INDUSTRY DEFINITION TARGET: CREATIVE MEDIA & DESIGN NATIONAL GROWTH TRENDS

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1 TARGET: CREATIVE MEDIA & DESIGN INDUSTRY DEFINITION The creative media and design industry is comprised of creative services focused on developing uniquely designed products and services based on innate creativity and talent, such as software design, film production, music recording, interior and graphic design, advertising, marketing, and commercial photography, as well as architecture, urban design, and historic preservation. This industry is distinct from the related hotels and entertainment industry through its focus on technical and professional services as opposed to direct performance, art galleries, or entertainment, though the two industries are certainly linked together. The creative media industry is highly concentrated in locations that are able to attract a creative workforce, as companies in this industry are typically limited only by a lack of workforce. Considering that, the ultimate recruitment target for this industry is not necessarily the creative companies, but rather the people that constitute those companies. Businesses in these industries tend to cluster together not because of supplier advantages or value chain synergies. Rather, these firms choose locations that will provide a high quality of life and an environment in which creatively minded individuals can flourish. A supportive business climate, including available incentives for film and video game production, adequate facilities for sound recording and film production, and large festivals which celebrate and promote the work of local creative designers provides opportunities for exposure and business growth for companies in this industry. Support services for small businesses and entrepreneur is an important aspect of retaining these industries. NATIONAL GROWTH TRENDS The creative media and design industry is comprised of several different subsectors, including: Film and TV recording and production Music recording and production Advertising and marketing Graphic design Architecture and interior design Software and video gaming design Other specialized design services, including commercial photography and industrial design. NATIONAL EMPLOYMENT & AVERAGE WAGE, Employment Avg. Annual Wage (millions) 2.90 $65K $66,000 Creative industries continue to work their way into all fabrics of American life. Industrial and product design continues to expand through popular product lines such as Michael Graves line of home products at Target. More of our day-to-day activities involve computers, and software designers keep these systems efficient and user-friendly. According to the Bureau of Labor Statistics, nationally, design occupations are expected to grow by 21% to 35% over the next ten years. Advertising and marketing are expanding industries, adding nearly 30,000 jobs nationwide since 2003 at average wages of more than $58,000 annually. Film, television, and sound recording and production are large industries driven primarily by incentives. By providing investment tax credits, job creation tax credits, and sales tax exemptions, regions around the country $57K CREATIVE MEDIA & DESIGN $64,000 $62,000 $60,000 $58,000 $56,000 $54,000 $52, Source: Bureau of Labor Statistics QCEW 53

2 and the world have been able to promote and build capacity in film recording and production. While on-location shooting provides local jobs in creative media and design, a longer-term strategy for film production requires investment in production facilities, recording studios, and essential high-tech equipment. Sound recording studios have continued to lose employment as recording equipment and software becomes more readily available to amateur users, and the music industry struggles to resolve its business model in the face of downloadable music. Software design shrank substantially over the past 6 years, losing almost 28,000 jobs, though most of this loss occurred from , and has added 8,000 jobs nationally since then. With software design outsourcing, an increasing focus is on more creative software design, including video gaming. Video game production has expanded along with the market for video games, and this sub-industry requires both knowledge of computer software production but also creative design, story writing, and other non-traditional software design skills. Most people are familiar with occupations such as computer animation and graphic design, though many overlook the more industrial applications. Commercial and industrial designers develop and design manufacturing products, from cars, airplanes, and ships to biomedical lab equipment and consumer products. Growing the creative media and design sectors in Greater New Orleans could have spin-off impact in some of the region s more traditional industries. LOCATION DECISION CRITERIA For the creative media and design industry, location decision criteria are driven by a combination of incentives for film and video game production, access to a well-educated, creative, and diverse workforce, and an attractive quality of life for the workforce. Film and sound recording facilities are essential for those industries, while industry showcase events focused on spotlighting local productions provide business growth opportunities. The top five location decision criteria include: Incentives: Tax incentives drive film production Cool Factor : Excellent quality of life, good word of mouth among young professionals Creative class workforce: Educational offerings and young professional workforce in this industry Film and sound recording facilities: State of the art recording and production facilities Industry showcase events: Music and film festivals, cultural festivals to showcase regional creativity Structural Assets The infrastructure needs of creative firms are not as critical as those in other industries. Typically, these firms need access to telecommunication and electricity services, but cost and reliability concerns are not as crucial. These firms are often small and prefer to locate in architecturally interesting spaces generally located in central, downtown, and vibrant walkable locations. However, large film and sound recording facilities, including state of the art production facilities, are required for long-term growth in film production. These facilities are large employers, and provide video and television studio production, commercial filming, and film soundstages. Costs of Doing Business The primary costs of doing business in this industry come from wages for employees, though computer equipment and other technical equipment is an additional expense. Film makers and other designers are sensitive to incentives provided to incentivize local production of film and video games. 54

