Mediatainment Finance Issue no 12

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Published by Juliana Koranteng, one of the best media journalists in the business. Check out David Grover is featured in the Billion Dollar Blast

Published by Juliana Koranteng, one of the best media journalists in the business. Check out David Grover is featured in the Billion Dollar Blast

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  • 1. MediaTainment FINANCE Issue No. 12 For Decision-Makers and Strategists Who Value Creativity and Appreciate the Value Creativity Brings to Business Facebook: MediaTainment Finance; Twitter: @MediatainmentMT; @JayKayMedIn this edition - NEWS: Apple, Google save Kodak; crowdsourcing Bruce Springsteen;Nokia commissions films; Qatar invests in Chernin Media; Hollywood studios buy intogames; Net-a-Porter to rival Vogue; new owner for Faberge jewels; live music’s MAMAGroup finds new saviour; Chinese-theme Australian park; electric cars drive new Formula Esport; plagiarism tests Hollywood; Metallica make copyright history ...pages 3-14NEW ZEALAND: The Hobbit, The Lord of the Rings and Avatar are Hollywood box-office hits made in New Zealand. The economy’s small size prompted some of its bestminds to emigrate in the past. Now, the nation’s international ambition in movies, TV,music, games and sport is luring in talent at home and abroad 15RIDLEY SCOTT ASSOCIATES: This UK production powerhouse co-founded byand named after the Hollywood filmmaker has worked with the best in global entertainmentand brands, including Daniel Craig, Lady Gaga, Kathryn Bigelow, BMW and Sony. Head ofsales Damiano Vukotic discusses filmmaking’s future in digital media 25BERTELSMANN: Europe’s biggest media conglomerate is nearly two centuries old,and continues to rely mostly on old media for its revenues. But it declared war in the digitalspace when it recently agreed for subsidiary Random House, the world’s biggest consumer-book publisher, to merge with the iconic Penguin Books. Its ethos: to win in the age of e-books, tablets, smartphones and anything else, you need the best creative content. …page 29THE BILLION DOLLAR BLAST: David Grover is the kind of money man theinternational media industry loves. ING Bank’s head of media finance handles media-investment opportunities for the billion-dollar financial group. In MTF’s fantasy game, seewhy his imaginary no-expenses spared dinner guests would include Eric Clapton, MarkKnopfler, Vincent van Gogh, Bob Woodward, Carl Bernstein and Elon Musk 35
  • 2. Content December 2012NEWS NEWSPage3: Film Page 13: Photography/ArtPage4: Television Page 14: CopyrightPage5: Music REPORT Page15: Country Profile - NEW ZEALANDPage6: Architecture/Design FEATURES Page25: The Q&A Sessions - RIDLEY SCOTT ASSOCIATESPage7: Out-Of-Home Page 29: Creative Corporate - BERTELSMANN Page35: Billion Dollar BlastPage8: Books/Print - DAVID GROVER, ING BANK Page33-34: MTF DIARY listing of internationalPage9: Ads & Marketing conferences and events Back Page: ABOUT MTFPage10: SportPage11: Games SUBSCRIPTION: To subscribe to the most enriching and enlightening aide to your media and entertainment business strategies, contactPage12: Fashion/Luxury
  • 3. FILMSpringsteen rocks a crowdsourcing film US rock star Bruce Springsteen and British actor Damien Lewis, star of the Emmy award-winningHomelands TV thriller, are fronting two high-profile feature films by Ridley Scott Associates (RSA)that illustrate how digital media is impacting filmmaking. In the feature documentary Springsteen & I,RSA director Baillie Walsh is crowdsourcing film footage, video clips, photographs and audio record-ings from Springsteen fans worldwide. Their contributions will be turned into an homage to the Bornin the USA star. It is scheduled for release in cinema theatres worldwide next year. Fans and othercontributors can upload content, including videos shot with smartphones, to the Online submissions have to be five minutes long at the most. Springsteenfans’ content on old media, such as 16mm film, VHS tape or Hi8 tape, will be digitised. The format isinfluenced by Life in a Day, the award-winning documentary directed by Oscar-winner Kevin Mac-donald and produced by RSA co-founder Ridley Scott in 2011. RSA has also bagged Lewis to star inDesire, a high-end online branded-entertainment short feature film about passion, betrayal andgreed, for car manufacturer Jaguar. Shot in Chile’s Atacama Desert, the music is by Lana del Rey.Nokia to screen six original Disney already on Star Warsshorts on Sundance TV trail after Lucasfilm buy Nokia Music, the free streaming music The Walt Disney Company has apparentlyservice from the Finnish mobile-phone manu- already commissioned the creators of the nextfacturing group, has commissioned six short Star Wars trilogy following its mind-blowingfilms by independent directors (including US$4.05bn deal to acquire George Lucas’Abteen Bagheri and Tyrone Le Bron) to Lucasfilm in October. The Hollywood Reporterpromote its range of Lumia smartphones. The says Oscar-winning screenwriter Michael10-minute films will premiere on US TV net- Arndt will write episode VII of the now legend-work Sundance Channel in January. The ary film franchise. Lawrence Kasdan, who co-themes will include New Orleans with its sissy wrote The Empire Strikes Back and Return ofbounce culture; underground rap in Brooklyn, the Jedi, and Simon Kinberg are reportedly onNew York; and Detroit’s famous warehouse board as scriptwriters/producers of episodegigs. The films will be screened on the VIII or IX. Kathleen Kennedy, Lucasfilm’s after airing on TV. president, will also produce.Juliette Binoche stars in €€5.4m Two screenplays collide forNordic/Irish war-theme movie biopic of INXS’’ Hutchence Norwegian independent production compa- Robert Galinsky, the US acting coach fa-ny Paradox, Sweden’s Zentropa International mous for his work with hip-hop star 50 Centand Ireland-based Newgrange Pictures are co and Hollywood actor Willem deFoe, is execu--producing A Thousand Times Goodnight, a tive producer/screenwriter for a movie based€5.4m feature film for theatrical distribution. on Michael Hutchence, the late lead singer ofScheduled to premiere in the autumn of 2013, super rock group INXS. It will be called Twothe movie stars French Oscar winner Juliette Worlds Colliding and be based on Just a Man:Binoche. She plays a war photographer whose The Real Michael Hutchence, the biographywork takes its toll on herself and her family. co-written by his sister Tina Hutchence.Binoche’s co-stars include Larry Mullen Jr, ichard Lowenstein, who directed INXS musicdrummer of rock band U2. The shooting loca- videos, is also said to be planning anothertions include Ireland, Kabul in Afghanistan, Hutchence biopic.Morocco and Kenya.
  • 4. TELEVISIONQatar capital takes Chernin’’s TV global Investors’ faith in TV-media content was given a major boost in November when Qatar Holdingagreed to commit a reported US$100m to The Chernin Group (TCG), the media vehicle owned byformer News Corp executive Peter Chernin. Expenditure on media properties is said to be rare forQatar Holding, the Arab state’s sovereign fund that is more famous for its stakes in the UK’s BarclaysBank, German car brand Volkswagen and London’s luxury department store Harrods. The deal givesTCG an opportunity to grow into an international media conglomerate, from the boutique operationthat Chernin started with after leaving News Corp in 2009. The US$100m will be added to theUS$200m invested in TCG by US-based international private-equity firm Providence Equity Partners.The goal is to develop media-and-entertainment intellectual properties in the US and Asia. To date,TCG content have come from its US-based Chernin Entertainment subsidiary, which co-producedHollywood movie Rise of the Planet of the Apes and comedy TV series New Girl. In Asia, TCGmajority owns CA Media, a Hong Kong-based media company. New York investment companyApollo Global Management is reportedly in talks to merge TCG with Endemol, the Netherlands-basedreality-TV production group famous for the Big Brother franchise, and Core Media, which ownsAmerican Idol producer 19 Entertainment. TCG also has interests in Tumblr and Pandora.UK government commits £6m Time Warner invests into train film/TV talent YouTube via Maker Studios The UK government is investing £6m in Time Warner Investments (TWI), part of thetraining up to 3,000 entry-level and profession- US media conglomerate, is the lead partner inal talent in the film and TV industries during a group of investors spending US$40m onthe next two years. This comes after cable and Maker Studios, a US start-up specialising insatellite-delivered multi-channel broadcasters creating video content for Google’s video-like BSkyB and Discovery Network, Turner sharing website YouTube. Maker Studios hasBroadcasting and NBCUniversal spent £623m produced 1,000-plus YouTube channels thatin UK-made content in 2011, a 31% increase have 80 million subscribers combined. Thefrom 2010, says a report for the UK’s move will give Maker Studios a potential valueCommercial Broadcasters Association. UKTV, of US$200m. This year, TWI has invested in athe BBC Worldwide and US-based Scripps series of social-media start-ups, includingNetworks Interactive network, is investing Bluefin Labs, Adaptly and CrowdStar.£100m annually in new content.Discovery acquires Takhayal BBC thrilled with new thrillerfor Arab media market share from UK producer Red Planet Discovery Communications, owner of the UK independent production firm Red Plan-Discovery TV networks, is expanding into the et Pictures has clinched a commission fromMiddle East and North Africa with the acquisi- BBC One, the UK public broadcaster’s flag-tion of Dubai-based Takhayal Entertainment. ship channel, for By Any Means, a six-part,Takhayal has a movie-production business in one-hour thriller created by a team led byEgypt, operates the pan-Arab TV-food channel Tony Jordan, Red Planet Pictures’ founder.Fatafeat, publishes books and magazines. The plot centres on a clandestine police squadWith a catalogue of 700 hours of programmes, with a mission to bring down criminals thatwhich is boosted by up to 200 hours annually, escape the official judiciary system. It isthe five-year-old Fatafeat reaches more than scheduled to premiere next year.55 million homes. Discovery’s networks,including the female-oriented TLC, are in morethan 217 markets.
  • 5. MUSICHeavy Metallica regains its music rights Metallica, one the most successful heavy-metal bands of all time, has formed a new label calledBlackened Recordings. The move comes after they concluded a deal to reclaim ownership of all theirmaster audio and videos recordings from Warner Music Group (WMG). Blackened’s first release willbe a DVD recording of the band’s 2009 World Magnetic live gigs at Quebec City, Canada. The USband’s 10th studio album will also be on Blackened and is scheduled for a 2014 release. WMG labelRhino Entertainment will manufacture and distribute Blackened’s recordings. Warner Music Interna-tional will be licensed to handle distribution outside the US. Gaining control of their masters is theresult of WMG honouring a 1994 joint-venture agreement between the two. *Warner Bros, anotherWMG label, has signed a label-distribution deal with October’s Very Own (OVO), an entertainmententerprise headed by Drake, the Canadian hip-hop star and actor. Drake, who has sold more than 5million albums internationally, is signed to Cash Money Records and Young Money Entertainment,both subsidiaries of WMG rival Universal Music Group. But the OVO company has been a vehicle forDrake’s personal projects, including the OVO annual music festival in Toronto, a clothing brand, blogand the new label.Forbes’’ 2012 top 10 musicians Vevo video channel has paidearn less than last year $200m to music rights owners Income earned by the Forbes world’s 10 Vevo, the global online music-videohighest-paid musicians fell to US$712m in channel, discloses it has paid out US$200m in2012 compared to US$872m in 2011, repre- royalties to rights owners since its 2009senting an 18% drop. Whether that reflects launch. Co-owned by major labels Universalrecorded music’s declining value is hard to Music Group, Sony Music Entertainment andsay. But the highest earner during May 2011- Middle East media group Abu Dhabi Media,May 2012 was US uber-producer Dr Dre, who Vevo wants to be to the digital generationamassed most of his US$110m from selling a what music-TV network MTV was to the cable-stake in the Beats by Dr Dre headphones ven- TV generation. It is free on the web-ture to Taiwanese smartphone maker HTC. site and YouTube. Google, YouTube’s owner,Irish rock band U2 were No.1 in 2010- is renegotiating Vevo’s distribution deal, which2011with US$175m, mostly from touring. . is scheduled to expire early 2013.UK music manager grows into Canada’’s Linus seeks to shinenext phase with BMG Chrysalis with Solid Gold acquisition BMG Chrysalis UK, a subsidiary of Berlin- Canadian independent label Linusbased BMG Rights Management, has formed Entertainment is expanding its portfolio bya couple of music-publishing joint ventures taking over Solid Gold Records, another inde-with Sam Eldridge, British manager of urban- pendent known for its 1980s hits with bandsmusic star Plan B. The first joint venture is like Toronto, Chilliwack and Headpins. Thewith Urok Management, which Eldridge co- Solid Gold package includes the publishingowns with his father Roy Eldridge. The second rights to Toronto songs. Although Solid Goldis with Merok Records, which Sam Eldridge co stopped signing up new acts in the late 1980s,-owns with electronic-rock artist Milo Cordell. its catalogue of songs has been activelyBMG Rights Management is a joint venture of marketed for secondary use.German media group Bertelsmann and USprivate-equity giant KKR.
  • 6. OUT-OF-HOMELive Nation occupies emerging markets Live Nation, the global live-music promotion group, has stepped up its activities in the emergingmarkets. It is taking its concerts business into Russia and Ukraine, starting with the launch of an of-fice in Moscow in January. The increasing presence of cities in Russia and Ukraine, with a combinedpopulation of 200 million-plus, on artists’ international tours, has made the two territories vital to fu-ture growth. Among the global artists that have performed there are Madonna, U2, Shakira, Stingand Lady Gaga. It remains unclear whether the company will use its presence in Moscow to organiseinternational tours for local acts such as Russian singer-songwriter Vitas and Ukraine rock bandOkean Elzy. China is another important emerging market in Live Nation’s repertoire. Chinese singingstar Chris Lee, also known as Li Yuchun, has embarked on her first global tour and Live Nation isbringing her to London for the first time to perform at Wembley Arena in January. Her show will fea-ture dance, 3D high-tech displays and costumes by French haute-couture designer Jean Paul Gau-tier. Lee found fame as the winner of the 2005 edition of Super Girl, the Chinese singing-talent TVshow that could command an audience of more than 200 million viewers.Private equity helps MAMA to Australian theme park tocut tough HMV umbilical cord rebuild China for A$500m Juno Newco, a subsidiary of the UK-based A New South Wales local authority hasmid-market private-equity firm LDC, has agreed to sell 15.7 hectares (38.8 acres) ofbought live-music company MAMA Group for land to a private company with ambitions to£7.3m from HMV, the struggling music-and- build a A$500m Chinese-culture theme park inentertainment retailer. HMV took over the Australia. The Wyong Shire Council is sellingMAMA Group for £46m in 2009. The now the real estate to the privately held Australianprivately owned MAMA Group will use the new Chinese Theme Park company, which wantscash to expand globally. Its current assets to tap into the country’s A$3.8bn tourism busi-include London music venues The Borderline ness. Scheduled to open in 2020, the park willand The Jazz Café, plus the festival Global feature a real-life replica of the gates to theGathering. MAMA Group says the separation mythical imperial palace Forbidden City.from HMV has been a “difficult process”.US theme park Cedar Fair bets West Ham still favoured tenant$60m on content and comfort at £590m UK Olympic stadium US theme-park operator Cedar Fair is to West Ham United, the London-based soccerinvest in more night-time attractions at its flag- club, has been named the preferred bidder toship park Cedar Point in Sadunsky, Ohio, after occupy the now empty London 2012 Summera US$60m three-year revamp of the park’s Olympics stadium. But the club must fulfilhistoric hotels and seaside properties. The specific financial conditions to win the 99-yearoverhaul aims to modernise the 106-year-old tenancy. LOCOG, the games’ organisingpark’s hospitality services, encourage visitors committee, and the London mayor office’sto extend their stays and hence justify invest- London Legacy Development Corporation arements in more entertainment. The park has urging the club to improve its £15m contribu-more than 72 rides and attractions and tion to the more than £160m required to covertreceives more than 3 million visitors annually. the £429m 60,000-capacity stadium into an athletics and soccer field with retractable seats and roof.
