3    St Petersburg Survey: Problems and potential

3.1 	Background

In June-September 2001 a survey was carried out to establish initial understanding of existing and potential enterprise in St Petersburg's cultural sector.  This involved desk-top research (see section 2) and more than 60 interviews with cultural businesses, practitioners, intermediaries, institutions, service providers and policy bodies1.  

The survey covered the following areas:

•	Traditional Arts – visual and performing arts, galleries and venues, museums, literature and publishing.
•	Design (furniture, fashion, graphic) – both as ‘arts and crafts’ and as an input into mass manufacture.
•	Media – TV, Radio, Newspapers and Journals, Film
•	Popular Music – recorded and live
•	Leisure – retail and entertainment.

These are obviously a very diverse set of activities – in what and how they produce; in their sources of finance; in the motivations and values of actors; in their markets and sectoral structures (e.g. TV production is very different from making a work of contemporary art) etc.  But the research touched on some generic and strategic issues with cross-sectoral implications. 

This project is concerned to promote the growth of  entrepreneurial activity in St Petersburg's cultural  sector both as a source of employment in its own right and as an essential part of the city's developing life. The focus of the work is on fostering enterprise and entrepreneurial approaches across the cultural spectrum - large organisations, smaller, freelance and commercial. But the project is emphasising the Western experience of small cultural businesses of the not-for-profit type, because the strategic, entrepreneurial role these organisations could play, making them a key element in the city's cultural development strategy, is only partly recognised in St Petersburg.   As far as the Russian situation is concerned these organisations' potential for activity and self-sustainability is limited by current restrictive definitions of 'enterprise' and 'not-for-profit' - problems which we will address later.

The official definition of ‘small’ enterprise is under 50 employees. However, experience in Western Europe suggests that for the cultural sector this is quite large; a great many of those producing the impact that is of interest to this project are ‘micro-businesses’ of under 10; and of course there are many individual ‘freelancers’. The European research indicates that over 40 per cent of all cultural sector employment is in small businesses, and the percentage is increasing. Moreover, it is here that creativity and innovation in the sector is concentrated. 

In attempting to promote this activity in St Petersburg we stress the need for culture as a whole to access new sources of income – whether grants, sponsorship or new markets – beyond (but not excluding) those provided by traditional state funding. In order to do this, the management, marketing, organisational and entrepreneurial skills associated with the commercial sector will be of great value to state institutions, not-for-profit organisations and individual cultural producers alike. Moreover, in order to maximise the potential of the St Petersburg cultural sector, large and small organisations, public and private – the sustainability of the city's culture  and related structures will benefit from the development of an official strategic vision which involves a switch from an exclusively ‘subsidy’ model to one that builds in models derived from the sphere of ‘economic development’ (though it should also be stressed that these cannot be transferred directly).

However, this should not be seen as a wholesale shift to ‘commercial’ values at the expense of the ‘artistic’. The clear remit of this Tacis programme is to find ways of facilitating and enhancing the effectiveness of entrepreneurial activity in the cultural sector, with the aim of increasing employment and wealth creation in St Petersburg. But this cannot be done by ignoring cultural or artistic values. On the contrary, it is only by improving the efficiency and the quality of enterprise in the cultural sector that tangible and sustainable economic benefits can be produced. 

3.2 	Culture and commerce

The previous dominance of the state in Russia and the past decade's attempts to shift to a private market economy are subjects which go beyond the remit of this report but which inevitably pervade the issue of the cultural economy - if only because the state continues to fund the vast majority of art and cultural production. However, the issue takes on a particular complexion in this sector because of dilemmas relating to economic activity in the cultural sector that influence acceptance or rejection of this activity's importance and potential for positive impact. Policy dilemmas are partly due to a general lack of information about the economic benefit of enterprise in the cultural sector, but they also reflect a deeper ambivalence about ‘culture and commerce’ that is present at all levels of the cultural sector, including amongst many non-state and 'alternative' organisations.

There is a lot of active resistance, by producers, consumers (audiences) and policy agencies to the idea of 'culture as business'. This could stem from a number of considerations. 

First, it relates to the separation of subsidised culture (‘art’) and commercial culture (‘entertainment’) which was general in Western European cultural policy fields at least until the changes occurring there in the early 1980s. 

Second, this issue has a specific Russian dimension relating to the politicised role of ‘high culture’ in the Soviet Union – when it was both a vehicle for political ideology but also a site for the transcendence of that ideology. The state tightly controlled cultural production for ideological purposes, but within a framework of respect for (usually pre-20th century European bourgeois) ‘high culture’. Soviet culture was of course defiantly non-commercial (ie, non-capitalist). On the other hand, oppositional, 'alternative' culture was by necessity non-commercial also; both in the sense that it did not generate income and in that it rejected immediate acceptance/ popularity, envisaging for itself an ideal audience of the future (sometimes beyond the existing regime, or some more general ‘judgement of history’, or a mixture of both). There was also a sense of oppositional culture speaking to an ‘international cultural mainstream’. Both officials and dissidents upheld a notion of ‘high culture’ as non-commercial, though oppositional culture was open to the current of Modernism whereas this was very difficult for the Soviet state. This international mainstream – and by the 1970s this meant ‘modernism’ – was very often imagined differently by oppositionalists from its actual reality in the West. Something made clear in 1989.