3 Research & Development While not overly reliant on R&D, the technically focused niches in this sector do require product development and customization. Additionally, the industrial and commercial design segments require research and an involved product development process. Other research and development occurs in industry-serving software, and additional ways of streamlining software design processes. Economic Conditions Creative media and design firms tend to be small in size, consisting mainly of high-skilled workers and few support staff. Roughly one third of all designers are self-employed. Thus, the entrepreneurial network of a community is vital to the success of local creative firms. A large regional economy provides opportunities for advertising and marketing firms and graphic designers. Architectural and interior design firms are more closely tied to the health of the construction industry. Workforce The creative sector comprises a broad range of occupational categories, from computer-aided design, software development and architecture, to graphic design and marketing. The workforce spans such varied industries as motion pictures and industrial machinery. These jobs generally require advanced training using design software and artistic techniques. Many of the occupations within this industry require specialized technical or computer training on top of bachelor s degrees. ASSESSMENT GNO GROWTH TRENDS The City of New Orleans provides the ideal setting to 20,000 draw creative media and design companies and individuals. The region is home to an 15,000 established sector of creative employment in film production, 10,000 advertising, software and graphic design. Through continuing to attract creative 5,000 young professionals to the City of New Orleans to rebuild the 0 historic areas of New Orleans and retaining them for careers in creative media and design, the region can create a base of creative companies to build an industry around. CREATIVE MEDIA EMPLOYMENT & AVERAGE WAGE Employment Avg. Annual Wage Projected '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 There are, however, few home-grown companies in the film or video gaming businesses, and most investments in these industries tend to be by companies from outside the region seeking incentives for production within the state. Without some more permanent local investment, Louisiana s investment in some subsectors of the creative media and design industry are destined to leave should other states institute more competitive $0 Source: Economy.com, Bureau of Labor Statistics QCEW 55

4 incentive programs. The Nims Center Studios in Jefferson Parish provides excellent local film production space, though with the much-touted Louisiana Institute of Film Technology project in New Orleans tied up in legal proceedings, the Greater New Orleans region still faces significant hurdles in this area. Industry employment and wages are projected to rise fairly steadily over time, adding several thousand jobs to the regional economy, with wages approaching $57,000 annually in The majority of employment in the Greater New Orleans region is in the architecture and engineering services, advertising, and film industries, with additional specializations in interior and graphic design and photography. Because of the lack of focus on software design, the Greater New Orleans region has lower wages than the industry as a whole. As a whole, this industry is extremely fragmented, with little emphasis on the integrative effects of combining efforts across the industry. Industry groups play a large role in the development of this industry, and those in the Greater New Orleans region is no exception. The following industry groups provide GNO, Inc. with an excellent opportunity to leverage existing networks of organization to further organize and strengthen this industry: American Institute of Architects New Orleans American Institute of Graphic Artists New Orleans Ad Club of New Orleans Cutting Edge Music Business Conference COMPETITIVE COSTS AND CONDITIONS ANALYSIS Competitive costs in the creative media and design industry favor the Greater New Orleans region, as wages are substantially lower than in competitor areas, though without a focus to the industry, it may never gain a foothold as a primary industry driving the economy of the Greater New Orleans region. New Orleans primary competitor for creative media and design companies will depend primarily on the type of company being discussed. Greater New Orleans does, however, provide excellent incentives for location of these types of companies in the region through the Louisiana Digital Media Act, which provides tax credits equivalent to 15% of qualified investments over 6 years, the Sound Recording Investor Tax Credit, which provides tax credits of between 10% and 20% for investment in recording studios and equipment, and the Broadway South tax credits, which help New Orleans attract live Broadway bound productions, including theater, opera, ballet, jazz, comedy revues and variety entertainment through a 25% state tax credit on their base investment, and construction costs, and a 10% tax credit on payroll for Louisiana residents. For film production, New Orleans competes primarily with New York, California, New Mexico, and other areas within Louisiana to capture productions. These areas provide excellent film incentive packages, though Louisiana s package is recognized as the most permissive of any state in the U.S. Louisiana provides a transferable investment tax credit equal to 25% of expenditures for motion picture production, with an additional 10% tax credit for Louisiana labor costs, and a 40% tax credit for infrastructure development. Texas recently increased its tax credits to provide grants equal to 5% of expenses in Texas, provided they spend at least $1 million, shoot 80% of the project in Texas, and hire 70% of the actors, crew, and extras locally. Austin and Nashville provide primary competition for music production, and a report conducted by Economic Research Associates in December 2006 notes that the music production industry in Louisiana is underdeveloped, with little production activity despite a recognized jazz and blues music scene. Both Austin and Nashville have recognized, activist organizations promoting both the music performance industry and music production and distribution. Austin s notable South by Southwest Conference provides local, national, 56