  • 7. BOOKS/PRINTSimon & Schuster tries self-publishing Simon & Schuster (S&S) is investing in online self-publishing via a joint venture called ArchwayPublishing. It was formed with US-based self-publishing specialist Author Solutions, itself a subsidi-ary of S&S rival Pearson, which owns the Penguin Books and the Financial Times. S&S wants to lureauthors who have found success and a fan-base by avoiding the traditional route and publishing theirown books. Archway Publishing will offer its authors assistance to promote their brand and access toretailers. Pearson bought Authors Solution, which has 150,000 authors on its roster and 190,000titles in print and e-books, for US$116m in July. Meanwhile, online-retail giant (seeMTF Issue10) is injecting an extra US$1.5m into Kindle Direct Publishing (KDP), its self-publishingbusiness to encourage the participating authors to make their books available for its Kindle LendingService. Currently, Amazon sets up a monthly fund of US$700,000 to share among KDP authors forworks sold. The extra US$1.5m added to the fund over the Christmas period aims to make more self-published titles available to customers buying Amazon’s Kindle e-reading devices for Christmas gifts.Fashion e-tailer challenging UK media groups bet millionsVogue with new magazine on local newspaper venture Net-a-Porter, the popular high-end fashion David Montgomery, the former CEO of thee-tailer, is to launch a print magazine of the UK’s Mirror Group Newspapers, remainssame name. The news emerged during an committed to the struggling print media. Heindustry conference where CEO Mark Sebba has launched Local World to acquire 110disclosed plans for the publication, which is British local newspapers and about 60 local-scheduled to launch next year. Its frequency news websites published by Northcliffe Media,remains unknown, but it is expected to be a subsidiary of Daily Mail & General Trustsimilar to the online store’s weekly online/app (DMGT), and Iliffe News & Media. DMGTmagazine, plus the one-off limited print edition received £50m for Northcliffe and about 40%last year. Plans for the magazine include the of Local World. In 2006, DMGT declined arecent appointment of Lucy Yeomans, former £1bn offer for Northcliffe. Its rival Trinity Mirroreditor of Harper’s Bazaar. has a 20% stake.HarperCollins ends 10-year UK newspapers attacked forpartnership to go solo in India low ethics by Leveson Report HarperCollins has ended its 10-year part- Self-regulation within the UK press is beingnership with Living Media India by taking over challenged for the first time ever by thetheir joint venture in India. HarperCollins India Leveson Report, the result of a judicial inquiryis now a fully owned subsidiary of HarperCol- into the culture that encouraged the illegallins Worldwide. It will continue to publish titles phone-hacking by reporters at the Rupertin the English language and Hindi dialect. Its Murdoch-controlled company News Interna-award-winning authors include Siddhartha tional. The inquiry, led by UK judge Lord BrianMukherjee and Aravind Adiga. The move will Henry Leveson, concluded that the press’enable the publisher to exploit the new responsibilities “have simply been ignored” onHarperCollins 360 initiative. This allows any “too many occasions”. It recommends, amongbook published in one market to be available others, that an independent regulatory bodyglobally in all the English-speaking markets. backed by legislation be set up to ensure the press maintains its own ethical standards.
  • 8. ADS & MARKETINGUS TV host grabs major content agency Ryan Seacrest, the US TV host of reality-TV talent show American Idol, is boosting his ambitionsto be a media mogul buy acquiring the majority of Civic Entertainment Group (CEG), a US experien-tial-marketing agency and brand-entertainment producer. The acquisition is for an undisclosed sum.CEG-created campaigns include several for US TV networks, such as HBO, ESPN and Lifetime. Theacquisition is via Seacrest Global Group, Seacrest’s investment company. But it is separate from theUS$300m fund launched this year by private-equity firms Bain Capital (co-founded by US presiden-tial candidate Mitt Romney) and Thomas H Lee (THL) Partners to develop content for Ryan SeacrestProductions, which makes the hit reality-TV series Keeping Up with the Kardashians and JamieOliver’s Food Revolution. Bain and THL are the majority owners of Clear Channel Communications,which makes Seacrest-hosted radio shows such as American Top 40. Seacrest’s other interestsinclude a partnership in AXS, the cable-TV channel co-owned by Mark Cuban, owner of the NBAbasketball team Dallas Mavericks; talent agency Creative Artists Agency; and live-events giant AEG.Seacrest is expected to use these ventures plus his personal deals with global marketers Procter &Gamble, Ford Motor and Coca-Cola to boost CEG’s access to talent for its branded content.China’’s CCTV network breaks US agency McGarryBowenrecord in airtime sales breaks ground in China The one-day auction of prime-time airtime US advertising agency McGarryBowen ison CCTV, China’s national free-to-air TV net- setting up an office in Shanghai, its first foraywork, in 2013 raised a record US$2.5bn, an into Asia. McGarryBowen Shanghai will serve11% increase from last year, Chinese marketers seeking global expansionreports. The three top bidders, alcohol-drink for their brands and global advertisers withbrands Jiannanchun and Wuliangue, and ambitions in China. US banking group JPbeverage manufacturer Huiyuan Juice, spent Morgan is among its first global clients.US$231.5m combined. The national auction, *Meanwhile, China is the only major marketwhich sells the most popular TV spots to that has not given its regulatory approval toadvertisers, is big news as it reflects the state the planned US$4.9bn global acquisition of UKof the national economy. -based media agency Aegis Group by Dentsu, Japan’s biggest agency and McGarryBowen’s owner.Chinese digital agency OMP Coke’’s creativity pays off withjoins the Aegis network Cannes Lions top accolade Giant UK media agency Aegis Group is to Coca-Cola, the carbonated soft-drinksbuy OMP, one of China’s few remaining inde- behemoth with presence in more than 200pendent digital agencies. The news, unveiled countries, is to be named Creative Marketer ofby online video network Thoughtful China, the Year at the 2013 Cannes Lions Interna-indicated that OMP will become part of Isobar, tional Festival of Creativity. Famous for itsAegis’ international network of digital agencies global- campaign slogans like “Things goand will be renamed OMP -Linked by Isobar. better with Coke” and “It’s the real thing”, CokeOMP’s existing clients include global brand has snapped up more than 100 Cannes Lionsowners like L’Oreal, Microsoft and awards over the years. The event, which takesVolkswagen. Local clients with an international place at Cannes, south of France, is thereach include China Eastern Airlines. biggest gathering for the international advertising community.
  • 9. ARCHITECTURE/DESIGNHadid wins Japanese futuristic stadium The globally acclaimed Zaha Hadid, the British architect who became the first woman to win theprestigious Pritzker Award, is ending 2012 with a growing portfolio of new assignments. London-based Zaha Hadid Architects, which includes the 2012 Summer Olympic Games’ London AquaticsCentre among its achievements, has snapped up the covetous contract to redesign the nationalKasumigaoka Stadium in Tokyo. The Yen130bn (US$1.56bn) project will expand the stadium from itscurrent 54,000-capacity to 80,000. It will have a retractable roof. Construction should be completed inMarch 2019, in time for the Rugby World Cup competition in September and October that year. Thenew stadium is also expected to be suitable for the 2020 Summer Olympic Games in Tokyo, shouldthe city win its bid to host the event. The Japan Sport Council selected Zaha Hadid from 46 originalapplicants for the job. The Kasumigaoka Stadium news came shortly after the Eli and Edythe BroadArt Museum, a Zaha Hadid design at the Michigan State University, opened for business in Novem-ber. The exhibition space will be devoted to photography, modern art, video art, new media andgraphic art. Also on Hadid’s books is the new Beko complex on 94,000sqm of a disused textilefactory in Belgrade, Serbia. Part of a £168m regeneration project, the complex will be near the citycentre and will feature a five-star hotel, galleries, retail outlets and a congress centre.Norman Foster opens his first Pioneering recycled-paperdoor in US residential market building grounded in Germany UK star architect Sir Norman Foster and his Dratz & Dratz Architekten, the Berlin-basedFoster + Partners company have won an firm operated by the brothers Ben and Danielassignment for their first US residential tower. Dratz, has built what is believed to be theCalled 50 UN Plaza, the US$500m 44-storey world’s first building made out of compressedtower of luxury apartments is being developed recycled paper. Called Paper House, theby Zeckendorf Development and Global Essen-based structure is built on a formerHoldings. It is located near the United Nations’ mining site, now a designated UNESCO Worldheadquarters and Trump Tower, and should Heritage Site. The 2,045sqft building is alsobe completed in 2014. Until now, Foster + rain-resistant. The Dratz brothers won thePartners’ US work has focused on office and US$200,000 commission in a competition co-public buildings, such as the new World Trade sponsored by Essen’s Zollverein School ofCenter Tower 2. Management & Design.Apple’’s space-age HQ delayed; Facebook hikes size of designopening scheduled for 2016 team in New York office The completion of the new futuristic head- Leading social-media network Facebookquarters for computer and technology giant plans to increase its dedicated-design teamApple looks set to be delayed until 2016. The in New York to help advertisers and marketerscompany had hoped to move in a year earlier. improve the visuals of their campaign on theThe 176-acre campus in Cupertino, California, Facebook website. The company stated thatwill cater for 14,200 employees. The designer advertising is key to its business model whenis UK-based Foster + Partners. Plans for the it applied to float on NASDAQ in May. Current-new circular spaceship-like building, expected ly, most of the employees in the New Yorkto be one of the world’s biggest, were submit- office are in the software engineering andted by Apple co-founder Steve Job, four advertising sales division, while designersmonths before his death last year. have so far been at the California office. 9
  • 10. SPORTElectric cars fuel new Formula E race International motorsports sponsors will have another event to consider investing in when the newFormula E competition opens for business in 2014. The Formula E Championship set up by thesport’s governing body FIA will showcase the future of motor cars powered by sustainable energyfuel in urban environments. Ten teams, 20 drivers will race in electric-powered cars around urbanlandmarks in 10 city centres that consider clean environments a top priority. Rome and Rio de Janei-ro are the first two cities to confirm their participation. The first Formula E test runs take place nextyear. The competition will be organised by Hong Kong-based Formula E Holdings, a company led byCEO Alejandro Agag, who is involved in the Barwa Addax teams participating in GP2 and GP3 motorraces. The Formula E vehicles will be supplied by French company Formulec. Another hefty invest-ment in motorsports comes in the form of Motorsports City, a new 109-hectare city development andentertainment hub for motor enthusiasts in Johor, Malaysia. The US$1.15bn venture will be financedby Singapore billionaire Peter Lim’s FASTrack Autosports company, which will have a 70% stake in ajoint venture called Crimson Carnival. The remainder belongs to local developer UEM Land Holdings. Lim has a stake in McLaren Automotive, which includes the McLaren F1 team among its assets.Fox TV backs global branding Euro Championship kicks thefor top-level Dutch football event’’s host cities Euro-wide Fox International Channels (FIC), the non- The quadrennial European ChampionshipsUS pay-TV networks operated by media giant soccer competition is to be held in severalNews Corp, has bought 51% of Eredivisie cities across Europe from 2020, instead ofMedia & Marketing (EMM). EMM, which is the traditional location of one or two hostjointly owned by TV-production group En- countries. The 2016 Championships will be indemol, manages the corporate media and only France. Governing body UEFA says thesponsorship rights of the 18 soccer clubs new pan-European structure aims to sharebelonging to the Eredivisie (Dutch soccer’s costs among several countries instead ofpremier league). The national football associa- placing the onus on up to only two countries.tion KNVB and the Dutch Competition Authori- *Meanwhile, a new under-19 UEFA Youthty have given their approval. EMM hopes League competition, similar to the prestigiousFIC’s international reach will provide more Champions League tournament, starts in theexposure to the Eredivisie brand. 2013-14 season.Scottish Premier League Muhammad Ali gloves knocksoccer strikes expansion plans out buyer for $770,000 A working party has been set up to examine Two pairs of boxing gloves used by thehow the UK’s Scottish Premier League (SPL), legendary Muhammad Ali in landmark fightsScotland’s top-level soccer league, can be have been sold at auction for more thanexpanded to boost media revenues and share US$770,000. An unidentified buyer got boththe spoils more fairly with the lower-division for US$385,848 each. The first pair, a SammyScottish Football League (SFL). The working Frager brand, was used in the 1964 fightparty, including executives from the SPL, the against Sonny Listen. The second, an EverlastSFL and governing body Scottish Football As- pair, were for the 1971 Joe Frazier bout. Theysociation, will consider increasing the number were sold by the estate of the late Angeloof SPL clubs to 24 from the current 12, before Dundee, Ali’s trainer. The sale was organisedsplitting the 24 into three eight-club leagues. by California-based SCP Auctions.
  • 11. GAMESSocial media make bets with real cash Two major digital-media owners have made the controversial decision to enter the real-moneyonline gambling business, raising the question whether digital-only monetisation is a viable businessmodel. Facebook has formed a gambling joint venture with 888 Holdings, the London Stock Ex-change-quoted gaming company, aimed at users over 18 years old. Players have the opportunity towin tens of thousands of pounds by gambling up to £500 on bingo, casino or slot games. Startingnext year, the new deal kicks off with Bingo Appy, a real-money game, followed by other versions forcasino and other games. Critics claim Facebook is exploiting minors, who might lie about their age oruse adult relatives’ account to gamble illegally. Facebook insists there are safeguards in place. Inbusiness terms, however, it provides the social-media company with another revenue stream and888’s shares rose when the news broke. The financially troubled Zynga, the social-games pioneer(see MTF Issue1) that has relied on its Facebook integration for its audience, is betting on real-money gambling as a solution to its money woes. It has applied for a licence for the PreliminaryFinding of Suitability from the Nevada Gaming Control Board, which would enable the state’sresidents to gamble on Zynga’s website. It has also joined forces with UK-based online gamblingcompany to offer real-cash gambling in Britain next year.Hollywood studios like Kabam Film director explores newso much they bought shares outlet using games engine Hollywood giants Warner Bros Entertain- US movie director Albert Hughes, famousment (WBE) and Metro-Goldwyn-Mayer for Menace II Society with Samuel L Jackson,Studios (MGM) have bought a stake in San has jacked in immediate plans for his nextFrancisco-based social-games company movie MotorCity to enter the video-gamesKabam for an undisclosed sum. As reported in business. He is working with Electronic ArtsMTF Issue.11, Kabam is developing games to and Germany’s Crytek to make The 7 Won-accompany The Hobbit, the new trilogy of epic ders of Crysis 3. It is a series of cinematicmovies based on JRR Tolkien’s fantasy novel. shorts made with Crytek games-technologyWBE and MGM, the Hobbit’s movie distribu- CryEngine 3 and is scheduled for a Februarytors, wanted to extend the relationship with 2013 release for the Xbox 360, PlayStation 3Kabam, which has garnered more than and PCs. The shorts will be used to promoteUS$125m in investments since it was Crytek’s new Crysis 3 sandbox-shooter game.launched in 2006.Microsoft pay-to-play game in Black Ops II breaks billion-tune with Karaoke Channel dollar entertainment record Microsoft has joined forces with The Call of Duty: Black Ops II, the latest gameKaraoke Channel, the digital music-service by from the popular first and third-shooter videoCanada’s The Stingray Digital Group (SDG), games from US publishing giant Activisionto offer its first pay-to-play console game. (and Aspyr Media for Apple devices), hasCalled Karaoke for Xbox 360, players can been declared the fastest-selling entertain-access 8,000 streamed tracks to sing along to ment product ever. Sales generated US$1bn-by downloading the app via Microsoft’s Xbox plus in 15 days, faster than it took the highest-LIVE network to the Xbox 360 console. Play- grossing film of all time, the Oscar-winning 3Ders can pay for blocks of two, six or 24 hours movie Avatar, to reach the billion-dollar mark.with the Microsoft Points virtual currency that The Call of Duty series, developed by variouscan be purchased with credit cards. SDG studios, including US-based Treyarch, hassupplies the licensed music. sold more than 100 million units to date.
