Many cultural industries rest upon a mix of global distribution and local production. While the distribution and marketing of cultural products spans globally, the development and production–but not always the reproduction (Hesmondhalgh, 2002)–of them is highly clustered in a few major cities such as London, Los Angeles, Paris, Tokyo, Moscow, Mumbai, and so on (Scott, 2000). A few production processes are being outsourced from the hitherto dominating cities to places with either very specialized skills (such as remixing of music to Stockhom or film post-production to London) or intermediate skill levels but low labour cost (such as programming of computer games to Pakistan and special effects of films to the Philippines). Outsourcing of these production phases has been studied elsewhere (for example, Coe and Johns, 2004). Instead, this chapter focuses on the most value-creating processes of the cultural industries: that of product innovation, creating the intellectual property rights of cultural products and hence the bulk of their economic value. It asks the question: why does innovation of products in the cultural industries cluster in relatively few places? The chapter is conceptual, and merges economic geography literature with literature on cultural industries, adding occasional empirical examples. Hence, the chapter adds to the literature on cultural industries through applying methods from economic geography. While this exercise is capable of providing new knowledge of the dynamics of the cultural industries, these industries constitute such interesting cases for studying geographical processes that the chapter may, in turn, add to economic geography literature.