Claire enders presentation for Achieving Industry Best Practice

Digital disruption and the creative industries

Issues for Higher Education

Claire Enders +44 7831 214 036 [email protected]

14 February 2013

Overview of the creative industries

Digital disruption and the creative industries 2

• The UK creative industries is a large vibrant sector

• A broad spectrum of jobs for suits, creatives and techies

• Publishing, audio-visual, advertising, games etc

• Digital is disrupting some segments: newspaper publishing, recorded music

• Although digital is a new opportunity for publishing

BUT…

• 2013 is year 4 of our “zombie recovery” from recession

• Graduates must compete fiercely for jobs, many low-paid or part-time

• Employers often cite workplace skillset shortages

• Limited scope for new courses with pressure on funding

Social context


• Outputs of the creative industries strengthen our identity and sense of community on this island

• Identity is especially important in times of enduring economic hardship

• Culture generates ‘feel-good’: the opening ceremony of the Olympics, watched by 27 million people in the UK

• Defining “Who we are” outside this country: The Olympics, Downton Abbey, Adele, 50 shades of grey

• A Washington Post columnist wrote: “If [the opening ceremony] sometimes seemed like the world’s biggest inside joke, the message from Britain resonated loud and clear: we may not always be your cup of tea, but you know – and so often love – our culture nonetheless.”

Public policy is confused


Positive factors:

• Coalition government has identified creative industries as an engine for UK economic growth

• Longstanding tax credits regime for film extended to animation, high-end TV production

• Education, research to gain copyright exceptions

Negative factors:

• Cuts to guardian institutions like Arts Council

• BBC is the largest single employer, including work experience; frozen licence fee to 2016 led to cost cuts

• 50% cut to DoE budget means HE is “on its own”

• Delay to implementing Digital Economy Act to 2014

• IPO loosening IP regime due to Hargreaves Review

Creative industries worth £36 billion, 2.9% of UK GVA

Advertising, £5,990, 17%

Architecture, £3,290, 9%

Art & Antiques, £260, 1%

Design, £1,790, 5%

Designer Fashion, £120, 0%

Film, Video & Photography, £3,000, 8%

Music & Visual and Performing Arts, £4,070,

11%

Publishing, £11,560, 32%

Software/Electronic Publishing, £560, 2%

Digital & Entertainment Media, £400, 1%

TV & Radio, £5,260, 14%

Gross Value Added in the UK creative industries by sector, 2009 (£million)

[Source: DCMS]


Creative jobs number 1.5 million, 5.1% of UK jobs

Advertising, 268,254 , 18%

Architecture, 136,298 , 9%

Art & Antiques, 8,818 , 1%

Crafts, 91,983 , 6%

Design, 208,810 , 14%

Designer Fashion, 25,583 , 2%

Film, Video & Photography, 71,731 , 5%

Music & Visual and Performing Arts, 292,536

, 19% Publishing, 243,809 ,

16%

Software/Electronic Publishing, 23,205 , 1%

Digital & Entertainment Media, 13,179 , 1%

TV & Radio, 113,966 , 8%

Employment in the UK creative industries by sector, 2010

[Source: DCMS]


Creative industries support 107,000 SMEs, 5.1% of UK total

Advertising, 16,010 , 15%

Architecture, 11,700 , 11%

Art & Antiques, 2,580 , 2%

Design, 14,720 , 14%

Designer Fashion, 970 , 1%

Film, Video & Photography, 10,360 , 10%

Music & Visual and Performing Arts,

30,460 , 29%

Publishing, 9,700 , 9%

Software/Electronic Publishing, 1,810 , 2%

Digital & Entertainment Media, 440 , 0%

TV & Radio, 7,960 , 7%

Number of enterprises by sector in the UK creative industries, 2011

Note: excludes sole traders. [Source: DCMS]


Disruption from rapid rise of internet and mobile devices


• About 80% of households now have PC internet access

• More people will access the internet by a mobile device than by a PC by the end of 2013

• More than 8 million tablet owners by the end of 2012

• By 2017, the mobile internet will be virtually ubiquitous:

–Smartphone penetration will be close to 100% amongst mobile phone users

–Tablet penetration will exceed 30% of adults and take-up of e-readers will most likely be around 20%