Third, the impact of the rapid market reforms in Russia was, as elsewhere, very hard on the cultural sector. Not only were the institutions and jobs of official subsidised culture under severe threat, but the complex eco-system which had sustained oppositional culture (and the liminal areas which of course linked the two) in the form of university jobs, commissions from larger institutions state grants, more private unofficial commissions etc. – this eco-system suffered severely. With the result that there was as much antagonism and anxiety about the collapse of state funding for culture on the alternative or oppositional side as there was the official side. 

Fourth, the commercialisation of culture was seen by oppositional culture as a degradation of culture; production for the market was as much (maybe more?) anathema for these as it was for official culture. This shocked encounter between a preserved (through political opposition) notion of ‘high art’ and the reality of commercial culture industries in the West was prefigured in the reactions of exiled oppositionists (one thinks of Solzhenitsyn and Milan Kundera). It can be seen today in the cynicism of writers such as Victor Pelevin. 

It should be said that Russia is not alone here.  Similar arguments can be found all over Western Europe, where changes in cultural policy have threatened established mechanisms for the distribution of cultural subsidy. Cultural business, many say, equals cuts in subsidy to both institutions (and institutional jobs) and to individual artists.  Fears have been expressed that policies to develop the creative industries mean the sustainability of culture relying increasingly on the market, so that issues of cultural industries development feed anxiety/antagonism towards 'commercial culture'. Culture produced for the market, it is said, means pleasing the lowest common denominator, creation of easy 'entertainment', and the courting of immediate (and thus transitory) popularity. In this way, many people see the autonomy of the artist - which should be at the heart of authentic cultural production - being betrayed 'for 30 pieces of silver'.  

It would be wrong to dismiss these fears as unfounded:  pressures on state budgets, the power of the market, the globalisation of the large cultural industries - all these have set a context for cultural producers and policy-makers in the West that is different from that in which they operated two decades ago. The forces that have promoted such transformations are increasingly felt in Russia and - for the reasons sketched above - the situation is exacerbated here.  Part of the task of this Tacis project is to address some of the fears.  Like all changes, they present both dangers and opportunities.

This is the situation of risk facing St Petersburg culture today, whose addressing can be postponed, but not avoided.  'Globalisation' has involved accelerated flows of money, information, goods, people passing through cities.  These flows include ideas, signs and symbols, the whole range of cultural products, information and ideas which make up the complex global cultural circuit of the contemporary world, driven by publishing, satellite, internet, the internationalisation of production and distribution etc which have transformed the immediate day to day context and wider significance of local cultures. 

Inevitably both local cultural production and cultural consumption now take place in a much wider context – culturally, economically and organisationally. All cities need to be much more reflexive and responsive to the changes – cultural policy therefore now looks to the preservation and promotion of local, place-based cultures through active engagement with these wider contexts. 

Solomon Volkov has called St Petersburg an ‘Atlantis’, sunken for 80 years (St Petersburg. A cultural history, London 1996, p xvi).   One of the great world cities has now re-surfaced – but the world is a very new one. The 2003 Tercentenary presents the opportunity to inaugurate a new century of cultural achievement and energy, but there are some clear things that need to be done - in order for St Petersburg to revitalise its own unique cultural profile, but also to reap the full benefits of the new, contemporary era.

3.3 	The state cultural sector

This project is essentially focused on enterprise that is small, flexible and responsive; but it cannot ignore the state sector. The vast majority of state funding in St Petersburg goes to state institutions, and the bigger ones command by far the largest percentage of funds from non-state foundations. The bigger ones are also uniquely poised to benefit from tourism and foreign trade potential. This dominance of the state sector in general and the ‘big monsters’ in particular can be a source of resentment from smaller and non-state organisations, but in fact the 'monsters' represent a great potential sphere for the development of small enterprises' activity. 

The large, famous institutions are crucial to both the cultural identity and the cultural economy of the city. The global prestige of some represents a tourism and foreign investment potential that numerous other cities would envy. Many are also central to St Petersburg’s own sense of identity and represent a source of cultural dynamism and expertise which should not be underestimated. The questions for the current project are, first, to what extent the large state institutions can contribute to the health of the non-state or ‘independent’ sector and, second, to what extent can these ‘independents’ contribute to the health of St Petersburg’s cultural sector as a whole.

It is clear that these state institutions are currently far from maximising their potential and that any overall  cultural strategy must see this maximisation as a prime focus. The under-exploitation of this potential is generally damaging to the sustainability of St Petersburg’s cultural sector.

