyers. Supplies background info for inbound/outbound official delegations in Culture. Some trade policy implications as well.

6. 6 Cultural trade statistics- limited acceptance in several cultural policy branches where encouraging domestic content is paramount. Funding of certain cultural industries is restricted to Canadian companies meeting domestic content rules. These policy branches at Canadian Heritage request export data that itemize the domestic content for some products. Cultural Trade Data and Domestic Content

7. 7 For film and TV productions, a 10-point requirement to fully meet Canadian content rules. 4 Director 2 pts 4 Screenwriter 2 pts 4 Highest paid actor 1 pt 4 Second-highest paid actor 1 pt 4 Head of Art Department 1 pt 4 Director of photography 1 pt 4 Music composer 1 pt 4 Picture editor 1 pt For sound recording, a 4-point Canadian content system (MAPL) is used; M usic, A rtist, P roduction, L yrics. Cultural Trade Data and Domestic Content continued

8. 8 Measuring domestic content is of interest in context of UNESCO cultural diversity treaty. Difficulties: cultural goods Import and Export data are Customs-based. Possible to verify the national content (by degree) of cultural goods trade? Other countries may have the same need. But surveys = significant costs. Cultural Trade Data and Domestic Content continued

9. 9 Data Gap: Craft Craft Definitions Classify by Material Used Classify by Utilitarian Function (Use) May need to distinguish fine crafts, Aboriginal crafts, naïve crafts.

10. 10 Craft in Canada Canadian craft - represent Canadian culture. Craft used as diplomatic gifts of choice for visits inbound and outbound. In Canada - 22,000 craftspeople, artisans. Economic contribution: estimated CDN$700 million in 2001 Canadian Craft exports : ~ CDN$100 million Estimates from Profile and Development of Craft in Canada; Canadian Craft Federation, Oct 2003

11. 11 Crafts Now Classified in Manufacturing Crafts - little in common with manufactured objects. Production processes differ: NAICS Artisans add value: Handcrafted ceramic bowls should not be classified with toilet bowls: NAICS 32711 To separate Crafts from Manufacturing, issues of time, cost, effort, and the differing NAICS trilateral positions on Craft objects (CDN-MEX-USA).

12. 12 Craft & Intellectual Property Protection Craft objects receive recognition under intellectual property (IP) legislation. Some Aboriginal craft objects receive special IP recognition: 4the Toi Iho certification mark for Maori craft; 4the Canadian governments Igloo tag or trademark for authentic Canadian Inuit carvings, wall hangings, traditional tools. Protection for indigenous womens intellectual property: design of crafts, aboriginal symbols and patterns. In developing nations, crafts are an important export. Sources: WIPO Guide to Marketing Crafts; Government of Canada, Department of Indian and Northern Affairs; World Summit on Sustainable Development: Intellectual Property Rights and the Inuit Amauti

13. 13 Measuring Crafts: Some Considerations Separate Crafts from Manufacturing. Production processes are different. World Customs Organization, UNESCO ask member nations to measure Craft. Craft occupations are already in Culture. Classify by the media used, or functionality. If original visual art can be measured (the work of 17 000 individual CDN artists), then crafts can be measured (work of ~ 22 000 individual artisans). Classification codes needed.

14. 14 Data Gap: New Media / Interactive Digital Media Our industry now generates more revenue than motion picture box office sales. To people under 20, were a bigger cultural force than the movies. Don Mattrick President, Electronic Arts Worldwide Studios (BC & CALIF) Game Creators: FIFA Soccer 2005, The Sims 2, The Lord of the Rings: Battle for Middle Earth, Harry Potter and the Prisoner of Azkaban

15. 15 Interactive Media Industries in Canada Approximately 3000 firms in interactive digital media across Canada. Estimated total gross revenues - almost CDN$5 Billion. Full-time employment estimated 32 000 (2005). Part-time employment was estimated at 7 000; contractors numbered around 9 000. Game development city clusters: Montréal, Vancouver, Toronto. Canada is home to two of largest game development studios worldwide. Source: Canadian Interactive Alliance Interactive canadienne

