Table of Contents
Comments
Commenters1
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Digital technology has significantly reduced the cost of producing, distributing, storing and manipulating content. Today anyone can be their own publisher, journalist, programme maker or international e-merchant. It also enables content to be replicated instantly at virtually no cost.
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Digital technology has significantly reduced the cost of producing, distributing, storing and manipulating content. Today anyone can be their own publisher, journalist, programme maker or international e-merchant. It also enables content to be replicated instantly at virtually no cost.2
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These technology changes bring convenience and enable personalised media consumption. They create opportunities for new formats and more interactive services. They also enable the online environment to be a highly effective price discovery mechanism, improving the efficiency of the market and shortening the supply chain for individuals and businesses alike.
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These technology changes bring convenience and enable personalised media consumption. They create opportunities for new formats and more interactive services. They also enable the online environment to be a highly effective price discovery mechanism, improving the efficiency of the market and shortening the supply chain for individuals and businesses alike.3
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The UK’s inherent creative strengths have given us a global advantage in the creation and production of compelling and innovative content, not just in traditional broadcasting, but in advertising, online content, mobile content, music and programme production. These have given this country a cultural significance around the world out of proportion to our relative size.
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The UK’s inherent creative strengths have given us a global advantage in the creation and production of compelling and innovative content, not just in traditional broadcasting, but in advertising, online content, mobile content, music and programme production. These have given this country a cultural significance around the world out of proportion to our relative size.4
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The audiovisual content production sector in the UK accounts for annual production activity of between £5.5 to £6bn, and exports (according to ONS data) of around £2.3bn.
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The audiovisual content production sector in the UK accounts for annual production activity of between £5.5 to £6bn, and exports (according to ONS data) of around £2.3bn.5
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UK content production is in turn an important part of the overall creative industries sector that in total accounts for more than 6 per cent of UK gross value added, which as a sector is equivalent in scale to the financial services industry. Radio and TV, along with software, computer games and electronic publishing account for around half of this total.
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UK content production is in turn an important part of the overall creative industries sector that in total accounts for more than 6 per cent of UK gross value added, which as a sector is equivalent in scale to the financial services industry. Radio and TV, along with software, computer games and electronic publishing account for around half of this total.6
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The OECD estimates that the UK cultural sector is relatively more important (at just under 6 per cent of GDP) than its equivalent sectors in the US, Canada, France and Australia. Unesco estimates indicate that the UK is the world’s biggest exporter of “cultural goods”, surpassing even the US.
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The OECD estimates that the UK cultural sector is relatively more important (at just under 6 per cent of GDP) than its equivalent sectors in the US, Canada, France and Australia. Unesco estimates indicate that the UK is the world’s biggest exporter of “cultural goods”, surpassing even the US.7
In 2008, the Government published a strategy for developing “Creative Britain”, which argued that the creative industries must move from the margins to the mainstream of economic policy.
In 2008, the Government published a strategy for developing “Creative Britain”, which argued that the creative industries must move from the margins to the mainstream of economic policy.8
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Until 2008, the sector was growing, driven by rising revenues, new consumer demand, and competition for audiences. In online and mobile in particular, growth in content spend has been rising rapidly from a small base. The UK games industry continues to make a significant financial, creative and cultural contribution to the UK, but is facing particular challenges.
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Until 2008, the sector was growing, driven by rising revenues, new consumer demand, and competition for audiences. In online and mobile in particular, growth in content spend has been rising rapidly from a small base. The UK games industry continues to make a significant financial, creative and cultural contribution to the UK, but is facing particular challenges.9
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Much of the sector’s size and growth has been based on revenues in television. Internationally, the UK television content sector is the largest in Europe and the largest relative to GDP in the world, and in export of TV show formats, the UK is by far the largest single source. Overseas sales of UK programmes and formats grew by 23% in 2007, with overseas revenues of UK distributors and producers totalling £663m, producing a net contribution to content creation, after distribution costs and commissions, of around £380m.
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Much of the sector’s size and growth has been based on revenues in television. Internationally, the UK television content sector is the largest in Europe and the largest relative to GDP in the world, and in export of TV show formats, the UK is by far the largest single source. Overseas sales of UK programmes and formats grew by 23% in 2007, with overseas revenues of UK distributors and producers totalling £663m, producing a net contribution to content creation, after distribution costs and commissions, of around £380m.10
This overall growth trend stalled in 2008, however, as the sector has begun to face significant revenue pressures. Predictions for the short term signal a decline in the total value of UK television content production, but with continued increases in new media activity. In the longer term, there are significant structural and competitive challenges, which will change the shape of the sector and its prospects in its home market.
