Culture Boom: How Digital Media Are Invigorating Australia Preface

Report

Culture Boom How Digital Media Are Invigorating Australia The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in­sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet­itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 75 offices in 42 countries. For more information, please visit bcg.com. Culture Boom

How Digital Media Are Invigorating Australia

Jan Belza

Patrick Forth

James Purnell

Paul Zwillenberg

commissioned by

MARCH 2012 | The Boston Consulting Group Contents

3 Preface

4 Executive Summary

6 The Australian Digital-Media Economy: A Snapshot A Growing Industry Consumers, Creators, and Producers Benefit The Impact

9 Bigger and Better: How Online Content Drives australian Media A Digital Nation The Media Economy The Online Driver A Stimulus for Most Players An Internet Superhighway

15 Content and Contentment: Australians and The New Media Landscape Beating the Quota A $24 Billion Benefit to Consumers Local Is Good A Cultural Trade Surplus The Arts Online A Promising Future

21 A Value Chain Reaction: The Changing World of Media Content Technology Drives Change The Internet and Media Content Value Chains Changing Economics Opportunities for Consumers Opportunities for Creators Opportunities for Traditional Industry Participants An End to the “Tyranny of Distance” The Blurring of the Old and the New

29 Conclusion

30 Appendix: Methodology

31 note to the reader

2 | Culture Boom: How Digital Media Are Invigorating Australia preface

he amount of Internet content that is created and consumed Tgrows by the day in Australia and around the world. The Internet is an ever more integral part of daily life and a significant generator of economic activity.

To better understand the impact of the Internet on consumers, artists, and the content sector in Australia, Google commissioned The Boston Consulting Group to prepare this independent report. The results have been discussed with Google executives, but BCG is responsible for the analysis and conclusions.

The Boston Consulting Group | 3 Executive Summary

he Internet offers a significant economic and cultural opportunity for T Australia. It is a catalyst for growth across the media sector. It is substan- tially improving the choice available to consumers and enabling thousands of new creators and producers. Most of all, Australians want to watch Australian content. And the world is watching it, too.

The Australian media and content industry is in a healthy state. It is expected to grow over the next four years, driven primarily by Internet media.

•• In 2011, the Australian media industry generated revenues of $24.8 billion.1 This is projected to rise to $29.1 billion by 2015.

•• The online portion of this industry is still in its infancy, generating only 7 percent of these revenues. Although small, the online sector is responsible for a significant share of growth, generating 40 percent of the total growth from 2007 through 2011, and it is expected to contribute more than half of the $4.3 billion in growth through 2015.

•• Yet offline media remain the major revenue generators. They will still account for 86 percent of revenues ($25.1 billion) in 2015.

•• The industry employed approximately 105,000 people in 2011, a number that is projected to rise to about 120,000 by 2015. Online media are likely to create half of these jobs.

The Internet’s dynamism has stimulated other media activities and is driving a cultural change with many benefits.

•• All media consumption is rising, with Australians now spending 21.7 hours per week on the Internet in addition to spending more time per week watching TV (15 hours), listening to radio (10.3 hours), and reading newspapers (3.4 hours) than they did in 2007.

4 | Culture Boom: How Digital Media Are Invigorating Australia •• The Internet has been a shot in the arm for many sectors of Australian media, driving growth for books, games, movies, and radio. Even where there has been offline contraction, online growth has helped compensate.

•• Online media’s share of income from news, current affairs, and education has doubled to 10 percent since 2007.

•• The increasing accessibility of the Internet is driving a cultural change in Australia. For example, it is making niche content readily available and enabling remote communities to play a more active role in the economy.

•• The arts also are doing well. The revenues for performing arts are up by 20 percent. An example of the Internet’s impact is that a fifth of Australia’s opera audience is now online.

Australians like the greater choice and convenience of Internet content, and they cherish Australian content in particular.

•• Internet media content is delivering a consumer surplus—the value that consumers place on an activity or a product that is over and above the price they pay for it—of $24 billion a year to Australians.

•• Of this, the largest single contribution comes from online content portals such as BigPond, iTunes, and YouTube. Although consum- ers pay nothing for them directly, these platforms deliver a nationwide benefit valued at more than $9 billion per year.

•• Online platforms such as these play a key enabling role in deliver- ing choice to consumers and providing opportunities for creators and producers to reach a local, national, and global audience.

•• Australians believe the media landscape is improving, with more good quality content available both online and offline.

•• Australians like Australian content. The top 20 TV programmes since 2007 have all been Australian-made, and more than 90 percent of the newspapers read online are Australian.

Australian content is highly competitive in the Internet’s global free market.

•• Australia has a trade surplus in online video, exporting more than it imports. Twice as much Australian online video is consumed in the U.S. than is consumed in Australia.

•• A new contingent of Australian creators and content entrepre- neurs is emerging and taking on the world.

NOTE 1. All figures cited in this report are in Australian dollars.

The Boston Consulting Group | 5 The Australian Digital-Media Economy A Snapshot

here are many opinions about the few years. They have provided a boost for the Timpact of the Internet on society. What is sector as a whole, accounting for 40 percent of undeniable, however, is that the Internet has the sector’s revenue growth from 2007 had a significant impact on the daily lives of through 2011. This is despite online media the majority of the Australian population. It representing only 2 percent of revenues at the is part of the daily routine of Australians. It is end of 2007. Of course, some media compa- integral to the workings of many types of nies—those that have chosen to rely on old Australian businesses, not only those focused business models and have not incorporated on the Internet. the Internet into their offerings—have found it challenging to grow revenue and will con- Australia rightly aims to be one of the world’s tinue to do so. digital leaders by the end of the decade. As the National Broadband Network (NBN) is com- pleted, bringing super-fast download speeds to Consumers, Creators, and 90 percent of the population, usage of the In- Producers Benefit ternet is set to change dramatically for every- The opportunities that are available to all one from the millennials to the silver surfers. types of media companies are reflected in the attitudes of consumers. At the same time that The Internet has already brought change, their consumption of and satisfaction with however, and on such a scale that it deserves Australian offline content continues to in- serious examination. This report presents the crease, consumers also told us that they like findings of BCG’s independent investigation the richness, the choice, and the quality of into the impact of online media on Australian content that is now available to them online. artists and users and the media sector itself. Internet media provide an annual consumer surplus—the value consumers place on an ac- Our conclusion is simple: overall, the Austra- tivity or product that is over and above the lian media and content industry is growing, price they pay for the activity or product—to consumers like what they are offered, and Australian consumers of $24 billion. there are opportunities for all. However, making the distinction between online and offline media is in and of itself A Growing Industry misleading. Just as the line between audience Online media have played an important part and artist is blurring, so, too, is the line in the growth of media revenues over the past between online and offline content.

6 | Culture Boom: How Digital Media Are Invigorating Australia Consumers who enjoy an Australian programming that is highly valued by smaller Broadcasting Corporation (ABC) television but no less valuable audiences. programme are delighted that the iview service means that they can catch up on an In all this, the English language is a double- episode they’ve missed, watching at a time edged sword for Australia. It means the and place that suits them. They do not country can export to a larger global English- distinguish between watching the episode speaking market, but it also means Australia online and offline. faces greater competition. However, the evidence shows that Australians are punching Our research highlights the importance of on- above their weight in this area, continuing to line content portals, including BigPond, favour Australian content while exporting iTunes, and YouTube, which give Australians their own content and culture to the rest of access to a wide variety of content. Austra- the world. lians value these platforms to the tune of al- most $1,400 per connected household. The Some feared that the Internet would tip that content portals provide consumers access to a balance, and Australian content would be rich and diverse mix of media, which allow overwhelmed. This does not seem to be the them to shape their own experience. These case, however. Australians believe that platforms are putting the power of choice Australian online content is as good as the into the hands of consumers who have content from overseas and that there is a lot displaced cultural gatekeepers as the arbiters more content than there was three years ago. of content. It is not a surprise, therefore, that Additionally, the digital media trade surplus consumers place a value on these platforms is growing, with twice as many Australian that is 2.5 times greater than the value they online videos being watched in America as in place on online videos and Australian online Australia. newspapers. In addition to the opportunities for both Although there are challenges for some, many consumers and producers, there is also a creators and producers are also feeling the wider positive cultural and economic impact benefits of the Internet. It has given creators from online media and the Internet. The and producers opportunities to reach many increasing consumption of media online is audiences, whether they are in the next driving a cultural change in Australia that can village, across the country, or around the have many benefits for niche consumers, world. It has also allowed thousands of remote communities, and society as a whole. creators and producers to distribute content It is also driving new revenue streams and where they never could before because of new jobs, which will be crucial to achieving high barriers to entry. These impacts are of the national digital-economy goals. This particular benefit to Australia. The two great applies not only to business but also to health, historical Australian competitive education, and government. Australia’s many disadvantages—distance and the greater remote communities are now connected, economies of scale enjoyed by foreign giving them the chance to participate both as businesses with much larger home markets— consumers and creators. Connections with have been partially or completely removed. Asia, an essential element in Australia’s future, have become much easier.

The Impact The new, rich, and diverse media landscape Despite posing a number of challenges to makes the best of Australian content more traditional players, media companies large available to Australians—and to the world. and small are rapidly adapting to the new Whether opera fans are in Katherine, Internet world. Some companies are focusing Australia, or Kuala Lumpur, Malaysia, they on hit programming—the quality drama or can see Sydney Opera House performances entertainment show, for example—that draws that they might never see in the flesh; large audiences and unites the nation. Others Australian cricket fans in London and are focusing on specialist content: the niche Lyndhurst can follow the Boxing Day test

The Boston Consulting Group | 7 almost as if they had tickets for the media have enriched the lives of Australians Melbourne Cricket Ground. and brought benefits that far outweigh any losses. The effects of online media will be felt The media and content industry is constantly from the rural heartland to the urban centres evolving. Whether through the development by both the young and the old, and digital of new forms or new technologies, the content will play a growing role in industry is always changing and transforming transforming Australia’s culture and economy the ways people consume media. Online for many years to come.

