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Creativity Needs Soul (Chapter 2 of Fueling The Kreativ Malaysia

Creativity Needs Soul (Chapter 2 of Fueling The Kreativ Malaysia


THE ECOSYSTEM of the Creative Industry needs to be analysed critically. If not, we will forever prescribe the wrong medicine that will never heal the disease. It would be a shame if all of our efforts are channelled to address the symptoms rather than the causes of the problems. Earlier we have had some discussions on ‘Grants’ and whether it is the right approach to assist entrepreneurs (of the Creative Industry). Perhaps we should park this question aside first as it is still premature to conclude without understanding the components of our Creative Industry’s ecosystem.

So what can we say about our (Malaysian) Creative Industry’s ecosystem? There are many components to an ecosystem. The first is the source of creativity. True that everybody kept on saying that education is the key. However, we must remember that creativity, or art, for that matter, is not a structured deal. It is the right brain – the chaotic and abstract interchange of pulses between the neurons that occupy the right side of the brain. Therefore creativity comes from experience as well as collective memory of what the soul accepts as beauty. Each individual defines his or her own beauty. It is a unique deal from each one of us. As they say, “Beauty is in the Eye of the Beholder.”


In the earlier Chapter we made some comparisons to Korea. Now we should look at our neighbour, Indonesia. We (Malaysia and Indonesia) share the same genetic origin, hence the common reference to the Nusantara region. The Nusantara is a term often used to group the Malay race be it from the Peninsula, Borneo, Sumatra, Jawa, Sulawesi or any islands from the Indonesian borders as well as the Southern Philippines. When extended to include our slightly non-Malay neighbours such as Thailand and Vietnam and such, a Chinese reference of Nanyang is used – that means, South East Asia. So how are we in comparison to our Malay neighbours?


Indonesia has a very liberal openness to their creative acceptance. They seem to have been able to absorb many parts of foreign culture but morphed it into something very much their own. If we listen to Indonesian Jazz and R&B, it is miles ahead, quality-wise. Malaysia on the other hand, is dampened by the concerns over Islamic values being tarnished. We (Malaysians) have caused our creative evolution to be stagnated by ceasing to infuse new elements into the art. As quoted by the Chief Executive Officer of Cradle, Mr Nazrin, “To remain truly local in only one mould would hurt the appreciation of local arts and culture.”


The society (Malaysia) has evolved so much differently from those in Indonesia when it comes to creativity and culture. Perhaps God has a plan for Malaysia but we cannot help to notice that Indonesians have reached a far higher level of culture evolution from all aspects such as diversity, inclusivity, societal appreciation, education, pride, globalisation, talent pool and of course, economically. Have we (Malaysians) destroyed our potential to evolve (culturally) simply because we want to be purists? Our interpretation of what are acceptable forms of art and culture may have hindered us from infusing external ideas and hence, shrunk our openness for new things. In other words, we simply refuse to go against what we perceive to be cultural norms. We continue to follow traditions passed down by previous generations and that saga continues without avenues to blossom but instead, crumpled within.


Why is this observation true? Let us go back to Indonesia. In 2016, a team of observers from a Government agency called MyCreative Ventures was sent to Jakarta. Their task was simple. Observe and compare to Malaysia. To their astonishment, their observations did nothing other than to confirm that Indonesia has evolved tremendously when it comes to their creative industry. When in Jakarta, drop by any night clubs with live bands and you will see a local Indonesian band performing. Do that in Malaysia, half of the time you will either end up getting Indonesian or Philippino bands. Whatever happened to our local bands? The local bands are struggling to express their creativity because the market is limited. They are forced to go underground. Somehow the underground culture is preferred by our youth. They (Malaysian musicians) are lucky that they have Jennifer Thompson to bring them around on live band circuits.