  • 12. FASHION/LUXURYRussian Faberge jewels change hands Gemfields, the UK-based precious-stones miner, has agreed to buy out 170-year-old Russianjewellery maker Faberge in a deal valued at £89m. The price, in the form of shares, represents anestimated 40% of the diluted but enlarged group. Faberge, famous for the Russian tsars’ bejewelledeggs, is 49.1% owned by UK/South African investment venture Pallinghurst Resources, which alsoowns 33% of Gemfields. The plan for the restructured company is to sell Gemfields’ stones under theFaberge brand name, enabling the company to compete against giant diamonds retailer/distributorDe Beers. Both are competing within the competitive luxury-goods business, valued at €212bn inrevenues this year, international research group Bain & Co says. *Meanwhile, PPR, the French luxu-ry group that owns the Gucci and Yves Saint Laurent brands, is reported to be selling OneStopPlus,its online store for plus-size fashion items, for US$525m to Charlesbank Capital Partners and Web-ster Capital, the US private-equity companies. OneStopPlus is part of Redcats, the mail-order divi-sion that PPR tried to sell last year. Instead, it has decided to sell the different units within Redcats,including its sports and leisure business (The Sportman’s Guide and The Golf Warehouse), whichwas bought by US online power-tools retailer Northern Tool + Equipment for US$215m.Apax pays $570m to take Cole Uniqlo owner expands in USHaan off Nike’’s hands with majority buy of J Brand Sports-apparel giant Nike is selling Cole Fast Retailing, the Japanese group famousHaan, its luxury shoes and bags units, to for the Uniqlo brand, is growing its presence inInternational private-equity group Apax the US by purchasing 80.1% of US-basedPartners for US$570m. The deal follows denim-jeans maker J Brand Holdings forNike’s recent sale of soccer brand Umbro to US$290m. The sellers were J Brand’s manag-Iconix Brand Group for US$225m. According ers and US middle-market investment firmto, Nike bought Cole Haan for Star Avenue Capital. *Meanwhile, Katy Perry,US$80m plus US$15m of debts in 1988, while US pop sweetheart, will have her futureUmbro was bought for US$565m in 2008. perfume brands, developed, marketed andNike, with a brand value of US$18.6bn, has distributed by US fragrance manufacturerbeen selling subsidiaries it feels are not core Coty, which will also distribute her existingto its business. brands Meow and Purr.Courageous UK bank supports Alain Mikli says aye to privatestreet-wear firm with £1.6m equity takeover by Luxottica Emerging UK street-wear fashion firm A special agreement formed by LondonJackson Distribution has clinched a loan of investment firm Neo Capital Private Equity in£1.6m from retail bank HSBC to launch its November will enable Luxottica Group, theown apparel and footwear brand. Called Italy-based global luxury-eyewear designer, toBrakeburn, the new brand is scheduled to take over Alain Mikli International Group, thelaunch next March in the UK and on continen- French company that includes Jean Paultal Europe. Targeted at 16 to 35-year-olds, Gautier eyewear among its brands. Neo Capi-Brakeburn will expand Jackson Distribution’s tal has shares in Alain Mikli, which is valued atportfolio, which already includes Abbey Dawn, €60m. Giorgio Armani has a minority stake inCanadian rock star Avril Lavigne’s fashion the privately owned Luxottica, which includesventure. The new cash will be used to eyewear by Gucci, Prada and Ray-Ban amongmanufacture Brakeburn items in the Far East. its range.
  • 13. PHOTOGRAPHY/ARTApple, Google shelve rivalry for Kodak Apple and Google, two bitter rivals in the consumer-technology business, have joined forces in aUS$500m deal to save the financially troubled US photography pioneer Eastman Kodak Company.They have formed an alliance to acquire Kodak’s technology patents. In so doing, they bail out thenear-bankrupt Kodak. The sale enables Kodak to fulfil conditions required by its creditors to securethe estimated US$800m required for its overall rescue (MTF Issue No.11). The 1,000-plus patents fordigital imaging, capture, image manipulation, photo frames, among others, are said to be actuallyworth more than US$2bn. But Kodak needs a quick sale and Apple and Google could not afford tohave them fall into the hands of a potentially hostile owner or competitor. Kodak’s technologies arevital to Apple, Google and rival makers (eg, Samsung, Nokia Microsoft) of smartphones and tabletswith pre-installed cameras. By joining forces, Apple and Google reduce what each would have had topay on its own. And they can reap the rewards of licensing the patents to their competitors.*Meanwhile, the University of Oxford’s Bodleian Library is making a £2.25m bid to keep the archiveof William Fox Henry Talbot, the British photography pioneer and pioneering photographer, in theUK. An unidentified New York dealer has so far made the best bid to the Talbot-family estate.Roman Abramovich in $400m Legendary Leica camera sellsspend on new Russian museum for record €€1.68m at auction Roman Abramovich, the Russian billionaire A custom-made Leica M3D-2 camera, oneowner of London soccer team Chelsea Foot- of only four ever manufactured, set a world-ball Club, has commissioned the construction record price for a commercially producedof a US$400m museum complex in St Peters- camera, when it fetched €1.68m at the West-burg. The centre is being designed by New licht photography gallery auction in Vienna inYork architect WORKac and will be located on November. It was made in 1955 for 96-year-the Russian city’s New Holland Island, an old former Life magazine photojournalist Davidartificial island. It will feature galleries, a hotel, Douglas Duncan, who is famous for his photosretail outlets and an outside hot tub. Abramo- of Picasso. And a 1929 gold-plated Leicavich’s life partner Dasha Zhukova is extending Luxus, one of only 95 made during that period,Moscow-based Garage Center for Contempo- was bought for €1.02m at the same auction.rary Culture (MTF Issue No.8) to the island.Man gets prison term for van- Revered Turkish painter raisesdalising Rothko painting profile at major NYC gallery Wlodzimierz Umaniec, the 26-year-old who The erotically charged works of Tanerpleaded guilty to causing £5,000 worth of Ceylan, the Turkish-born painter based incriminal damage to a mural by legendary Germany, are to be exhibited at the prestig-abstract painter Rothko at London’s Tate ious Paul Kasmin Gallery in New York. TheModern museum, was sentenced to two years gallery’s roster of artists includes Andyin prison in December. Experts say the cost of Warhol. Ceylan’s works, famous for theirrepairs could add up to £200,000. Umaniec photo-realism, have been exhibited mostly indrew graffiti and smeared paint on the mural, Istanbul galleries. Some of his paintings, suchwhich is called Black on Maroon and is valued as the Esma Sultan portrait, can fetch up tobetween £5m-£9m, in October. It belongs to a US$200,000 each. The November 2012 coverseries of works Rothko was commissioned to of the Turkish edition of fashion bible Voguepaint in 1958. magazine used a Ceylan painting.
  • 14. COPYRIGHTPlagiarism tested in two celebrity cases Two US plagiarism court cases involving high-profile entertainment names concluded that proof isrequired to show defendants had access to plaintiffs’ original works to make a strikingly or substan-tially similar copy. In November, the US Ninth District appeal court confirmed The Big C, the hit USTV drama series on pay-TV channel Showtime, did not infringe plaintiff Nancy Radin’s copyrightedscreenplay Quality of Life. Radin had alleged Showtime and screenwriter Darlene Hunt of plagiaris-ing her story. But the plaintiff showed no evidence that Radin and Showtime had access to herscreenplay to copy the concept. The appeal court thus reaffirmed an earlier decision by the lower USDistrict Court for the Central District of California. The Radin v. Hunt ruling was followed in Decemberby a New York District judge’s dismissal of plagiarism allegations by US screenwriter Eve Pomer-ance against UK film star and Oscar winner Emma Thompson. Pomerance had reportedly accusedThompson of stealing ideas from two screenplays about the 19th-century scandalous love triangleinvolving art critic John Ruskin, his young wife Effie Gray and Ruskin’s protégé painter John Millais.The accusation had prevented Thompson from releasing Effie, a historical film she co-wrote and isproducing about the scandal. The New York court’s ruling questioned evidence of copyright infringe-ment and the originality of creative works based on historical facts.Disney companies ordered to Tolkien estate sues Hobbitpay $319m to Millionaire firm producers over merchandise Walt Disney Company subsidiaries ABC The estate of JRR Tolkien, author of fantasyTelevision, Buena Vista Television and classics The Hobbit and The Lord of theValleycrest Productions have been ordered to Rings, is suing Hollywood studio Warner Bros,pay US$319.4m to UK-based Celador Interna- production company New Line, and the Saultional following an eight-year dispute over Zaentz Company, for US$80m copyright in-unpaid royalties. Celador had sold the US fringement. The estate alleges the defendants,rights to the reality-quiz show Who Wants To who financed the award-winning Rings moviesBe a Millionaire? to the Disney companies. and new The Hobbit trilogy, have exceededThe US District Court for the Central District of the limits to their merchandise rights. TheCalifornia, however, has upheld the plaintiffs claim in the Los Angeles US DistrictUS$269.4m awarded to Celador in 2010 for Court that the defendants should be producingnot receiving all profits due. The extra only physical merchandise, such as toys, notUS$50m is for interests accrued. digital ones, like digital games.FACT help police convict UK Canada toughens rulesfootball copyright pirate protecting mobile app users UK anti-piracy organisation FACT has Canada’s federal and regional lawmakershelped the Thames Valley Police Economic have unveiled rules for local mobile-app devel-Crime Unit nab a pirate who illegally sold opers. The guidelines are designed to ensurestreamed live footage of top-level English the apps’ users are aware of how developersPremier League soccer matches. Gary will use their personal data. Canada’s nationalGoodger set up the freelivefooty website at his government and the local authorities at Britishhome to retransmit unauthorised live games Columbia and Alberta insist all developersfor commercial purposes. He was found guilty should have a privacy policy, encrypt any dataof infringing the UK’s 1988 Copyright, Design they store or transmit, set up systems that& Patent Act. *Meanwhile, Italian anti-piracy guarantee the policies are being effective, andgroup FAPAV has signed a Memorandum of offer users the option not to accept updates toUnderstanding with local cinema chain Odeon- the policies.UCI to fight cinema-movie piracy.