8 | Culture Boom: How Digital Media Are Invigorating Australia Bigger and Better How Online Content Drives Australian Media

oday’s digital content is bringing ing games and performing arts, are being Tfresh energy to an already significant stimulated by fresh digital dimensions. media culture—both online and offline. Better infrastructure, the proliferation of All of this adds breadth to a vigorous media access devices, and the need for mobility are culture. also driving growth. Although the bulk of the industry’s income is still generated by offline Australians spend a substantial and growing media, the revenue coming from online proportion of their discretionary time con- media is growing fast. suming media. Nielsen research now suggests that Australians who are online (which is most of the population) spend more time on A Digital Nation Internet media activities than on traditional It is the declared aim of the Australian gov- ones, such as watching television, listening to ernment that it should be one of the world’s the radio, or reading newspapers. (See Exhib- leading digital economies by 2020. The trends it 1.) The time spent on the Internet comes of recent years, which show what the Austra- not from finding extra hours in the day to de- lian Interactive Media Industry Association vote to media but from increased multitask- (AIMIA) describes as a “seismic shift” in In- ing. A majority of Australians report that they ternet usage, suggest that this is within watch television and surf the Internet simul- reach.1 The growing digital economy—which taneously. Yet there is still room for expan- sees Australians taking to the Internet as they sion. A report published by comScore in Feb- previously took to print, film, and televi- ruary 2011 found that the time spent online sion—is stimulating established media sec- by Australians was less than the global aver- tors in which Australia, with a population of age and much less than users in the U.S. and 22.6 million, has traditionally punched above Canada.3 its weight in global markets.

Australia is producing and consuming much The Media Economy more digital content than ever before. There High consumption has created a vigorous are now more than 2 million .au websites, a media economy. Total media revenues in Aus- number that has more than doubled since tralia in 2011 were $24.8 billion, with televi- 2007. The amount of time the average Austra- sion ($7.9 billion) and newspapers ($5.3 bil- lian spends online has tripled in the past de- lion) accounting for a little more than half. cade.2 And a wide variety of sectors, includ- (See Exhibit 2.)

The Boston Consulting Group | 9 ExhibitEXHIBIT 1 1| The| Time Time Spent Spent Online Online Is in Is A inddition Addition to the to Timethe Time Spent Spent on Other on Other Forms Forms of Media of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 71 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the AverageAverage hours hours per pe weekr week spent spen consumingt consuming media media by among online on Australians,line Australi 2007–2010ans, 2007–2010 Through 2015 Continue to Grow Is $3,882 Share of consumption of Australian online-video content by country of consumption1 Value Chain Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Surplus per connected household ($) Estimated revenue captured along book value chain: hardcover book and e-book Hours per week $billions Surplus per connected household ($) 32 Share (%) 4,000 87 50 Share (%) Hours per week $billions $billions1.0 4,000 50 32 40 $billions 87 3,882 More than twice as much Cover design, Print, store, 10 1.0 200 40 2.2 Author Marketing Cover design, PublisherCRetailer onsumer 25 0.9 3,882 MoreAustrali thanan twconticeen ast ismuch consumed typesetting, Prandint, shistore,p 58% 10 0.8 490 200 times2.2 Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 9.3 0.8 0.8 0.9 Total Internet-media times Auin stralithe Uan.S. coasnt inen Aut isstrali consumeda and editing and ship 0.8 490 and editing 9.3 0.6 2007 2011 2015 3,000 Toconsumertal Internet-medi surplus a in the U.S. as in Australia 491 20 21.7 8 0.6 0.6 2007 2011 2015 3,000 consumerin Australi surplusa is 7.9 0.5 0.6 491 30 32 20 21.7 13% 2007 2010 8 2007 2011 2015 Online 0.4 0.5 in$24 Australi billiona is 30 2007 2010 7.9 2007 2011 2015 Online 0.4 0.5 0.5 491 $24 billion 32 13% 106% 0.3 0.3 0.3 0.3 106% 0.2 491 15 6 Online share is still small in 2015, with 0.2 0.3 0.2 0.2 0.3 0.2 0.3 0.3 2,000 15.0 4% 6.0 0.2 545 1.0 0.8 15 6 Online share is still small in 2015, with 0.1 0.1 0.2 0.1 0.1 0.2 0.1 0.2 0.2 0.1 0.1 0.1 2,000 3.3 4.1 13.7 15.0 4% 6.0 5.6 the exception of music 0.0 545 3.9 1.0 0.8 13.3 13.2 5.35.3 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 20 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 13.0 10 39% 5.35.3 20 13.0 10.3 1,496 Hardcover 26.0 10 9.9 39% 4 1,496 Hardcover 9.9 10.3 4 1,000 Hardcover 26.0 10% –70% 10% –5% 1 1 1,000 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 –70% –5% 1 1 –100% –50% 5 6.4 4.6 6.4 2.4 2.9 3.0 2.4 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 10 14 3.4 2 2.2 2.1 2.2 10 3.1 4.6 2.1 2.4 1.9 2.4 1.9 Change from 2007–2011 (%) 3.4 2.2 2.1 2 2.1 1.6 2.2 2.1 1.6 2.2 Change from 2007–2011 (%) 0 3.1 2.2 1.9 1.5 1.9 0 8 2.1 1.6 1.6 1.2 1.5 1.01.0 1.1 0.5 0.5 0 1.2 0.4 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 108 Total 5 4 2 0.8 0.5 0.0 0 0.1 0.1 116 106 272 232 159 Total 5 333 2 3.3 0 116 106 108 446 414 159 0 4 0.8 0.5 0.0 4.6 3.9 923 272 446 414 232 333 1 3.3 4.6 3.9 923 0 E-book 13.0 Change from 2011–2015 (%) E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent coOnntlineent Onvidlineeos AustraliOnlinean Onmusilinec Online TV Onbolineoks Inraditerneto internatiOnlineonal Onmovlineies ofHigher retail share price Moremarketing social Reducedin digital costs applNoticable Increase(share ofd) Rbuteduced negligib share,le reducti50 percenon int Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 coportalntenst videos newspAustraliapaners music books radio innewspternatiaponalers movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 TraditiRadionao l Newspapers Magazines Video games arts video1 140 160 153 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy medium in digital retail price costs in digital price paid Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 376 36 portals newspapers newspapers Radio arts video1 907 376 140 160 153 medium inmedium digital retail price costsmedium in digital price paid medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media907 Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Sources:Notes: Based The Aonustr thealian time Online spent onlineConsumer in an Lands averagecape week, Neilsen, by Austr Maraliansch 2011. 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Sources:Radio industry Austr alianrepo rtCo; Livemmunic Perfoationsrmance and A ustrMediaalia Au; Authority;stralian Scr Reeencording Austr Industryalia; Motion Asso Piciation;cture Distributors Ovum; JPMor Assogan;ciation Frost of& ASullivustralia;an; Magnaglobal; Digital Sources:industry reAupostrrtalian; Austr Coalianmmunic Recorationsding Industryand Media Asso Authority;ciation; OvumScreen Digit Australalia; Games Motion Fore Pcaicturst; JPMorge Distributorsan; Frost Asso & Sullivciationan; of B CGAustr analyalia;s is.Magnaglo bal; Digital Radio Sources: Consumer Austr surplusalian isInt theernet value Consumer consumers Surve placey, January on an 2012; activity Austr or alianproduct Bur thateau isof overStatistics and ab ABSove 8146.0, the price Household they pay Use for itof. SeInfeormation “Appendix: Te chnologMethodology”y, 2010–2011. for Sources:Note: : "A CustromScoraliane; online IT Te-vchideo Repo content"rt. refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. Source:Notes:1 The Based Australian on the Online time s peConsumernt online Landscape in an average, Neilsen, week byMarch Austr 2011.alians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; 1 1 Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note 1 Consumption: : "Australian is measu onlinere-vdideo by the content" numbe refr ofers pla toybacks content of uploaded content. Only in Austr thealia top; nine"Austr countriesalian" consumers are shown r;ef numerers to ousconsumers other countri livinge ins with Austr aalia. small share of Sources:Note: : Estimated New York fTiorme a s“typi, 2010;ca l”B CGha rdanalycoversis. book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. industry The 2008 re poandrt ; 2009Austr valianalues R arecore usedding fo Industryr initial AssoTV andciation online; Ovum video Digit channelsal Games resp Foectivelyrecast ;as JPMorg no revenuesan; Fro stwere & Sulliv recordedan; B CGin 2007 analy. Thesis. percentage change is over more information. 1 Note:12 Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n = 5,886); not all media types or activities are shown. 1 1 2 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note The :example : Estimated for thefor ae- “typibookca herl” hae assumesrdcover b anoo kag andency e- mobook;del amounts approach, a rewhe inre Uby.S. thedollars. publisher sets the consumer price and the retailer acts as an agent. BrIncludesoadcast PC TV, video, (not online and D TV);VD/video, excludes but time-shiedexcludes video TV usingand Internet mobile Prdevicesotocol. television. BC OnlineG anal videoysis. revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. Thethree 2008 years and and 2009 two v years,alues arrese peusedctively for .initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over moForre example information., BigP ond, iTunes, andYouTube. consumption are not shown. 1 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Broadcast Includes TV PC (not, video, online and TV); DVD/video, excludes but time-shifted excludes video TV and using Internet mobile Protocol devices. television. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown. 2 Includes PC, video, and DVD, but excludes video using mobile devices.