This overall growth trend stalled in 2008, however, as the sector has begun to face significant revenue pressures. Predictions for the short term signal a decline in the total value of UK television content production, but with continued increases in new media activity. In the longer term, there are significant structural and competitive challenges, which will change the shape of the sector and its prospects in its home market.11
These structural challenges arise from the transition to digital economics and, with that, the dwindling of the advertising pound and the retail margin for physical copies that, in the past, funded substantial parts of both our traditional media and new media.
These structural challenges arise from the transition to digital economics and, with that, the dwindling of the advertising pound and the retail margin for physical copies that, in the past, funded substantial parts of both our traditional media and new media.12
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Since 2002, e-commerce has grown from £19billion to nearly £163 billion a year. Internet advertising has grown with it. Britain has the highest proportion of internet advertising of any developed economy: at 15% of all advertising it already dwarfs the revenue of radio advertising and is on course to overtake press and TV before long. British consumers have a huge appetite for new digital services, with high levels of take-up of new networks and devices. This in turn creates a market environment which unlocks new commercial possibilities and encourages innovation in new content, services and applications.
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Since 2002, e-commerce has grown from £19billion to nearly £163 billion a year. Internet advertising has grown with it. Britain has the highest proportion of internet advertising of any developed economy: at 15% of all advertising it already dwarfs the revenue of radio advertising and is on course to overtake press and TV before long. British consumers have a huge appetite for new digital services, with high levels of take-up of new networks and devices. This in turn creates a market environment which unlocks new commercial possibilities and encourages innovation in new content, services and applications.13
These changes are challenging the economics of intermediaries of all kinds and more traditional types of content companies – publishers, the music industry, the newspaper industry and broadcasters – in particular.
These changes are challenging the economics of intermediaries of all kinds and more traditional types of content companies – publishers, the music industry, the newspaper industry and broadcasters – in particular.14
There are four commercial challenges that need to be addressed to preserve a healthy content market in the digital age.
There are four commercial challenges that need to be addressed to preserve a healthy content market in the digital age.15
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Firstly, if digital distribution and copying costs are lower so too are digital revenues from the product or the advertising impact; often, in current business models, an order of magnitude lower. New business models need to evolve for that environment. The role for regulation or intervention is not to prevent the emergence of new business models or to preserve old and unsustainable ones. It is to contribute constructively to the transition.
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Firstly, if digital distribution and copying costs are lower so too are digital revenues from the product or the advertising impact; often, in current business models, an order of magnitude lower. New business models need to evolve for that environment. The role for regulation or intervention is not to prevent the emergence of new business models or to preserve old and unsustainable ones. It is to contribute constructively to the transition.16
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Secondly, the rapid growth in the number of digital outlets has hugely increased the volume of advertising inventory available. This trend will only increase: unless there is a paid-for product or service for the consumer to own, (e.g. paid-for content or application downloads) internet content is perceived to be ‘free’- i.e. if monetised, it is through advertising. This increase in the volume of advertising impacts has a commensurate impact on their price (and hence on the margins of advertiser-funded businesses).
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Secondly, the rapid growth in the number of digital outlets has hugely increased the volume of advertising inventory available. This trend will only increase: unless there is a paid-for product or service for the consumer to own, (e.g. paid-for content or application downloads) internet content is perceived to be ‘free’- i.e. if monetised, it is through advertising. This increase in the volume of advertising impacts has a commensurate impact on their price (and hence on the margins of advertiser-funded businesses).17
Thirdly, there is the challenge of access to content and the ability to innovate across the increasing range of distribution platforms and digital devices. Convergence has allowed development of bundled packages offering consumers a mix of content and services. Development of business models built around such bundling depends to a large degree on wholesale access to important content to deepen the range of bundles addressing individual consumer preferences.
Thirdly, there is the challenge of access to content and the ability to innovate across the increasing range of distribution platforms and digital devices. Convergence has allowed development of bundled packages offering consumers a mix of content and services. Development of business models built around such bundling depends to a large degree on wholesale access to important content to deepen the range of bundles addressing individual consumer preferences.18
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Fourth, the very ease with which digital content can be distributed and copied also dramatically increases the scope for unlicensed and illegal copying and distribution. At the same time, new technological forms of piracy are being manifested at an increasing pace. Counter-piracy measures and effective rights enforcement are an important element, but only one element and insufficient on their own: new methods of legitimate access, based on new business models and incentive structures will be crucial.