The problems of the state cultural sector are fairly well known. Some pertain to the skills and culture of the institutions themselves, some to the environment in which they are operating. Any cultural strategy cannot simply focus on one dimension (e.g. ‘arts management skills’) without taking into account the others (e.g. the complex legal/financial/regulatory context). On the other hand, one must start somewhere. The problems facing large state institutions include the following

i)	lack of arts administration and marketing skills; 
ii)	legal, bureaucratic, fiscal and cultural constraints on entrepreneurial activities;
iii)	lack of flexible human resources management powers (difficult to get rid of or financially reward staff);
iv)	a tendency for the large institutions to be self-contained and remote from other locally based cultural institutions;
v)	the continued existence of many financially unviable small state institutions, over-manned, lacking basic skills and contributing little to the overall cultural life of the city;

These are compounded by:

i)	the city’s lack of a clearly outlined unified cultural and tourism strategy; 
ii)	the opacity and clientele basis of its cultural funding system; 
iii)	the wider uncertainty about the economic dimensions and potential of the cultural sector; 
iv)	lack of a strategic driver with regard to tourism, culture and small business development – who can bring these issues together, who would translate a coordinated vision into reality.

These larger issues need to be addressed alongside strategies for cultural enterprise development. It is not the task of this Tacis project to produce a strategy for these large cultural institutions, nor to suggest an overall cultural strategy; nevertheless, the developmental change currently being explored within the St Petersburg Administration's Committee for Culture and the support for small enterprise planned by the Committee for Economic Development could have a direct bearing on how the small, independent cultural sector operates. Every attempt is being made to ensure coordination.

3.4 	The state sector and small independents

The independent sector involved in cultural production should not be seen as opposed to or completely separate from the state sector. In actual fact there are many personal and professional contacts between people involved in both; they often circulate in similar milieux and there are cases of migration from one to the other over time; there are many educational and experiential crossovers. Despite the divisions between the sectors there is also a certain symbiosis, and this needs to be developed. 

There are three inter-related aspects:

i) 	One of the difficulties facing large cultural institutions is their inflexibility – to some extent this is inherent in any large organisation, especially those charged with a ‘conservationist’ role. However, it is exacerbated by the problems above – insufficiency of specialist administrative and management skills, and external constraints (due to a range of legal, fiscal etc. factors) on the exercise of those skills even if possessed. Recent and current ‘arts management’ training programmes are to be welcomed here as long as we recognise the existence of external constraints on full implementation of these skills. 

However, one of the major shifts in the last 20 years in the West is the increased use by larger arts organisations of smaller ones to perform certain tasks – from joint artistic productions to sub-contracting graphic and exhibition design, catering and retail. Western arts institutions – and indeed the arts sector as a whole – are much more collaborative affairs than they used to be. Successful projects do not therefore imply a corresponding failure (zero-sum) but can provide a stimulus to the sector as a whole. This collaboration increases the flexibility of the large institutions and gives an economic and artistic stimulus to the small (including non-cultural ancillary) specialist enterprise sector. 

One of the issues that needs to be examined is the extent to which  larger state institutions can open up their organisations to more collaborative ventures. There have been some examples of this – Au Coin de France (Ugolok Frantsii) working with sponsors to promote events with the Mariinsky Theatre – but these are not common. To develop such contacts requires a lot of personal effort and a level of social capital (reputation, prestige) not available to many small businesses. 

It will be some time before this tendency gathers pace but three developments could bring it forward. First, the development of skills and professionalism in the small cultural sector; second, greater transparency and competitiveness in the allocation of the city cultural budget; and third, a more coherent and unified voice from the small cultural sector. We shall return to these issues. But finally, what is also needed is a new willingness of official cultural planners and the big cultural institutions to work in a collaborative manner with partners whom they may not control through direct funding mechanisms. This demands new levels of risk and trust.

ii) 	There is the whole issue of cultural tourism. The development of tourism is complex. It involves clearly political issues such as reform of visa regulations; upgrading the hotel and transport infrastructure; improved/increased city marketing; festival and event promotion; strategic cultural vision and management; a general cultural shift in dealing with foreign visitors. This is far too big a range of issues to be dealt with fully here, but certain aspects need to be outlined.

Obviously the large state institutions are crucial here, and nothing should be done to undermine the prestige and quality of their offer, but tourism requires a broader cultural offer than that of the big players alone. As one participant in the recent survey argued: St Petersburg is like Luxor rather than Paris;  once the big cultural monuments have been visited the visitor finds it difficult to penetrate further into the urban environment. A city’s cultural offer benefits from the inclusion also of smaller, newer, more diverse, more alternative cultural events and venues; it needs to be animated by more easily accessible, medium price range, stylish cafés, bars, restaurants and clubs  – which in turn create demand for visual and performing artists, designers, promoters etc. In this way also tourist spend is increased and an expanded market created for local cultural products.

In short, to fully maximise its potential, and to enhance its central and crucial cultural tourism offers, St Petersburg needs a thriving independent sector, ranging across the cultural field from contemporary art to DJs, from small theatres to new media producers and graphic designers, from 'art' cafés to stylish local clothing and accessory boutiques.   This sector is a crucial part of the cultural infrastructure. Barcelona is one of Europe’s top five city tourist destinations. It does not have anywhere near the level of cultural heritage of St Petersburg, but it provides a distinctive and dynamic environment for its visitors. And this is not just about the climate. Part of any St Petersburg strategy to develop its cultural tourism potential needs to have as an urgent priority the development of the small, independent sector as a crucial and officially recognised part of the cultural offer and tourism infrastructure.

iii) 	St Petersburg cannot rely on its classical heritage alone without turning into a 'museum' city ,  which can easily become a stagnant tourism culture. Vienna has recently attempted to address this issue, including in its new Museum Quarter an initiative known as Quarter 21. Not only does it attempt to promote contemporary art in new media, it also looks to new ways of financing cultural experimentation. St Petersburg is dominated by its ‘classical heritage’ – by which is meant the unique built environment and cultural products largely from the 18th and 19th centuries. The modernist heritage is much less exploited. Contemporary art lacks a strong presence. 