Exhibit 2 | Media Revenues Are Forecast to Grow by 4 Percent Through 2015 Total media revenues earned in Australia, 2007–2015 EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture 1 1 Number of employees in Australian media industry Strongly Strongly How much do you agree with these statements about the Internet?1 Ideation and Talent Reproduction 4% Number of employees in Australian media industry1 Stronglydisagree Stronglyagree How much do you agree with these statements about the Internet? Production Marketing Monetisation Consumption $billions CA4%GR disagree agree Idcompeationositi anond discoveTalentry Production Marketing andRepr distributoductionion Monetisation Consumption $billions CAGR 29.1 I consume more online content now than composition discovery and distribution 30 Number of employees Strongly Strongly 30 3% 29.1 II consumedid three moreyears onaglineo content now than Strongldisagreey Stronglyagree CAGR Numb150,000er of employees Music sales 3% 86% Media I did three years ago Australian disagree agree Music sales CAGR 150,000 I consume more media content now than Online Australian content is as good as 24.8 86% 3% Online Offline consumptioMedia n Australiand an Vertically integrated labels Stores 24.0 24.8 II consumedid three moreyears medago ia content now than Ononlineline inAustraliternationalan co ntcoenntten ist as good as Old Professional Vertically integrated labels 23.2 22.8 24.0 CA3%GR Online Offline isconsumptio increasing—n internatiand onal Typically high barriers to entry Stores Few devices 93% CAGR 120,000 I did three years ago online international content moOlded l Professiartistonas l 22.0 23.2 22.8 95% Online Offline bois increasingth online an—d I consume more Australian media content incoternatintent onalare Offline Australian content is as good as model TyDopiminatedcally high by baa fewrriers la torge en pltrayy ers Few devices 22.0 93% 120,000 artists 97% 96% 95% Online Offline 105,000 both offlinonlinee and Inow consume than Imore did three Australi yearsan agmedio a content coofnt simient laarer Offlineoffline inAuternatstraliioannal co ntcoenntten ist as good as DoTraditminatedional “curatorsby a few la” ofrge ar pltayers Concerts 20 98% 97% 96% 105,000 89% offline now than I did three years ago ofqu simialitlayr offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline Merchandise 100,000 94% Ico cannten accesst now more than highthree-q yearsuality ag offlino e content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website Australian Professiartistonas l plDigitalatforms MusiStoresc sales 2% 2% 2% Australian Thto ereme isnow more than Au stralithere anwas med threeia coyearsnten agt availo able platforms Self-production Artist website CA2%GR CA2%GR CA2%GR content is artists Consumers Stores cocontntinuouslyent is to me now than there was three years ago Social Online CAGR CAGR CAGR Online I can access more high-quality online Australian online content is not worse now than Consumers Online Multiple Ico cannten accesst now more than highthree-q yearsuality ag onoline coimprovntinuouslying New Digital labels marketinSocial g 10 coOnntlineent is Auit wasstrali threean on yearsline coagnto ent is not worse now than Digital labels marketing Increasingly plMultiplatformse 10 50,000 content is content now than three years ago improving moNewdel lIncreasinglyess relevant Concerts andplatforms multiple 50,000 improving it was three years ago model Digital Concerts improvin qualitingy Online content is better now than it was less relevant andde multiplvices e Onthreeline years cont agento is better now than it was marketinDigital g in quality Traditional marketing Merchandise devices three years ago Labels Merchandise 23% Labels Traditionalabels l Traditional 34% 25% CA23%GR The User generated labels Trmarketinaditionagl Sponsorship CA34%GR 14% CA25%GR CAGR The Internet makes it easier now to promote User generated 14% InternetThe is marketing Sponsorship CAGR CAGR 11% ThAuestrali Internetan culture makes abro it easiader now to promote 7% Overall, Inhaternetving ais Australian culture abroad Continuum More Greater role of artist Prominence of 0 0 11% Growth rate for jobs I prefer the current media landscape to Continuum More Greater role of artist Prominence of 7% consumersOverall, positivehaving effec a t The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 0 2% 3% 4% 5% 0 6% assGrowthociated rate with for on jolinebs Ithe prefer landscap the currene fromt medi threea yearslandscap agoe to across artists opportunities Emergence of new players new business 2% 3% 4% 5% consumersprefer how ponositive Australi effecant ThAuestrali Internetan culture is not having a negative effect on and user (for example, Increased involvement of consumers models 6% assacoctiviiatyted is wmoreith on thanline the landscape from three years ago and user (for example, Increased involvement of consumers models 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) preferthings ho arwe I am not worried that the emergence of on Auculturestralian Australian culture generated via platforms Higher share 11ac timestivity isoffline more growth than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth thingsnow are Ithe am In notternet worri willed threaten that the traditiemergenceonal ofmedia culture such as for artist now the Internet will threaten traditional media suchYouT ubase) for artist Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; YoFeuTwerub bae)rriers Sources:SourceAustr aliaAustralian: A filmustr alianindustry Communications Communic statistics;ations Magnaglobal and and Media Media media A Auuthority,thority forec CommunicationsCoasts;mmunic Digitalations Radio Report r epIndustryort,, 2010–2011;2010–2011; Report 2010 ScrScreeneen; Live AuA Pustralia;strerfoalia;rmance Motion Motion Austr Pi Picturecturaliae; ADistributorsustr Distributorsalian Re Acordingss Aocssociationiation Industr of ofy Sources:IBISWorld; A ustrBCGalian analy Busis.reau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Fewer barriers Australia’sAAssustrocaliaiation film film ;industry Ovum industry Digit statistics; stalatistics; Games Magnaglobal Magnaglobal Forecast: 2010–16 mediamedia; JPMorgforecasts;forecasts;an; Digit DigitalFrostal & RadioRadio Sulliv Industryan digital ReportRe mediaport 20102010 resear;; Livech, PPerformance2011erfo;rmance BCG anal A Austrysustralia;isalia. ; A Austrustralianalian Re Rcordingecording Industr Industryy IBISWorld;Note: CAGR BC =G com analypoundsis. annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. Source 1 Results: A austrre faliarom Internetthe following Consumer surve ySurve questiony, January (surv ey2012. size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please Source 1 Results: A austrre faliarom Internetthe following Consumer surve ySurv questioney, January (surv ey2012. size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 1 Association;AssNotes:ociation CA OvumGR; Ovum = Digital comp Digitound Gamesal Ga annual mesForecast, Fo grreowth ca2010–2016;st r: ate.2010–16 JPMorgan;; JPMorgan; Frost Frost & & Sullivan; Sullivan digitBCGal analysis. media research, 2011; BCG analysis. Note Employee: CAGR num = combepors undare full-time annual gr employeesowth rate.. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Reratesults how a remuch from you the agree following with surveeach yof question them. (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please RePleasesults r aatere fhowrom muchthe following you agr eesurve withy questioneach of them. (surv ey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Source: BCG analysis. 1 Artists Industry Consumers Note:Notes: CAG RCA =GR compound = compound annual annual growth growth rate. rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

10 | Culture Boom: How Digital Media Are Invigorating Australia Media revenue was up from $22 billion in Overall, the media content industry supports 2007, a compound annual growth rate (CAGR) an estimated 105,000 employees, with the of 3 percent. This was in spite of a setback af- largest numbers in newspapers and movies. ter the financial crisis in 2008 and 2009 that At constant productivity levels, the forecast saw a small contraction in revenues. Perfor- growth in the industry should create another mance was varied across different types of 15,000 jobs. (See Exhibit 4.) media, with sectors of prosperity outweighing the pockets of retreat. Games led with a 46 percent revenue increase over four years, The Online Driver while television, movies, books, and perform- Growth in the media sector is being driven by ing arts grew strongly. Newspapers, maga- online activity. Of the $2.9 billion expansion zines, and music experienced a more chal- in annual revenue from 2007 through 2011, lenging environment, but these media types 40 percent was generated online, even though are learning to adapt. digital activity was responsible for only 2 per- cent of revenues at the start of the period. We forecast that media revenue will grow at a Online revenue grew at a rapid 34 percent CAGR of 4 percent through 2015, reaching CAGR, compared with 3 percent for the me- $29.1 billion. We expect television to be up by dia industry as a whole. In 2009, the growth 17 percent over the period, reaching $9.3 bil- in online media partly compensated for the lion, while books, games, and performing arts contraction driven by the global financial cri- improve on their impressive growth rates of sis. (See Exhibit 5.) the past four years and movies maintain solid growth. (See Exhibit 3.) Music has turned the What’s more, the contribution of Internet me- corner and is forecast to grow by 12 percent dia to total media-sector revenues is set to over the next four years. Only magazines are grow over the next four years, accounting for likely to contract in revenue from 2011 more than half of the extra $4.3 billion annu- through 2015, while newspapers stabilise al revenue projected by 2015. Digital media without regaining the ground lost since 2007. revenue is expected to grow at a CAGR of 25

EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media ExhibitEXHIBIT 3 3| Revenue| Revenue for for Most Most Media Media Types Types GrewGrew fromfrom 2007 ThroughThrough 20112011 andand IsIs Fo Forecastrecast to to Gr Growow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 ThroughThrough 2015 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain RevenueRevenue earned earned by bymedia medi typea type in inAustralia Australi ain 2007, 2007, 2011 2011,, and and 2015 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Sources:Radio industryAustralian re poCommunicationsrt; Live Performance and AMediaustralia A;uthority; Australian Screen Recording Australia; Industry Motion Asso Pictureciation; DistributorsOvum; JPMor Agassociationn; Frost & ofSulliv Australia;an; Magnaglobal; Digital Radio industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 Industry Report 2010; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; BCG analysis. 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online Online video video revenues revenues do notdo notinclude include revenue revenue derived derived from from TV TV and and movie movie downloads downloads or or streaming,streaming, as these aarere includedincluded in in TV TV an andd movie movie re revenues.venues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown.

The Boston Consulting Group | 11

EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown.

Exhibit 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with the Online EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Sector the Key Driver of Growth 1 Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth 1 How much do you agree with these statements about the Internet? Impacting Australian Culture Number of employees in the Australian media industry 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry Sources:IBISWorld; Australian BCG analy Bureausis. of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. IBISWorld;Note: CA BCGGR =analysis. compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Note: Employee CAGR = compoundnumbers a reannual full-time growth employees rate. Forecast. job numbers assume no change in productivity levels from 2011 levels. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers 1Employee numbers represent full-time employees.

Exhibit 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow ContinueEXHIBIT to5 | GrowRevenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 RevenueContinue earned to by Gr onlineow media channels in Australia, 2007–2015 Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 Sources:1 Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 Includes PC, video, and DVD/video, but excludes video using mobile devices. 1 Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. Industry Report 2010; Australian Recording Industry Association; Ovum Digital Games Forecast, 2010–2016; JPMorgan; Frost & Sullivan; BCG analysis. 2 For example, BigPond, iTunes, andYouTube. consumption are not shown. The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. 1 three years and two years, respectively. The 2008 and 2009 values are used for initial TV and online video channels, respectively, as no revenues were recorded in 2007. The percentage change is over three years and two years, respectively.

12 | Culture Boom: How Digital Media Are Invigorating Australia EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

percent, which compares with only 4 percent Only in the music space, where downloads for overall media growth. are increasingly displacing previous genera- tions of technology, will online sales account We estimate that approximately 5,500, or a for a majority of revenue by 2015. little more than 5 percent, of the jobs in the media content sector are associated with on- It is clear that online media growth has not line activity. We forecast that more than half hindered the expansion of offline media. For of the media sector jobs created from now example, television, which added nearly $2 through 2015 will be associated with digital billion in offline revenues from 2007 through media activity, assuming constant productiv- 2011, is projected to add another $1.3 billion ity. This would increase the number of online- by 2015, an increase of more than 50 percent related employees to 13,500, or 11 percent of over eight years. the media workforce. Even where there is offline contraction, on- Digital media’s share of revenues in the two line growth can compensate. Radio has gener- categories of entertainment and drama and ated less traditional revenues over the past education, news, and current affairs doubled four years, but online revenues have ensured from 2007 through 2011. that, overall, the numbers for the sector re- main stable. Additionally, online radio is pro- The role of digital media in generating the bulk jected to deliver some growth in the sector of growth was driven by some remarkable lev- through 2015. Fewer traditional books are els of expansion. E-books generated more than likely to be sold in 2015 than are being sold ten times the revenue in 2011 that they did in now, but publishers will more than compen- 2007, and they are expected to repeat this feat sate with extra income from e-books. Authors over the next four years. The income from on- will also benefit, since e-books offer them a line games more than doubled from 2007 higher share of the income generated than through 2011, and it is expected to fall only a traditional printed books do. little short of the same performance by 2015. An Internet Superhighway A Stimulus for Most Players Future digital media growth is likely to be The Internet has stimulated interest in tradi- driven by improvements in the speed and tional media. Australians watched more quality of Internet connections rather than broadcast television and listened to more ra- larger numbers of new users. In Australia, the dio in 2010 than they did three years earlier. capacity available to new users is fast For the consumer, online and offline televi- improving. Until recently, Australia had low sion and radio are increasingly complementa- broadband penetration, slow broadband ry, with online access and catch-up services speeds (compared with other developed providing extra ways of watching programmes economies), and high subscription prices. All when and where it is convenient. The 2011 of this is changing. In June 2011, Australians Digital Australians report noted that tradition- downloaded a total of 274,000 terabytes of al radio listeners and TV viewers were sup- data, or 44 gigabytes per connected plemented by other groups using these servic- Australian household. This is close to triple es online (with 18 to 29 year-olds being the amount Australians were accessing two particularly enthusiastic online consumers).4 years earlier.5

As dynamic as the online media sector is, the Nor is this growth likely to slow. The NBN, to bulk of media revenue is still generated by be completed over the coming decade, is traditional media. After four years of rapid planning by 2021 to bring download speeds online growth from 2007 through 2011, the of 100 megabits per second—more than 40 Internet’s share of overall media revenue is times as fast as a connection using an still only 7 percent (or about $1.6 billion). We asymmetric digital subscriber line and four forecast that in 2015, 86 percent of total me- times as fast as cable—to 93 percent of the dia income will still be generated offline. population.