5 COMPETITIVE COSTS ANALYSIS- ENERGY, PETROCHEMICALS, AND PLASTICS Criteria Average Annual Wage (5 year growth) (2) Austin, TX 15.4% $70,022 $66,572 $61,790 $62,286 $60,686 Nashville, TN 22.8% $57,838 $53,151 $50,697 $47,360 $47,090 San Francisco, CA 17.8% $97,530 $91,684 $87,350 $85,045 $82,807 GNO, LA 8.7% $46,714 $48,220 $41,599 $42,876 $42,990 Real estate prices (3) Low High Low High Low High Low High Office park (per acre) $65,000 $218,000 $65,000 $400,000 $900,000 $1,500,000 $174,000 $871,000 Industrial park (per acre) $65,000 $152,000 $75,000 $125,000 $1,200,000 $1,450,000 $131,000 $610,000 Land (non-park) (per acre) $44,000 $131,000 $65,000 $100,000 $950,000 $1,100,000 $44,000 $348,000 Taxes (4,5,6) State income tax rate (4) Sales tax rate Average real and personal property tax rate (5) Real and personal property tax rate range (6) NONE 8.25% mills mills 6.5% 9.75% 7.46 mills mills 8.84% 8.50% 5.68 mills mills 4.0% - 8.0% Up to 9.5% 4.26 mills mills Airport connections (8) Domestic Foreign Domestic Foreign Domestic Foreign Domestic Foreign Nonstop destinations Quality of Life Rankings Urban Area Superlatives Money Best Places to Live, Best Cities for Best Cities for Relocating Singles and Families, National Geographic Best Little Relocating Singles and Families, Forbes Best U.S. Cities for Jobs, Forbes Best Cities for Singles, Money Best Places to Retire, Top 2007 International Travel Destination, Best Cities for Relocating City in America, Forbes BusinessWeek Best BusinessWeek Best Places Families, Top Cities for Best U.S. Cities for Jobs Places for Artists for Artists Seniors, (1) Source: Energy Information Agency, 2007 (5) Source: AngelouEconomics, 2006 (2) Source: Economy.com, 2007 (6) Source: AngelouEconomics, 2006 (3) Source: NAI/CIP, 2007 (7) Source: U.S. EPA, 2007 (4) Source: Federation of Tax Administrators, 2006 (8) Source: AngelouEconomics, 2007 and international bands recognition and a venue for exposing their talents to the world, while also adding an industry trade show in music, film, and interactive digital media. Other creative competitors include San Francisco, a hotbed for software and video game design. Wages in San Francisco are roughly double those of New Orleans, though this is due primarily to the extensive software development in the region. This industry sector will thrive and locate in an area that has a young, educated populace. The workforce is largely mobile and usually is attracted to an emerging sector in their desired area of expertise. With both artistic and commercial appeal, occupations can be found in a broad spectrum of industries. AngelouEconomics recommends the fast growing and high paying targets of digital media content creation, graphic design, and film and visual media production as a primary sector in which the City of New Orleans in particular can find a differentiating niche compared to other communities. The Greater New Orleans region s primary concern in competitive analysis is its ability to attract and retain a creative, educated workforce in these industries. With several large universities in the region, and a trend toward attracting young, urban professionals focused on rebuilding (or YURPs, as they have identified themselves), Greater New Orleans must engage these communities, along with extending business startup and entrepreneurial assistance services to support the creative media and design industries and aid their expansion into a larger, more robust creative industry. 57