A few years ago, Tan Sri Rais Yatim encouraged Malaysians to wear Malaysian Batik on Thursdays. Many citizens (of Malaysia) made fun of this. They are not proud of the Malaysian Batik. The move was viewed as a protectionism measure rather than an appreciation undertaking. Why is that so? Guess what the MyCreative Ventures’ observers noticed? On Fridays, the entire Jakarta was in their Indonesia Batik. Both male and female, old and young, across all ethnic groups, not matter whether you are working or you are just a Pecal seller by the road side. It is a fantastic feeling to see the citizens of a nation expressing their pride and joy of their local culture. This astonishment reaches its zenith when the team entered into a huge mall called Thamrin City Mall in Jakarta. Thamrin City Mall is a gigantic multilevel Indonesian Batik retail store that showcases diverse and contemporarised Indonesian batik.


Next was the culinary arts. How many times have you tasted Nasi Lemak that tastes like normal white rice (in Kuala Lumpur)? You would probably score eight out of ten. Let us take traditional cakes for a test. Anyone from Penang would curse the ‘kuehs’ (traditional Malay cakes) in Kuala Lumpur. For example, the Cucur Badak, that originated from the Northern Malaysia, is supposed to have its filling made of grated juicy coconut. Only then will the Cucur Badak tastes divinely delicious. Somehow, the urge to cut cost has resulted in the Cucur Badak (in Kuala Lumpur) tasting very dry with no juice. The hawkers had extracted the juice for other purposes. This never happen in Indonesia. Go to any food stall or hawkers in Jakarta and you will be promised a delicious treat no matter what the price is. A simple ‘ayam kampung’ (free range chicken) with rice flanked by five different types of Indonesia ‘sambals’ (chili sauce) will epitomise food from the heavens. Enough said.


Let us talk about performing arts and content creation. We are indeed proud of Tuan Haji Burhanuddin’s Upin and Ipin that had gone viral amongst Indonesian kids. The nation is very much gratified with this success. Then we have Boboiboy that is emulating such success. So we are not always faced with negativity. Somehow we do have success stories to shout about. That is great. However, we need a more pervasive success. An achievement that creeps deep into the society and survives the change of era and progressively adapting to the changing environment.


It is interesting that more than half a century later, P. Ramlee’s work is still a benchmark. If we look at P. Ramlee’s stories ranging from Ibu Mertuaku to Bujang Lapok, he had always infused in foreign elements that made it international. With him making fun of whatever is in our lives (social commentaries), it immortalises his work beyond 2 generations, at least. In 1960’s, P. Ramlee’s work was showing on the national television of Egypt. Now that is a pervasive success. The old folks in Cairo who sits and drink that sweet black coffee on the streets of Khan Al-Khalilee still mention P. Ramlee to shoppers who they can identify as Malaysians. This is a fact. Not a made up story. But why? Well, don’t we all ever wondered that perhaps the Egyptians are entertained by the fact that Abdul Wahub from Tiga Abdul wears a tarbush? What about the adaptation of Ali Baba and the Forty Thieves into Ali Baba Bujang Lapok? This is what we need to revive our creative society. Not necessarily the dark red tarbush, but the soul that creativity needs.


In any progressive society, at least the urbanites celebrate local arts, culture and music. That is lacking in Malaysia. We have rich Dato’s and Tan Sri’s buying art in Bali instead of from Malaysian artists. When asked, they will say, “It is cheaper.” Art is not about expensive or cheap. Art is about appreciating creativity, although we all like that to be extended to be ‘economically appreciated’. These people (not all) are proud that they spent thousands of Ringgit on their Italian chairs but boast that they bought cheap art from Bali. Would it not be more meaningful if the money is spent on great Malaysian art but small budget provided for Ikea furniture instead?