The Boston Consulting Group | 13 The NBN will supplement the growing devices all mean that life is improving as impact of mobile connections. Mobile much for creators as it is for consumers. downloads accounted for a little more than 1 percent of total Internet traffic in mid-2011, Most Australians use digital media every day, but the sheer number of handsets—and the as do companies—old and new. All are set to rapid growth in smartphone penetration— do so even more in the future. means that this contribution should grow rapidly. According to Aimia.com, a Nielsen online-consumer report estimated that half of all Australians had access to the Internet from mobile devices, including a third who

have smartphones. Ipsos research shows that NOTE 75 percent of new handsets sold in Australia 1. Submission–Convergence Review Detailed Discussion are smartphones, the second highest Papers, AIMIA, October 31, 2011. proportion in the world.6 2. State of the Internet–Australia, comScore, February 2011. 3. State of the Internet–Australia, comScore, February Increases in transmission speeds and the 2011. increasing prevalence of smart mobile 4. Digital Australians–Expectations About Media Content in devices are themes that are evolving hand in a Converging Media Environment, ACMA, October 2011. hand with improvements in content 5. Submission–Convergence Review Detailed Discussion Papers, AIMIA, October 31, 2011. generation and editing technology. Cheaper 6. Ipsos, “Measuring Global Smartphone Impact,” computers, software, and multifunction http://www.ourmobileplanet.com.

14 | Culture Boom: How Digital Media Are Invigorating Australia Content and Contentment Australians and the New Media Landscape

ustralian content is competitive And yet, on the Internet, where there are no Aboth at home and globally, with a trade quotas, local Australian content is competing surplus in the cutting-edge online-video and winning. Our research found that Austra- market. Consumers like what they see online lians like both the new and the old media. as well as offline. They believe the value of They still cherish offline media, but they have the online media they consume is greater—to no desire to return to an offline-only world. the tune of $24 billion annually—than the Most prefer today’s media landscape to that price they pay for them. This landscape is one of three years ago, with far fewer believing in which both mass media and high culture that the Internet will threaten traditional me- can prosper online. dia. (See Exhibit 6.)

Beating the Quota A $24 Billion Benefit to Consumers If television is any guide, Australian content Our research into the Internet media-content can not only compete but also win in the local consumer surplus—the value consumers and global marketplace. Australian networks place on an activity or product that is over offer their audiences the best and most popu- and above the price they pay for the activity lar programming from the U.S. and the U.K. or product—shows the great extent to which Yet the 20 most-watched programmes on free- consumers value online media. (See the to-air television since 2007 have all been of sidebar “A Consumer Surplus.”) Online media Australian origin.1 The three commercial free- is worth an impressive $24 billion in to-air channels consistently and comfortably consumer surplus annually to Australians; exceed the required 55 percent minimum that is $3,882 per connected Internet quota of homegrown programming from household. (See Exhibit 7.) 6:00 p.m. through midnight. Why? Because Australians want to watch local content. Of particular note is the added value that Australians place on online content portals. Those quotas are part of the long tradition of The total annual surplus for all users of Inter- protecting Australian broadcast content net content portals is $9.2 billion. (See the through regulation. They reflect apprehen- sidebar “The Role of Platforms.”) sion that homegrown content could be mar- ginalised by foreign (mostly American) mate- Australia’s Internet consumers also believe that rial. This concern has also been voiced in there is better content available to them than relation to the Internet. there was three years ago. (See Exhibit 8.) This

The Boston Consulting Group | 15 EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown.

EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online ExhibitEXHIBIT 6 6| Media| Media Consumption, Consumption, Particularly Particularly Online,Online, Is CChanginghanging fforor thethe Better Better,, sa Sayy A Australiansustralians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth HowHow much much do doyou you agree agree with wi ththese these statements statemen tsabout about the the Internet? Internet?1 1 Impacting Australian Culture 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source:Source BCG’s: Austr Australianalia Internet Internet Consumer Consumer Surve y,Survey, January January 2012. 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1Results 1 Results are fromare f rothem followingthe following survey surve questiony question (survey (surv eysize: size n: =n 1,035):= 1,035): Below Below are are a a series series of of statements statements we’vewe've heaheardrd ppeopleeople sa sayy ab aboutout the the Internet. Internet. P leasePlease 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how rate muchhow much you agreeyou agree with witheach each of them. of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

opinion is epitomised by the comment, “If you Nor does the novelty and wealth of interna- know what you are looking for, the quality is bet- tional online media appear to be seducing ter—we have access to resources that we didn’t Australians away from trusted local content. have before.” And this isn’t confined to “new” Consumers told us that 35 percent of their media. To take one example, from 2007 through newspaper reading is online, the highest 2011, the annual unit sales of DVDs, cinema tick- share of online activity in any sector. But in ets, and movie downloads rose from $165 mil- spite of the ease with which foreign content lion to $202 million, with a tripling in online pur- can be accessed, readers continue over- chases accounting for most of the increase. whelmingly (91 percent of the time) to choose Australian papers rather than the New York Times, for example, or the Daily Mail. Local Is Good Although the Internet offers access to global content, Australian content is still highly val- A Cultural Trade Surplus ued, in particular for domestic news and en- Australian content producers are taking advan- tertainment. Australian content is also viewed tage of lower barriers to entry and easier access more than it was previously. From 2007 to overseas markets created by the Internet. We through 2011, the number of unique visitors found strong agreement with the proposition to .au websites came close to the number of that “the Internet makes it easier now to pro- Australians visiting international websites. mote Australian culture abroad.” This belief is substantiated at the fast-growing cutting-edge That Australians broadly prefer offline to on- of digital content: online video is progressively line media is only to be expected when 85 taking over from text and photographs as the percent of consumption remains offline. medium’s key currency. (See Exhibit 9.) However, the broad belief that Australian content is as good as its international coun- Australians, who watch a lot of imported video terpart is held more strongly for online than and export even more, are creating an online- for offline material. video trade surplus. International viewers con-

16 | Culture Boom: How Digital Media Are Invigorating Australia A Consumer Surplus

Given that Australians spend a significant whatever type of content they are inter- amount of their time consuming media, it is ested in. The added social dimension of no surprise that they like and value activities recommendations from friends and reviews such as watching TV, listening to music, and from peers serve to enhance the benefits. reading newspapers. What may be a surprise The value of these benefits is reflected in is how much consumers have come to enjoy the yearly consumer surplus for online and value performing these activities online. content portals in Australia: $9.2 billion or $1,500 per connected household. A $24 Billion Surplus Our consumer research has shown that the Measuring Consumer Surplus perceived value to those Australians who The consumer surplus quantifies the benefit participate in various online-media con- of an activity or product to consumers that is sumption activities amounts to a massive over and above what they pay for that $24 billion. This equates to $3,882 of added activity or product. We measure what is value for every Internet-connected house- called the “equivalent surplus”—the amount hold (there are approximately 6.2 million in of additional income that consumers would Australia). need to receive to generate the same value they get from the activity or product. Consumers particularly value the high level of convenience and choice offered by Quantifying this value is an inherently difficult online content portals such as BigPond, exercise. To elicit reliable valuations, we use a iTunes, and YouTube. In a world where there methodology that asks consumers to choose is more content than one individual could the most and least valuable offering from ever consume, the ability to go to a single different groups of Internet media-related website and readily access the type of activities or products. By including opportuni- content that is of interest is of great value. ties to save different amounts of money These websites do the job of aggregating among the options presented, we are able to millions of hours of content and offering use statistical methods to derive a monetary the user the functionality to search for, find, value for each activity or product. (See and enjoy—either for a fee or for free— “Appendix: Methodology.”) sumed eight times as much Australian content time in the online market. In 2011, they sold as Australian viewers consumed in the second 630,000 e-books, an increase of 1,260 percent half of 2010; twice as much Australian content in only three years. was watched in the U.S. alone, while substantial amounts were also consumed in Japan. The Arts Online We compared data from two six-month peri- The potential benefit of the Internet is not ods: the second half of 2010 and the second confined to mass media. Performing arts, half of 2011. Our analysis showed that the such as opera, that tend to attract more niche consumption of Australian online video by audiences, have been a conspicuous benefici- those in Australia grew by 110 percent. This ary. In fact, the more niche, the greater the growth in consumption of Australian content benefit. Those with the lowest overall con- by Australians outpaced the growth of inter- sumption—which may be the result of the national consumption of Australian content. availability of locations, performances, and However, the trade surplus still remains. tickets, and possibly of pricing, as much as the result of public taste—are those likeliest Nor is online video an exception. Australian to be enjoyed online. (See the case study e-books are also increasingly competitive. “The Sydney Opera House: Democratising Australian publishers are making up for lost High Culture and Creativity.”)

The Boston Consulting Group | 17 Exhibit 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Is $3,8821 Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: BCG’s Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. 2010–2011. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 1 1 Consumer surplus is the value consumers place on an activity or a product that is over and above the price they pay for it. See “Appendix: Methodology” for 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. more information.For example , BigPond, iTunes, andYouTube. consumption are not shown. 2For example, BigPond, iTunes, andYouTube.

