THE CREATIVE RECESSION

Can you feel it?

“The Creative Recession” is a term we started to use around two years ago to refer to the malaise – economic and spiritual – that every sector in the wider creative industries seems to be experiencing.

It seems that everyone immediately knows what we’re talking about (possibly including you, the reader) but here are some examples to paint a picture:

• Inside the major creative conglomerates, Gen X talent is being quietly phased out, replaced by a nimble layer of AI-native zoomers. In other corners, the inverse: juniors are being cut loose because their newly “AI-literate” seniors can now do it all themselves.

• Fashion and luxury are in free fall. Ssense filed for bankruptcy – one of many casualties in a collapsing retail ecosystem. Surviving labels are being squeezed by tariffs, inflation, and a young customer base that can no longer afford to participate.

• The music industry is caught up in the failed economics of streaming, changing consumer behavior post-Covid, broke audiences, unsustainable costs of touring and an attention economy trap.

• In 2024, global art sales fell 12%, down to an estimated USD 57.5 billion. Tech wealth is uninterested in signaling status through cultural patronage and commodities available in the art market. Galleries are closing left and right.

• The ZIRP era VC money spigot has been tightened and redirected to

  A) AI capex (no creative services needed)

  B) startups with a realistic path to actual revenue (as opposed to spending on brand and marketing to prop up what were ultimately undifferentiated commodities).

• The creative service layer – strategists, designers, copywriters, art directors, marketers – is being squeezed from both sides: clients cutting budgets above, automation eating away below.

• And, well, no one watches films anymore (global box office revenues are down roughly 10 % year-on-year and more than 25 % below pre-pandemic levels)

• (Insert your creative industry of choice here)

So what’s the deal?

A lot of this is simply an expression of the current K-shaped economy, in which a few sectors (AI, defense, select tech etc.) are booming and the rest of the economy is stagnant or in a slowdown. The creative industries simply aren’t very important to the boom sectors or affected the wealth effect they’ve generated around them, so creatives mostly find themselves (with many other knowledge workers) on the downward prong of the K-economy.

Then there are the first and second order effects of the holding pattern that AI has sent large parts of the economy into (that is, reduced hiring and investment), as well as AI’s direct impact on the production of the more fungible end of creative assets and services. If the economic function of the wider creative class is to “create new ideas, new technology and/or creative content” (via Richard Florida) it certainly appears the marginal value of new/creative ideas – or being an “ideas guy” – has diminished in a viscerally clear manner over the past years.

Of course the average cost and value of new ideas and/or novelty had already been trending towards zero before the LLM boom began in 2023. But what has changed is that the economic function of many creative outputs can now be served equally well by fungible slop – especially if you aggressively ramp up its volume (eg. AI lo fi beats).

The creative recession is fueled both by diminishing demand for creative work as well as diminishing the margins that once made that work viable. The distance between creation and consumption has been compressed: discovery is automated, and the legacy hallmark of creatives, producing difference, has been flattened into an infinite scroll of almost-sameness. Profits have migrated upward to platforms and downward to automated production, leaving a shrinking corridor in which human creativity can actually command a premium.

A bastion of hope (or humanist cope) is to be found in the idea that creativity is both a defining characteristic of true intelligence as well as something that’s unique to humans. Maybe. At Nemesis HQ we’re yet to witness a truly novel idea or act of sublime creativity by our AI underlings – so far. Yet the all-but-disappearance of the ideas guy, says something is really going on here.

The “intelligence margin” is a fabulous term we borrowed from a schizopost from Goodalexander. It posits that in the deployment of AI, every unit of compute naturally seeks the highest possible margin. This means that if it yields a higher profit from improving the Tiktok algorithm rather than, for example, protein folding for drug discovery, with all else being equal, it will be deployed in the former. In other words, following the breadcrumbs of what is being sloppified at any given time gives a good indication where current intelligence margins are the highest.

To no one’s surprise, at the moment they appear to be in short-form video content. OpenAI has pretty much openly admitted to this in their defense of their friendly, human-flourishing-aligned, infinite short form video slop machine Sora – a direct competitor to Meta’s infinite slop machine Vibes. (You might as well harvest some profits from the dopamine mines on the way to AGI.)

What’s notable is the rhetoric about Sora introducing a Cambrian explosion of human creativity. Liberated from the bottlenecks of charisma, skill and craft, real creativity – i.e ideas – can now flourish and be channeled via text prompt.

In fact, this points to something deeper than a mere recession, i.e. a cyclical downturn. Perhaps we’re looking at a secular change: a structural reordering of what “creative work” even means. The trad creative economies of ideas, taste, and differentiation are being replaced by economies of scale, prediction and synthesis. In this regime, “intelligence” and “creativity” are no longer scarce resources but cheap, abundant, and mostly directionless.

If you happen to agree that posting is indeed the new art – as some have been arguing and rearguing lately on X – one should interpret that statement not as a new era of “peak creativity” but rather as art having been, well, replaced (by posting). The cultural capital that we used to see accrue to those who managed to put out unique artistic material simply isn’t stacking up the way it used to.

So the deeper question remains, what will become valuable? This is a question we’ll tackle together in our upcoming workshop Autonomous Strategy III (early bird enrollment opens October 22). But it certainly seems that it isn’t the generation of ideas itself but the ability to direct, and deploy them toward meaningful ends; discovering where creativity still matters.