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Fourth, the very ease with which digital content can be distributed and copied also dramatically increases the scope for unlicensed and illegal copying and distribution. At the same time, new technological forms of piracy are being manifested at an increasing pace. Counter-piracy measures and effective rights enforcement are an important element, but only one element and insufficient on their own: new methods of legitimate access, based on new business models and incentive structures will be crucial.19
This is placing pressures on professional content, whether in programme-making or in journalism and newsgathering, with significant implications for the future health and growth of the sector. While some traditional audio-visual content is under threat, new media content is in its relative infancy as a possible new generator of economic wealth.
This is placing pressures on professional content, whether in programme-making or in journalism and newsgathering, with significant implications for the future health and growth of the sector. While some traditional audio-visual content is under threat, new media content is in its relative infancy as a possible new generator of economic wealth.20
Faced with these challenges and, in particular, the dwindling of the advertising pound in its historic role as underpinning finance for much content creation, the UK needs to consider whether there are other funding streams or mechanisms that would substitute in whole or in part. Several of these, including regulatory assets, industry or equipment levies and contestable funding for content production that meets public purposes, are deployed in varying degrees in other markets.
Faced with these challenges and, in particular, the dwindling of the advertising pound in its historic role as underpinning finance for much content creation, the UK needs to consider whether there are other funding streams or mechanisms that would substitute in whole or in part. Several of these, including regulatory assets, industry or equipment levies and contestable funding for content production that meets public purposes, are deployed in varying degrees in other markets.22
In the final report we will examine measures needed to address the challenges for digital content in more detail, including opportunities for providing further support to foster UK creative ambition and alternative funding mechanisms to advertising revenues.
In the final report we will examine measures needed to address the challenges for digital content in more detail, including opportunities for providing further support to foster UK creative ambition and alternative funding mechanisms to advertising revenues.23
In the remaining parts of this section we address some of the most immediate issues which have an impact on digital content and outline ways forward.
In the remaining parts of this section we address some of the most immediate issues which have an impact on digital content and outline ways forward.Tags: advertising impact, advertising inventory, advertising pound, advertising revenues, Australia, Britain, Canada, digital, Digital Content Digital technology, digital services, e - commerce, e-merchant, Europe, finance, France, GBP, government, interactive services, internet advertising, internet content, journalist, media activity, media content, OECD, online content, online environment, paid-for product, personalised media consumption, radio advertising, retail margin, supply chain, technology changes, through advertising, UK, United Kingdom, United Nations Educational Scientific and Cultural Organization, United States
There are other possible models for monetisation here and they don’t all involve advertising. I’ll give just two models for illustration.
1. Product affiliate and referral schemes which are distinct from the advertising category.
2. Donations
There is plenty of fruitful discussion and practice in this area, among content providers of all sizes.
The future of advertising is definitely worth discussing – but let’s not set policy on the limited view that it’s the only model.
A couple of others;
Driving purchase- the model King Gillette started his razor business with; give disposable razors away for free, and sell replacement blades.
“Freemium”- the majority get access for free, but a few pay for a premium service (eg. Flickr.com, Last.fm.)
Driving value- a product is provided for free, which then increases the value of another product. For example, an author makes their book available for free online to drive sales of the printed copy to people- increasing demand for, and therefore value of, the printed copy.
Driving sales; Nine Inch Nails’ “Ghosts I-IV” album was released as a free download, and under a Creative Commons licence (meaning it’s allowed to copy and share it.) Yet it was the best selling MP3 album on Amazon last year.
There are plenty more, if you care to look for them.
Good points SRN.
It does say “unless there is a paid-for product or service for the consumer to own”.
But maybe it is worth being really clear about this. I do believe that overcoming this inadequate wording with an understanding of these examples will make us less desperate to shore up certain businesses that are not sustainable.
Thanks,
I think it’s worth being clear that just because someone else pays for a product or service, that doesn’t mean that I don’t get a related product or service for free.
Open Source software is another example of content that is free- Apache web server software and the WordPress blogging software are all free- and are (I believe) used to bring this very website to us users, for free, with no advertising in sight.
However, there are companies who monetize the software by using it for commercial uses (eg. hosting websites through which they do business, providing support services for it), who work on improving the software that they use, from which the community (ie. us) can benefit.
What’s a digital revenue when it’s at home?
More seriously, the sentence “The role for regulation or intervention is not to prevent the emergence of new business models or to preserve old and unsustainable ones” is absolutely key, and probably deserves to be in the introduction rather than in this section.
“New business models need to evolve for that environment.” This is absolutely key – protecting old models is NOT the way forward and instead the opportunities (for example, the “long tail”) need to be taken up.