The Role of Platforms EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting AustralianIn Cultur the sidebare “A Consumer Surplus,” we and the rights to it), requires a great deal of identified the significant value that con-1 investment. For example, investment in: Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR sumers assign to online content portals composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees such as BigPond, iTunes, and YouTube.Strongly This •• Infrastructure and supportingStrongly systems 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian value reflects the important role that to store and provide easy access to I consume more media content now than Online Australian content is as good as 24.8 Online consumption and media platforms play in providing content content Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 to consumers. Without platforms of this model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offlinesort, internat theio tasknal co ofnt enfindingt and consuming •• Software and expertise to develop, Traditional “curators” of art Concerts 20 98% 89% quality content online would be significantly maintain, and improve the platform Merchandise 100,000 94% I can access more high-quality offline content now than three years ago harder. Creators and producers can use Digital Music sales Therethese is more platforms Australian medto easilyia cont enreacht avail localable and •• Enabling software and systems to Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago global audiences and benefit from the support rights management, billing, Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australiconsequentan online co ntrevenueent is not streams. worse now Where than payments, and other functions New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was platforms are open, this capability comes Digital in quality marketing devices three years ago at no cost to the creator, which dramati- To consumers (and even to producers), this Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The cally lowers the barriers to entry for investment is transparent. To recoup their User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australibuddingan culture content abroad producers to pursue new investment, different platform providers 7% 11% having a Continuum More Greater role of artist Prominence of 0 0 Growth rate for jobs Overall, I prefer the current media landscape to creative and commercial opportunities. use various business models. Some charge 2% 3% 4% 5% consumers positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 6% associated with online the landscape from three years ago and user (for example, Increased involvement of consumers models activity is more than prefer how on Australian Australian culture for content; others provide it for free and 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) culture generated via platforms Higher share 11 times offline growth things are I am not worried that the emergence of To provide consumers with a wide choice and recover their expenses through advertising. now the Internet will threaten traditional media such as for artist a user-friendly experience, and to provide Either way, consumers benefit and seem YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumercreators Survey and, January producers 2012. with the capability to very happy with the content consumption Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 control their material (for example, its use experience facilitated by online platforms. Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

18 | Culture Boom: How Digital Media Are Invigorating Australia EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown.

Exhibit 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively Impacting EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example the Key Driver of Growth 1 AustralianImpacting Culture Australian Culture Total media revenues earned in Australia, 2007–2015 How much do you agree with these statements about the Internet? 1 How much do you agree with these statements about the Internet? 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please Source: 1 Re BCG’ssults a reAustralian from the Ifnternetollowing Consumer survey question Survey, (surv Januaryey size 2012.: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. 1Results Pl easeare from rate howthe followingmuch you survey agree withquestion each of(survey them. size: n = 1,035): Below are a series of statements we’ve heard people say about the Internet. Please Source: BCG analysis. Artists Industry Consumers rate how much you agree with each of them.

Exhibit 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia Share of consumption of Australian online-video content by country of consumption1 EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 Value Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Sources:Note :ComScore; : "Australian IT online Tech -vRideoeport. content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. Note: “Australian online-video content” refers to content uploaded in Australia. 1 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. 1Consumption consumption is measured are not shown. by the number of playbacks of the content. Only the top nine countries are shown; numerous other countries with a small share of consumption are not shown.

The Boston Consulting Group | 19

EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers

The Sydney Opera House: Democratising High Culture and Creativity

The outside of the Sydney Opera House (SOH) is a symbol of Australia recognised worldwide. Now, its own digital revolution means that what goes on inside the iconic structure can be seen by a global audience—the Internet has become the “eighth stage” of SOH.

In 2009, SOH’s management decided to break through restrictions of location and capacity and use the Internet to bring its performances to an online audience across Australia and beyond. Transforming SOH from a venue into a brand for creative content, a content creator, and an aggregator has broadened and democratised access to high culture. In 2011, SOH sold 1.3 million tickets; the digital content on its own website, including video on demand and live streaming of performances, attracted nearly 1 million page views. Next year, online traffic is expected to double, creating a virtual opera house that is expected to attract almost triple its physical audience, reaching both international viewers and people in remote regions of Australia.

To further strengthen its digital presence, this year SOH will launch a digital education pro- gramme, delivering educational content directly to teachers and students in their classrooms. Social media are being emphasised, with a 116 percent increase in presence over the past year expected. This will generate a sales increase of 140 percent. SOH’s plans include the develop- ment of a strong mobile presence.

As a publicly funded body, SOH is always looking for ways to generate more income. Although digital revenues have not yet matched the initial investment, they are expected to do so. And rising ticket sales are being attributed, in part, to the interest stimulated by online viewing. Digital content has already been sold to Foxtel’s arts channel and will in the future be monetised more systematically through the SOH website.

The success of SOH’s digital revolution is perhaps best demonstrated by a response to the Ship Song Project, which recreated Nick Cave’s song with the participation of Australian stars such as Paul Kelly. A British viewer, one of more than 220,000 people who watched the video over the past seven months, wrote, “If I were an Australian, this would make me so proud of my cultural heri- tage, but because I’m not I can only wait in impatience for the Royal Opera House to catch up.”

Fewer than 5 percent of Australians have where it suits them, but because they like it and watched opera in the last year, but nearly a find that it serves their needs and purposes. quarter of their visits were online rather than at a theatre. Given a decent connection, the opera Australian producers have responded to the fan in the country towns of Bourke or Broken possibilities and challenges of the new media Hill can watch performances at home that landscape, generating content that both the would previously have required a trip to Sydney. home and global markets like and thereby gen- erating a cultural trade surplus in a highly com- petitive sector such as online video. In this, as A Promising Future in so many areas of life, Australia is competing. The evidence is clear: the market is working for Australian consumers. There is a great deal of enthusiasm for the choice, convenience, and variety that the Internet brings with it. Consumers also continue to value and use Australian content. They do this not uncritically NOTE 1. Convergence Review: Background Paper, Australian or out of unthinking patriotism, since they are Government Department of Broadband, Communica- more than happy to use imported content tions and the Digital Economy, December 14, 2010.

20 | Culture Boom: How Digital Media Are Invigorating Australia A Value Chain Reaction The Changing World of Media Content

echnological advances have disrupt- for the distribution of content in the country. Ted media content value chains, lowered Rapidly increasing transmission speeds make barriers to entry, and enabled a proliferation the Internet a viable option for transmitting of players and content. The beneficiaries of ever-larger file sizes, which is required to these developments include creators, whose view online television programmes and costs are lower and who now have access to movies. global market, and consumers, who now have the power of choice. This realignment As Internet technologies continue to advance, challenges media companies to adapt their they will usher in fresh possibilities and new business models. devices designed to exploit them, and the me- dia landscape will continue to evolve as it has always done. Technology Drives Change The Internet is having a profound effect on the production and consumption of media The Internet and Media Content content in Australia. However, there is noth- Value Chains ing new about the media landscape changing The Internet and the wide availability of in response to new technologies. Print, radio, devices such as smartphones have impacted film, and television all had their moment as the media sector in two key ways: they have the new dynamic force. Time and time again, reduced the costs of production and they have technology has impacted established value sharply reduced the costs of distribution. chains, creating new opportunities for some These changes have radically altered the and challenges for others. That all these me- value chain of media businesses. Lower dia have evolved and retained a significant production costs have democratised content place in the contemporary landscape pro- creation; now that an expensive production vides important context for the Internet. studio is no longer a necessity, anybody can be a content creator. Reduced distribution The impact of the Internet has grown as its costs mean not only is the whole country a penetration has increased and, in particular, potential audience but also the world. as transmission speeds have improved. In Australia, the Internet now reaches more The Internet also has no limits on the number than 80 percent of the population, and the of channels available for the distribution of con- intensity of everyday online participation tent. This makes targeting and reaching specific makes the Internet an ever-stronger channel audiences much easier. It also means that TV

The Boston Consulting Group | 21 programming directors are no longer the ones have a serious chance of getting noticed. They EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia EXHIBIT 11 | Online Distribution and Sales of Books Dramatically Change the Economics of the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumptiowhon of Audecidestrali whatan on Aline-ustraliansvideo co cannten watch.t by coun try of consumptcan uploadion1 tracks and videos to YouTube and Value Chain publicise themselves through a group website Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 Estimated revenue captured along book value chain: hardcover book and e-book Surplus per connected household ($) Share (%) Together, these three factors are disrupting and social media. Some get picked up by the Hours per week $billions 4,000 50 32 $billions 1.0 87 40 traditional value chains and changing the music majors and become global superstars; 3,882 More than twice as much Cover design, 10 200 2.2 Author Marketing Print, store, PublisherCRetailer onsumer 25 58% 0.9 economicsAu straliof contentan conten creation.t is consumed others are adopted and shared by a social typesetting, and ship 0.8 490 times and editing 9.3 0.8 Total Internet-media in the U.S. as in Australia network and become stars in their own right 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is The traditional model was characterised by for a smaller audience. The industry has had 2007 2010 7.9 0.5 30 32 13% 2007 2011 2015 Online 0.4 0.5 $24 billion high barriers to entry: substantial investment to seek fresh means of monetization, such as 106% 491 0.2 0.3 0.3 0.3 0.3 and economies of scale that favoured large, merchandising, sponsorship, and ticket sales. 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 vertically integrated media companies. Now (See the case study “Pogo and YouTube Play: 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 20 5.35.3 we are seeing the fragmentation of the value ‘People Power’ Takes Pogo to the 13.0 10 39% 1,496 Hardcover 26.0 9.9 10.3 4 chain, which allows for the rise of specialists. Guggenheim.”) 1,000 10% –70% –5% 1 1 (See Exhibit 10.) –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 Change has perhaps been most striking in the Changing Economics 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total music sector, where digital5 downloads are As some value-chain activities2 decrease in im- 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 now the dominant revenue generator. The portance, or even disappear altogether in the E-book1 13.0 Change from 2011–2015 (%) vertically integrated record labels that for- online channel, the economics of content busi- Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies merly dominated most stages of the value nesses change in response. (See Exhibit 11.) of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 chain have seen this structure fragment. The medium in digital retail price costs in digital price paid medium medium 907 reproduction and distribution elements have A compact disk or book has to be printed, Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-vallideo but content" disappeared, refers to content and uploaded the inonce-omnipres Australia; "Australian"- consumersstored, ref ersand to consumers either mailed living in Au orstr alia.sent to a store, 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. 1 2 1 2 ent shopping-mall music store is much more whose floor space has to be paid for. Analysis The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown. of a rarity, marginalised by online sales. by the New York Times shows the dramatic im- pact of the e-book on the publishing value Musicians no longer need to convince a chain. The analysis suggests that a typical record company of their merits in order to e-book is likely to cost only half as much as a

EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively ExhibitEXHIBIT 10 10 | Media | Media Value Value Chains Chain HaveHas Fu Fundamentallyndamentally C hangChanged:ed: Re Recordedcorded Music Music Example Example Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? 1 Impacting Australian Culture 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality Merchandise 100,000 94% I can access more high-quality offline content now than three years ago Digital Music sales There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices three years ago Merchandise Labels Traditional 23% labels Traditional 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture now the Internet will threaten traditional media such as for artist YouTube) Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers Source: BCG analysis.