The contemporary innovation - in art, design and the knowledge economy - typical of the small independent sector is essential if St Petersburg culture is to renew and revitalise itself. It is from here that new ideas, new forms, new energies come – the creativity crucial to modern urban cultures. To promote this aspect of St Petersburg's culture is not simply a matter of redistribution of funds, it demands a radically new approach to this sub-sector. 

Creation of a vibrant small, independent cultural sector thus has great implications for enhancing traditional cultural products and the overall cultural offer of St Petersburg. But traditional cultural products – classical, modernist or contemporary – are not the only thing at stake here. The independent sector also influences other aspects of related contemporary  production.

In West European cities, the growth of cultural sector employment has come in large measure from the increased consumption of 'cultural ' commodities produced for mass distribution and consumption. The industries marked by electronic and now digital (re)production techniques - the fields of recorded music, television, radio, film and video, publishing and new media – these are areas with economic (employment, wealth creation) potential but also of great cultural significance. To dismiss these as ‘commercial’ or ‘merely entertainment’ is to risk leaving ‘art’ as an isolated, minority activity and to reduce the revitalising possibilities of contemporary cultural production. This is not to deny the difficulties in entering some of these fields in a situation of already established dominance by a few global players;  but the opportunities to create new possibilities at the local level should not be under-estimated either. 

Again, the promotion of these sub-sectors in a city like St Petersburg demands a radical rethink of how to approach the independent cultural sector. Because whilst wider experience indicates that the big players do play the key roles in this field,  they themselves depend on clusters of small businesses. Whilst an approach to the large players is more obvious and straightforward, it is the clusters of smaller cultural businesses and related services, as well as a more diffuse ‘know-how’, that often allow these big players to operate and need to be considered also. This configuration of large and small is different in different places and different sub-sectors. Knowing how the different industries are structured around specific places is crucial here, so that specialist local 'intelligence' needs constant attention.  For example, there are very different entry levels for different sub-sectors into production and markets (pop music and radio can have very low entry levels; TV and film are high), and the industries can be spatially organised in different ways (TV tends to be very place-based around large institutions; new media more dispersed).  Specialist knowledge of this kind often accrues within small-business networks:  its accessibility can benefit any official development strategy.

The overall 'official' character of the St Petersburg broadcast media tends to place them beyond the scope of this project, and this dimension will certainly influence any policy that is developed in this area. But even here there are possibilities for an independent production sector benefiting from the opportunities offered by the commissioning and distribution centres controlled by the state.

And of course the explosion of new media , both related to the older media (music production, TV, Radio, Graphic design etc.) and as an emergent sector in its own right, also offer possibilities for the independent sector.

The growth of a consumer economy brings with it an increase in the symbolic/ cultural and ' lifestyle' components of many different goods. That is, the design element is fore-grounded in previously ‘utilitarian’ goods; and many ‘designer goods’ (such as fashion, ceramics, furniture) are sold to a new ‘mass’ public. This means many designers may now exercise their skills in more ‘mass’ production, or have opportunities to franchise their ideas etc.; and more traditional manufacturers need to place increased emphasis on the design element in their products. Both these tendencies create the need for a whole new set of skills and understandings not necessarily easy to come by. There is a precedent for such high cultural interrelations in movements such as Mir iskusstva, but there is also an intervening heritage of high-volume, low-quality manufacture with more utilitarian aims that has driven out smaller markets and more individual design solutions, both of which should re-emerge now.

The re-orientation of traditional crafts and design, art-based ‘designer-makers’, manufacturing skills and marketing to specific large and small new markets – all this demands an approach that takes us beyond traditional cultural policy, but also makes new demands on standard ‘economic development’ policies. That is, traditional manufacturing policies need to address the value-added dimension rather than competition on cost – and this involves a new form of cultural as well as business competence. 

For all these reasons the promotion of the small, non-state cultural enterprise sector is of crucial importance to the development of St Petersburg culture and can contribute significantly to the city's economic well being. The question we face is how this sector can be so promoted?

3.5	The non-state cultural sector

The non-state sector is very diverse and grouping the existing Non-state cultural enterprises and cultural sector organisations operating in an entrepreneurial way under the term ‘independents’ hides some very real differences. However, given the predominance of the state in matters cultural, at this stage this term may serve as a convenient label.

The research carried out in St Petersburg suggested a basic distinction between those independents that look to get income in the form of grants/contracts from the state and/or private foundations, and those that look primarily to the market. Many respondents  - as well as the official codex of organisations - suggest a further ideological division mapped on to this:  that between those who are primarily ‘artistic’/not-for-profit and those who are ‘commercial’, producing for a market. Some of these latter also claimed that the main purpose of the commercial activity was to subsidise their ‘real’ artistic activities. However, the research also showed that this polarisation is not as clear-cut as it may appear.