Again, a key paragraph and it is very pleasing to see it included here. One of the “new business models” alluded to is, in fact, a variation on an old one, namely a subscription based service: no one will want to have CDs or DVDs cluttering up their house in future – they will simply want to rent access to all the films, television and music ever made.
It’s nice to see at least a tiny nod towards conventional business models spawning piracy out of their own antiquity and stubborn inflexibility. The U.S. has the worst of this in its RIAA and bloodthirsty recording industry.
Companies with innovative business models, products and practices are rarely if ever affected by piracy.
Digital technology will continously pave way for low cost production, distribution, storage and manipulation of content. As long as their’s a competitive market in the industry, access to resources and tools would always be at a reasonable price.
The issue of piracy and copyright laws are the only factors protecting the issue of content, whether it be music, books, etc.
Nevertheless, people will always source for where they can replicate content at no cost. The internet has been a reliable source of achieving such task. There are always websites that give access to free download of softwares, programs, music and more.
It’s an ongoing issue.
Everything is now mobile, can be done online. Resources, information and data are easily accessible. There is a high level of convenience for uploading, downloading and most of all easy interaction.
Due to this, there’s a competitive market and competitive prices.
Continous technological development has brought about a variety of options for customers as businesses strive to be the best.
The United Kingdom is a great asset due to its level of technological advancement. It has made sincere contributions globally.
The UK is a strong influence in neighbouring countries and all over the world. They play a major role in production and distribution of content. Digital media contents are shown and primarily can be accessed over the web all over the world.
We have more than enough information as societies become more informed.
The UK is very developed in audiovisual content with various competitors. The cost of annual production activity is not surprising but never the less, profit is made from exporting content which is good form of profit and revenue.
Radio, TV, software, computer games and electronic publishing play a major role in generating revenue. The media industry continues to grow and there is a major market.
The UK with its level of technological advancement is expected to play a prominent role in the media worldwide.
Unesco estimated that the UK is the world’s biggest exporter of “cultural goods”, surpassing even the US.
I do not believe this is a surprise. The UK play a major role in all sectors, economy, industrial, technologically and more.
There will always be development which leads to progress.
I believe that the online and mobile market in particular is one of the best technological revolution so far.
The UK games industry is another market that continues to make significant financial, creative and cultural contribution to the UK.
Irrespective if its challenges, the gaming, online and mobile industry will continue to flourish.
The UK television industry continues to grow rapidly with various target audiences.
Most of the content watched in neighbouring countries such as Europe is partially from the UK.
It’s all to do with modernisation, technological advancement, the era of satellite, online television an so on.
Even in Africa, most well to do families have a satellite box, a dish or whatever. When you have a box, most of the content is British. You practically get the same UK channels. Its all got to do with Westernisation. How to generate profit globally.
Britain has the highest proportion of internet advertising of any developed economy. It also has the highest proportion of revenue from radio advertising and is on course to overtake press and TV before long.
Once the technological advancement is present, with a mixture of creative advertisers and artist, coupled with multibillion dollar clients, the rest is history.
Most UK advertising agencies and media organisations have the best of clients who depend on them.
I belive that advertising the the internet’s primary way of generating revenue. There are other possible models for monetisation such as donations, etc but it cannot be continously depended on.
But manufacturers of products and services need to advertise, to communicate to the public. It is a reliable source of generating revenue.
Not all digital media can produce content for free. There must be a way of generating income.
The issue digital content that can be easily accessed, distributed and copied dramatically increased the scope for unlicensed and illegal copying and distribution.
It all boils down to the issue of copyright laws and laws against piracy.
We all got this tingle when we found out that we could download music for free off limewire. It brought more users, publicity and service provided.
Access to digital content should be pleasurable, whether free, sometime.
New technological forms of piracy which are being manifested at an increasing pace will protect the artist’s or producer’s interest.
This is grossly inaccurate. In the case of music, the creators still incur substantial costs in the creation of the music, even though putting it on a web site is cheap. The cost of musical expertise is actually many times larger than the cost of the hardware used to realise it, and this is a major issue for music creators that is largely ignored by Government, who seek to support the music industry, rather than musicians. This is highly problematic because it is the music industry who seek to reduce the musicians remunerations as a matter of course.
This is again erroneous, as the market efficiency is only achieved by failing to pay the music creators appropriately
[...] Comment on Digital Britain writetoreply.org [...]
[...] Comment on Digital Britain writetoreply.org [...]
[...] Comment on Digital Britain writetoreply.org [...]
This whole chapter suggests, that the UK should lead the way in keeping the internet open and neutral. No ISP should have the right to impose network management rules which favours one persons content over another.