22 | Culture Boom: How Digital Media Are Invigorating Australia Pogo and YouTube Play: “People Power” Takes Pogo to the Guggenheim

In becoming the first video jockey to conclude a long-term movie-remixing deal with a major studio, Nick Bertke, alias Pogo, is continuing a spectacular trajectory made possible by Internet media. The Perth-based 23-year-old has not only worked with Disney, Pixar, Microsoft, Showtime, and even the United Nations but also won serious artistic recognition. His video “Gardyn” was among the exhibits in the YouTube Play show at the Guggenheim Museum in New York, sharing space with artistic icons such as Picasso and Chagall.

Bertke records sounds from his favourite games and movies, piecing them together like a jigsaw puzzle to create nostalgic, infectious, and original music. It has been a massive hit online, attrac- ting 50 million YouTube views for his remixes of movies such as Alice in Wonderland.

Although all of his work is free on YouTube and his own website, Bertke has monetised his output by selling the tracks for download using the pay-as-you-like schemes popularised by Radiohead in 2007. He has also turned to his audience using the crowd-funding platform Kickstarter to finance his new project, world remix, which he describes as “to travel the world capturing sights, sounds, voices, and chords, and use them to compose and shoot a track and video for each major culture of the world.” Offering contributors downloads from the new project after it is completed, Bertke was quickly oversubscribed, raising $25,000 when he initially needed only $15,000. hardcover book, yet the author and publisher Opportunities for Consumers will make virtually the same amount from a The consumer is now king. This is perhaps the single sale of each. The biggest single reduc- single most-significant shift resulting from the tion is in the cost of retailing, but the most Internet. Consumers have growing power, and drastic effect is on the cost of printing, stor- they are active participants throughout the age, and shipping. These account for one- value chain, getting what they want when and eighth of the price of a printed book and dis- where they want it. Smartphones and tablets appear entirely as costs when producing an make consumption truly mobile, and on-de- e-book. Authors who have the means to self- mand services, such as the ABC’s iview, liber- publish e-books could retain as much as 60 ate consumers from programming schedules. percent of the revenue generated. New business models, such as subscription services and pay per view with streaming With a greater range of business models pos- from the cloud, are a response to changing sible, and barriers to entry coming down, consumer preferences for access to content more new players are entering the market, anywhere and at any time. (See the case study and more content is being generated. “ABC Iview: A Leaf from Old Media’s Book.”)

There are now 162 television channels avail- Consumers are now routinely offered choices of able to Australians, including 13 that are ex- media for content or events that were previous- clusively online. The 743 print newspapers ly restricted. For the 2012 Australian Open, ten- are supplemented by 412 online newspapers. nis fans were offered two free online choices: There are 27 music download sites, 776 radio mobile streaming of Channel Seven’s pro- stations (of which 147 are online), and more grammes and Tennis Australia’s own coverage than 2 million websites that use the .au do- in partnership with video provider Ooyala. Ten- main—a number that has more than doubled nis Australia also used YouTube for additional since 2007. In addition, there are a gamut of content, reaching fresh audiences for some aggregators and social networks. All of that events, such as the qualifying tournament. adds up to an immense choice of content and sizeable demand, particularly when com- Consumers choose how and how much they pared with ten or fifteen years ago. consume. Music fans can buy individual

The Boston Consulting Group | 23 EXHIBIT 1 | Time Spent Online Is in Addition to the Time Spent on Other Forms of Media EXHIBIT 3 | Revenue for Most Media Types Grew from 2007 Through 2011 and Is Forecast to Grow EXHIBIT 5 | Revenue for All Online Media Types Has Shown Significant Growth and Is Forecast to EXHIBIT 7 | The Annual Internet Media Consumer Surplus per Connected Australian Household EXHIBIT 9 | Eighty-Six Percent of Australian Online-Video Content Is Consumed Outside Australia ExhibitEXHIBIT 11 11 | |Online Online Distribution Distribution andand Sales ofof BoBooksoks DrDramaticallyamatically Ch Changeange the the Economics Economics of of the the Average hours per week spent consuming media among online Australians, 2007–2010 Through 2015 Continue to Grow Is $3,882 1 Share of consumption of Australian online-video content by country of consumption1 ValueValue Chain Chain Revenue earned by media type in Australia 2007, 2011, and 2015 Revenue earned by online media channels in Australia 2007–2015 EstimatedEstimated revenue revenue captured captured along along the boo bookk value value chain chain:: hard hardcovercover book book and and e-bo e-bookok Surplus per connected household ($) Share (%) Hours per week $billions 4,000 50 32 $billions 87 1.0 40 Cover design, 10 200 3,882 2.2 More than twice as much Print, store, 0.9 Australian content is consumed Author Marketing typesetting, PublisherCRetailer onsumer 25 58% 0.8 490 times and ship 9.3 0.8 Total Internet-media in the U.S. as in Australia and editing 0.6 2007 2011 2015 3,000 consumer surplus 491 20 21.7 8 0.6 in Australia is 7.9 0.5 30 32 13% 2007 2010 2007 2011 2015 Online 0.4 0.5 $24 billion 106% 491 0.2 0.3 0.3 0.3 0.3 15 6 Online share is still small in 2015, with 0.2 0.2 0.2 0.2 2,000 15.0 4% 6.0 545 1.0 0.8 the exception of music 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3.9 3.3 4.1 13.7 13.3 13.2 5.6 0.0 5.35.3 20 13.0 10 39% 1,496 Hardcover 9.9 10.3 4 Hardcover 26.0 1,000 10% –70% –5% 1 1 –100% –50% 5 6.4 6.4 2.9 3.0 3.0 Television Newspapers Books Games Magazines Movies Radio Music Online video 14 4.6 2.4 2.4 10 3.4 2 2.1 2.2 2.1 2.2 Change from 2007–2011 (%) 3.1 2.2 1.9 1.9 2.1 1.6 1.6 1.5 0 1.2 0 8 1.01.0 1.1 0.5 0.4 0.5 0.1 0.1 Total 5 2 0 116 106 108 159 4 0.8 0.5 0.0 272 446 414 232 333 3.3 4.6 3.9 923 0 E-book1 13.0 Change from 2011–2015 (%) Online Online Online Online Online TV Online Internet Online Online Higher share More social Reduced costs Not Increased Reduced share, 50 percent content videos Australian music books radio international movies of retail price marketing in digital applicable (share of) but negligible reduction in Internet Television1 Video 2 Traditional Newspapers Magazines Video games 2 U.S. AustraliaU.K.CanadaGermany JapanFrance Brazil Italy Television Newspapers Books Games Magazines Movies Performing Radio Music Online 107 60 96 36 portals newspapers newspapers Radio arts video1 376 140 160 153 medium in digital retail price costs in digital price paid 907 medium medium Sources: The Australian Online Consumer Landscape, Neilsen, March 2011. Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Sources: Australian Communications and Media Authority; Screen Australia; Motion Picture Distributors Association of Australia; Magnaglobal; Digital Radio Sources: Australian Internet Consumer Survey, January 2012; Australian Bureau of Statistics ABS 8146.0, Household Use of Information Technology, 2010–2011. Sources: ComScore; IT Tech Report. 1 Sources: New York Times, 2010; BCG analysis. Notes: Based on the time spent online in an average week by Australians 16 years of age and older (survey size: n=5,886); not all media types or activities are shown. Radio industry report; Live Performance Australia; Australian Recording Industry Association; Ovum; JPMorgan; Frost & Sullivan; industry report; Australian Recording Industry Association; Ovum Digital Games Forecast; JPMorgan; Frost & Sullivan; BCG analysis. Consumer surplus is the value consumers place on an activity or product that is over and above the price they pay for it. See “Appendix: Methodology” for Note: : "Australian online-video content" refers to content uploaded in Australia; "Australian" consumers refers to consumers living in Australia. Sources: New York Times, 2010; BCG analysis. 1 1 1 Consumption is measured by the number of playbacks of content. Only the top nine countries are shown; numerous other countries with a small share of Note: : Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. Broadcast TV (not online TV); excludes time-shied TV and Internet Protocol television. BCG analysis. The 2008 and 2009 values are used for initial TV and online video channels respectively as no revenues were recorded in 2007. The percentage change is over more information. Note:1 Estimated for a “typical” hardcover book and e-book; amounts are in U.S. dollars. 2 1 2 The example for the e-book here assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent. Includes PC, video, and DVD/video, but excludes video using mobile devices. Online video revenues do not include revenue derived from TV and movie downloads or streaming, as these are included in TV and movie revenues. three years and two years, respectively. For example, BigPond, iTunes, andYouTube. consumption are not shown. 1The example for the e-book assumes an agency model approach, whereby the publisher sets the consumer price and the retailer acts as an agent.