The ‘not-for-profit’ independent sector involves, by definition, non-state institutions. This is not to say that they do not get state money, simply that they have to apply for this money. In order to obtain the money they have to set up as not-for-profit organisations – ‘entrepreneurial’ activity in the sense of purely profit-making activities cannot be underpinned by state cultural funds.1 In fact, this distinction also has a moral/ ideological dimension: to define oneself as ‘non-commercial’ and thus 'artistic' makes relations with the Federal and local state easier. The state is more at ease with not-for-profit organisations than with commercial companies. Some of the other benefits also include lower rents – a major consideration – and some tax benefits. Finally, non-commercial ‘artistic’ groups may also be more shielded from the ‘attention’ of some of the more problematic aspects of the bureaucracy and of illegal organisations. 

The distinction between ‘not-for-profit’ organisations and ‘commercial’ ones is not necessarily about the target source of income – grants or the market. The former are not ‘entrepreneurial’ in the sense of pure profit making, but this does not mean that this activity is not ‘entrepreneurial’ in the sense of searching for and exploiting grant funding (and indeed commercial) opportunities. Some not-for-profit organisations interviewed were very entrepreneurial, seeking a whole range of public, private and commercial opportunities. As in the West, the line between efficient, energetic, creative and opportunistic organisations and those not able to maximise their opportunities in this way is often as important a distinction as whether they work in the commercial or not-for-profit sectors. Many not-for-profit organisations, indeed, have a much higher turnover than the straightforwardly commercial ones. 

Nor does the fact that a cultural business is commercial necessarily mean that it is purely ‘market driven’ (ie seeking financial reward at the expense of other considerations). The small cultural business sector (including self-employed and freelancers) in Western Europe is in fact driven by a complex mix of commercial and cultural motivations. If cultural business is about economic value being derived primarily from cultural value then part of the ‘asset base’ of any such business is its cultural capital, its awareness of the changing cultural field. And experience in the West has shown that - despite the business analysts’ talk - much of this entrepreneurial capacity is intuitive, or (in sociological terms) a part of the ‘habitus’ or customary way of thinking and acting of the cultural producers. Small cultural businesses are concerned with developing products that are ahead of the market, they take a risk on them acquiring a future cultural (and therefore economic) value. 

Some do follow the existing market closely – clothing manufacturers copying the latest fashions just ‘ahead of the game’. Some are far ahead of existing demands – the alternative fashion designer trying to identify future trends based on their (and their friends’) personal tastes. Some are in it for money, some because they don’t want to work 9-5, some to be ‘artistic’. Or a mixture of these. Whatever the motivation there are similar constraints in operation – the need to mix innovation and business survival, to manage creativity and cash flow, to look to the future but be aware of the demands of the present.  

Looking toward the state for grant funding and towards the market do require different approaches and priorities from businesses and individuals. This choice depends also on what cultural sub-sector you are in and how the state has organised its funding regimes. In St Petersburg, presenting oneself as a not-for-profit 'artistic' individual or organisation has clear benefits with regard to state funding; in other countries a more entrepreneurial and market oriented profile may be useful to the same individual or organisation. The key point is that the two should not be seen as radically different entities. Cultural organisations can look to the market and grants, and part of being entreprenuerial is looking to both rather than simply ‘the market’.

The tendency in the West over the last 20 years has been a blurring of the boundaries between the two activities – gaining grants and accessing markets. 

On the one hand there has been a shift to project-based funding, where grants are given (often representing a mix of funding sources) on the basis of a specific project which fits into an overall strategic line. This can range from singular cultural products/ activities (a performance, a sculpture); to a programme of events or commissioned products; to umbrella/ intermediary organisations which promote/ represent individual artists. In addition many non-cultural organisations have financially promoted cultural activities on non-cultural programmes (public art, arts for health, social and urban regeneration activities etc.) Cultural organisations can thus look to tendering for work offered by non-cultural organisations but who want to use culture/ cultural activity within their programmes. Non-cultural organisations – both public and private – represent economic opportunities for cultural producers.

On the other hand, many programmes (such as this!) have been set up which (1) emphasise the economic dimensions of cultural activities – job creation, area-regeneration, innovation, tourism development, etc. – and ask cultural organisations to justify their activities accordingly, or (2) create new sector organisations which are concerned to develop the economic capacity of the cultural sector.

For all these reasons the situation in the West is becoming one in which cultural organisations have to develop a whole range of financial and management skills; and small cultural businesses and self-employed entrepreneurs are operating across a complex patchwork of grant-led and market-led activities. This process is quite clearly beginning to happen in St Petersburg. 

3.6  	Grant funding and markets

State funding in St Petersburg is restricted, and struggles to finance existing institutions. There are also issues relating to the transparency of the funding allocation mechanisms, their rationale in terms of overall strategic vision, and with the existence of a client-based system.

However, there is evidence that budget allocations at St Petersburg level are now beginning to open up to the non-state sector as legitimate bidding organisations for state funding. The details are as yet unclear as the Committee for Culture has been reviewing the situation. Ideally, however, reform should include a longer term shift to greater emphasis on more project-based funding – where the state finances a project which delivers to its strategic objectives rather than undertakes to permanently finance an institution. 