  • 15. REPORT A Country Profile New Zealand The Hobbit, The Lord of the Rings and Avatar are Hollywood box-office hits made in New Zealand. The economy’’s small size prompted some of its best minds to emigrate in the past. Now, the nation’’s international ambition in movies, TV, music, games and sport is luring in talent at home and abroadWith a population of about 4.5 million, New favourite among tourists and an investmentZealand is one of the world’s smallest devel- haven for the wealthy. The capital is Welling-oped countries. The country’s populace is half ton while Auckland is its biggest metropolis.the size of a major capital city such as London Both cities are located on the North Island.and a metropolitan destination like New York The UK used to be New Zealand’s biggestCity. source of foreign visitors. These days, the Yet, like its nearby English-speaking former majority of its tourists come from Asia-Pacificcolony Australia, this cluster of islands has countries, such as China, Japan, and Austral-carved out its own identity on a cultural level. ia. In 2008, New Zealand became the first It has done so by being a global player in country in the West to sign a free-trade pactthe creative businesses and attracting interna- with China. There are also strong trading linkstional investors. with the US and Australia. The country’s rapid recovery from the tragic Efforts to improve and tighten trading2011 Christchurch earthquake said a great activities between New Zealand and Australiadeal about its industries’ determination to have taken place under the Closer Economicsthrive. That year, the All Blacks national rugby Relations initiative, which celebrates its 30thteam won the international Rugby World Cup. anniversary in 2013. During that period,The production of The Hobbit, one of this however, the two governments have beenyear’s hotly anticipated Hollywood block- expressing a desire to replicate the single-busters, maintained jobs by continuing to use market structure established by the Europeanthe admired film locations and filmmaking Union. The goal is to reduce trade barriers andfacilities. Singer-songwriter Kimbra conquered encourage freedom of movement between thethe US music-sales charts. two markets. Celebrity Kiwis, by birth or descent, include And the historical commonwealth links withactors Russell Crowe, Lucy Lawless, Anna the UK have made those two countries strongPaquin, Sam Neill, Sir Peter Jackson, Jane allies. New Zealand is considered one of theCampion; rock bands Crowded House and world’s least corrupt countries, a status thatSplit Enz, opera star Dame Kiri Te Kanawa, encourages significant investments by foreignand country star Keith Urban; comedy duo tycoons from Australia, the US and UK.Flight of the Conchords. An article in the New Zealand Herald news- At this year’s London Olympic Games, Kiwi paper pointed out that billionaires that havemedallists included Valerie Adams (shot put), invested in New Zealand include PayPal co-Jo Aleh and Olivia Powrie (sailing); Mahe founder/Facebook investor Peter Thiel, EmpireDrysdale (rowing); and Sarah Walker State Building owner Tony Malkin, US vine-(women’s BMX). yard king William Foley, Australian tycoon As in several developed markets, its tradition- Gina Rinehart, Russian mogul Alexanderal media businesses are feeling the brunt of an Abramov, the Sultan of Brunei and UK entre-unforgiving advertising industry that has been preneur Sir Richard Branson.hurt by the chronic economic slump. However, Among the prominent local media moguls isNew Zealand’s small stature has equally made Sir Peter Jackson, director of The Hobbit andit nimble in the race to adopt the digital media. The Lord of the Rings, who was valued at NZ$560m by the National Business ReviewThe country Rich List in 2011.New Zealand’s renowned clean environment, The Kiwi culture is influenced by the domi-dramatic landscapes, friendly climate and nant citizens of European descent, who repre-relaxed lifestyle have made the country a sent about 78% of the population, followed by 15
  • 16. REPORTthe indigenous Maoris (15%) plus immigrants telecommunications sector, internationalfrom mainly the nearby Asian countries and carrier Vodafone New Zealand is the localthe Pacific Islands. market leader with 2.5 million subscribers. The New Zealand’s head of state is England’s next big player is Telecom New ZealandQueen Elizabeth II. But as a parliamentary (TNZ), which is the biggest telecommunica-democracy, its current government is led by tions group when its fixed-line telephonyPrime Minister John Key, whose centre-right business and Internet services are added toNational Party came into power in 2008 and the picture.was re-elected in 2011 as part of a minority TNZ is a former state-owned venture thatgovernment. Recently, the international eco- was bought by private companies and thennomic-ratings agency Fitch Ratings declared sold to the public via the New ZealandNew Zealand’s economy is on the right track Exchange (NZX) as well as stock exchangesto surviving the global economic slump. in New York and Australia. With 2011 reve- nues reaching NZ$112bn, TNZ is one of theMedia and entertainment biggest corporations on the NZX. It has aboutRevenues generated by the media and 4 million consumer and business customers.entertainment sectors are expected to reach The third largest mobile communicationsNZ$6.66bn by 2016 from NZ$5.5bn in 2012, company is 2degrees, a UK/US newcomeraccording to forecast data compiled by Price- that already has 1 million subscribers since itswaterhouseCoopers (PwC), the international launch in 2009.accountancy giant, and consultancy Wilkofsky Consolidation in the competitive marketGruen Associates. escalated when Vodafone paid NZ$850m for This is based on a compound annual growth TelstraClear, a subsidiary of Australia-basedrate of about 5% on revenues earned from TV, telecoms group Telstra. With its digital-TV,filmed entertainment, games, print media, Internet service and mobile communicationsadvertising, out-of-home entertainment and businesses, TelstraClear will enable new own-marketing, and recorded music in the tradition- er Vodafone to expand its presence in theal and digital media space. This has not entertainment and media space. TelstraClearstopped the country from feeling the effects of carries the Sky TV pay-TV service on its digitalthe still uncertain global advertising market. -cable TV platform, InHome TV, to its sub- Screen-based media, including TV, film, and computers, continue to thrive. More than half of New Zealand’s 1.6 millionAccording to the government’s Statistics New TV homes subscribe to Freeview, the digitalZealand, the “screen industry” was worth terrestrial TV platform.NZ$3bn in the year ending March 2012. New Zealand’s broadcast-TV analogue The sector’s production and post-production switch-off is expected to be completed by theelements generated NZ$1.4bn in revenues end of 2013. The spare analogue spectrumsfrom directly employing more than 8,500 will be licensed as mega-speed 4G (fourthpeople. The WETA Workshop is famous for generation) wireless communications thatthe award-winning special effects, props and telecommunication operators can bid for indesigns created for movies such as District 9, auctions. 4G wireless signals would enableThe Hobbit, The Lord of the Rings trilogy, New Zealand’s smartphone owners to down-Avatar, and The Adventures of Tintin. load and stream movies, TV shows, music and PwC’s positive prediction in terms of future games with high-quality images on the moverevenues is based on New Zealand’s enthusi- anytime and anywhere in the country.astic embrace of digital media and technology. The country’s telecommunications’ infrastruc- ture caught the attention of investors after TNZDigital infrastructure split into two and its infrastructure businessJust as the small size of emerging digital- was spun off into a separate company calledmedia companies is said to make them more Chorus. After the demerger, Chorus wasnimble in innovative creativity compared to floated on the NZX stock exchange and is onetheir conglomerate counterparts, small of the country’s largest corporations.countries like New Zealand are equally swift to Submarine cables are being installed in Newadopt digital media. Zealand to ensure high-speed telecommunica- According to Statistics New Zealand, more tions with other countries. The biggestthan 2.5 million New Zealanders are using investors in this field include Southern Crosssmartphones to subscribe to mobile Internet Cables, which connects a trans-Pacific under-services; they represent more than half of the water cable network from New Zealand tocountry’s population. In the wireless Australia and US. Southern Cross’ sharehold- ers are led by TNZ (50%), Singapore’s SingTel 16
  • 17. REPORTOptus (40%) and the US-based Verizon Busi- A$2.33bn. The drastic state of the finances isness. Ambitions by Pacific Fibre to launch a due to “significant impairments” caused mostlyrival international fibre-optic cable network on by the slump in value of its assets and the costthe seabed collapsed in 2012 when the com- of job cuts and restructurings.pany failed to find the required investment. According to local media reports, the value of Another telecoms-infrastructure service Fairfax’ New Zealand newspapers fell toprovider is Kordia, the state-owned broadcast NZ$175.2m in June 2012 from NZ$950m 12and telecommunications company that months earlier. Going public with suchenables New Zealand TV and telephone com- negative figures also indicated how the parentpanies like Sky TV, Vodafone, 2degrees, company felt about the future prospects of itsMediaWorks, Telecoms New Zealand and traditional media assets. During the sameFreeview to provide nationwide services to period, Fairfax’ total New Zealand operationtheir customers. Kordia had once wanted to reported a loss of NZ$709.1m.join forces with China-based Axin to launch a The New Zealand business has been focus-pan-regional submarine fibre-optic cable to ing on digital media, a strategy also beingrival Southern Cross. But that ambition followed by parent company Fairfax Media,appears to have faded. Industry observers which bought Australian technology-believe Southern Cross’ monopoly on that investment firm Netus in will be facing potential new rivals Ironically, in New Zealand, the companyin the coming years. chose to reduce debts by selling its most The enthusiasm to build a first-rate digital valuable digital-media asset Trade Me, Newcommunications infrastructure is encouraging Zealand’s equivalent to pioneering auctionthe established leaders in the local traditional website eBay (see Digital infrastructuremedia to invest in digital media. above). Fairfax New Zealand’s rival APN is At this stage, the results are mixed. Leading equally feeling the heat of the increasinglymedia group Fairfax New Zealand, which is competitive media market. APN is majorityexperiencing massive losses in its newspaper owned by Ireland-based newspaper groupbusiness, sold its auction website Trade Me Independent News & Media, which has almostfor a significant profit. 30% of the company via subsidiaries INM Aus- It bought Trade Me for NZ$625m in 2006. It tralia and News & Media NZ.started selling parts of Trade Me via the New APN and Fairfax have to contend with theZealand Exchange, in 2011. It got rid of Trade fact that News Corp, the media conglomerateMe for a total of NZ$1bn-plus by the time it controlled by the highly aggressive Australiansold the remaining 51% in December, making mogul Rupert Murdoch, is boosting its Austral-a 70% profit. ia-based media business. It has acquired Critics could not understand why a company Australia-based Consolidated Media Holdingsthat is hiking its digital-media interests should to strengthen Murdoch’s regional power base.then sell its most valuable digital-media opera- That would empower News Corp enough totion. Fairfax has responded by noting the need expand into the New Zealand slash its debts in order to move forward. In response, APN has also been cutting costs. It is selling its print-publishing business.Print media In September, it reduced the size of its week-New Zealand’s media industries are closely day flagship broadsheet newspaper Newtied with those of the nearby Australia. Fairfax Zealand Herald to a compact tabloid.Media and APN News & Media, two of the big- The Herald’s daily circulation of 169,555, sixgest media conglomerates, are positioned as days a week, is concentrated in the AucklandNew Zealand and Australian operations. region and is the largest-circulated daily in the But the state of the ailing print industry country. Weekday circulation used to be aboutreflects the sector’s condition on a global 200,000 in 2006. Its sister publication Heraldscale. Fairfax New Zealand Holdings owns the on Sunday, still a broadsheet, has a circulationfollowing print titles: the Wellington-based of about 100,000.daily newspaper The Dominion Post; The Other APN New Zealand print titles are inChristchurch Press; Auckland’s The Sunday women’s and lifestyle magazines. TheyStar-Times; TV Guide magazine and NZ include NZ Woman’s Weekly, the currentHouse & Garden, plus a host of niche agricul- affairs and entertainment magazine NZ Listen-tural and lifestyle magazines. er, the real-life stories weekly That’s Life and In the financial year ending 24 June 2012, the bi-annual fashion magazine Simply You.the Fairfax Media group reported a net loss of Additionally, it controls a host of regional andA$2.73bn from its combined Australian and community newspapers, and printing presses.New Zealand businesses, on revenues of But investment firm Allan Cont 19 17
  • 18. REPORT NEW ZEALAND — FACTS & FIGURESPOPULATION: 4.5 millionGDP PER CAPITA: US$35,880INTERNET USERS (2011): 3.8 millionFIXED BROADBAND USERS (2012): 1.1 millionTV HOMES 1.6 millionMOBILE PHONE SUBSCRIBERS (2012): 5 millionSMARTPHONE USERS (2012): 2.5 millionFACEBOOK USERS (2012): 2.25 millionTWITTER (ACTIVE) USERS (2012): 120,000VALUE OF MUSIC INDUSTRY (2011): NZ$71.6mVALUE OF ADVERTISING SPEND (2011): NZ$2.18bnCURRENCY EXCHANGE RATE:NZ$100 = £51.18; US$83.36; €62.98ORGANISATIONS TO KNOW:-Association of New Zealand AdvertisersAustralasian Performing Right SocietyCommerce CommissionCopyright Council of New ZealandCreative New ZealandFilm New ZealandInteractive Games & Entertainment AssociationMinistry of Business, Innovation and EmploymentMinistry of Science and InnovationNew Zealand Film CommissionNew Zealand Game Developers AssociationNew Zealand Music CommissionNew Zealand On AirNew Zealand Open Source SocietyNewspaper Publishers’ Association of New ZealandNZ on AirOverseas Investment OfficePPNZ Music LicensingRecording Industry Association of New ZealandSOUNZSource: The Economist; Internet World Stats; Point Topic; TNS New Zealand;ZenithOptimedia; CASBAA; Socialbaker; Statistics New Zealand; AdvertisingStandards Authority; New Zealand Music Industry Commission 18
  • 19. REPORTGray, which has a 19.8% stake in APN and previous year. Revenues from advertisingjust over 10% in Fairfax, has been urging both jumped NZ$9m to more than NZ$313m, givingcompanies to do whatever it takes to reduce the network a 62.2% share of TV advertising.their vulnerability to the declining print- Revenue from other sources fell more thanadvertising market. 12% to NZ$28m. This was caused largely by APN and Fairfax are not the only media the increased cost in buying international pro-groups cutting costs. ACP Media, another grammes, the broadcaster says.Australian-New Zealand media group, was a TVNZ revenue was also spent on igloo, a lowsubsidiary of Australia-based APC Magazine, -cost digital terrestrial pay-TV service jointlywhich belonged to the financially embattled launched with Sky TV in 2012. Sky owns 51%.broadcast group Nine Entertainment TVNZ is selling Avalon Studio, its productionCompany. Nine recently sold ACP to German facility, to a consortium comprising local busi-company Bauer Media Group for a reported nesses and Avalon executives who plan toA$500m. ACP is the largest magazine- retain it as a production house. The sale isdedicated publisher in New Zealand. Its titles expected to be finalised in March 2013.include the local editions of its Australian sister Major niche communities have their own TVmagazines such as The Australian Women’s services. Te Reo is the state-funded Maori-Weekly, the local lifestyle monthly Metro, and language channel available on digital-North & South, the current affairs monthly. terrestrial, satellite and cable platforms. It complements the government backed free-to-Television air Maori Television, which is in English andOf the old-media platforms, TV continues to Maori. Another player targeting a niche audi-generate the most income. But in a market like ence is World TV, which operates a host ofNew Zealand and its small population, expan- regional TV channels, including CTV8 andsion has its limits and consolidation and joint TV9 for New Zealand’s Chinese among rivals are common. The three major players in TV are the state- The Ironbridge investmentowned terrestrial broadcaster Television New Australian investment group Ironbridge CapitalZealand (TVNZ), the privately owned free-to- is the biggest player in the privately ownedair MediaWorks and the biggest pay-TV free-to-air TV sector. In 2007, it took over theplatform Sky TV. company that eventually became Media- TVNZ’ is the nation’s biggest broadcaster Works, which is Ironbridge’s largest asset.with a 40%-plus audience share. Its general MediaWorks operates TV3 (New Zealand’sentertainment flagship channel TV One first private TV channel); the youth TV channellaunched in 1960. It is a commercially funded FOUR; the time-shifting catch-up TV servicepublic broadcasting service. It is followed by TV3 Plus 1; and the music-TV channel C4.TV2, which is aimed at youths and young MediaWorks also owns a large portfolio ofadults and is described as “semi-commercial”. national and regional radio stations under TVNZ U is a youth and music digital- several locally established brands, such asterrestrial network, which replaced the now Kiwi FM and MORE FM. MediaWorks’ TV anddefunct TVNZ 6. TVNZ Plus 1 is a kind of radio services are supported by nearly 20catch –up TV service. It is an exact replica of branded websites.TV One, but transmitted one hour later. It However, Ironbridge has been stemmingreplaced the now shuttered TVNZ 7. The losses at MediaWorks with a complex seriesgovernment also funds TVNZ Heartland, a of loans, including NZ$70m from US private-network based on classic TVNZ shows but equity firm TPG (which bought out debts owedavailable on only the subscription-funded Sky to Commonwealth Bank of Australia).TV platform, as is TVNZ Kidzone 24. MediaWorks’ debts are also with international TVNZ ondemand is the broadband online banks such as the Australian/New Zealandservice launched in 2007. It used to be sub- bank Westpac, the US-based JP Morgan,scription funded but is now ad-financed and Dutch finance group Rabobank, and the UK’sfree to consumers. It can also be accessed via Lloyd Banking Group.the PlayStation 3 video-games console and Additionally, Goldman Sachs has some debt-digital-mobile devices. related interests in MediaWorks, which owes Advertising, licensing, merchandising and NZ$43m to the New Zealand government. Theother commercial activities account for about government made the loan to help Media-90% of TVNZ’ funding; the remainder is sup- Works renew its radio licences until 2031.plied by the government. Analysts fear the creditors might choose to TVNZ’ net profit soared to NZ$14.1m in the take control of MediaWorks unless its financialyear ending 30 June 2012, from NZ$2.1m the stability improves. 19