tracks or whole albums, or they can stream Creators benefit all along the value chain, as music using a number of paid-for and adver- fixed costs are slashed and their share of in- tising-supported Internet-based offerings. come rises. Creation and production are less EXHIBIT 2 | Media Revenues Are Forecast to Grow by 4 Percent through 2015 EXHIBIT 4 | Australian Media Industry Employment Is Forecast to Grow Through 2015, with Online EXHIBIT 6 | Media Consumption, Particularly Online, Is Changing for the Better, say Australians EXHIBIT 8 | Australians Think Their Online Content Is High Quality, Improving, and Positively EXHIBIT 10 | Media Value Chain Has Fundamentally Changed: Recorded Music Example This greater variety of choice means consum- expensive, with no need for recording studios 1 Total media revenues earned in Australia, 2007–2015 the Key Driver of Growth How much do you agree with these statements about the Internet? Impacting Australian Culture ers can select high-engagement content— or printing presses, so self-publishing become 1 Number of employees in Australian media industry1 Strongly Strongly How much do you agree with these statements about the Internet? either the most popular content or niche ma- a practical option. Creators can market and 4% disagree agree Ideation and Talent Production Marketing Reproduction Monetisation Consumption $billions CAGR composition discovery and distribution terial focused on particular interests. promote online, either through specialised 29.1 I consume more online content now than 30 Number of employees Strongly Strongly 3% I did three years ago disagree agree websites such as Bandcamp or through social CAGR 150,000 Music sales 86% Media Australian I consume more media content now than Online Australian content is as good as media websites. They can also distribute on- 24.8 Online consumption and Vertically integrated labels 24.0 3% Offline I did three years ago online international content Old Professional Stores 23.2 CAGR is increasing— international Typically high barriers to entry Opportunities for Creators line, plus there are potential artistic benefits 22.8 93% 120,000 model artists Few devices 22.0 95% Online Offline both online and I consume more Australian media content content are Offline Australian content is as good as Dominated by a few large players The Internet helps artists thrive. Creators can in collaborating with other creators through 97% 96% 105,000 offline now than I did three years ago of similar offline international content Traditional “curators” of art Concerts 20 98% 89% quality now reach global audiences with ease. It is Creative Commons’ music sites, such as Merchandise 100,000 94% I can access more high-quality offline hard to imagine that Halfbrick Studios, the Soundcloud. content now than three years ago Digital Music sales Brisbane video-game developer, could have There is more Australian media content available Professional Self-production Artist website 2% 2% 2% Australian artists platforms Stores achieved anything close to the more than 10 As always in times of change, media business- CAGR CAGR CAGR content is to me now than there was three years ago Consumers Social Online Online I can access more high-quality online continuously Multiple million in worldwide iTunes’ sales of its on- es are looking for fresh economic models. It is improving Australian online content is not worse now than New Digital labels marketing 10 content is content now than three years ago it was three years ago Increasingly platforms line game “Fruit Ninja” if it had had to reck- not clear yet which models will be successful, 50,000 improving model less relevant Concerts and multiple Online content is better now than it was Digital in quality marketing devices on with the costs of physical—as opposed dig- however, it is apparent that there are oppor- three years ago Merchandise Labels Traditional 23% labels Traditional ital—distribution and sales. (See the case tunities. Rob Nixon’s cooking programmes 34% 25% CAGR The User generated CAGR 14% CAGR The Internet makes it easier now to promote marketing Sponsorship study “Halfbrick Studios: Digital Ninjas from and the YouTube-driven success of Natalie Internet is Australian culture abroad 11% Continuum More Greater role of artist Prominence of 0 7% Growth rate for jobs Overall, having a Down Under.”) Creators can reach not only Tran, who has attracted more than 1 million 0 I prefer the current media landscape to positive effect The Internet is not having a negative effect on across artists opportunities Emergence of new players new business 2% 3% 4% 5% 6% associated with online consumers the landscape from three years ago larger audiences but also more targeted audi- subscribers and has received 400 million prefer how on Australian Australian culture and user (for example, Increased involvement of consumers models activity is more than generated via platforms Higher share 2007 2008 2009 2010 2011 2015 (f) 2011 2015 (f) 11 times offline growth things are I am not worried that the emergence of culture ences. This gives many, many more creators a views, exemplify the possibilities of an ap- now the Internet will threaten traditional media such as for artist YouTube) chance of success, as they no longer have to proach that is enabled by low fixed costs, so- Source: Australian Communications and Media Authority Communications report, 2010–2011; Screen Australia; Motion Picture Distributors Association of Sources: Australian Bureau of Statistics; Australian Communications and Media Authority; Department of Education, Employment and Workplace Relations; Fewer barriers meet the audience and content requirements cial marketing, flexible pricing models, and Australia film industry statistics; Magnaglobal media forecasts; Digital Radio Industry Report 2010; Live Performance Australia; Australian Recording Industry IBISWorld; BCG analysis. Source: Australia Internet Consumer Survey, January 2012. Source: Australia Internet Consumer Survey, January 2012. Association; Ovum Digital Games Forecast: 2010–16; JPMorgan; Frost & Sullivan digital media research, 2011; BCG analysis. Note: CAGR = compound annual growth rate. Forecast job numbers assume no change in productivity levels from 2011 levels. 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. Please 1 Results are from the following survey question (survey size: n = 1,035): Below are a series of statements we've heard people say about the Internet. of broadcast executives who have to please a the absence of traditional gatekeepers. (See 1 Notes: CAGR = compound annual growth rate. Employee numbers are full-time employees. rate how much you agree with each of them. Please rate how much you agree with each of them. Source: BCG analysis. Artists Industry Consumers mass audience. The “long tail” of creators has the case study “Nicko’s Kitchen: From the Air- been liberated. port to the Airwaves.”)

24 | Culture Boom: How Digital Media Are Invigorating Australia ABC Iview: A Leaf from Old Media’s Book

The ABC has shown that it is well on top of its multimedia game with the creation of iview. The online video-on-demand and catch-up TV service offers viewers a large proportion—250 broad- cast hours—of prime-time programmes from the past 14 days. In doing so, iview attracts 1 million unique visitors and receives 3.6 million visits each month (these numbers reflect those visitors using Web browsers).

Launched in 2008, iview was a response to changing consumption patterns: “You need to be on more platforms than only TV if you want to keep reaching the same number of viewers,” said an ABC manager. So the ABC set up iview and made it available not only on computers but also on platforms such as Internet Protocol television, the Xbox 360, and the iPad. Widely recognised as the most complete service of its kind in Australia, iview shows how the Internet complements traditional viewership rather than cannibalizing it. The ABC stated, “Since iview has been opera- ting, there has been no significant decline in traditional viewership, nor has there been a decline in DVD sales.” By “adding value to content through choice (when, where, and how),” the ABC has also provided an endorsement for Australian content. In fact, some of the most popular shows on iview are those commissioned by the ABC.

The ABC is responding to the increasing importance of social media and mobile video by plan- ning an app for release in early 2012. The app will closely integrate social-media capabilities with the iview website. By responding to changing consumer demands and making content available on multiple platforms, the ABC is creating the conditions for its long-term competitiveness.

Halfbrick Studios: Digital Ninjas from Down Under

“Fruit Ninja” shows how Australian creativity can build a global phenomenon. The game, in which players slice fruit with a blade controlled by swiping their fingers across a smartphone or tablet screen, is the flagship product of Brisbane-developer Halfbrick Studios. It is the number one paid app in countries such as Germany, Russia, and Taiwan, and it is the number two paid app in the U.S., Australia, and China. “Fruit Ninja” has reached 70 million players worldwide and amassed more than 10 million paid downloads, which have generated more than $13 million in sales on iTunes alone.

Halfbrick, founded in 2001 by CEO Shainiel Deo and colleagues who used their savings to start the venture, is now one of the world’s leading independent game-app developers. It employs more than 50 people in Australia, nearly a third of whom have joined in the past 18 months. It now has a second hit on its hands and a new business model. “Jetpack Joyride” generated 1 million paid downloads in a little more than three months. When Halfbrick made it free to play in December 2011, it found that downloads soared to more than 14 million and, surprisingly, revenues increased as players started making “in app” purchases.

The company has consistently embraced the Internet and the tools it offers to improve its products and increase revenues. It designs its games for the medium and for consumers’ habits. “Every round of ‘Fruit Ninja’ lasts for two minutes on average. People don’t have much free time these days, and I think quick games on mobiles are going to become the future of the industry,” said Deo. Halfbrick showed similarly acute marketing instincts when it developed a free version of “Fruit Ninja” for Facebook, recognizing its potential to introduce the game to a broader audience.

The Boston Consulting Group | 25 Internet platforms enable some content cre- newspaper may have to adjust to the chang- ators to develop their product, bring it to audi- ing—and more difficult—economic environ- ences, make a living, and move on to longer- ment of modern print journalism, but it has established media. The Danger 5 TV series the resources, expertise, promotional power, shown on SBS exemplifies this process and the and brand on which to build. role of online video as an incubator of fresh talent that might otherwise not get the chance Successful newspapers find ways to adapt by to develop. (See the case study “Danger 5: offering their content on multiple platforms There’s No Stopping Creative Creators.”) and tailoring their content and revenue mod- els to specific audiences. If print news is de- Challenges remain for artists as they always clining, there are opportunities emerging for have, but the future is promising. For exam- quality professional journalism to find a voice ple, more funding is emerging for online con- (and income) on the Internet. tent. Programmes such as the YouTube Part- ner Program offer artists copyright protection The music industry in particular is seeking fresh while providing them a means by which to ways to acquire and monetise content, and it is monetise their output through a majority increasingly using the Internet to source talent share of advertising revenue earned for ads and information on consumer preferences. The that are shown alongside their content. next great star may still be found by the tradi- tional means of a company executive attending a performer’s gig, but the immense amount of Opportunities for Traditional material online suggests that talent will increas- Industry Participants ingly be sought and sourced digitally. Although traditional media participants face more challenges than other players, success- Content producers will seek to balance their ful companies can prosper by evolving their portfolios, with some focusing on mass-market models using their built-in advantages. A hits and others on niche content that produces Nicko’s Kitchen: From the Airport to the Airwaves

Rob Nixon’s cooking show, Nicko’s Kitchen, is one of the world’s favourite programmes, with 40 million views on YouTube alone, an international audience, and feedback from all over the world. Nixon has three YouTube channels, each with 1 million viewers, and he has made in excess of $50,000 in advertising income since inception. On top of this, Nixon does weekly TV appearances, sells DVDs, has sponsors, and is releasing a cookbook.

Nixon is the archetypal Aussie online-media success story. He used to work on the ground staff at Perth Airport, but everything changed after he decided to film his hobby, cooking, and put the films on YouTube. As he says, “Not too long ago, it would have been impossible to have had such global reach…but YouTube has changed all that.”

He particularly enjoys learning how an international audience is taking to Aussie recipes: “I once had a guy in Iraq message me to tell me that they were making lamingtons for the very first time. It spun me out,” he said. “There is a fire crew in Florida that watches my show on a regular basis…and whips up a few of my recipes. It’s quite amazing really.”

He’s now a full-time cook, focusing on recipes that are easy to prepare—or as he puts it, “simple foods that anyone can make.” His largest group of viewers is teenagers from age 13 to 17, a demo- graphic often accused of being fast-food junkies.

With a click of a mouse, Nixon has transformed his life, introduced good, simple Australian cooking to the world, and maybe done something for the long-term health of the nation’s youth.

26 | Culture Boom: How Digital Media Are Invigorating Australia Danger 5: There’s No Stopping Creative Creators

The screening of the action-comedy series Danger 5 on SBS in early 2012 marked the latest stage in the YouTube-fueled ascent of online filmmaker Dario Russo. It is a classic example of how a creative, low-budget, online production can break into mainstream media.

The programme began life as a final screen-production project while Russo was at Flinders Uni- versity. This three-minute short on vintage 16-millimetre film became a YouTube hit—receiving nearly 2 million views in five months—when Russo publicised it as the trailer of a “lost film” from the 1960s called Italian Spiderman.

Its apparent authenticity inspired heated debate as to whether the film actually existed and attracted the attention of the South Australian Film Corporation (SAFC). The SAFC’s Sandy Cameron recalls, “We decided to take a bit of a punt on him with a low-risk investment and not much money and see how far he could push it, and he came up with the ten episodes.” Russo received $10,000 to shoot the additional episodes, which were presented as clips from the mythic film and distributed online only. Each generated up to 1 million views.

It was this success that persuaded SBS to approach Russo and his partner David Ashby, who acts in the films, with a deal for the TV series. Other funding for the series, a fully homegrown production with a wholly local cast and crew, came from SAFC, Screen Australia, and the Adelaide Film Festival.