16. 16 Defining Interactive Digital Media (IDM) New media/ interactive digital media is the creation, production, and delivery of interactive digital content for the purposes of informing, educating, and entertaining. Three components: 4 Interactive design 4 Interactive entertainment 4 E-learning Source: Canadian Interactive Alliance Interactive canadienne

17. 17 Interactive Digital Media (IDM) and the Selection of NAICS Industry Problem: Classification systems often dont recognize new media / IDM as a distinct entity. Question: How do interactive media companies classify their principal business activity in NAICS? Context: Companies operating in Canada require a Business Number (BN) for taxation and other administrative purposes such as Import/Export. Canada Revenue Agency requires them to identify their NAICS industry (major business activity).

18. 18 Interactive Digital Media (IDM) and the Selection of NAICS Industry- continued The Project: Identify the NAICS industry chosen by existing Canadian interactive digital media businesses when applying for the Business Number. Finding: Many interactive media companies have aligned themselves in non-culture industries. Task: Encourage changes to the major international classification systems (industries, goods, services, and occupations). Or count the culture activities in a non-cultural industry.

19. 19 Interactive Digital Media (IDM) and the Selection of NAICS Industry - continued A sample of 650 Canadian interactive digital media businesses yielded the following preliminary findings, classed by NAICS industry. Frequency Computer Systems Design and related services35.4% Motion Picture and Video Production14.4% Software Publishers 6.0% Graphic Design Services 4.5% Advertising Agencies 2.8% Internet Service Providers 2.0% Administrative Management Consulting 1.7% Computer and pre-packaged Software 1.4% Motion Picture and Video Distribution 1.4% All others (100 other industries selected) 30.5%

20. 20 Interactive Digital Media (IDM) in Culture? 1. Interactive media has two components: Content creation, and Coding. Identify content creation to separate IDM from Information and Communications Technology (ICT). Some countries have content legislation or content ratings (industry regulated) for video games: Canada, Korea, China, USA, UK, Germany, Australia, and others. Computer software does not require a content rating.

21. 21 2. Production processes: NAICS Aggregates The North American Industry Classification System principle: the producing units that use similar production processes should be grouped together in the classification. Possible reason why IDM was initially placed in ICT: Original IDM was mostly coding, with a little art. Now, new media is mostly art, and a little coding. IDMs Coding and Programming processes (ICT): ~ 30% of total. Production Processes (already identified in Arts & Culture): About 70% of total. 3. Close Substitutes: NAPCS (Products) Close substitutes for interactive digital media products: Table games like chess? Other Software? Digital video? Interactive Digital Media (IDM) in Culture? continued

22. 22 Measuring IDM: Roadblocks Some interactive media activities are already in other non-culture categories and cannot easily be separated. i.e. interactive web design in an agriculture supplies firm. In NAPCS (Products), there are inherent difficulties measuring the online transactions common to many interactive media.

23. 23 Measuring IDM: Proposed Solutions Measure content, not coding. Coding properly belongs in ICT. Interactive digital media firms can be identified and separated from other firms. There are many companies that work in interactive media exclusively. Industry lists exist and are publicly available.

24. 24 Other Culture Measurement Gaps to Address Need measurement of downloads: music, television, film, video on demand, online games, books and magazines, etc. Music: copyright collection societies. Royalties for Copyright industries, for Design. Classification revisions needed in 2012, if not present in 2007 revisions.

25. 25 Conclusion & Questions Culture is a significant sector in our economies, but is under-measured. Culture measurement data gaps: Crafts, Interactive Digital Media, downloads, and other sector-specific issues, i.e. Video On Demand, copyright collection societies. Measurement of domestic content of products would satisfy some culture policy needs. It is proposed that major classification systems be revised in 2012, if not in 2007, to address these gaps. Questions