The students of the Faculty of Film, Theatre and Animation (FiTA) of Universiti Teknologi Mara (UiTM) attend a course in their final semester that exposes them to what is out there in the real world of Creative Industry. Many of them expressed their surprise when they had learnt that Malaysians have increased their contribution to cinema collections over the years but when dissected, the contribution from local movies has declined. This means that we (Malaysians) prefer Hollywood movies rather than local. This conclusion is also confirmed by a study done by the Film Directors Association of Malaysia (FDAM).
We should not blame the Malaysian society alone. We should blame both, the Malaysian society, as well as the film makers. The former is guilty for arrogance and the latter for ignorance. We if give a fair chance to the local movies, we will find that there are really good ones. Some examples worth mentioning are Songlap, Bunohan, Setem, Sepet, Talentime, Ola Bola and many more. Let us not have the attitude of “Filem Malaysia kampung” (Malaysian films are low class). Let us not be arrogant. For the film makers, they ought to strike a balance. A balance between making money as well as producing quality films. It seems that achieving this balance is a big issue and has resulted in two different types of movie makers in Malaysia. They are the ‘Hantus and Gangsters’ group (reference to mass market taste) and the ‘Artsy Fartsy Nobody Can Understand’ group.


What is this balance we ought to achieve? The Hantus and Gangsters actually makes a lot of money. People love a simple minded movie. They like comedy like Anak Mami. They like love stories like Ombak Rindu. They like action movies like KL Gangster. They like horror movies such as Khurafat. These types of movies can make money. On the other hand, we have the artistic work of the late Yasmin Ahmad that achieved so many awards but did not make money. It is either something is not right with the production or something is not right with the people. Either or, we need to balance this. This is a balancing act that requires sacrifices. The production houses may have to sacrifice from being a purist in order to make money. Then, from that money, produce the award winning ones.
Independent movie makers may not have the stamina to do both. The ones who want to remain artistically purists, will get the awards but not the money. The ones who wants to make a living, practically, will forego the awards but get the profits. Big studios like Astro’s Tayangan Unggul and Media Prima’s Primework Studios can afford to do both. They do a few of the ‘Hantus and Gangsters’ to make money, and then they take part of that money to produce the award winning movies. This is the balance that will ensure both the development of quality movies as well as sustaining the industry economically. Somehow, the independent producers must emulate this method. If the stamina is a concern, then perhaps it is best to produce the money making movies first before going for the awards. As you can see, it is quite tough to assimilate business acumen into Creativity.


Earlier we made reference to how the right brain works – the chaotic and abstract interchange of pulses between the neurons that occupy the right side of the brain. Well, the left brain behaves differently - the structured and calculated interchange of pulses between the neurons that occupy the left side of the brain. We have now instantly explained why it is tough to assimilate business acumen into the creative mind. However, we must not blame biology forever for such blaming action would mean we are blaming God for who we are. There is a way to contain chaos and abstract thinking within the boundaries of structured framework. This can be done. This has been done.


We shall remind ourselves the term ‘grantrepreneurs’. It is the Malaysian way of describing entrepreneurs who rely heavily on grants. The idea of grants is a noble one. It is to kick start a business. Naturally, it relates to the stage where research and development is conducted and study is done to address technical aspects of a particular product or service in order for it to be suitable for commercialisation stage. Even at commercialisation stage, a grant is logical for items such as marketing, distribution and promotional costs. However, grants are only meant to kick start the business. Once the products hit the market and it is accepted by the market, you are meant to ‘graduate’ from the grant seeking stage and start looking for investors who can push the business to the next level. Sadly, many Malaysian companies continue to apply for grants even when they have operated their businesses for more than a decade and many with profits accumulated. What is worse, some companies survived all these years not because of profits from commercialisation, but from being fuelled by grants continuously. Is this efficient and effective?


A briefing done by the Malaysian Venture Capital and Private Equity Association (MVCA) in their training courses for the investment fraternity revealed that the capital framework for entrepreneurship is akin to a valley. They call it the Valley of Death. Whilst this may be elementary to those who are educated with investment analytical knowledge, this is not what most of the entrepreneurs (in Malaysia) understand. The deepest part of the Valley of Death is when grants are given. With the grant money, they develop prototypes. Then they are supposed to find Early Investors, or Angels, who can pull them out of the valley and climb upwards. If they cannot achieve this, they will slide into the valley and the idea will just die away. Hence, the Valley of Death.