This is certainly the situation with respect to the non-state funding institutions; however the tendency is to finance organisations that are of a similar kind to those supported by the state.  There are a number of reasons for this. The foundations are interested in high profile cultural organisations. Grant-givers frequently want to fund a small number of large projects rather than lots of smaller ones, with the result that the larger organisations gain an advantage. There is also the issue of social/ cultural capital on the part of the smaller organisations – they may not feel able to approach the large charitable foundations because of a limited track record. Indeed, they may lack the information and the skills to write successful bids in the way demanded by these funders.

Similar issues confront independents who look towards sponsorship and/ or more directly philanthropic sources of funding.

The opening up of the state budget allocation procedures and the proliferation of non-state, often international, funding would create new opportunities for the smaller independents, but it would also require new skills and levels of professionalism. These include – information sourcing, writing applications, making diverse presentations, costing and planning, networking etc. Whilst these skills do exist in many St Petersburg organisations, large and small, there is a general skills lack which needs to be addressed. The pressure to acquire new skills is all the more real in that it is clear that state and non-state grant funding are unlikely to increase in the near future to levels which will go anywhere near satisfying the demands made on it. It is to the market that the cultural sector will have to look, and this too requires new skills.  

This is not a question of importing ‘commercial’ skills and values wholesale into the cultural sector; the cultural sector has its own specific demands and requirements. Some cultural organisations have a lot of these skills already – managing to combine culture and business, although many are far from possessing them (see Section 3.7). However, there is an issue about markets as such in St Petersburg which needs to be acknowledged before we deal with specific skills requirements of the sector.

More is involved than changing cultural producers' attitudes to doing business – there is a real problem with the market itself. The problem has two dimensions. 

First, the market itself is not fully established – at least not as it is understood in the West. Second, the culture of consumption is not as developed here as in the West; a number of the respondents surveyed have referred to the need for ‘education’, for a policy to develop the cultural market in general before individual cultural businesses can thrive.

The abstract ‘free market’ beloved of neo-liberal Western ideologists does not and never has existed. The ‘market’ has developed over many centuries and this process depended on and gave rise to an extensive range of public and private institutions, laws and regulations etc. as well as practices socially embedded as ‘custom’, networks of trust, and a wider ‘civil’ society which allowed all of these to function more or less coherently (I am ignoring here issues of power and exploitation). In short, ‘the market’ is not just about buying and selling – it is about buying and selling within a formally and informally regulated, socially embedded context. This does not emerge overnight. 

What this means is that ‘normal’ market relations do not readily apply in Russia – they are distorted by insufficient legal infrastructure, by clientele systems at all political levels, by lack of in-depth democratic scrutiny and by a large ‘informal’ economy which, though not necessarily a problem in itself (at least for individuals and small businesses), offers much greater scope for illegal operators. 

Comments from entrepreneurs interviewed in our research have underlined this – they have called for a greater sense of ‘civil society’, of trust, of a formal and informal framework within which business operations can happen. This is a much larger problem of ‘governance’ than can be addressed here, but it raises three issues that are important for us. 

First, any strategic intervention in the cultural business sector has to think about these formal and informal underpinnings (or lack thereof) of the market. Failure to do this in the 1990s led to economic difficulties; we should not be recommending the same thing for the cultural business sector now. 

Second, and more specifically, the skills requirements for cultural businesses will not therefore be direct transplantations of ‘Western business courses’. As many respondents noted, we have to pay much more than lip service to the specificities of the Russian business context.

Third, part of this concerns the issue of networks. Many respondents stressed the crucial importance of personal networks and working with people you trust. This is by no means unique to Russia. Work in the UK has shown how informal networks are crucial to the cultural enterprise sector – even amongst the bigger cultural companies. These networks are concerned with knowledge, skills and information transfer; they can involve informal borrowing/credit; they are about the testing of ideas; and they are also about off-setting personal and business risks. 

Experience of creative industries development shows that the theft of ideas (and material goods) and non-fulfilment of agreements, non-payment of money owed or non-delivery of services promised is extremely common and it is clear that similar problems occur in St Petersburg. In such circumstances networks of trust and friendship are quite crucial. However, there are specific historical reasons for the development of strong personal networks - often across quite dispersed fields. The reasons for such strong personal networks relate to the exigencies of existence in the Soviet period; and given the uncertainty and volatility in the current transitional situation they are not likely to disappear in the near future.

However, it needs to be acknowledged that networks can lead to insularity, working to restrict new entrants. They are also nascent clientele systems. These dangers are most apparent when the market is limited and/or distorted by a monopolistic source of either contracts or grants. Here the existence of networks involves controlling access and thus can be heavily exclusive. This is often the case in St Petersburg where the market is under-developed, export opportunities very restricted, and the state still plays a dominant role in allocation of contracts and grants. The task of the Tacis project is to work with the strengths of the existing networks whilst attempting to open them up to co-operation with those beyond that particular network. This is crucial to any eventual sectoral collaboration in St Petersburg, partnerships with the local state and joint activities with foreign organisations and initiatives.

