Digital disruption and the creative industriesIssues for Higher EducationClaire Enders   +44 7831 214 036   claire.enders@...
Overview of the creative industries                  • The UK creative industries is a large vibrant sector               ...
Social context                 • Outputs of the creative industries strengthen our                   identity and sense of...
Public policy is confused                   Positive factors:                   • Coalition government has identified crea...
Creative industries worth £36 billion, 2.9% of UK GVA Gross Value Added in the UK creative industries by sector, 2009 (£mi...
Creative jobs number 1.5 million, 5.1% of UK jobs Employment in the UK creative industries by sector, 2010                ...
Creative industries support 107,000 SMEs, 5.1% of UK total  Number of enterprises by sector in the UK creative industries,...
Disruption from rapid rise of internet and mobile devices                  • About 80% of households now have PC internet ...
Publishing: a sector in decline                   • Newspaper publishing: in sharp decline                     –Structural...
Newspaper circulation is declining, and decline is acceleratingUK annual print circulation (m)                            ...
News: Newspaper publishers shift to digital Estimated share of revenue from digital (%)60%                       50%50%40%...
News: BBC accounts for 47% of news consumptionNews day by organisation (%)                                                ...
Economics of online news: digital pennies for print £                  • UK Google News sources 4,500 English-language new...
Online news: citizen journalists                   • Reliance on citizen journalism at the local, regional and            ...
News: Print publishers dominate online news served to mobile devices Print businesses share of time spent online (%)80%   ...
Audio-visual: a sector that is in mild decline                   • Recorded music lost sales, but live music rose sharply ...
BBC and commercial radio: Robust reach and steady listening Total listening per week (millions of hours) 1,200 1,000      ...
Radio: Leading BBC and commercial brands are largely complementary      Listeners of leading BBC and commercial radio bran...
Audio-visual: UK is world-classTurnover and programming in audiovisual activities, 2008 (€ m)12,000                       ...
TV: PSBs lost share of viewing in digital switch-over due to more choice  Average daily viewing share (%)100%90%        20...
TV: Future ad revenue looks shaky because of the economy TV NAR (£m, nominal)4,000                                        ...
TV: Internet content unlikely to displace TV content on the TV set Devices used to connect the TV set to the internet (%)9...
Display advertising: still below the 2007 peak UK display advertising revenues by medium (£bn)                            ...
Key conclusions                  • Constant pressure on topline of creative industries due                    to digital d...
Issues for higher educationSupport self-education and continuous learning      JobsSolutions for older workers to re-train...
DisclaimerImportant notice: By accepting this research note, the recipient agrees to be bound by the following terms of us...
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Claire enders presentation for Achieving Industry Best Practice

  1. 1. Digital disruption and the creative industriesIssues for Higher EducationClaire Enders +44 7831 214 036 claire.enders@endersanalysis.com 14 February 2013
  2. 2. Overview of the creative industries • 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 Digital disruption and the creative industries 2
  3. 3. 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.” Digital disruption and the creative industries 3
  4. 4. 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 Digital disruption and the creative industries 4
  5. 5. Creative industries worth £36 billion, 2.9% of UK GVA Gross Value Added in the UK creative industries by sector, 2009 (£million) TV & Radio, £5,260, 14% Advertising, £5,990, 17% Digital & Entertainment Media, £400, 1% Software/Electronic Publishing, £560, 2% Architecture, £3,290, 9% Art & Antiques, £260, 1% Design, £1,790, 5% Designer Fashion, £120, Publishing, £11,560, 32% 0% Film, Video & Photography, £3,000, 8% Music & Visual and Performing Arts, £4,070, [Source: DCMS] 11% Digital disruption and the creative industries 5