  • 20. REPORT MediaWorks has attempted to stem the In addition, the bouquet of Sky Sport net-economic hurt to its traditional media proper- works has cornered live transmissions ofties by diversifying. In 2011, it launched a deal English Premier League soccer games, New-of-the-day e-commerce website called Cudo Zealand national golf, tennis, hockey andNew Zealand. This is a joint venture with Cudo basketball games, plus Indian Premier LeagueAustralia, itself a joint venture owned by cricket taking place in New Zealand. Sky Sport Microsoft and the struggling Nine Entertain- 3 carries Sky Sport News and Australia’s Foxment Company. By mid-2012, however, Cudo Sports News, which is part of Premier MediaNew Zealand was reporting losses, New Zea- Group, a News Corp joint employees were laid off and the site’s With iSky, the online TV and movie stream-operations took place from Australia. ing service free to all Sky TV customers, view- However, some debt restructuring has taken ers are increasingly gaining access to foreignplace and MediaWorks’ debts are now with shows shortly after they have aired in theirthree private-equity firms: Ironbridge, TPG home markets.and, the newest entrant, US-based OaktreeCapital Management, which happens to be Pay-TV: Quickflixrestructuring its investment terms with Nine Despite the financial struggles of the mediaEntertainment. companies serving a small market like New Despite its financial woes, MediaWorks Zealand, Quickflix believes there is alwayscharges ahead with its commercial duties to room for more competition.provide audience-grabbing entertainment. TV3 Quickflix’ entered the New Zealand markethas clinched the rights to broadcast the first last March but its prospects in New Zealandlocalised version of The X Factor, the popular rely on the fate of the parent company ininternational reality-TV singing contest. It goes Australia. Quickflix is Australia’s answer toon air in 2013. Until now, New Zealand Netflix, the pioneering US online DVD rentalviewers watched only the US and Australian and streaming-TV and movies platform. Iteditions of The X Factor. originally launched in 2003 and was listed on the Australian Stock Exchange (ASX) twoPay-TV: Sky years later. It has licensed more than 55,000Sky TV is in 50% of New Zealand TV homes. film and TV titles. It reported a A$14m loss forIt is the country’s largest pay-TV platform. It the fiscal year ending 30 June 2012.carries more than 100 channels and had about Recent media rumours stated that US-based847,000 subscribers by the middle of 2012. As HBO, the Time Warner cable-deliveredwell as its subscription revenues, it generates subscription-TV giant, wanted its A$10m loanadvertising income, which brought in back. Quickflix has denied the HBO rumour. ItNZ$62.7m in the year to 30 June 2012. did not help, however, when trading on the By law, Sky has to carry the country’s free-to- ASX was suspended in November after theair networks. It also offers a live mobile-TV company apparently could not verify the pro-service via 3G signals or mobile apps. portion of its 129,000-plus subscribers paying Sky TV, controlled by Rupert Murdoch’s for the service. There have been job cuts andNews Corp conglomerate, has used its own- senior executives have resigned.ers’ financial clout to snap up the most popular But rescue arrived in December when US-sports events. The 2012 London Olympic based investment firm BluePrint PartnersGames, transmitted on Sky TV, were the first committed A$5m in funding. BluePrint isnot to be broadcast on TVNZ. Sky also has fronted by billionaire Greek shipping heir andthe rights to the popular Commonwealth digital-media entrepreneur Alki David.Games competition. The number of Quickflix’ Kiwi subscribers Inevitably competitors have complained has not been disclosed. The number of pro-about this stranglehold as Sky TV was also grammes and films licensed for the Newallowed to buy terrestrial free-to-air channel Zealand market also remains unknown. How-Prime for NZ$30m in 2005. It uses it to broad- ever, the company is chasing more investmentcast delayed footage of the most popular to grow the DVD and streaming subscriptionshows on Sky, especially of sports events. numbers in New Zealand and Australia. Between them, the three Sky Sport channelshave the live rights to domestic professional Advertisingrugby union’s ITM Cup games, the Super Rug- New Zealand’s Advertising Standards Authori-by international games with Australia and New ty (ASA) calculated that advertising spendZealand, plus the home and away games by reached NZ$2.18bn in 2011, a NZ$42mthe national All Blacks rugby team, and games increase from 2010. Although the increase isfeaturing the national cricket team. slight, it represented a positive picture 20
  • 21. REPORTconsidering the NZ$250m slump between 2011, WPP’s public relations company Burson2008 and 2009. -Marsteller appointed Auckland-based Profes- Television accounted for the biggest single sional Public Relations New Zealand as itsshare at 28.4%, followed by newspapers official local affiliate.(26.7%), which however continued to BC2G, formed in 2010 by the merger of localdecrease in revenues, from NZ$627m to agency Blackwood Communications GroupNZ$582m. Digital advertising reported the and the local arm of WPP’s Grey ad agency, isfastest growth, to NZ$328m from NZ$257m. a fully integrated agency. Other WPP subsidi- It also means digital advertising has pushed aries in New Zealand include ad agenciesradio advertising into fourth place with an 11% JWT, Grey, research firm Millward Brown,share of ad spend, followed by magazines media-investment agencies Mediacom and(9.6%) and outdoor (3.8%). Yet, digital repre- MEC, consumer-research operation Idea-sents only 15% of total ad spend. Works, and branding agency DesignWorks. Experts estimate that total advertising spend Publicis, on the other hand, decided to shutwill grow at an average rate of 6% in the next down its Publicis Mojo agency. Graeme Wills,five years. The catalyst for growth will be CEO/chairman of Publicis Mojo Australia/Newdigital interactive media via the Internet, Zealand is launching a new venture calledmobile devices and connected TV. Joy. Publicis still owns Saatchi & Saatchi NZ Advertisers’ expenditure on TV, newspapers, in Auckland. M&C Saatchi, launched byprint and radio will continue to decline. But the Saatchi & Saatchi’s original founders, also hasdeceleration will not be as quick as the growth a branch in Auckland.rate of digital media. The decline will take IPG, the fourth major multinational advertis-place more slowly compared to other major ing group, got a boost in December wheneconomies. Draftfcb Auckland was acknowledged by New Zealand’s small size means the old Kenexa Best Workplaces survey as one of theways of consuming media decrease slowly best places to work in the country. Draftfcbbecause the competition does not get the time has also won praise for the SPCA (Royal Newto become too heated to cause radical disrup- Zealand Society for the Prevention of Crueltytions rapidly. to Animals) campaign, which involved teach- ing real-life rescue dogs to drive the MINIThe agencies Countryman car for the commercial.The Big Four advertising conglomerates (UK-based WPP, US-based Omnicom Media Filmed entertainmentGroup, France’s Publicis Group and the US’ New Zealand’s reputation as a hub forInterpublic Group of Companies) have inter- filmmaking and post-production is among theests in New Zealand. best globally. Compared to Hollywood, Omnicom’s OMD New Zealand is considered Bollywood and the growing Chinese filmmak-the country’s largest media agency. Omni- ing industry, the size of New Zealand’s movie-com’s DDB Australia/New Zealand was hailed making business is minuscule. But, addingCreative Agency of the Year at the 2012 US$4.2bn-plus to the national economy inawards for the Campaign Asia Pacific and 2011 is no mean achievement. It representedGreater China Agency of the Year. a 4% jump from 2010. DDB New Zealand was voted the world’s Size, however, is all relative. As the Guardianleading ad agency in 2011. The ranking is newspaper noted, Hollywood contributed morebased on the annual Bestads Rankings, which than US$40bn to the much larger US econo-examine the standard of the agencies’ creative my. Yet, New Zealand has been home to thework worldwide. Omnicom’s other award production of international blockbusters suchwinners from New Zealand include digital as The Last Samurai; Once Were Warriors;agency RAPP Tribal, Colenso BBDO (New X-Men Origin: Wolverine; The Chronicles ofZealand agency of the year). Whybin/TBWA/ Narnia: The Lion, The Witch and the Ward-Digital Arts Network created the much lauded robe; and the Oscar-winning Lord of the RingsTourism New Zealand campaign, using The trilogy and Avatar.Middle-Earth theme and content from The Director Sir Peter Jackson also directed andHobbit, the blockbuster fantasy movie co-produced the first of The Hobbit trilogy, thereleased globally in December. Lord of the Rings’ prequel, in New Zealand. WPP continues to expand. Subsidiary Ogilvy The country’s determination to hold on to itsNew Zealand recently launched a local office reputation as a reliable source of filmmakingfor OgilvyAction, the ad agency’s shopper- facilities could be seen when the governmentmarketing and retail-activation division, which went out of its way to quell setbacks thataims to boost consumer purchasing. In July threatened to derail the shoot. 21
  • 22. REPORT It overturned legislation that would have The commission is allocated about NZ$8m aallowed union members to boycott the produc- year to co-fund up to five feature films. Totion, a setback that would have forced Holly- qualify, each movie must have a budget of atwood studio Warner Brothers, production least NZ$1m or NZ$5m at the New Line and Jackson to consider For co-productions, at least the writer ortaking the production elsewhere, such as director must be a Kiwi. And if, for example,Eastern Europe. The government also agreed 50% of the budget is to be spent in New Zea-to offer financial assistance to the production. land, then at least 50% of the crew and the While the legislative move has been criticised key creative personnel must be Newinternationally, New Zealand had much to lose Zealanders. The commission also likes to seeif the strike had disrupted The Hobbit’s filming. some kind of collateral in the form of advance The international success of The Lord of the sales to distributors or guaranteed distributionRings had triggered a massive tourism busi- from them.ness for the country. With tourism being a key For its Large Budget Screen Productionrevenue source, The Hobbit’s potential Grant, the commission offers 15% of thesuccess would have ensured continuity of production’s qualifying expenditure, whichattracting overseas visitors. Not filming it in must be at least NZ$15m for a feature film,New Zealand did not seem to be an option. and at least NZ$500,000 per commercial The move has paid off. The Hobbit: An episode of a TV series. There is also a grantUnexpected Journey was released globally in for Post, Digital and Visual Effects. All facilitiesDecember 2012 to both critical acclaim and and locations must be in New success. From a budget of about NZ On Air has access to an annual budget ofUS$150m, the first of the Hobbit trilogy pulled NZ$80m to invest in TV shows that reflect thein nearly US$700m in box-office receipts less local culture, including Maori traditions andthan a month after its release. The Hobbit also language. If NZ On Air provides more thanmade cinematic history as the first movie to be NZ$200,000 to the production budget, it is en-shot in 48 frames per second, as opposed to titled to a share of the profits. Every month,the standard 24 frames per second. This is the agency’s decision and the amount award-said to give the image quality a higher resolu- ed are published on its website. Kids’ pro-tion. grammes and programmes of “special inter- New Zealand’s cinema chains can expect ests” are among the most successful genres.competition against the growing number ofmobile screens in the form of smartphones Gamesand tablets. But the average number of admis- Like other small countries, such as Finland,sions per year is expected to stay about 16 New Zealand’s creative industries have had tomillion annually for the next few years. be productive exporters of their talent. And the games sector in both countries has used theFilm: government funds more cost-effective Internet as a platform toThe New Zealand Film Commission and its TV sell and distribute social and mobile games-broadcast (plus music and radio) counterpart globally. The New Zealand Game DevelopersNZ On Air provide most of the funding for Association calculated that the nation’s gamesindigenous productions, as private funding is sector almost doubled in size in the two yearsextremely rare. to 31 March 2012. In the last year alone, New For example, NZ On Air is co-funding The X Zealand developers released 73 games.Factor NZ, the local version of the internation- What was noteworthy was that the majority ofal reality-TV music contest, which is going to the games were for online or (iOS and An-New Zealand for the first time. droid) smartphone consumption. The two agencies work with the Ministry of Because of the low distribution cost of usingBusiness, Innovation and Employment, the the Internet, as opposed to physical consoles,Ministry of Culture and Heritage, and the the profit margins are decent. Most (99%) ofMinistry of Foreign Affairs and Trade. They are the revenues came from exports to Europeregulated by the Broadcasting Act. and the US. Their mission is to provide financial support Recent figures from the Interactive Games &to film development and productions to en- Entertainment Association (iGEA) show thatcourage local producers to make their films sales from New Zealand generatedand TV programmes at home. Another objec- NZ$179.6m in the 2011 calendar year com-tive is to attract foreign producers to use New pared to NZ$158m in 2010. An estimated 13%Zealand’s facilities either on their own or as co of the revenues are from royalties. The iGEA-production partners. In co-productions, the quotes the forecasts of global consultancyfinance is for the New Zealand elements. group PwC, which state that revenues from 22
  • 23. REPORTmobile games alone will yield NZ$99m in The three major multinational labels2015, with NZ$13m coming from online (Universal Music Group, now including EMIgames. Revenues from console/handheld Music; Sony Music Entertainment; and Warnergames will grow at a slower rate to NZ$56m Music Group) have interests in the Newthat same year. Zealand market. Among the leading local developers are Among last year’s best-selling local actsPikPok, which had a hit with the mobile game were rock band Six60, the female singer GinFlick Kick Football, while Rocket Jump is Wigmore, singer-songwriter Kimbra, folk bandfamous for its Major Mayhem title. Bloons Avalanche City and country-music singerTower Defence by NinjaKiwi is very popular. Dennis Marsh. Emerging acts making an Other the major players are Sidhe, the impression in the industry include cross-overcountry’s leading games studio, which owns jazz saxophonist Nathan Haines and rockPikPok. The games-based kids’ virtual world band Heavy Metal Ninjas.BigLittleBang is by another major studio The sector is supported by two high-profilePodscape Holdings. music-industry awards: the Vodafone New Zealand Music Awards and the NationalMusic Waiata Maori Music Awards. The artists toThe recorded-music in New Zealand has walk away with the most gongs at the 2012suffered in the last decade, following a trail left Vodafone event were Six60 and the declining global sector. In a report by Te Awanui Reeder, a singer-songwriter withthe New Zealand Music Industry Commission, an international following, snapped up awardsmusic sales generated NZ$71.6m in 2011 for the most Waiata categories, including Bestfrom NZ$72.9m in 2010. Only a decade earli- Maori Male Solo Artist and Best Song By Aer, sales reached NZ$120.8m in 2003. Maori Artist. Songstress Kirsten Te Rito Like most developed countries, CD sales walked away with the Best Maori Female Solohave been blighted by the increasingly univer- Artist award.sal digital music. However, the latter has notgenerated enough sales to make up for the Out-of-home entertainmentloss incurred by physical recordings. The num- New Zealand’s largest stadium is the Auck-ber of dedicated brick-and-mortar music stores land-based 55,000-capacity Eden Park. Thehas shrunk by almost 90% during the past tenants are the Auckland Blues professionalcouple of decades. rugby team. The 39,000-capacity AMI Stadium Moreover, online piracy continues to harm in Christchurch would have been the secondthe business with the free offerings made on biggest. It is currently closed having beenillegal music websites. A whole generation has severely damaged by the Christchurch earth-grown up believing it is entitled to free music if quake in is on the Internet. The third biggest stadium is Wellington- However, the anti-piracy legislation intro- based Westpac Stadium. It has a capacity ofduced in 2011 and discussed in the section on 37,500 and is home to the Hurricanes rugbyCopyright below, appears to be having some union team and the Wellington Phoenixpositive effect. Football Club. According to the commission, digital and Among the most popular music venues arephysical album sales by New Zealand acts Bar Bodega in Wellington, Westpac Stadium,grew by 16% to 72,805 units in the first quarter the 47,000-capacity Mount Smart stadium inof 2012 compared to the first quarter in 2011, Auckland suburb of Penrose, and Wellington-while album sales by all artists grew by 52% based TSB Bank Arena. New Zealand re-during the same period. Sales of physical and mains an essential stop for international actsdigital singles by New Zealand acts grew by embarking on world tours. In 2013, Live27% in the first quarter of 2012, and by 53% Nation, the world’s biggest concert promoter,for all artists. will have UK comedian Alan Davies at the The number of digital-music stores serving Auckland Town Hall and the Opera HouseNew Zealand is growing. For online down- Wellington; US comedy duo Wayans Brothersloads, the commission mentions iTunes, at the Bruce Mason Centre in Auckland; theVodafone, Telecom, Digirama, The Ware- Red Hot Chili Peppers, Linkin Park and Blackhouse, Mighty Ape and Amplifier; Real Groovy Sabbath at the 12,000-capacity Vector Arenaand Rough Peel Music are among those sell- in Auckland; plus rock band The Waterboys ating physical CDs and DVDs online. The free- the Civic Theatre in Auckland.mium-funded streaming-music sector has For leisure, the country’s biggest theme parkentered New Zealand courtesy of Spotify, is Rainbow’s End. The owner and operator iswhich launched the local service in May 2012. New Zealand Experience (NZE). 23