The authors of this chapter should make their views know to those writing the chapter on next generation access which sees no need for net neutrality principles – Clause 40. The latter is probably an error.
Some thought needs to be given to the importance of supporting those who cannot afford to give content away otherwise it will only be a few big players (e.g. major universities using MIT model) backed by corporate or government donations who will effectively control information. There will be a huge long-tail of unfunded people chirruping in the wilderness but that’s not a balanced or fair market.
Thank you for the opportunity to comment on the “Digital Britain” report.
I am especially concerned about the economic assumptions made in section 3.1. I completely agree that the UK content creation sector has many strengths and advantages that should be nurtured. However the report fails to clearly distinguish between activities that *create value*, namely actual creation of content, and those which *transfer revenue*, such as royalty collection.
The UK games and TV production industries are successful because they create value in new products, and these products benefit “UK PLC” by sales overseas. Contrast this with the TV Licence fee, necessary in the current funding model, but which does not directly generate income for UK PLC.
However, rather than creating significant incentives for value creation, the report’s recommendations concentrate on revenue collection. This will be to the detriment of content creators, due to the expensive requirements for legal clearance on any possible use of copyrighted material. So not only does this penalise the illegal file sharers mentioned in the report, but it also penalises the content creators themselves. And for no gain to UK PLC – in fact a strongly enforced royalty regime is likely to result in transfer of funds outside the country, the majority going to US content creators.
Action 11 starts to look towards a solution, but is still fixated on prevention of illegal use, rather than legalising activities and allowing revenue to be made which can flow towards content creators. A “compulsory licence” scheme would help, assuming the licence fees were set proportionately. Statistical sampling of watermarked material would offer a way of measuring who should be rewarded; in this way, people who successfully redistribute material could be encouraged, rather than penalised. Even better, a copyright regime that facilitated re-working of material without requiring lengthy legal agreements would promote content creation, not only by large businesses, but also individual citizens. Those few who were successful in gaining popularity would be able to reap their just rewards. Those not so successful might not meet the minimum level to cover the cost of sending a royalty cheque.
So photos, videos, music, books published on the internet would be able to attract a certain proportion of the revenue being raised, likely to be through advertising, or possibly subscription services. By allowing re-use, and potential rewards to the creators, a swathe of restrictions would be removed, truly an encouragement to content creators. Whilst most individuals would be unlikely to gain wide distribution of their work, the few highly successful “blockbusters” would be able to get rewarded for that success, and in turn that would encourage others.
This scheme could also apply to other areas of creation. In particular to software development – for example the UK is strong in open source software development, and the associated skills are beneficial to the country. By including software in the collection scheme, an additional revenue stream would be formed to reward those developers, and help them produce further works.
I believe any such scheme to “promote the Progress of Science and useful Arts” (to quote the US Constitution) would create significant benefits for the country. And simplified fair schemes for revenue collection would assist in this.
The phrase ‘contribute constructively to the transition’ is disturbingly vague. Different people have different ideas about what is constructive and what is not.
Most likely, the government will go with whatever the media industry considers constructive i.e. consumers being made to pay prices kept artificially high by threats of disconnection and invasion of privacy. To them that is constructive, to the rest of us it isn’t.
It is not worth sacrificing the free, equal, and unmonitored exchange of information that the Internet currently allows UK citizens, just to make a sector of industry artificially viable.
Counter-piracy must, by its very definition, entail discrimination between different types of data being sent through a users connection. This attacks the very principles that have made the Internet useful in the first place, and requires by definition banning the private use of encryption (as a counter-piracy agency must assume any data it cannot read is ‘illegal’ and move to block it).
Also, in the long run, it simply will not work. Young people protesting the fraudulent election in Iran have shown that even a totalitarian government cannot exercise that kind of control, so a democratic one certainly will not be able to.
“However the report fails to clearly distinguish between activities that *create value*, namely actual creation of content, and those which *transfer revenue*, such as royalty collection.”
Well said. This is a consistent theme throughout the report; the notion that money is a perfect and complete representation of value, and therefore information only has value when someone is making money out of it.
There is very little reference to the social capital you get from having fast, free and private data exchange between citizens, and incredibly low entry barriers for publishing (beyond the potential that has for expanding the content industry).
The value of the Internet to politicians and industry leaders, as demonstrated in this report, is purely as a means to access consumers. Any function of the Internet outside that is at best irrelevant to them and at worst undesirable.
The value of the Internet to ordinary citizens is the open access to information and easy communication with other citizens. Shopping is only a small part of it.