–Mobile internet access over high speed 3G and 4G networks, complemented by Wi-Fi, means high quality ‘always-on’ access

Publishing: a sector in decline


• Newspaper publishing: in sharp decline

–Structural and terminal decline of print newspaper

–Digital pennies replace print £

–Lots of free news; only premium is pay-for

–Pockets of opportunity for video and online journalism, citizen journalism

• Book publishing: disruption ahead

– High street retailing in decline

–Opportunity for ebooks

–Open Educational Resources (OERs)

–Distance learning

–elearning in the classroom

–Professional training

Newspaper circulation is declining, and decline is accelerating

0

1,000

2,000

3,000

4,000

5,000

6,000

1987 1992 1997 2002 2007 2012e 2017f

UK annual print circulation (m)

Daily national newspapers Sunday national newspapers Regional newspapers

2012 Estimates based on reported ABC data: Jan-Nov for national newspapers; Jan-Jun for regional newspapers and B2C magazines [Source: Enders Analysis based on ABC data]


Launch of BBC News 24

Metro launch

Google achieves scale

iPhone launch

iPad launch

Penetration:

75% smartphone 40% tablet Sky and BSB

merger

News: Newspaper publishers shift to digital


50%

23%

12%

5% 5% 5%

0%

10%

20%

30%

40%

50%

60%

FT Business Guardian News andMedia

Associated andNorthcliffe

Trinity Mirror plc Johnston Press Archant

Estimated share of revenue from digital (%)

2007 2008 2009

2010 2011 2012

Columns with no fill are estimates based on available data FT Business includes Mergermarket, a 50% share in The Economist and BDFM as well as the FT itself

[Source: Enders Analysis based on company data]

News: BBC accounts for 47% of news consumption


47.2

4.7 1.1 0.7 8.5

11.6

8.8

5.6

3.3

3.5 2.5 1.2 0.4 1.0

News day by organisation (%)

BBC

ITV

C4

C5

Sky

News International

DMGT

Trinity Mirror

Telegraph Media Group

Northern & Shell

Guardian Media Group

Lebedev Foundation

Pearson

Other

[Source: Enders Analysis from ABC, BARB, Nielsen, NRS and RAJAR]

Economics of online news: digital pennies for print £


• UK Google News sources 4,500 English-language news services, including newspapers, newswires, blogs, etc.

• The famous brands from the pre-internet era continue to receive the lion’s share of users and time

• Mobile device usage will reduce the share of long tail as consumption is more app-driven on a small screen

• However, compared with print, all screens reduce the time spent with branded news bundles as a whole

• Digital does not – and never will – attract the advertising CPMs of print, except in the most premium environments (FT homepage, for example)

• In general, the large-scale newsrooms will shrink in the next few years, and some will vanish entirely

Online news: citizen journalists


• Reliance on citizen journalism at the local, regional and national levels will inevitably continue to grow

• Real value of citizen journalists is to ‘witness and record’, thus requiring video and digital native skills

• Professional journalism can not be replaced by citizen journalists with any degree of consistency and reliability

• Reader comments and feedback on news services are often counter-productive for the ‘publisher’ brands

• Paywalls, registered users and reader editors help preserve a quality, paid-for (premium) news ecosystem

• The skills at the heart of news provision are most diluted by the “snacking” in the digital news ecosystem

News: Print publishers dominate online news served to mobile devices


0%

10%

20%

30%

40%

50%

60%

70%

80%

News Niche* Family Tech Finance Arts Sports Books Music Fashion* Food*

Print businesses share of time spent online (%)

All devices

PC (home and work)

Share of time spent with top 50 websites in each category; *top 50 websites account for less than 80% of time spent in category [Source: Nielsen NetView]

75% of mobile news consumption is to print publishers

Audio-visual: a sector that is in mild decline


• Recorded music lost sales, but live music rose sharply

• BBC and commercial radio consumption is very stable

• Despite rise and rise of the internet in the home, the economy of broadcast TV is stable

• BBC Studios and ITV Studios sustain in-house programming, and Channel 4 largely commissions

• Total commissioned programming to independents - estimated at £2.4 billion - has softened in recent years