  6. 6. Creative jobs number 1.5 million, 5.1% of UK jobs Employment in the UK creative industries by sector, 2010 Music & Visual and Performing Arts, 292,536 , 19% Publishing, 243,809 , 16% Film, Video & Photography, 71,731 , 5% Digital & Entertainment Media, 13,179 , 1% Designer Fashion, 25,583 , 2% Software/Electronic Publishing, 23,205 , 1% TV & Radio, 113,966 , 8% Design, 208,810 , 14% Crafts, 91,983 , 6% Advertising, 268,254 , Art & Antiques, 8,818 , 18% 1% Architecture, 136,298 , [Source: DCMS] 9% Digital disruption and the creative industries 6
  7. 7. Creative industries support 107,000 SMEs, 5.1% of UK total Number of enterprises by sector in the UK creative industries, 2011 Film, Video & Music & Visual and Photography, Performing Arts, 10,360 , 10% 30,460 , 29% Designer Fashion, 970 , 1% Design, 14,720 , 14% Publishing, 9,700 , 9% Art & Antiques, 2,580 , 2% Digital & Entertainment Media, 440 , 0% Software/Electronic Publishing, 1,810 , 2% Architecture, 11,700 , 11% TV & Radio, 7,960 , 7% Advertising, 16,010 , 15% Note: excludes sole traders. [Source: DCMS] Digital disruption and the creative industries 7
  8. 8. 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 Digital disruption and the creative industries 8
  9. 9. 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 Digital disruption and the creative industries 9
  10. 10. Newspaper circulation is declining, and decline is acceleratingUK annual print circulation (m) Metro launch iPhone launch Penetration: 75% smartphone 6,000 Sky and BSB Launch of BBC 40% tablet Google achieves merger News 24 scale iPad launch 5,000 4,000 3,000 2,000 1,000 0 1987 1992 1997 2002 2007 2012e 2017f 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
  11. 11. News: Newspaper publishers shift to digital Estimated share of revenue from digital (%)60% 50%50%40%30% 23%20% 12%10% 5% 5% 5%0% FT Business Guardian News and Associated and Trinity Mirror plc Johnston Press Archant Media Northcliffe Columns with no fill are estimates based on available data 2007 2008 2009 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] 2010 2011 2012 Digital disruption and the creative industries 11
  12. 12. News: BBC accounts for 47% of news consumptionNews day by organisation (%) BBC 2.51.21.0 0.4 ITV 3.5 3.3 C4 5.6 C5 Sky News International 8.8 47.2 DMGT Trinity Mirror Telegraph Media Group 11.6 Northern & Shell Guardian Media Group Lebedev Foundation 8.5 0.7 4.7 Pearson 1.1 Other [Source: Enders Analysis from ABC, BARB, Nielsen, NRS and RAJAR] Digital disruption and the creative industries 12
  13. 13. 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 Digital disruption and the creative industries 13
  14. 14. 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 Digital disruption and the creative industries 14
  15. 15. News: Print publishers dominate online news served to mobile devices Print businesses share of time spent online (%)80% 75% of mobile news consumption is to70% print publishers60%50%40%30%20%10%0% News Niche* Family Tech Finance Arts Sports Books Music Fashion* Food* All devices 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] PC (home and work) Digital disruption and the creative industries 15
  16. 16. 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 Digital disruption and the creative industries 16
  17. 17. BBC and commercial radio: Robust reach and steady listening Total listening per week (millions of hours) 1,200 1,000 Peak gap for BBC 800 600 400 200 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f All Radio All Commercial All BBC [Source: RAJAR, Enders Analysis forecasts] Digital disruption and the creative industries 17
  18. 18. Radio: Leading BBC and commercial brands are largely complementary Listeners of leading BBC and commercial radio brands, Q4 2012 85% Five Live Bubble size = network reach talkSPORT 80% Sports Extra 75% Five Live Planet Rock 70% Share of Male listeners 65% 6 Music 60% XFM Kerrang! BBC Local/ 55% Absolute Network 1Xtra LBC Regional Radio 4 Asian Radio 2 50% Gold Extra Network Radio 1 Radio 3 Real Radio Classic FM 4 45% Smooth Choice Kiss Capital Heart 40% Magic 35% 25 30 35 40 45 50 55 60 Average age BBC Global Radio Real and Smooth Radio [Source: Enders Analysis from RAJAR] Digital disruption and the creative industries 18
  19. 19. Audio-visual: UK is world-classTurnover and programming in audiovisual activities, 2008 (€ m)12,000 €9 billion of turnover; €10 billion of production10,000 8,000 6,000 4,000 2,000 0 TV programming & broadcasting activities [Source: SBS database, Eurostat] Motion picture, video and television programme production activities Digital disruption and the creative industries 19