Subsequent to the Angels phase, the business should be ready to embark on commercialisation. That is when a Venture Capitalist comes in. They pump in money with the view of the product achieving significant growth in its market share. At this stage, the business may not even start making profits yet. The Venture Capitalists will work with the entrepreneurs to grow the business into a promising one. This ‘promise’ is what the Venture Capitalists will sell to subsequent investors.


We have to be fair when linking the types of funding to the stage of the businesses. Many citizens are upset when the Government spend millions of Ringgit channelling funds in the form of grants to entrepreneurs. What they do not understand is that grants have the same function as other infrastructure. When the Government builds the roads, or railways, they do not generate profits (or at least not in the initial years). It is the ripple effect of those infrastructure has to the economy is what matters. Similarly, when grants are invested in many entrepreneurs, it is with the intention of creating growth to the economy. Entrepreneurs make up majority portion of what we termed as Small and Medium Enterprises (SME’s). SME’s make up more than half of the source of the nation’s GDP. Fuelling entrepreneurs will therefore fuel the economy. Of course, not all will succeed. Just like the gang of sperms swimming up the stream. Only one will make it (or two if they are meant to be non-identical twins).


So, what has all this got to do with the Creative Industry? It has everything to do with the Creative Industry. That is why many grants are channelled to Creative entrepreneurs via agencies such as Cradle, FINAS, MDeC, MCMC and many more. The entrepreneurs must have a road map where they should plan for ‘graduating’ the ‘grant’ stage and grow into the ‘investors’ stage. An interview by My Intellectual Property Organisation (MyIPO) with Vision Animation’s CEO, Mr Low HuoiSeong, revealed that he used such plan. Vision Animation had already incorporated plans for investors to come in for more than one season of their animation series inspired by Gwen Stefani,Kuu Kuu Harajuku, when they were applying for their first investor, MyCreative Ventures, to come in.


Today, they have investors from Malaysia, Philippines and Australia. They have/are producing three seasons of the show and the first season is already showing on Nickelodeon in America and on other channels across the globe. They secured a licensing and merchandising deal early with Mattel, the maker of Barbie dolls, who is making this a major product launch in 2017. All this did not happen by chance. It was planned, well ahead of time. This is what the entrepreneurs should do. By the time the business has investors who are willing to put the chips on the Roulette table, grants will become irrelevant.
In this case, a few key points ought to be extracted. First, the plan to progress (funding wise or product progression wise) must be in place. Second, avoid being trapped in a limited market by going beyond borders. Third, capitalise on unique selling propositions. Fourth, convince the investors. Fifth, perhaps pray for a bit of luck. In most cases, the entrepreneurs in Malaysia do not do this. They pursue grants for a season but no consideration for continuous development for future content – i.e. project based rather than business based. They just produce what will be consumed by the thirty million Malaysian population (at most) and do not produce what the market is craving for (‘syiok sendiri’). They certainly refuse to educate investors and behave as if the investors' generosity is their right.


Many entrepreneurs will say that it is a chicken and egg situation. If we do not pump in money, we can never develop. If we do not develop (content), we will never know whether the market will accept it. In order to know whether monies can be invested, monies need to be invested in the first place. Therefore, investors should trust that it will succeed instead of being calculative for profits. This do not go well with the investors. In an investor’s mind, he is saying that he will achieve certainty in a Nasi Lemak restaurant rather than investing in the movie. So the investor will do just that – i.e. invest in a Nasi Lemak restaurant. This is why the Creative Industry is lacking the funding from traditional sources of funds. This is why grants are important to build the entrepreneurs to a level where they are on par, or slightly below the comfort level given by the Nasi Lemak entrepreneurs.


Climbing out from the Valley of Death is a tall order for Creative businesses. The traditional Bankers work in a myopic manner. They start their Chapter 1 with assets. Their first question would be, “What is the value of the assets?” This is different from a Venture Capitalist who asks, “What is the product?”, or “Is there a market?”, or “Who is in the management team?” A Banker would first establish a value in accordance with their acceptable methods such as discounted cash flows or comparable market price model. Then they would apply a limit, say, eighty per cent of the value of the assets. This is the figure they are willing to give out as loans. This is on the back of that asset being collateralised. No asset means no loan.