In addition to a launch pad for offline media, online media continue to be key to publicity. Audiences were warmed up for the series premiere on February 27, 2012, with a prologue series called Danger 5: The Diamond Girls, which was released on YouTube in November 2011. Russo said, “With Italian Spider- man, we learned that you can foster quite a good fan base on the Internet. We still have contact with our fans, so SBS recognised the potential in being able to cultivate your audience online.” hits for smaller audiences. Some broadcasters worldwide for productions that have never will place a premium on the types of content— been performed outside the country. The Wig- top-rated series, top-class drama, and sports gles could have established an international such as the Australian Football League and Na- profile as children’s entertainers through tour- tional Rugby League—that can still deliver ing and overseas sales of their ABC television large audiences. Other broadcasters will seek programmes, but their strong online presence out niche programming that brings in highly en- has undoubtedly enhanced the brand. gaged and targetable audiences. The two ends of the market will strengthen while the undif- Easy access to global markets redresses the dis- ferentiated middle becomes less viable. advantages of a comparatively small popula- tion. Much as cheaper air travel turned Austra- lians from among the world’s more isolated An End to the “Tyranny people into its greatest travellers, so can the In- of Distance” ternet transform Australia into a content hub Although many of the Internet’s benefits ap- for the English-speaking world. It has already ply to many countries, some are particularly shown that it is likely to sell more than it im- important to Australia. Distance—which has ports in the free-trade markets of the Internet, isolated the country, particularly in relation even though a shared language offers British to the largest English-speaking markets— and American material easy access to Australia. ceases to be a handicap in a world of digital communication and distribution. The costs and benefits of online media should not be measured in purely monetary Local brands can go global. The Sydney Opera terms, however. Among the long-established House has won plaudits from opera fans services that have benefited from the Internet

The Boston Consulting Group | 27 is the School of the Air, which dates back to one assume that high-quality media only 1951. An offshoot of the Royal Flying Doctor arrive offline. Such distinctions rapidly Service, the school takes educational services become irrelevant as the media landscape to children in Australia’s remote communi- evolves, partnerships are formed, and ties. It has been able to enhance its content boundaries are crossed. Print and broadcast and capabilities by adding an online provi- media are increasingly moving online, sion to its historic radio platform. The Con- broadcasters and agents are searching versation, a Melbourne-based virtual news- YouTube for fresh talent, and new media are room already adopted in the U.S., is a much filling the gaps left as broadcasters newer success story. (See the case study “The rationalise and focus. Business Spectator and the Conversation: The Emergence of New News.”) The future, as always, is uncertain. But an im- portant lesson from the history of Australian media is that the energy, inventiveness, and The Blurring of the Old and resourcefulness of the companies and individ- the New uals in the industry, combined with the fresh It would be a mistake to think too rigidly in drive of new entrants, usually make nonsense terms of “old” and “new” media, nor should of predictions of doom. The Business Spectator and the Conversation: The Emergence of New News

Less than five years after its founding by Alan Kohler and other financial journalists, the Business Spectator shows that there is a home for quality journalism online. Indeed, the independent, real-time business news and commentary service is now the subject of takeover speculation involving major media companies that supposedly value the company at no less than $50 million. The service, which has created new jobs, is funded by advertising and supplied free to a monthly viewership of 300,000.

The Business Spectator’s commercial progress is matched by the rapid success of the not-for- profit website the Conversation. Launched in Melbourne in 2011, the Conversation is already one of the largest virtual newsrooms worldwide, providing independently edited information on complex academic matters. Its mission is endorsed by Nobel Prize winner and former Australian of the Year Peter C. Doherty, who says, “When it comes to complex issues like climate change. . . there is an enormous difficulty in getting well-resourced and verifiable information across to the general public. . . . Within the Australian universities, we have an enormous depth of expertise and talent looking at such issues. . . . What we need is a well-regarded and well-edited website that will allow the general public to access that information and those insights.”

The Conversation’s curators are professional editors who aim to mix journalistic flair with academic rigour. Nearly 2,000 academics from 160 universities and research institutes write for it, and more than 3,500 articles of analysis, commentary, and research were published in its first seven months of operation. More than 1,000 of its articles were republished by other media. The site attracted 2 million visitors and received a total of 4.2 million page views during the first seven months. Since one-fifth of those visitors came from the U.S., there are plans for an American version.

28 | Culture Boom: How Digital Media Are Invigorating Australia Conclusion

he Internet is sometimes compared to areas of health, education, and business and Tan unruly teenager, whose occasional government services. Such developments will outbursts may grab attention today but help to improve outcomes for society on whose future potential is much more exciting. many levels. The Internet will also help That metaphor is particularly apt for what is Australia to engage more effectively with happening in the media sector. As a source of Asia, an important component of the nation’s innovation and growth, the Internet has future. caught the attention of consumers, creators, and producers. It has also contributed to a But the country is only at the start of this revival of traditional media for those who media transformation. The teenager hasn’t have adapted and embraced it in the same gone to university yet. If we were to compare way Australian consumers have done. the Internet to film, the equivalent would be “talkies”—we are still some years away from As this report has documented, Australian Technicolor, let alone 3-D. Looking back, it’s consumers are happy with this new world remarkable that the Hollywood studios and prefer it to what was available in the initially tried to ignore sound. Of course, in past. They are becoming creators, with some the end, they gave in to the demands of the of them reaching global audiences. They love audience, but today, no producer would Australian content and use the Internet for dream of holding back change in that way. everything from high culture to home videos. They also simply could not, because the No wonder Australians are getting $24 billion power is now in the hands of individuals to in consumer benefit from Internet media decide what they want to make and what content every year. they want to consume. It is this dimension, and the competition to deliver the content Although this report has concentrated largely consumers want, that will stimulate ever on the Internet’s impact on the media sector, more investment and innovation, with the Internet has had an impact across the consumers and creators the big winners. whole of the economy and society. It has enabled remote communities to play a more Australia is winning and can continue to be a active role in the economy and to participate winner. The companies that have succeeded in innovation that they would typically be are those that have embraced these changes excluded from in an offline world. As usage and adapted. The challenge now is to of the Internet increases, so, too, will the emulate them and trust Australia’s citizens to adoption of other applications, such as in the use their new-found power wisely.

The Boston Consulting Group | 29 Appendix Methodology

o develop an appreciation for the size type to online versus offline, to drama or Tand growth of the Australian media-content entertainment versus news, current market, we measured the 2011 revenues for the affairs, or education, and to Australian different media types and developed a forecast versus international content. for the revenues in 2015. We chose revenue as an intuitive metric for the size of the media We also assessed the size of the employment content industry, as it is easily understood and it associated with the Australian media-content is a good measure of the value of activity in the industry. industry. Given the focus of the report on the role of the Internet, we then identified the •• Scope. The scope considerations for proportion of those revenues that were associ- measuring employment were exactly the ated with online content. same as those for measuring value.

•• Scope. We measured revenues pertaining •• Approach. We measured the employment to the following media types: books, associated with consumption in each media games, magazines, movies, music, newspa- type and allocated jobs to either traditional pers, online video, performing arts, radio, offline or online employment. The approach and TV. To avoid double counting, online was a mix of industry by industry analysis video revenues do not include revenue and, where required, company analysis to derived from TV and movie downloads or ensure accuracy and validity of the numbers. streaming; these are included in TV and Where available, we measured the employ- movie revenues. We identified all revenues ment related to online media. But where derived from online media and associated unavailable, or where jobs were shared with online media activities compared across both channels, we extrapolated the with traditional offline media channels. online share of revenue within each media type to the total revenues to allocate jobs to •• Approach. As a general rule, we took a the online media channel. For activities conservative approach to quantifying the where it was difficult to isolate employment total revenue in each media type, erring associated with online media activities, we toward the lower end of ranges of esti- benchmarked the revenue per employee of mates and cross-referenced several a subset of representative players and sources to ensure the accuracy of the extrapolated for the whole sector. For the numbers. Where possible and relevant, we employment forecast, we assumed a apportioned revenues within each media constant level of productivity through 2015.

30 | Culture Boom: How Digital Media Are Invigorating Australia note to the reader

About the Authors The authors would also like to thank For Further Contact Jan Belza is a project leader in the Huw Richards for his contributions to To discuss this report in greater detail, Sydney and London offices of The Bos- the writing of this report; Mark or to learn more about BCG’s capabili- ton Consulting Group. Patrick Forth is Alexander, Gaby Barrios, Arul ties in technology, media, and tele- a senior partner and managing direc- Baskaran, Robin Blumenthal, Disha communications, you may contact one tor in the firm’s Sydney office and Gupta, Filippa Kindblom, Andrew of the authors: leader of the Technology, Media & Luers, Maximilian Miller, Kate Norton, Telecommunications practice in the Lydia Ogilvie, Jean-Paul Petranca, Gary Jan Belza Asia-Pacific region. James Purnell is a Tsang, Shaun Yow, and Elisse Zarimis Project Leader senior advisor in BCG’s London office for their contributions to the research; and a former Member of Parliament and Katherine Andrews, Gary [email protected] and Secretary of State for Culture, Me- Callahan, Angela DiBattista, Kim dia, and Sports in the U.K. Paul Zwil- Friedman, Angela Goldberg, Trudy Partrick Forth lenberg is a partner and managing di- Neuhaus, Sara Strassenreiter, and Senior Partner and Managing Director rector in the firm’s London office and a Simon Targett for their contributions [email protected] member of its digital economy leader- to the editing, design, and production ship team. of the report. James Purnell Acknowledgments Senior Advisor This report is a product of BCG’s Tech- [email protected] nology, Media & Telecommunications practice. The authors are indebted to Paul Zwillenberg the contributions of David Dean, a sen- Partner and Managing Director ior partner and managing director in [email protected] BCG’s Munich office and the former global leader of the firm’s Technology, Media & Telecommunications prac- tice. We would also like to acknowl- edge the contributions of the following BCG global experts: Niki Aryana, a partner and managing director in the London office; Paul Clark, a principal in the London office; Karalee Close, a partner and managing director in the London office; Philip Evans, senior partner and BCG Fellow in the firm’s Boston office; Dominic Field, a partner and managing director in the Los An- geles office and leader of the firm’s Digital Economy initiative; Anna Green, a partner and managing direc- tor in the Sydney office; Michael Hitz, a principal in the Sydney office; Chris Mattey, a principal in the Sydney of- fice; Jacob Rosenzweig, a principal in the London office; Sarah Willersdorf, a principal in the New York office; and Damien Wodak, a principal in the Mel- bourne office.

The Boston Consulting Group | 31 © The Boston Consulting Group, Inc. 2012. All rights reserved.

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