Many argue that the market for cultural goods is very undeveloped in Russia. First, there is the problem of disposable income – it’s growing, but slowly. Second, that people aren’t used to buying ‘art’; those that can may spend money on subsidised visual art or craft but have no tradition of actually purchasing it from private galleries. Third, that when people do buy cultural or high-design goods they tend to buy foreign goods - or even antiques (local) - because they either don’t know about local contemporary work or lack confidence in their own taste or the prestige of these local goods. 

The issue of disposable income is certainly very pertinent, but it is not an absolute threshold – many chose whether or not to spend, making use of such criteria as practicality/necessity and cultural/symbolic etc within their own spending range (this is not to deny the real effects of low spending levels). For many the issue is one of ‘educating’ the market. This is complex. It can mean creating a more discerning taste culture through TV, publications, exhibitions etc. (cf. Ugolok Frantsii’s attempts to create a discerning market for haut couture). It can also mean promoting knowledge of the local products, as well as raising their prestige and appeal vis-a-vis foreign goods (for eg, the Defilé St Petersburg fashion events). 

This process of education – in fact the creation of a more sophisticated consumer culture – is part of the transition to a market economy as noted above. It will take some years to emerge; and moreover such an ‘education’ has to take place in a context where the mass media carries an increasingly global content. Individual initiatives can certainly make a difference, but this is something that will also have to involve collaborative, sector wide efforts (joint marketing; promotional fairs; trade associations etc). Such sector wide initiatives (discussed below) maysometimes have the direct support of the local state and sometimes not; but ultimately an overall strategic vision will have to emerge if the St Petersburg cultural economy is to really expand - development of sub-sector networks will surely speed this process.

But this kind of development does not just relate to the education of consumers; one of the current problems in St Petersburg is that the cultural and design-led goods that people might buy are simply not being produced, or not produced at the right price. Businesses and individuals who might be able to produce for that market very often simply do not have the skills, or the economic and social capital to make connections, or the confidence/ knowledge to produce for this market.

3.7 	Building capacity

Skills and training

The survey of existing cultural enterprise in St Petersburg foregrounded the need for a new set of skills. These include: 

•	business planning and strategy; 
•	business management – issues of accountancy, tax, legal issues etc.; 
•	marketing; 
•	accessing information; 
•	writing grant applications

There are also skills and knowledge related to the creation and distribution of products – new media skills certainly, but also knowledge of available services, pricing structures, key contact names, industry structure etc. 

Requirements for these skills will differ from sub-sector to sub-sector within the cultural industries and depending on the relevant skills level of the business or individual. Start-up businesses, or individuals wanting to get started, will require very different skills and information than a more established organisation wanting, for example, to access foreign markets. Some skills and information can be generic – basic accountancy, legal issues etc, but other sorts may pertain to the specific sub-sector. Beyond a certain point what is useful for a furniture designer is of little interest to a club promoter. 

These skills are very rarely possessed by standard business advisors – there are specific conditions in the cultural sector which demand a customised approach: 

•	The cultural sector may resist being associated with ‘pure’ business, and certainly being told to operate within a standard business framework. There are different languages in operation here which cannot be brushed aside but must be accommodated;
•	There is need for trainers to have an in-depth knowledge of the sector; recognising the specific realities of cultural business operations is key to effective delivery;
•	At an early point training will need to target specific sub-sectors or be clear about where cross-sectoral relevance does or does not exist;
•	Where possible, training should be delivered by actual practitioners with a credible track record.
•	Provision frequently needs to be short and flexible – cultural economy is dynamic and progression often non-linear. 

At present this sort of provision in St Petersburg comes either from existing small business support services or from ‘arts management’ courses. Evidence suggests that neither are hitting their mark. ‘Arts management’ courses tend to reflect the needs of their main subscribers -–which are relatively large, grant-funded organisations which can afford to send staff on long courses. The content matter also reflects these needs. The existing small business services in St Petersburg have dealt with some cultural businesses, but these are few. None of the Tacis survey's cultural sector respondents had received any targeted small enterprise training.

The skills and business support infrastructure that can give targeted support and training to cultural businesses and individuals in St Petersburg is in need of creation.

Wider sector capacity

i)	Whilst such skills training is crucial it has to be recognised that this is not just about individual businesses but also about sectoral capacity as a whole. 

ii)	The creative industries sector needs access to specialist skills – legal, accountancy, promotional, new media etc – and information. The absence of these can severely hamper a sector; until recently Manchester had only one music lawyer, people had to travel to London. These gaps need to be identified. There may be specialist skills which can be adapted to the cultural sector (for example, intellectual property law) or encouraged to locate in St Petersburg (on the basis of potential business). 

iii)	There are also specialist functions which  need to be targeted. In Helsinki there are many musicians but until recently they all went to Stockholm, London etc for management services. An ADAPT course at the Sibelius Academy trained ‘rock managers’. Promotion, marketing, information services, legal services, management, agents – all these are an essential part of the cultural sector. 

