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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
Digital disruption and the creative industries 3
• 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
Digital disruption and the creative industries 4
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]
Digital disruption and the creative industries 5
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]
Digital disruption and the creative industries 6
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]
Digital disruption and the creative industries 7
Disruption from rapid rise of internet and mobile devices
Digital disruption and the creative industries 8
• 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
Digital disruption and the creative industries 9
• 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]
Digital disruption and the creative industries 10
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
Digital disruption and the creative industries 11
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
Digital disruption and the creative industries 12
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 £
Digital disruption and the creative industries 13
• 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
Digital disruption and the creative industries 14
• 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
Digital disruption and the creative industries 15
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
Digital disruption and the creative industries 16
• 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
Digital disruption and the creative industries 17
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
Digital disruption and the creative industries 18
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
Digital disruption and the creative industries 19
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
Digital disruption and the creative industries 20
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
Digital disruption and the creative industries 21
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
Digital disruption and the creative industries 22
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
Digital disruption and the creative industries 24
• 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
Digital disruption and the creative industries 25
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
Disclaimer
Digital disruption and the creative industries 26
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