Tasks for Nurturing
         Cultural Industry
Following is an article written by Koh Jeong-min, senior researcher with
Samsung Economic Research Institute - Ed.

When stressing the possibility for the culture industry, they often say that Jurassic Park, a Hollywood film, had the same results you get from exporting a million cars in value added terms. But it is not a proper analogy to use for the situation in specific terms. It left out the fact that the rate of failure is higher in films than in auto manufacturing and Jurassic Park, being one of few successful films, is not appropriate to compare it with the automobile industry. It simply is not right statistically speaking.
The movie industry is a high-risk and high-return industry and a few successful films earn high returns, but others end up with red ink. In a few words, successful movies have high value-added returns, but the risk is very high.
Here we can assume two traits of the culture industry. First, it is a high risk industry and second, it is a high value-added industry for a few hit films. So, they have to take these factors into account when they set up business strategies to minimize possible losses.
First, they need a risk hedge strategy because it is a high risk industry. One of the strategies would be to disperse risk factors by moving deep into the culture industry and come up with a business portfolio. You can find reasons for major foreign companies diversifying and perpendicularizing their business affiliates, their rationale being that they can survive if one of their affiliates turns out to be a cash cow even if they sustain failures in a number of their products. In the case of large firms, they opt to strengthen supply and distribution sectors, but outsource manufacturing, which is another one of those strategies to reduce business risks.
This is particularly so with the culture industry because of its special characteristics of being one-source multi-use where a product can be used in many other areas. For example, Walt Disney's animation movie "Beauty and Beast" is being used as a character, theme park and performance material while fully maximizing profit.
Second, you need a strategy for expanding sales of your product in order to maintain the characteristic of being a high value-added product. In the case of a hardware products, the profit and loss line goes up in tandem with changes in costs with so little profit generated. But it is not so with the culture industry although its start up cost is high. The industry does not require additional costs and profits generated after reaching the profit and loss point become all profits.
The government should provide support to firms so that they may be able to expand sales through its policy to develop the domestic market. The government should be exempt from taxes on cultural expenditures, buying cultural products, and investing in cultural infrastructure to expand the domestic market. The government should also launch next-generation cultural contents service facilities such as broadcasting information services like IPTV and DMB to create new demands for such product contents.
The industry should look to overseas markets for growth as domestic market only account for 2 percent of total global market. But there is a limit to exports because of cultural walls. Korean movies have not been received well in the United States, unlike cell phones because of cultural walls.
But the possibility still remains. The industry should try to penetrate sectors with low cultural walls such as game, animation, mobile contents, and others. They should also try to open markets in regions with Confucian traditions like us in Southeast Asian countries due to similar sentiments and culture. This has been proven already by the Korean wave.
Our cultural industry has a large potential for development due to dynamism of the Korean people and superb infrastructure, but it needs a special strategy to succeed, not the ones used for general products. Businesses and the government should exert their efforts to develop it after grasping its special features. nw