Everything about that concept is not working well with the Creative Industry. First of all, the Bankers will not accept the type of assets a Creative business can offer, i.e. intangible asset called Intellectual Properties (IP). Second, the value of IP’s, as determined by the discounting of future potential net profits to be generated by the IP’s are often astronomical. Third, even if the Bankers accept the IP’s, there is no systematic market to liquidate those IP’s (in Malaysia). For this, the Bankers are reluctant to fund Creative businesses. For this as well, the Government, via MyIPO and the Ministry of Finance (MoF), are developing a local acceptable IP valuation methods, training a pool of valuation professionals as well as establishing a market place for those IP’s. Efforts are still on-going but far from perfection.
We started the thinking process in this article with the word ‘Ecosystem’. This article alone is not sufficient to address all of the ecosystem components. We have so far only touched two important areas. They are: Source of Creativity and source of funds - but merely on the surface. A more in-depth discussion will happen in the future articles but what we have so far will suffice to build the momentum of our thought process. Just to give the readers a flavour of what more could be lacking, reference is made to a study group that was sent to Hollywood in 2013 to observe the matured film financing industry. The group consists of representatives from MDeC, FINAS, PEMANDU, MoF, BSN, MCMC, MAVCAP and MyCreative Ventures. Their observation uncovered how primitive our film financing ecosystem is.


First of all, a film producer in Hollywood will not commence the production activity until seventy per cent of the funds for the movie have been secured. They may start their pre-production activities but, even that is subject to the seeding funds from the early investors. What is more compelling is that, most of the time, the investors include the distribution players. In other words, they already have parties who will be distributing the content and this often comes with a minimum guarantee – a sale if you may – prior to the commencement of the production. The seventy per cent investors are normally made up of the original producers, perhaps some of the directors or actors, Venture Capitalists or Private Equity funds, Angels, distributors and rebates from various Governments. To close the thirty per cent gap, Hollywood has two industry players called the Bankers and the Bond dealers.


The Banks in Hollywood have dedicated divisions that only deal with film financing. Given that the Banks come in late into the deal, and they demand to be the earlier ones to recover their investments, they naturally charge the lower Return on Investments (ROI), or interests. This is generally around 12% per annum. The Distributor Financiers may take a cut from the sales value because it is akin to sales commission. This will definitely be higher than 12%. In most markets, sales commission range between 15% to 30%.


The Bond holders get paid next. This is because they fill up whatever last gaps remaining. Hence the name ‘Completion Bond’. They are like an insurance to ensure that the movie gets completed whether or not full funding requirements have been met. Completion Bonds cost higher than what the bankers charge but may be lower than what the Distributor Financiers take. After satisfying the Bankers, the Completion Bonds as well as the Distributor Financiers, the sales collection flows down the water fall to start filling up the cups for the Limited Partners such as Venture Capitalists and Private Equity funds. Finally, the early investors get paid. After all that, whatever remains get accumulated into a lake and is divided to all those parties again based on a predetermined ratio.


The financing mechanism in Hollywood does sound complicated. But who cares? As long as it brings money into the equation, let it be as complicated as hell. This method do not exist in Malaysia. We do not practice such water fall regime. Why? Because we do not have Completion Bonds. We do not have Venture Capitalists and Private Equity funds who are willing to take the risk of film production. We do not have production houses who can invest their own money as they have been relying on grants all this while. We do not have film financing divisions in our banks. We do not have enough distributors who are willing to invest in the content. We do not have lawyers and accountants who can manage the entire process. What we do have is the Film in Malaysia Incentive (FIMI) that is a film rebate system for those who produce in Malaysia. However, only RM50 million has been identified for FIMI in the 2017 Malaysia Budget. Most importantly, our creativity needs soul.
 

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About Author

Johan Ishak
Chief Executive Officer

Born in the year of Wooden Rabbit in Penang. Art is at Heart but Numbers keep me going,.. and I think Led Zeppelin rocks!