  • 24. REPORT But theme-park operations are capital- income they are entitled to. In New Zealand,intensive with narrow profit margins and NZE the 2011 Copyright (Infringement File Sharing)is continually investing in new attractions and Amendment law enables rights holders toentertainment at the 30-year-old park. issue three warnings against illegal download- The company has invested NZ$3.7m in a ers via Internet service providers. If thenew children’s entertainment area called Kidz unauthorised downloading persists, the rightKingdom. It is being built in phases and the holders can request that the Copyrightfirst phase opened in December 2012. NZE’s Tribunal impose penalties, which can be finesbusiness is steady and the company generat- of up to NZ$15,000. Ultimately, serial illegaled NZ$11.6m in revenues in 2011. It is report- downloaders or online pirates can have theired to be expecting 2012 profits to reach at accounts suspended for up to six months.least NZ$1.4m. However, extra capital is Anecdotal evidence indicates the amendedneeded to expand the in-house leisure and law has had some effect and copyright in-hospitality services, such as restaurants and fringement via the illegal downloading ofretail outlets. Financial pressure has reported- music, movies and TV programmes hasly prompted Canada-based Garlow Manage- declined. As Internet speeds increase, thement, NZE’s largest shareholder, to find a buy- penetration of mobile Internet grows and inter-er for its 74.86% stake. Wellington-based national laws about consumer privacy remainRangatira has made a NZ$10m takeover bid complicated, the effectiveness of the “three-for Garlow’s share. strikes” regime in the long term remains to be seen. An additional challenge would be to seeSport for how long rights owners would be willing toOn an international level, the Kiwis excel at pay NZ$25 every time they want to file a com-rugby, cricket and netball, all of which are na- plaint against an illegal downloader and issuetional pastimes. a warning. The local law was certainly tested The Rugby World Cup competition was held by Kim Dotcom, a German-born resident andin New Zealand last year and, according to the owner of Megaupload, a giant file-sharingsports minister Murray McCully, the event add- website. He is at the centre of a highly contro-ed NZ$573m to the national economy and cre- versial copyright-infringement legal dispute inated more than 7,800 part-time and full-time New Zealand. Megaupload was shut down injobs. About 133,000 tourists came to the January last year. Anti-piracy organisationscountry because of the World Cup, significant- say it encouraged online infringement and hasly more than the 85,000 tourists predicted. lost copyright owners more than US$500m in The All Blacks are the men’s national Rugby revenues. The website’s closure follows a raidUnion team. Not only is the All Blacks team on Dotcom’s mansion and offices near Auck-the current Rugby World Cup champion, it is land. The raid was held by law-enforcementconsidered the world’s best in the game’s his- authorities on behalf of the US government fortory; it is the only team to have defeated every two reasons.nation it has ever played. The website had been the target of US anti- The Black Caps, the men’s national cricket piracy officials because it is also a cyberlockerteam, is highly respected worldwide. But the that enabled users to store away their illegallyteam has not won any significant international gained music, films, TV shows and other con-competition in more than five years. The White tent. US law applied because the website’sFerns, the women’s national team, has servers were being hosted on US soil.reached the World Cup finals four times, and Dotcom and some colleagues were arrested,won the 2000 edition. The success of the Sil- and he is now free on bail. But the case is get-ver Ferns, the national netball team, has made ting complex, as with most international copy-netball one of the country’s most popular sport right-infringement legal disputes. Theseevents and activities. developments have given Kim Dotcom time to set up another file-sharing website calledCopyright Mega via This time, heNew Zealand made history when it became plans to give all Mega account holders thethe first country to clamp down on online technology to encrypt their own files, mediapiracy with the “three-strikes” law advocated reports say. Each Mega customer will, there-by copyright owners. fore, be responsible for his or her online activi- The “three-strikes” legislation is actually a ties via the website. This should, allegedly,graduated-response initiative designed to prevent legal authorities from using the com-discourage illegal downloading or file-sharing pany to gain access to the customers’ legalof content, which deprives rights owners of and illegal files. The website also features an audacious request for investors. 24
  • 25. FEATURE Ridley Scott Associates: THE Q&A SESSIONS The UK production powerhouse co-founded by and named after the Hollywood filmmaker has worked with the who’’s who in global entertainment and brands, including Daniel Craig, Lady Gaga, Kathryn Bigelow, BMW and Sony. London-based head of sales Damiano Vukotic discusses filmmaking’’s future in digital mediaRidley Scott Associates (RSA) is can football’s Super Bowl, the US’renowned for breaking boundaries that biggest TV sport event, that year andseparate the different video entertain- demonstrated the impact the event’sment-and-media genres. From music TV coverage could have on brand expo-videos, corporate videos, animation, TV sure. It was hailed “commercial of theseries, TV commercials to shorts, trailers decade” by the US’ Advertising Age.and movies, RSA has become a global Today, RSA’s offices for its differentproduction hub thanks to its radical and divisions (RSA Films, RSA Animation,adventurous body of work. Little Minx, Black Dog Films and Scott Now, the company that has worked Free Film & TV) can be found in thewith the who’s who in media and enter- London headquarters, New York, Lostainment, from superstars such as Angeles, and Hong Kong.James Bond’s Daniel Craig, maverick The stable of high-profile directorssongstress Lady Gaga, global brands like working with RSA include Sam Mendes,Sony and BMW to some of the hottest who is famous for helming Skyfall, thedirectors, is using digital media to cross latest James Bond outing, plus Oscarmore frontiers in the art of storytelling. winner American Beauty and the highly Co-founded by multi-award winning acclaimed Road to Perdition; Kathrynand Oscar-nominated British director Bigelow (known for Oscar-winning TheRidley Scott and his brother, the late Hurt Locker and the upcoming Zero DarkTony Scott, RSA kicked off in 1968 as a Thirty); and Andrew Dominik (for BradTV-commercials producer. Pitt’s recent starrer Killing Them Softly). Although the company and its roster of Among the global brands that havethe then emerging filmmakers, such as used RSA’s services are Sony; tyreAlan Parker and Hugh Hudson, became maker Pirelli; Bacardi’s blended Scotchfamous for making some captivating TV whisky Dewar; coffee capsule Nespres-commercials, it was Ridley Scott’s big- so; car manufacturers Audi, Lexus,budget 1984, the TV commercial for BMW; US TV network HBO and PhilipsApple’s first Macintosh computer, that Cinema. Lady Gaga’s techno-gothicshowed RSA was never going to be just video by US fashion photographerany production house. Steven Klein for her Fame fragrance, Filmed in the year 1984 for US adver- and the Baillie Walsh-directed Mouse &tising agency Chiat/Day and influenced Cat commercial promoting the Sonyby George Orwell’s classic novel Nine- devices used in Skyfall had blogospheresteen Eighty-Four, it is considered by tweeting via Facebook.many to be the first TV spot that At the London office, Damiano Vukoticconfirmed TV commercials could be just is head of sales at the company’sas artistically captivating as any commercial division, RSA Films. He iseloquent blockbuster movie. responsible for promoting the company’s It premiered, officially, during Ameri- directors to traditional, digital 25
  • 26. FEATUREand media agencies in the UK, Europe, Vukotic: The only difference is they areand the now growing economies of coming out of film schools more multi-Africa, the Middle East and India. Over- skilled and producing and directingseas production companies also content themselves from conception toapproach Vukotic for access to the online edit because of the advancementdirecting talent RSA represents. of technology. Filmmakers can shoot It is Vukotic’s mission to keep works themselves, then edit, sound mix andcreated by RSA directors relevant, grade on a laptop computer. But in thewhether it is for social media or mobile end they’ll strive to work at the highestplatforms, the TV screen or the cinema. professional level of the industry, which At a time when demand for original means you still need the skills of experi-artistic and technology creativity has enced and talented cast and crew andnever been higher, but recession-hit that still costs exactly the same tobudgets are constantly being cut, produce as before whether it ends up asVukotic talks about multi-tasking direc- web video online, on mobile or the TVtors, the monetisation of video, the screen. What is interesting is what willgamification of audience measurement, happen once there’s an acceptance ofthe digitisation of product placement the seamlessness between mobile,and explains why you need to be natu- tablet and large widescreen. At therally gifted to thrive in the creative moment, it’s still early days and theresectors today. are still clear definitions between the various media channels. The BBC’sMTF: What are the challenges facing iPlayer in the UK, Netflix and Hulu in thetoday’s directors? States are examples of that change.Vukotic: Nowadays, to be a busy MTF: What is the ultimate goal ofsuccessful director, you have to be any director?able to work across all mediums. Youmight specialise in music videos or Vukotic: As I said before, to tell biggercommercials, but it’s now much easier to stories, but it depends on what theircross over into films, TV, corporates and goal is, whether they’re a documentarydocumentaries. Directors need to be far filmmaker and want to inspire change inmore flexible than they used to be, the world, a movie director who wantspartly because of constrained budgets, to entertain the world or a commercialpartly because of how competitive it is director who has the skills to tell a story,out there. Also, we’re coming to a point visually or through dialogue, within 30with technology, such as the 5D Canon seconds.(SLR) digital camera, which is blendingthe visual mediums. Photographers now MTF: Is there a price to pay for thehave to be able to direct film as well as easy access to technology?have to take stills; we have more andmore photographers coming to us The barrier to entry to making, produc-asking us to represent them in the ing, finding and watching film content ismoving image. Think about it. If you are easy now so the value of film, videoshooting a TV-and-print campaign, why content has been devalued. There arenot have a photographer/director shoot 72 hours of video content uploaded tothe stills and video? It’s more cost- YouTube every minute. It’s so accessibleeffective for the brand and the agency. nowadays that we take it all for granted.With the advancement in new technolo-gies, in some cases, the filming process MTF: Is this affecting the way theis becoming much quicker and easier to commercial-video profession doesmake but brands and agencies have to its job?realise it still costs the same to produce. Vukotic: We’re in an environmentMTF: What impact is the new where there’s so much choice. But it’sgeneration of directors bringing to still relative. If you’re a talentedthe way production houses work? filmmaker and make great pieces of 26
  • 27. FEATUREcontent, your work will rise to the top. One day, hopefully, you’ll be able toBut nowadays, you’re up against some watch something funded by a brand thatmany different forms of entertainment you want to watch, with commercialsseeking your attention. Social networks, either end of the content (but not in thecomputer games, online games, blogs, middle interrupting it) or embeddedinternet TV, radio, whatever else, contextually into the content. Commer-there’s so much more competition for cials are considered essential for payingyour attention. The explosion of choice for the content but I think they break upmeans the value in this content is much the (narrative’s flow). My idea is thatless but so much more accessible and you will one day watch a TV serieseverything is linked. Creatives and TV simultaneously on your tablet and TVproducers in ad agencies used to sit screen. You will be able to click on thedown and watch big U-matic tapes and products within the programme on yourmake a concerted effort to watch a tablet screen without interrupting thedirector’s work. Nowadays, they just same content playing on your big TVclick a link on their computer so the role screen. Through the action of clickingof presenting director’s work has dimin- the tablet screen, brands will instantlyished somewhat. Also, with the changing know when, where, why you’ve clickednature of our consumption of media, in on a product. Through this advancedmany ways, we’re all multi-taskers. form of measurement, brands will know precisely how people were watching andMTF: So where is the value then? interacting with the content, and hope- fully this could lead to some form reve-Vukotic: The content creators, the nue share model with the filmmakers.directors and producers are the value inthis business. The Joss Whedons, the JJ MTF: What new video technologyAbrams, the Ridley Scotts. has impressed you?MTF: Who owns the created work? Vukotic: MirriAd: Once a piece of TV content, say a soap opera episode isVukotic: On the commercial, brand con- shot, a branded product can be digitallytent side of the business, we don’t own inserted into any scene - product place-any of the content we direct and pro- ment in a more contextual way. I’mduce. We’re employed by agencies and constantly looking for new ways for thethe clients to produce. They pay for the directors to tell their stories that peopleintellectual property, so they own it. Our want to watch and be but are funded bydirectors wrote and directed the stories brands. Although it’s not easy trying toto all the Philips Cinema (Parallel Lines) persuade the brands and the agencies toseries of short films and the rights to do something novel, it is enjoyablethose are with Philips. But, in this case, showing them, trying to inspire them tothe ideas, the characters are still owned consider a new idea, a new process, or aby the directors. That is rare but there’s new technology. The 30-second TV adnew revenue-share models coming to model still works extremely well but it’scontent creators. always good to be open to and aware of new ideas. New ideas, new models areMTF: How is the director’s talent re- the lifeblood of our business.warded in this fragmented medialandscape? MTF: At what point in the future will media and technology provide thatVukotic: I’m very interested in new ideal scenario for you?revenue models to finance original filmcontent. I’m all for any new technology Vukotic: Once mobile and Internetthat puts brands contextually and penetration reaches saturation, andunobtrusively into content. Also, in the we’re at a point where we have super-long run, that hopefully allows for more fast seamless wireless connection world-creative ownership for the filmmaker wide on our mobiles, on all our connect-and producer. ed devices, hopefully there will come a 27