6 WORKFORCE ASSESSMENT While the Greater New Orleans region continues to experience skilled labor shortages in most other industries, the labor supply for the nascent creative media and design industry seems to be in line with expected demand. Orleans Parish, in particular, has little problem attracting creative talent, especially from within Louisiana. Wages within the sector are significantly below national averages, which would be a boon for any large companies seeking to expand operations here. Key positions with regional shortages identified in the occupational analysis include surveying and mapping technicians and media and communications equipment workers. Neither of these seems to be in high demand, and therefore poses little problem for the industry. Searching through regional business websites revealed an additional need for film production helpers, including videographers, assistant directors, and sound mixers, as Occupation Key Occupations in the Creative Media & Design Industry Average Wage Occupational Information Title New Orleans MSA* 10-year U.S. Growth Projection US New Orleans MSA* Wage Differential % with Bachelor's Degree+ Education Architects, except landscape and naval % $69,760 $58, % 86% Bachelor's degree Architectural and civil drafters % $43,900 $44, % 22% Postsecondary vocational award Surveyors % $51,390 $38, % 82% Bachelor's degree Surveying and mapping technicians % $34,590 $41, % 11% Moderate-term on-the-job training Photographers % $31,830 $23, % 49% Long-term on-the-job training Landscape architects % $60,480 $50, % 86% Bachelor's degree Interior designers % $48,000 $42, % 54% Associate degree Advertising sales agents % $51,370 $46, % 55% Moderate-term on-the-job training Ushers, lobby attendants, and ticket takers % $17,500 $15, % 7% Short-term on-the-job training Producers and directors % $72,210 $40, % 73% Bachelor's or higher degree, plus experience Graphic designers % $43,830 $38, % 54% Bachelor's degree Drafters, all other ** 14.0% $45,480 $37, % 22% Postsecondary vocational award Writers and authors % $58,080 $51, % 83% Bachelor's degree Audio and video equipment technicians % $38,710 $42, % 38% Long-term on-the-job training Advertising and promotions managers % $85,140 $53, % 78% Bachelor's or higher degree, plus experience Media and communication equipment workers, all other % $53,230 $70, % 46% Moderate-term on-the-job training Demonstrators and product promoters % $25,770 $23, % 36% Moderate-term on-the-job training Technical writers % $60,850 $51, % 73% Bachelor's degree Public relations specialists % $53,760 $42, % 81% Bachelor's degree Media and communication workers, all other % $46,310 $30, % 39% Long-term on-the-job training Artists and related workers, all other ** 10.0% $48,890 $40, % 55% Long-term on-the-job training Public relations managers % $92,250 $52, % 71% Bachelor's or higher degree, plus experience Computer software engineers, systems software % $87,250 $78, % 83% Bachelor's degree Computer software engineers, applications % $82,000 $69, % 83% Bachelor's degree Market research analysts % $65,930 $43, % 79% Bachelor's degree Marketing managers % $107,610 $79, % 66% Bachelor's or higher degree, plus experience Computer programmers 1, % $69,500 $58, % 72% Bachelor's degree Electronics engineers, except computer % $82,820 $80, % 83% Bachelor's degree Editors % $53,220 $46, % 84% Bachelor's degree Broadcast technicians % $35,540 $23, % 38% Associate degree Merchandise displayers and window trimmers % $26,550 $19, % 54% Moderate-term on-the-job training Computer and information systems managers % $107,250 $81, % 70% Bachelor's or higher degree, plus experience Computer support specialists 1, % $44,350 $39, % 41% Associate degree Desktop publishers ** 23.2% $36,120 $32, % 42% Postsecondary vocational award Network and computer systems administrators % $65,260 $59, % 51% Bachelor's degree Source: BLS Occupational & Employment Statistics; *New Orleans-Metairie-Kenner MSA only 58

7 well as producers. While some of these occupations do not require bachelor s degrees or higher, the vast majority of the most sought-after occupations within the industry require a four-year degree. The programs, primarily in graphic design, architecture, and advertising and marketing, are available from regional universities, although many graduates choose to leave for other, higher-paying regions. Between retaining employees after the destruction of their homes and the lack of systematic training, particularly for film production, Greater New Orleans faces some small workforce shortages in important sub-areas. SUPPLY CHAIN ANALYSIS To further refine the focus of economic development efforts, AngelouEconomics undertook a supply chain analysis of the creative media and design industry using IMPLAN. This data reveals the source and amount of purchases among many different industries. By identifying the areas where creative media and design companies purchased goods and services from outside the regional economy, we can help to identify niche sectors to target for recruitment, retention, and expansion efforts. The chart below shows the flows of trade by industry both within the region and from outside of the Greater New Orleans region. Niche sectors to target for expansion appear as imports from outside the region, but still within the industry. In this case, movie and video production, advertising, sound recording, and software were identified as gaps in the services supply chain for the industry, with over $70 million in purchases from the industry outside of the Greater New Orleans region. Less than $10 million annually was purchased from other primary target industries in the region, as the creative media and design industry shares little in common with these manufacturing industries. The largest purchases within the New Orleans economy came from consulting, telecommunications, insurance, accounting, and related services, such as employment services, administrative services, and building management services, comprising $311.6 million in purchases in In addition, other related products were purchased from outside of the region, including information services, commercial printing, computer systems, data processing, and office supplies ($253.9 million), in addition to various film chemicals and adhesives ($8.3 million), and air freight and truck transportation ($3.5 million). Though high end services, such as management consulting, telecommunications and legal services are all purchased locally, these services are broadly required to support industry across the region, and not specific to the creative media and design industry. This analysis indicates the large role played by the film industry in the creative media and design industry. Additionally, advertising, graphic design, and digital media. This high-end industry should be a focus of expansion efforts within the region, and the knowledge contained regionally in providing these high-wage services should be the focus of retention and expansion efforts within the Greater New Orleans area. 59

