Business Models in Cultural Entrepreneurship: From Cost Disease to the Fractionalized Future

This work introduces the core logic of economics and of finance along with a number of business-model patterns in the creative industries. The core logic of economics is that price equals value, and that revenue must cover expense. The core logic of finance is that risk and return move in lockstep. The arts present interesting challenges to both: cultural entrepreneurs are often investors and producers. They must cover ongoing expenses while also taking risk to create things of value—before that value is known. While Baumol and Bowen coined the term “cost disease” in 1966 to describe the difficulties of cost-intensive models in the arts, newer entrepreneurial forms are embracing shared resources, fractionalization, and cooperative ventures that point to new organizational models in the arts and cultural sector. With cases ranging from emerging galleries to auction houses, this work focuses on visual arts, though connects those models to performing arts and other creative industries.