  • 28. FEATUREtime where worldwide brands will spon- and new media and can sometimessor the worldwide release of films, TV favourably or adversely affect our TVseries, music videos premiering through commercial production budgets.the net. I’m hoping and working towardsa world where there’s the multi-brand MTF: What do you think of the mo-financing of film content, whether bile platform?through sponsorship, pre-roll advertis-ing, the clickable measurement model or Vukotic: Without question, mobile isall three. There’s a place for them all. becoming the most influential screen in our lives. It is and will be the primaryMTF: How has the recent recession window that connects everyone withinfluenced brand owners’ crea- everything. It will be interesting to seetive and marketing strategies? how film advertising, film stories adapt to it and how it interacts with other in-Vukotic: You now have a lot of compet- teractive forms of brand engagement,ing channels, traditional and new online for example, brands interacting with TVchannels for the media-advertising busi- shows through games on mobile as wellness. Whether it is social media, other as clickable media, TV or cinema advertising,mobile advertising, in-game advertising, MTF: Is video production a businessexperiential advertising, there is a lot that would appeal to private inves-more choice now in what you can do to tors?promote brands. Agencies and brandsare realising that they can, as well as Vukotic: Yes, definitely. There are soproduce the traditional advertising, also many opportunities now to create com-experiment across all these new chan- pelling entertaining content and thenels to target particular demographics challenge is to marry traditional story-as well as interlink campaigns. Because telling with new tech in some way orof this fragmentation of media channels, other. That’s the exciting challenge, de-creative and marketing spend is now veloping those opportunities. It’s an in-split across many different forms of old credible business to be in and there are exciting times ahead. MTF PROMOTION JKM JayKay Media Inc ( Subscribe - MediaTainment Finance Commission - Photography-Design Buy - Stock Images Contact: 28
  • 29. FEATURE THE CREATIVE CORPORATE PROFILE Bertelsmann, Germany/GlobalBertelsmann is one company that will never assets. The RTL Group subsidiary is one of thetire of hearing about Fifty Shades of Grey, world’s most successful TV ventures. Despitethe soft-core erotica written by a hitherto un- the global advertising slump, the print-mediaknown UK author and is now a best-selling subsidiary Gruner+Jahr (G+J) remains a Euro-phenomenon said to have revolutionised pean market leader. Arvato, a business-to-e-reading trends. business subsidiary that offers technology, Bertelsmann, Europe’s biggest media con- e-commerce distribution and logistics servicesglomerate, owns Random House, the world’s to corporate clients, remains competitive.largest consumer-books publisher. VintageBooks, an imprint of KnopfDoubleday Publishng Content is the catalystGroup, a Random House subsidiary, bought the However, as part of its ambition to be at therights to the Fifty Shades trilogy after the title centre of the still evolving digital maelstrom,had become an e-book bestseller. Bertelsmann made the audacious move in The “mommy porn” reputation of a book with its October to merge Random House with UK rivalBDSM (bondage, discipline, sado-masochism) Penguin Books.theme published by via small Australian firm had This is not a contradiction. Bertelsmann main-gone viral in 2011 and word-of-mouth spurred tains the on-going premise that whoever ownssales up the New York Times’ fiction e-books the quality content will win the digital race.chart (MTF Issue No.7 Books). Should regulators approve the merger, which is Ever since Vintage snapped up the print and expected to be completed in the second half ofe-book publishing rights last year, the title has next year, the enlarged entity will be calledsold more than 40 million copies in the US and Penguin Random House.65 million-plus worldwide. Bertelsmann will control 53% and UK-based Random House will benefit further from the Pearson, Penguin’s owner, will own the rest.US$5m that Hollywood studio Universal Pictures The move is expected to give Penguin Randomhas paid for the movie rights. House 25% of the global consumer-books sales. A jubilant Random House, which is headquar- And Penguin Random House wants its books ontered in New York, celebrated these winnings by the fast growing market of e-readers, the e-bookrewarding every one of its US staff a bonus of devices, and computer tablets.US$5,000 each at the end of this year. Traditional publishers have been watching new players like, the online retailer,The E factor slash their profit margins by selling e-books atIt says a great deal about the current state of the very low book-publishing business that it In fact, it is the major publishers like Randomtook the e-book format and a soft-porn theme to House and Penguin that having been playinggive the mighty but very traditional publishing catch-up while Amazon, its e-book rivals and thecompany like Random House the fastest selling rapidly developing online self-publishing marketpaperback book of all time. eat into their business. It also says a lot about Random House’s owner Despite being the newcomer, Amazon has feltBertelsmann, a German operation based in the comfortable enough to start its own book-small city of Gutersloh. It is more than 177 years publishing business as well. Instead of respond-old, its English-language slogan “creativity ing by taking over e-book stores, Bertelsmannmeets entrepreneurship” does not roll off the strategy appears to be own well-written bookstongue easily, and its top management admit and the potential creative offshoots. The digitalthe company lags behind multinational rivals in business will follow.its digital transformation. However, it is hard to fault the efficiently organ- Bertelsmann the corporationised family-controlled media-and-entertainment More than 77% of Bertelsmann belongs to thegroup’s creative and entrepreneurial acumen. Bertelsmann Foundation, a not-for-profit It continues to be profitable with its ‘old-media’ enterprise founded by the late Reinhard Mohn 29
  • 30. FEATUREto oversee the family-owned publishing venture Joseph Conrad, Edmund White, Bret Eatonthat has become one of the world’s largest Ellis, James Ellroy, Anne Frank, Toni Morrison,media groups. The Mohn family own the remain- Joan Didion and Cormac McCarthy. Randoming 22.6%. Liz Mohn, Reinhard’s widow, and House’s other imprints include establishedother family members sit on the boards of the international brand names like Vintage, Bantam,foundation and the company. Chatto & Windus, Pantheon Books, and Nickel- The group CEO is Thomas Rabe, who odeon Books.replaced Hartmut Ostrowski in January this year. Internationally, it continues to boost its contentIn January 2013, Christoph Mohn, Liz Mohn’s base. This year, it acquired the 50% it does notson, will be the new chairman of the Bertels- own of Random House Mondadori, a Spanish-mann supervisory board. language joint venture targeting the Spanish The company they manage appears to be and Latin American markets plus Spanish-healthy financially. Revenues grew to €15.3bn in speaking US.the 2011 financial year, from €15.1bn the yearbefore. Operating income fell slightly to €2.2bn Televisionfrom €2.4bn during the same period, but that Bertelsmann has been encouraging its differentwas attributed to robust investments. key divisions to collaborate more often. In July, In the nine months to 30 September, the FremantleMedia, part of Bertelsmann’s TVgroup’s revenues jumped 5.7% to €11.4bn, from empire RTL Group and one of the world’s most€10.8bn during the nine months in 2010. And prolific TV-entertainment production groups,group profit rose to €528m in the first three agreed to develop scripted shows based onquarters of 2012 from €377m last year. The Random House fiction and non-fiction titlesamount spent on investments fell €447m from worldwide. This will create another income€577m during the same period. source from whichever digital platform the The gap between the amounts invested in the resulting content is distributed on.whole of 2012 and last year might diminish once The RTL Group is majority owned by Bertels-the Random House/Penguin merger in October mann (92.3%) with the remainder listed on theis included. Luxembourg Stock Exchange. However, Fitch Ratings, the financial ratings It operates 54 TV channels and 29 radio sta-agency, predicts a healthy financial year by the tions in 10 European markets. The TV channelsend of 2012. This is attributed to the profits include Germany’s RTL, Super RTL and N-TV;brought to Random House by the Fifty Shades M6 in France; Spanish network Antena 3 plusboom, a steady TV business at the RTL Group, interests in Russian TV operator National Mediaand only a slight decline in the magazine- Group. In 2012, new cable and digital TV net-publishing subsidiary G+J. works were launched in Hungary, France and the Netherlands.Books Its prolific TV and content-production businessRandom House was one of the ‘Big Six’ book- includes FremantleMedia (with offices in the UK,publishing giants. Once its merger with Penguin, US, Spain, Belgium, France and Australia), UFAanother of the ‘Six’, comes into effect, there will Fernsehprodukton, Teamworx and Grundy UFAbe five book-publishing majors. The other four in Germany; Netherlands-based Blue Circle,are France’s Hachette Livre, a Lagardere Group plus UK-based Talkback, Thames and Retort.subsidiary; Macmillan Publishers Group, a Each key production country also operates andivision of Germany’s Holtzbrinck Publishing online and mobile sister company.Group; News Corp’s HarperCollins; plus CBS Among FremantleMedia’s globally famousCorporation’s Simon & Schuster. original and licensed TV productions are They face the same financial challenges American Idol and its overseas offshoots, theRandom House and other multi-national media GotTalent reality-TV franchises, The X Factor,groups have to contend with: diminishing profit Family Feud, The Price is Right, Neighbours,margins as the accelerating growth of digital and Wheel of Fortune. In total, it has more thanslows down gains to be from the established old- 300 TV programmes or formats on air, inmedia assets. production or in development in nearly 60 The Penguin-Random House union gives countries. And via FremantleMedia Enterprises,Bertelsmann unprecedented access to some of it licenses and sells 9,200 hours of its complet-the most revered authors in history. More than ed productions. It also sells licensed content60 Nobel Prize and Pulitzer Prize-winning from other rights owners to other TV networks,writers have been published by Random live events and digital platforms in more thanHouse’s Knopf Doubleday Publishing. Authors, 150 countries.ancient and modern, at Knopf have included In Canada, FremantleMedia owns a majorityRudyard Kipling, W Somerset Maugham, stake (51%) in Ludia, a video-games developer 30
  • 31. FEATUREand publisher that creates titles based on Today, Bertelsmann owns 74.9% of G+J whileFremantleMedia shows. Additionally, it has the family-owned Jahr Holding retains thebought 60% of, the US-based emainder. In October, the two partners agreedbranded-entertainment agency. to continue developing this operation. They In India, RTL Group embarked on its first chan- argue that maintaining its high-standard journal-nel outside Europe. In November, it formed a ism will keep the business a market leader injoint venture with Reliance Broadcast Network digital media.Ltd, the multi-media division of the Indian con- Bertelsmann’s belief that excellent journalismglomerate Reliance Group. standards should not be sacrificed in the digital Called BIG RTL Thrill, the joint venture is an domain was not dampened by the demise of theEnglish and Hindi-language action-packed TV Deutschland Financial Times (DFT).network aimed at young males. The German edition of the iconic UK-originated RTL Group revenues for the fiscal year ended but internationally distributed Financial Times30 December 2011 grow 4.2% to €5.8bn from was launched in 2000 as a joint venture of G+J€5.5bn in 2010. Profit shot up nearly 9% to and Pearson, owner of the Financial Times and€795m during the same period. Bertelsmann Penguin. In 2008, Pearson sold its DFT share toattributed RTL Group’s positive figures to robust G+J. But the global slump in advertising reve-business at FremantleMedia (12.3% growth in nues has also hurt Germany and, after making arevenues in 2011) and at Dutch TV network reported loss of more than €250m in 12 years,RTL Nederland. And in the first nine months of DFT was shut down in December.2012, RTL Group’s revenues rose 4% to €4.1bnfinancial figures, while earnings before interest Musicand taxation leapt 9.8% to €671m. Although music is not mentioned as being part There was a setback in Greece. Its current of Bertelsmann’s four core subsidiarieseconomic troubles prompted RTL Group to sell (Random House, RTL Group, Gruner + Jahrits 70% share in Alpha Media Group, which op- and Arvato), it remains a vital source of income.erates the Alpha TV channel, to the company’s BMG Management Rights is a joint ventureother shareholder Dimitris Contominas. with KKR, the US private-equity group. It is estimated to be the world’s fourth largest music-Print media publishing company after Universal MusicThe Hamburg headquartered Gruner+Jahr Publishing, Sony/ATV Music Publishing and(G+J) is arguably the weakest link in the Ber- Warner/Chappell Music.telsmann content chain. A significant portion of It is the legacy of Bertelsmann Music Groupits revenues continues to rely on the traditional (BMG), formerly one of the five ‘major’ multina-printing presses such as the US-based Brown tional music companies (with EMI Music,Printing and Prisma Presse in France. Universal Music, Sony Music Entertainment and Its most famous magazine titles include weekly Warner Music Group).news magazine Stern, Germany’s biggest After selling its 50% in Sony BMG Music Enter-women’s magazine Brigitte, the educational and tainment to Sony Music in 2006, and BMGfactual monthly Geo, celebrity magazine Gala Music Publishing to Universal Music Group,and the business title Capital. Bertelsmann retained or bought back some of Although Geo, Capital and Gala have some the music assets. With that, BMG Rightsforeign editions, and G+J has the franchise to Management was launched in 2008, and KKRpublish National Geographic magazine for came on board in 2009.Germany, France, Poland and the Netherlands, It then repositioned itself as a company thatit does not appear to be globally focused. manages artists’ music rights in both the record-Its interests in more than 30 countries are most- ed-music and publishing sectors. It would alsoly centred on the business of publishing and own, manage and administer the rights ofprinting the titles of third-party clients. acquired music-publishing firms, and the sound- G+J pulled out of the US magazine market in track portfolio of TV production companies.2005 when it sold its business, including maga- Among the international singer-songwriters,zines like Parents and Family Circle, to the US songwriters and singers on BMG Rights’ rostermedia company Meredith Corporation. are Bruno Mars, Bryan Ferry, Katherine Jenkins, According to its website, G+J generated Anastacia, and Burt Bacharach. In the global€2.29bn in revenues in the 2011 fiscal year. In- deal with Ferry announced in October, forevitably, the digital editions of the G+J-owned xample, BMG Rights will arrange the release ofprint titles are not core profit centres. But Ber- the star’s next three albums. Additionally, it willtelsmann obviously plans to hold on to the busi- publish most of the songs he has written in theness and gradually convert it into one fit for the past 40 age. Expansion in the music business continues. 31
  • 32. FEATUREBMG Rights bought the legendary Mute Ideas, the US digital- media agency mentionedRecords from UMG’s portfolio after UMG was earlier, the group operates the Bertelsmannforced by European regulators to sell some of Digital Media Investment (BDMI) funds to investits enlarged number of assets after it took over in online and mobile start-up companies in theEMI Music recently. US and Europe. Before the Mute acquisition, BMG Rights had This year, the Dutch TV channel RTL Neder-spent US$300m on buying Bug Holdings and its land bought Videostrip, an online-advertisingpublishing subsidiary Bug Music from US-based network that measures the performances of allSpectrum Equity and Crossroads Media. Bug ads sold on the channel’s digital platforms. TheMusic’s catalogue includes the copyrighted lessons learned here will be applicable to othermusic of Muddy Waters, Johnny Cash, and RTL channels.Kings of Leon, plus classic songs like Fever and In Germany, the FremantleMedia productionWhat a Wonderful World. subsidiary UFA is among the content producers The strategy appears to be paying off. By May launching original ‘channels’ on YouTube, thethis year, BMG Rights owned, managed or rep- video-sharing website.resented the publishing rights to more than 1 Bertelsmann now separates the revenues frommillion copyrighted works. Furthermore, its online advertising earned at its TV division RTLsongwriters had clinched 42 nominations, Group. They grew 23% in 2011. It also launchedincluding the Song of the Year, Album of the 125 mobile apps last year, which have beenYear, Record of the Year and Best New Artist downloaded more than 38 million times. Mobile-categories, for next year’s Grammy Awards. delivered live broadcast TV is available in five European countries, including Germany, FranceDigital strategy and the Netherlands.Last year, Bertelsmann bought UK/US-baseddigital-media agency Smashing Ideas to create Emerging marketsmulti-media multi-platform content, including Bertelsmann has been using its Bertelsmannimmersive and interactive mobile apps, based Asia Investment fund to invest in strategicallyon books by Random House and third-party selected digital companies specialising in socialclients. Although Random House and Penguin media, e-commerce, digital marketing and pub-have not made any significant entrée into the lishing in Asia-Pacific.e-books distribution business, they are already It is particularly active in China, where Bertels-familiar with digitisation. mann has had some presence for 20 years. Its Digital content is available via Podcasts for four main subsidiaries have more than 4,600their audiobooks subsidiaries, the apps accom- employees in China alone. In 2012, similar stra-panying some of their titles, the video games tegic centres were set up for India and Brazil,based on their books, and the downloadable two other major emerging markets. MTFe-books for reading on Apple’s iBookstore andiPad,’s Kindle e-readers,Rakuten’s Kobo, and Barnes & Noble’s Nook. PROMOTION Should it choose to go in that direction,Penguin Random House also has the founda- JKMtion to invest in its own e-reading and content-distribution platform. Via technology sistercompany, Arvato, it delivers content to Kobo’se-book store and e-reading devices in Germany, JayKayas well as Kobo apps to Google’s Android MediaMarket and Apple’s Appstore. Inc Yet, Bertelsmann has been rather conservative ( its digital strategy. Its digital content hasmostly promoted the media and entertainment Subscribe -created for traditional channels, like broadcast MediaTainment FinanceTV, print magazines and physical books. Commission - Via the RTL Interactive division, the RTL Photography-DesignGroup’s TV networks offer online video-on- Buy - Stock Imagesdemand services, catch-up TV for viewers whomissed the scheduled programmes. But then, Contact:so do most broadcasters. The company, however, has started its drive tomake digital media central to its strategy. Inaddition to last year’s acquisition of Smashing 32