8 CREATIVE MEDIA & DESIGN INDUSTRY SUPPLY CHAIN MAP Imports (Outside of GNO Regional Economy) movie/video production, advertising, sound recording, photography, software ($69.6M) Creative Media & Design Internal purchases: movie/video production, advertising, special design svcs. ($219.0M) $300M Regional $150M Imports $ 0M LEGEND: Arrow Size Proportional to Purchase Flows All Other Industries consulting, telecom, employment svcs., insurance, admin svcs., accounting, bldg. svcs. ($311.6M) Truck transportation, warehousing ($4.2M) GNO Regional Economy gasoline, diesel, miscellaneous plastics ($3.6M) motor vehicle parts ($0.1M) Advanced Aerospace & Defense Mfg. International Trade, Logistics, & Distribution Energy, Petrochemicals, & Plastics Source: Minnesota Implan Group, AngelouEconomics NICHE SECTORS The Greater New Orleans region has several natural advantages in the creative media and design industry: a longstanding base of artist and creative professionals, excellent film and video game production incentives, an irreplaceable infrastructure of buildings and culture that inspire creativity, and a recent surge of young, urban rebuilding professionals (YURPs) who can be retained in the region for innovative job creation. The following niche sectors help to exploit these strengths of the Greater New Orleans economy. 60

9 Film and TV Production Film production is Greater New Orleans major entry into this expanding market. With excellent film incentives at the state level, Greater New Orleans can continue to build this industry through encouragement of facility construction, ensuring that local technical programs train a workforce for future film productions, and continuing to encourage film production in the region s soundstages. Digital Media & Graphic Design Graphic design, digital media, and film production all involve the design and creation of digital, media, or visual content. More and more, this content is being created through the use of advanced computing and software technologies. Video Gaming The global video gaming industry was worth $33.2 billion in 2003 and is projected to reach $52 billion in Though video gaming firms do not have a large presence in the Greater New Orleans region, Louisiana provides excellent tax incentives for video game production in the state. The primary opportunity for the Greater New Orleans region lies in video game developers, who produce video games for major producers. Music Production Music production provides New Orleans with a major opportunity to add value to its jazz and blues performances. While music production costs have come down, specialized spaces, computer systems, and experience are required to be successful in this niche sector. By tapping into the creative performances of regional performers, music production can help build New Orleans reputation as a creative region. Industrial Design and Modeling Industrial design and modeling taps into the same design-focused skill sets that workers throughout the creative media and design industry, including knowledge of advanced computer modeling software, graphic and computer-aided design, and aesthetically pleasing design. This industry, however, provides value-added services to other key industries in the Greater New Orleans region, including the ship and boat building industries and energy exploration companies. Services related to other target industries range from actual design of ships, boats, and offshore oil rigs to three-dimensional modeling of offshore oil deposits. 61

10 REGIONAL LOCATIONS CREATIVE MEDIA & DESIGN LOCATIONS Because of the emphasis in this industry on quality of life and coolness, the ideal location for this industry is in the City of New Orleans and nearby Jefferson Parish. This location selection also recognizes the existing resources in place for this industry, including the Nims Center Soundstages and existing creative media, advertising, and graphic design firms in the region. New Orleans Jefferson Parish CREATIVE MEDIA & DESIGN OVERVIEW: Greater New Orleans has existing assets in film production and excellent investment and job tax credits to incentivize film and digital media production in the region. Building on the assets of young urban professionals moving into the region after Katrina, as well as on the existing base of architectural, film production, advertising, and graphic and industrial design knowledge bases in the region, Greater New Orleans could leverage its assets to build a knowledge-based industry that builds provides opportunities to retain young professionals. 62