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Ontario's Creative Cluster: Common Features and Challenges to Continued Growth

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Each Creative Cluster industry has unique business models, creative drivers, distribution chains and global trends which bear on their competitiveness. However, the industries within the Creative Cluster also share a number of common features, including:

  • The changing corporate structure of the Creative Cluster – In recent years, consolidation and vertical integration within the various industries in the Creative Cluster have had a significant impact, particularly among anchor companies within and surrounding the creative industries (e.g. broadcasters, distributors, retailers);12
  • The financial sustainability of companies – Creative Cluster firms can be poorly financed and are often not particularly profitable. Without healthy profit margins and access to capital, it is difficult to make the necessary investments to innovate, retain upwardly mobile staff or expand internationally;
  • The presence of large buyers and/or distributors – Creative Cluster firms tend to be small or medium in size, and so are not often in a position to benefit from the presence of large customers or distributors owing to their relative lack of bargaining clout;
  • Human resources – Creative Cluster firms generally have a good supply of entry-level workers. However, many face challenges in retaining staff or attracting high quality technical, creative or management personnel from other jurisdictions.

These common features translate into a set of common challenges to the continued growth of the Creative Cluster in Ontario.

Challenge 1: Increasing Global Competition

One of the most significant challenges is the rise of global competitors from emerging and advanced economies. At least 100 global economies are vying for leadership in the creative industries as nations, regions and cities realize the important economic and social rewards of establishing footholds in this valuable sector. Jurisdictions worldwide are competing for buyers, production contracts, talent, and investments. The proliferation of film tax credits and other incentives by american states and other provinces is a major indication of this trend – with many now highly competitive with our own. At the same time, Ontario must compete with increasingly sophisticated emerging economies that see the value in providing low-cost services not only for their own creative industries, but increasingly for the global marketplace. The outsourcing of animation or visual effects elements of film production to jurisdictions like India, China and South Korea offers an example of this type of competition.

Challenge 2: Financial Structure and Business Sustainability

To effectively compete, Ontario has to develop healthy financial structures and business sustainability within the Creative Cluster. As Canada's financial centre, Ontario is home to a large private investment community, but one that has yet to fully identify and develop investment opportunities in the Creative Cluster. Increased competition within the Creative Cluster has lent itself to ever-thinning profit margins; this lack of growth capital is having a profound impact on Creative Cluster companies.

Challenge 3: Risk of Falling Behind Other Jurisdictions in Innovation

A company's competitive advantage or market penetration can shift within months as new standards
replace old, or as consumers vote for new accessories or platforms with their dollars. Creative Cluster
innovation does not solely reside within the domain of content or pure technology, but rather, resonates across the derivative domains of business models, business and production process, management, entrepreneurship and particularly, corporate and product finance.

Challenge 4: Rapid Technological Change

Technological change and its associated market disruptions create opportunity, but also introduce
significant challenges. This is particularly true for some traditional cultural industries, as they need to
invest to keep up with the latest trends, business processes and efficiencies. As with the challenge and risk of not keeping up with general innovation, the risk of not keeping up with technological change can be difficult for any company not sufficiently funded to bear the full loss of one or several product lines and/or the cost to build entirely new lines based on new technology platforms or IP.

Challenge 5: “Resting On Our Laurels”

The reality is that much of the world is working on improving the performance of their own Creative
Clusters. To sit still is to lose ground, which would be a mistake, given how far Ontario has come. This would be particularly unfortunate given the current alignment of Ontario's assets and accomplishments which are in place to enable the province to move up to the top tier of the global Creative Clusters.

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