  • 33. MTF DiaryGroningen: Eurosonic Noorderslag New York: Fashion Week Fall/Winter9-12 January 2013 2013@: De Oosterpoort, The Netherlands 7-14 February 2013Organised by: Stichting Noorderslag @: Lincoln Center, NYCAbout: Europe’s top showcase festival and Organised by: Council of Fashion Designersconference on European music industry’s of America; Mercedes-Benzemerging acts; a focus on Finnish music About: The US’ Grand Slam Fashion WeekDetails: Details: www.newyork.mbfashionweek.comHong Kong: Hong Kong Fashion Week Los Angeles: Annual Grammy Awards14-17 January 2013 10 February 2013@: Hong Kong Convention and @: Staples CenterExhibition Centre Organised by: National Academy ofOrganised by: HKTDC Recording Arts & SciencesAbout: Asia’s biggest fashion event About: 55 th edition of US’ biggest annualDetails: music event Details: www.grammy.orgLondon: London Art Fair16-20 January 2013 London: London Fashion Week@: Business Design Centre, N1 15-19 February 2013Organised by: Upper Street Events @: Somerset HouseAbout: About 100 galleries present 20 th cen- Organised by: British Fashion Counciltury and contemporary works of art About: The Autumn/Winter collection at oneDetails: of fashion’s Grand Slam events Details: City: 2013 Sundance Film Festival17-27 January 2013 Brasov: European Youth Olympic@: Park City Marriott Hotel, Utah Winter FestivalOrganised by: Sundance Institute 17-22 February 2013About: Seminal showcase of the best inde- @: Poiana Brasov Ski Resort and otherspendent movies by established and emerging Organised by: Association of Europeanfilmmakers Olympic CommitteesDetails: About: Europe’s key youth-sports spectacle for athletes 14-18 years oldCannes: Midem Details: www.eyowf2013.ro26-29 January 2013@: Palais des Festivals Milan: Fashion WeekOrganised by: Reed-MIDEM 19-26 February 2013About: Bringing together world’s musicians, @: Various venuestalent, technology experts and brand owners Organised by: Camera Nazionale della ModaDetails: Italiana About: Autumn/winter women’s collectionGeneva: The Rose D’Or Awards Details: www.cameramoda.it31 January 2013@: EBU headquarters, Switzerland California: TED2013Organised by: European Broadcasting Union 25 February-1 March 2013About: Call for entries for competition to @: Austin Convention Center; other venuesselect the best entertainment TV Organised by: Sapling Foundationprogrammes around the world About: Tech, Entertainment, Design collideDetails: www.rosed’ to celebrate the meeting of great minds and original thinkers at much coveted conferenceLondon: Techpitch 4.5 Details: www.ted.com6 February 2013@: Pinsent Masons, London EC2A 4ES Brussels: Global Marketer Week 2103Organised by: 2Pears 4-8 March 2013About: The tech-pitching contest du jour with @: Le Meridien Brussels, 1000 Bruxellesjudges of top entrepreneurs and investors Organised by: World Federation ofgiving go-getting start-ups no-nonsense prac- Advertiserstical advice about their concepts About: To celebrate the WFA’s 60 th birthdayDetails: 33 Details:
  • 34. MTF DiaryAustin, Texas: SXSW London: London Book Fair7-18 March 2013 15-17 April 2013@: Austin Convention Center; other venues @: Earls Court Exhibition CentreOrganised by: SXSW Inc Organised by: Reed ExhibitionsAbout: The world’s most talked about music About: Global event for book rights sales andand media conference and festival negotiationsDetails: Details: ILMC London: Sundance London Film and Music8-10 March 2013 Festival@: Royal Garden Hotel, London 25-28 April 2013Organised by: International Live Music @: The O2Conference Organised by: Sundance Institute; AEG Eu-About: Annual gathering of the world’s most ropeinfluential concert promoters About: The London arm of Robert Redford’sDetails: Sundance Film Festival Details: www.sundance-london.comParis: Art Paris Art Fair28 March-1 April 2013 Prague: Urban Popcultures@: Grand Palais, Paris 12-14 May 2013Organised by: Art Paris @: Michna PalaceAbout: Celebration of the contemporary and Organised by: Inter-Disciplinary.Netmodern art in France and Europe About: 3 rd global conference on the impact ofDetails: alternative cultural movements and creative trends on urban lifeNew York: The AIPAD Photography Show Details: 4-7 April 2013@: Park Avenue Armory, NYC New York: BookExpo AmericaOrganised by: The Association of Interna- 29 May to 1 June 2013tional Photography Art Dealers @: Javits Center, NYCAbout: Contemporary, modern and vintage Organised by: Reed Exhibitionsphotography art for sale About: The US’ largest book-publishing gath-Details: ering for selling and buying rights Details: www.bookexpoamerica.comCannes: MIPCube 7-11 April 2013 Washington DC: World Creators Summit@: Palais des Festivals 4-5 June 2013Organised by: Reed-MIDEM @: Ronald Reagan Center, Washington DCAbout: The innovators of tomorrow’s media/ Organised by: CISACentertainment technology About: International creators, policy makersDetails: and industry leaders debate the future and protection of creativity in the digital worldCannes: MIPTV Details: www.creatorssummit.com8-11 April 2013@: Palais des Festivals Cannes: 60th Cannes Lions InternationalOrganised by: Reed-MIDEM Festival of CreatvityAbout: Networking among the great, the good 16-22 June 2013and innovative in global TV and media @: Palais des Festivals, CannesDetails: Organised by: i2i Events Group About: Largest networking event for interna-Melbourne: Supanova tional advertising professionals12-14 April 2013 Details: Melbourne ShowgroundsOrganised by: Supanova Pop Culture Indus-tries Moscow: World Championships in Athletics 10-18 August 2013About: Australia’s premier expo for fanatics @: Luzhniki Stadiumand creators of pop culture in comics, TV, Organised by: IAAFmovies, animation, games, sci-fi, and tech About: Leading international athletics eventsDetails: featuring the world’s top sports talent 34Details:
  • 35. FEATURE BILLION DOLLAR BLAST Investor Spotlight David Grover ING BankIn each issue of MTF, an investor specialising in the media, entertainment and the cul-tural arts and related technologies, is invited to go on a Creative Spending Spree. In this fantasy column, the investor has access to US$1 billion to spend on tencategories of the arts and entertainment business, explaining why they believe eachwork’s creativity and genius deserve the money allocated. ________ Bring the worlds of finance and media together, and David Grover becomes a forcethat recognises when an entertainment company has the creative goods to light upviewers’ TV, smartphone and tablet screens with profitable content. As head of mediafinance at ING Bank, the Amsterdam-based international financial-services group, US-born Grover’s job includes lending to companies that produce quality content andgenerate income via traditional media and emerging digital platforms. The lure to thebanking world started in his youthful days growing up in the US state of Nebraska,home to Warren Buffet, arguably the world’s most successful investor. Grover learnedabout value investing from following Buffet’s career. His knowledge of media comesfrom his time in the US Air Force, where he got involved in supplying satellite TV toarmed forces overseas. Since leaving the Air Force in 1998, international media andfinance remain core to his work. He says media-and-entertainment bankers are “themost conservative people” at international trade events such as MIPTV in Cannes: “Oursis a low-risk, low-return business model; we lend in a way that provides us with amargin of safety and protects us if things don’t go as planned.” Companies that havebenefited from that prudent approach, at a time when banks are vilified for taking toomany risks with the global economy, include global entertainment company ZodiakMedia; the Russian World Studios/Sistema Mass Media partnership; Eredivisie Media(the media arm of Dutch top division soccer); Swiss international sports-marketing firmInfront Sports & Media; and Polish pay-TV group Cyfrowy Polsat. In this issue of MTF, the main beneficiary of Grover’s fictional US$1bn is the real-lifeOakland A’s baseball team in California, made internationally famous in the Brad Pittmovie Moneyball. Vincent van Gogh’s paintings gain from Grover’s generosity. And hewould also like to preserve the craft of investigative journalism while, at the same time,looking forward to the day when commercial space travel becomes a reality. 35
  • 36. FEATUREMovies (US$100m)You can’t beat The Warriors, a 1979 cult classic directed by Walter Hill about aConey Island gang running for their lives, but doing it with a lot of class and dignity:they knew when to run and when to stay and fight. The script was really right, everyscene had a purpose. It should be required viewing for anyone leading and managingpeople in tough times (and doesn’t the current economic climate qualify as ‘tough’?). Asa cult classic, it will generate revenues for a long, long time. It has also spawned videogames and merchandising. Admittedly, the production value must have been prettysmall, but, wow! what a story.Musical Recording (US$0.99)My dad showed me a video clip of Eric Clapton and Mark Knopfler playing Sultansof Swing live at Royal Albert Hall. It went on for 11 minutes and I was mesmerised. Iwent online trying to find the DVD (yes, the DVD), and I could not find it! So I wouldlike to buy that online!Live Entertainment (US$1m)How about Eric and Mark, live at Red Rocks, near Boulder, Colorado? This is a beau-tiful amphitheatre set amongst the rocks and trees. I saw 10,000 Maniacs there manyyears ago. Seeing a live act there seems to make it even more vivid.Television Show (US$24m)Burn Notice! This is an easy choice: a spy series that started out as more of anaction/comedy. But, in its latest (sixth) season, it has turned deadly serious. It is shoton location in Miami, one of my top three favourite US cities. I always have loved BruceCampbell, who plays the protagonist’s sidekick and has the best chin the business. Theway the main character does a voice-over-monologue during intense action scenes,describing his get-out-of-a-jam playbook for the tightest situations, is a cool twist. Ithas kept me hooked for six seasons. At US$2m per episode, 12 episodes costs US$24m.Sports Event (US$624,885,999.01)I would buy a share in the Oakland A’s (Oakland Athletics) baseball team, just so that Icould be involved in general manager Billy Beane’s grand experiment of “Moneyball”.Most of us have probably seen the movie of the same name. I’ve read the book too. Inthe early 2000s, Billy Beane gained notoriety for nearly beating the (top dog) New YorkYankees in the post-season playoffs, despite having only one third of the Yankees’ play-er budget. His management team did it through using statistics to find “undervalued”players in terms of their ability to get on base. When you bought players this way, itcould produce some head-turning results. I love stories about supposed “misfits” gettingone over on the “establishment”. The Oakland A’s embody that. Also, live-sports events,such as baseball, are the one sure bet as the media distribution landscape continues toevolve. You can’t substitute live sporting events with anything else.Video Game (US$5,000)OK! How much for an antique (Konami arcade game) Frogger machine? One of myfavourite Seinfeld TV episodes is when George goes through some hilarious antics topreserve his high score when a restaurant owner plans to pull the plug on the machinehe used to play on.Advertising/Marketing Campaign (US$50m)Nestle’s Nespresso marketing campaign with George Clooney. I am not the No. 1George Clooney fan, but the campaign is really well done. The growing popularity ofNespresso is revolutionising the way we drink coffee. A recent article in the financialpress said the growth of premium coffee capsule sales is now a factor that must beconsidered in coffee commodity prices. 36
  • 37. FEATUREWork of (fine) Art (US$100m)For The Bedroom, as well as The Café Terrace on the Place du Forum, Arles, atNight, by Vincent van Gogh. Van Gogh’s story is bittersweet, but I think most peoplecan identify with aspects of his personal and internal struggles. The way he adapted hisstyle over the years shows how an artist’s work changes through personal struggles andintrospection. When van Gogh painted The Bedroom in 1888, he was trying to start anart studio where he and his friends would live and work and inspire each other. It neverquite lived up to that grand vision but, nevertheless, the painting reminds me of the ex-citement I feel when I have a new idea, or I’m exploring a new creative side of myself.The Café Terrace on the Place du Forum, Arles, at Night just relaxes me.Book (US$100 million)One of my favourite books is All the President’s Men, which was by Bob Woodward andCarl Bernstein, the Washington Post investigative reporters who uncovered the Wa-tergate scandal that contributed to the downfall of US president Richard Nixon. It’s beencalled “the single greatest reporting effort of all time”. These two guys were just normalpeople in many ways, but they wanted answers, and they kept pursuing until they gotthem. Let’s not forget the industry that paid the salaries of the vast majority of investi-gative reporters: the newspaper industry. It is getting hammered by digital forces, somuch so that there is probably value in buying well-run regional titles with strong localcontent. If the book didn’t cost the full US$100m, I would use the rest to invest in re-gional newspapers to prolong the longevity of strong investigative reporting. Also, Ithink it pays to be a contrarian investor in this sector. Warren Buffet, one of the world’sshrewdest investors, has been quietly buying up regional newspapers. And even hewould say he is not quite certain how newspapers will be profitable in the digital age butI agree that, in certain regions, well-run newspapers will survive.Luxury Item: (US$109,000)I would buy a fully-equipped Tesla Roadster from Elon Musk’s company, Tesla Motors.The Tesla Roadster is the first highway-capable all-electric vehicle in serial productionfor sale today. Musk earned his fortune through co-founding PayPal, and then put hisfortune to good use. He reinvested it in some very worthwhile, not to mention for-profit,causes. When he grew frustrated with the military-industrial complexity surrounding theacquisition and development of rockets for launching space missions, he took mattersinto his own hands, founded SpaceX, and designed his own rockets. Musk is anotherguy that has taken on the “establishment” and won. He was vindicated recently whenSpaceX’s Dragon space capsule successfully docked with the International Space Sta-tion, hopefully ushering in a new era of privately-funded space initiatives. With a fewtweaks, the Dragon capsule could be used to send humans to Mars.About David Grover: Grover is the head of media finance at ING Bank, based in Am-sterdam, where he has held that position since April 2008. Prior to that, he ran his ownCalifornia-based consulting practice, Grover Advisory. Between 1999 and 2005, he wasat the investment banking department of Barclays Capital in London and New York,where he was responsible for increasing the bank’s presence in the media sector as wellas growing the firm’s satellite-finance business. David holds a Master’s degree in Inter-national Political Economy from the London School of Economics, a Master’s degree inBusiness Administration from the University of Auburn in the US, and he is a CFA Char-terholder, making him a qualified investment analyst. He is also a certified United StatesAir Force survival instructor.*Grover’s comments and views in Billion Dollar Blast are solely his and should not to beattributed to anyone else or any company. MTF 37
  • 38. ABOUT PUBLISHER: JayKay Media Inc ( EDITOR-IN-CHIEF: Juliana Koranteng EDITORIAL TEAM: Amanda Kyle Benedict King Alex Honger Mary Desmond Andrew Nassalyn CONTACT DETAILS: Editorial, Advertising, and General Enquiries: LIKE, SHARE, COMMENT. FOLLOW, CONNECT, ENJOY Facebook: MediaTainment Finance Twitter: @MediatainmentMT; @JayKayMed JayKay Media Inc Ltd is a registered company MTF’S MISSION: MediaTainment Finance’s mission is to learn who is investingin the creativity and craft that drive the international media-and-entertainmentbusiness, how much, where and why. From film to the fashion business, from televisionshows to theme-park attractions, from musical recordings to marketing campaigns,from concerts to computer games, and from printed books to photography, the creativework and content form the heart that beats inside the body of these sectors. MediaTainment Finance aims to report on deals that indicate where the money isbeing spent or cut, and analyse such deals’ impact on commercial culture worldwide. ABOUT MTF: MediaTainment Finance (MTF) will be published eight times in acalendar year, starting in January, by JayKay Media Inc Ltd ( Copyright Reserved. Reproduction in whole or part without written permission is strictly prohibited. All pric-es quoted in articles are correct at time of going to press, but subject to change. Cur-rency is based on the exchange value the day before publication date. Reprints can beused for marketing purposes. Contact editorial for permission.