• BSkyB spending £600 million in UK-originating programming

• BFI announced 30% decline in film investment in 2012, largely due to lower interest from Hollywood studios

BBC and commercial radio: Robust reach and steady listening


0

200

400

600

800

1,000

1,200

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f

Total listening per week (millions of hours)

All Radio All Commercial All BBC [Source: RAJAR, Enders Analysis forecasts]

Peak gap for BBC

Radio: Leading BBC and commercial brands are largely complementary


Radio 1

1Xtra Radio 2

Radio 3 Radio 4

Radio 4 Extra

Five Live

Five Live Sports Extra

6 Music

Asian Network

BBC Local/ Regional

Heart Capital

Gold

Classic FM

XFM

LBC

Choice Smooth

Real

Kerrang!

Magic

Kiss

talkSPORT

Absolute Network

Planet Rock

35%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

25 30 35 40 45 50 55 60

Sh

are

of

Ma

le li

ste

ne

rs

Average age

BBC Global Radio Real and Smooth Radio [Source: Enders Analysis from RAJAR]

Bubble size = network reach

Listeners of leading BBC and commercial radio brands, Q4 2012

Audio-visual: UK is world-class


0

2,000

4,000

6,000

8,000

10,000

12,000

TV programming & broadcasting activities

Motion picture, video and television programme production activities

[Source: SBS database, Eurostat]

Turnover and programming in audiovisual activities, 2008 (€ m)

€9 billion of turnover; €10 billion of production

TV: PSBs lost share of viewing in digital switch-over due to more choice


36.6 34.6 32.7 31.6 30.6 29.6 28.4 27.7 27.3 27.4

1.6 2.0

2.5 2.9 3.5 4.0 4.3 5.2 5.6 5.8

39.8 39.1

37.7 35.1 33.1 31.6

30.2 28.6 28.0 26.7

1.9 2.4

4.1 6.1 8.1 9.6

10.6 11.6 12.8 12.9

20.0 21.9 23.0 24.4 24.7 25.3 26.6 26.9 26.3 27.2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Average daily viewing share (%)

BBC 1&2 BBC Digital ITV1, C4, C5 Other PSB Digital Other[Source: BARB/InfoSysTV]

TV: Future ad revenue looks shaky because of the economy


3,514 3,326

3,626

2,954

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

TV NAR (£m, nominal)

Central Upside Downside[Source: Enders Analysis]

TV: Internet content unlikely to displace TV content on the TV set


5.9 4.3 7.8

14.0 13.8 12.8

2.0 5.2

15.0

2.4

56.6

0

10

20

30

40

50

60

70

80

90

Smart TV:ethernet

SmartTV:wifi

BluRayplayer

PS3 Wii Xbox 360 AppleTV TiVo Sky+ Other None

Devices used to connect the TV set to the internet (%)

Total 16-24 25-34 35-54 55+ Base: 4,006 adults 16+ [Source: Deloitte; GfK]

Gamers connect the TV set to the internet to game

Smart TV is very small

Older people much less likely to connect

Display advertising: still below the 2007 peak

Project title, date 23

8.7 8.9

9.5 9.7 9.6

9.9

9.5

8.3

9.3 9.4 9.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f

UK display advertising revenues by medium (£bn)

National newspapers Regional newspapers Consumer magazines Business & professional magazines TV Internet (PC and mobile) Outdoor Radio Cinema

[Source: Enders Analysis from AA/Warc]

Key conclusions


• Constant pressure on topline of creative industries due to digital disruption, shift of budgets to the internet, and zombie recovery

• Consumer behaviour is being transformed by mobile devices and discarding PC-based habits rapidly

• Value to the user of the content is meshed with the device and eco-system

• Media companies must adapt to content delivery on multiple devices, screen sizes, operating platforms

• Resilience of TV revenues and programming investments, but budgets are tighter

• SMEs have to juggle marketing, production and tech

• Expect graduates to mainly “learn by doing”

Issues for higher education


Jobs market

Universities

Colleges

Schools Encourage basic Maths and English

A balanced curriculum, including Arts

Mesh creative, technical and business skills

Encourage work experience

Reward team work

Support self-education and continuous learning

Solutions for older workers to re-train

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Claire enders presentation for Achieving Industry Best Practice

Documents

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