iv)	A more fluid function of ‘intermediary’ is also crucial. Not necessarily ‘artists’ themselves (though they can be) these intermediaries are highly networked – or rather they move between networks, putting people together, translating from one sphere to another, getting ideas and activities off the ground. St Petersburg has had a long history of such key individual ‘movers and shakers’; now is the time to re-invent the tradition for the 21st century. 

v)	Informal/ semi-formal groupings are also crucial to sector capacity; the ability for self-organisation and the circulation of information and ideas marks out a vibrant urban culture from one that is moribund. St Petersburg also has a long tradition of such groupings, and our research has shown this is now in the process of active revival. Such groupings are very diverse – from groups of artists, to groupings around cafés/clubs, to informal associations or larger organisations; they need to be counted as a central asset of the St Petersburg sector. They also have to be encouraged in areas where they are under developed.

vi)	More formal associations also have a key role; if operating correctly they act as information conduits and are able to give some representative voice to the sector/sub-sector. One of the problems of the cultural enterprise sector is that it rarely sees itself as a sector, is fragmented in its engagement with the city authorities and rarely has a singular voice when consultation is requested. Such associations help foster sectoral self-awareness and can give greater coherence to the policy making process. 

vii)	These kinds of association can also act as network or umbrella organisations which attempt to stimulate activities and joint initiatives, as well as providing services (most especially informational) to the sector/sub-sector as a whole.

viii)	Alongside these there are also intermediary organisations (though the latter can often act in this way also) which attempt to act as an interface between the cultural sector and the state or other large public/private providers of services. They act as conduits of information between the two; provide or broker services to the sector; stimulate network and other joint activities; proactively try to tailor existing services to the sector, or develop new ones; have a strong input into the policy and strategic decision making process at local (and sometimes national) levels. The Cultural Industries Development Service in Manchester is one such organisation, but these exist across the UK. Indeed, North West region in UK now has a network of such organisations – Creative Industries North West. Details on www.cids.co.uk and on www.mmu.ac.uk/h-ss/mipc/iciss. 

ix)	There are more general support services which, though not exclusively focused on the cultural sector need to be aware of the potential for specialist application in the creative industries sector that their services might have – for example small business support, micro-finance, trade and export services, cultural tourism specialists etc.

x)	There is also the crucial role of education. This needs a study on its own. In short, despite the production of graduates who go into the cultural sector there is a huge disjunction between what higher and further education currently teaches in St Petersburg and the realities of the cultural enterprise sector. This is frequently true of universities in the West; it is certainly true in St Petersburg. Ultimately higher and further education is crucial to the capacity of the local sector; but there needs to be a long process of consultation and assessment before its potential is fully realised. This is most telling in the classic split between high quality ‘arts and craft’ education – aimed at small batch, one-off work - and the more technical or ‘vocational’ education aimed at mass manufacture. 

xi)	We should note also that pervasive throughout this discussion of cultural capacity is the issue of international linkages. St Petersburg will ultimately need to think about foreign markets; it has already begun the process of foreign contacts and exchanges which feed new ideas into the local sector, as well as testing local ideas/ products on the outside world. The support and development of these processes needs to be present at all levels of cultural enterprise capacity building.

xii)	Finally, growth of sectoral capacity (which we have only touched on briefly) will ultimately need the support of specific official vision and strategy. Only appreciation by the local authorities of the value of the sector – whose achievement demands both quantitative and qualitative research - will maximise potential. There is a requirement for in-depth primary research into the economic value of the sector in St Petersburg - a difficult task given the existing pattern of statistical collection, but not impossible. There is also a need for more qualitative work to grasp the dynamics and requirements of the sector as a whole. However, it is at the level of strategic vision – where the local state authority sees the role of culture as central to many of its social, economic and urbanistic priorities – that the ultimate growth of St Petersburg’s developmental capacity will emerge.

Special support needs of creative industries small enterprises 

West European research has focused on the advice and skills needs of small businesses in the creative industries sector (CI SMEs) and has found that the support required is sector-specific.  

These small enterprises tend to be small, but strongly independent and resistant to standard business expansion models: they need to stay small and flexible.  The market for their goods is volatile, and business strategies are specialist, based on intuitive knowledge rather than standard market research.  The practitioners tend to be highly educated, but to prefer ‘learning by doing’ to standard business support mechanisms.  They need multiple and hybrid skills, and trust their own networks for information and advice rather than the traditional ‘business experts’.

However, the research and practical experience of EU countries also shows that there is a real need for dedicated business support for CI SMEs, especially in the area of business start-up. The practitioners have little formal business training and many failures are due to elementary errors such as cash-flow failure, inadequate book-keeping or simple ignorance of specialist regulations. CI SMEs often need specific advice about the structure of their own industries, relating to the realities of who gets the profits and who controls access to distribution, etc. They need sector-specific information about realistic business plans, marketing programmes and specialist topics like copyright, technology developments, export regulations, pricing and costing.  Their growth can be erratic:  the learning and support framework these enterprises need is non-linear and flexible, with multiple entry and exit points.

CI SME support and training modules planned for St Petersburg will almost certainly also need to be equally sector-specific, flexible and responsive – providing appropriate interfaces between the creative industries sector and the more formal economic development sector. But they will also need to be specific to the city of St Petersburg itself.