  20. 20. TV: PSBs lost share of viewing in digital switch-over due to more choice Average daily viewing share (%)100%90% 20.0 21.9 23.0 24.4 24.7 25.3 26.6 26.9 26.3 27.280% 1.9 2.4 4.1 6.1 8.170% 9.6 10.6 11.6 12.8 12.960% 39.8 39.1 37.7 35.150% 33.1 31.6 30.2 28.6 28.0 26.740% 1.6 2.0 2.5 2.9 3.5 4.030% 4.3 5.2 5.6 5.820% 36.6 34.6 32.7 31.6 30.6 29.6 28.4 27.7 27.3 27.410% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 BBC 1&2 BBC Digital ITV1, C4, C5 Other PSB Digital Other [Source: BARB/InfoSysTV] Digital disruption and the creative industries 20
  21. 21. TV: Future ad revenue looks shaky because of the economy TV NAR (£m, nominal)4,000 3,6263,500 3,514 3,3263,000 2,9542,5002,0001,5001,000 500 0 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f [Source: Enders Analysis] Central Upside Downside Digital disruption and the creative industries 21
  22. 22. TV: Internet content unlikely to displace TV content on the TV set Devices used to connect the TV set to the internet (%)90 Older people much less likely to connect807060 56.6 Gamers connect the TV set to the50 internet to game4030 Smart TV is very small20 15.0 14.0 13.8 12.810 5.9 7.8 4.3 5.2 2.0 2.4 0 Smart TV: SmartTV: BluRay PS3 Wii Xbox 360 AppleTV TiVo Sky+ Other None ethernet wifi player Base: 4,006 adults 16+ Total 16-24 25-34 35-54 55+ [Source: Deloitte; GfK] Digital disruption and the creative industries 22
  23. 23. Display advertising: still below the 2007 peak UK display advertising revenues by medium (£bn) 9.910.0 9.7 9.6 9.5 9.5 9.4 9.3 9.3 8.9 9.0 8.7 8.3 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012f National newspapers Regional newspapers Consumer magazines Business & professional magazines TV Internet (PC and mobile) Outdoor Radio Cinema [Source: Enders Analysis from AA/Warc] Project title, date 23
  24. 24. 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” Digital disruption and the creative industries 24
  25. 25. Issues for higher educationSupport self-education and continuous learning JobsSolutions for older workers to re-train marketMesh creative, technical and business skills UniversitiesEncourage work experience CollegesReward team workEncourage basic Maths and EnglishA balanced curriculum, including Arts Schools Digital disruption and the creative industries 25
  26. 26. DisclaimerImportant notice: By accepting this research note, the recipient agrees to be bound by the following terms of use. This research note has been prepared by Enders Analysis Limited andpublished solely for guidance and general informational purposes. It may contain the personal opinions of research analysts’ based on research undertaken. This note has no regard toany specific recipient, including but not limited to any specific investment objectives, and should not be relied on by any recipient for investment or any other purposes. Enders AnalysisLimited gives no undertaking to provide the recipient with access to any additional information or to update or keep current any information or opinions contained herein. Theinformation and any opinions contained herein are based on sources believed to be reliable but the information relied on has not been independently verified. Enders Analysis Limited,its officers, employees and agents make no warranties or representations, express or implied, as to the accuracy or completeness of information and opinions contained herein andexclude all liability to the fullest extent permitted by law for any direct or indirect loss or damage or any other costs or expenses of any kind which may arise directly or indirectly out ofthe use of this note, including but not limited to anything caused by any viruses or any failures in computer transmission. The recipient hereby indemnifies Enders Analysis Limited, itsofficers, employees and agents and any entity which directly or indirectly controls, is controlled by, or is under direct or indirect common control with Enders Analysis Limited from timeto time, against any direct or indirect loss or damage or any other costs or expenses of any kind which they may incur directly or indirectly as a result of the recipient’s use of this note.© 2013 Enders Analysis Limited. All rights reserved. No part of this note may be reproduced or distributed in any manner including, but not limited to, via the internet, without the priorpermission of Enders Analysis Limited. If you have not received this note directly from Enders Analysis Limited, your receipt is unauthorised. Please return this note to Enders AnalysisLimited immediately. Digital disruption and the creative industries 26

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