Creating growth Measuring cultural and creative markets in the EU
December 2014 Study supporters
With the initiative to set up a project aimed at analyzing the cultural and creative markets in the EU, GESAC, the European Grouping of Societies of Authors and Composers, commissioned EY to conduct this study. L`akhjgb][lakl`]Õjklg^alkcaf\&?=K9;[gddYZgjYl]\oal`l`]^gddgoaf_hYjlf]jkYf\kmhhgjl]jkafYf effort to rally a large segment of the representative organizations in the cultural and creative sectors for this unprecedented study.
GESAC’s partners for the study Supportive organizations
EUROCOPYA ACE European Federation of Joint Management Societies of Architects’ Council of Europe Producers for Private Audiovisual Copying AEC EVA European Association of Conservatoires European Visual Artists AER Association of European Radios FIAPF EACA International Federation of Film Producers Associations European Association of Communications Agencies IFPI ECSA International Federation of the Phonographic Industry European Composer and Songwriter Alliance IMPALA EGDF Independent Music Companies Association European Games Developer Federation IVF EPC International Video Federation European Publishers Council FEP SAA Federation of European Publishers Society of Audiovisual Authors FERA Federation of European Film Directors FSE Federation of Screenwriters in Europe IMPF Independent Music Publishers Forum Foreword 5
C]q^Y[lkYf\Õ_mj]k )(
01 Creative force: markets and jobs 14 in the cultural and creative industries in Europe
02 Creating Growth: future drivers of the creative economy in Europe 22
03 Creative diversity: understanding the 11 market segments 28 that make up the cultural and creative economy
Books 30
Newspapers and magazines 36 Music 40
Performing arts 48
TV 54
Film 62
Table of contents of Table Radio 68 Video games 74
Visual arts 80
Architecture 86
Advertising 90
Methodology 96
EY | December 2014 3 4 Creating growth | Measuring cultural and creative markets in the EU Forewords
Europe has a shared history and a Then there is the digital revolution. richly diverse cultural heritage. This While it gives much cause for hope, heritage is cherished by the people as it also disrupts the cultural scene. a common value that gives our Union Works are no longer distributed in its identity and binds us together. That the same way as before. Copyright is why Europe must do everything in and equitable compensation for its power to preserve that heritage creative works no longer seem to be in a political and economic climate accepted as a matter of course by the that is subject to major upheavals. public. Yet new digital uses are to go To begin with, the economic crisis had together with cultural development; a huge impact on the world of culture, therefore, in consideration and good comprehension of all. Martin Schulz particularly in the form of budget cuts. President of the European Parliament Result: theaters, museums, cinemas, In order to support the industry, orchestras and bookshops have been European cultural undertakings forced to close down. Behind the need help to ensure access to scenes, these closures mean that funding. It is in this spirit that the European people — many of them in Union has established a guarantee the younger age group — have lost scheme to enable all the cultural their jobs. This is heartbreaking for all and creative sectors to develop. of us in Europe, and for myself, both as The industry also needs support for a father and as a former bookseller. its access to technology; it needs Yet, culture is one of Europe’s protection against big groups that greatest assets. To say nothing of sell off culture at a discount, against their immense nonmaterial value, networks which deprive creative the creative and cultural industries artists of funding. The European account for 4.2% of the GDP of Union’s powers are limited, but it the Union, nearly 7 million jobs, must accept the challenge and tackle primarily in small businesses. These it alongside the Member States. Õ_mj]kYj]n]jq]f[gmjY_af_& It is only on this condition that Culture is therefore one of Europe’s we shall be able to preserve our great hopes. The jobs that it generates cultural assets. What we need to do cannot, as a rule, be relocated — they is preserve and promote our culture require a range of rare talents, and so that it impacts beyond European it is often our young people who borders, and not blindly defend display them; they are at home in al^jgeYdd^gj]a_fafÖm]f[]k& the digital world, which holds out the promise of fresh potential for _jgol`&L`]Õ_mj]khj]k]fl]\afl`ak study demonstrate this perfectly.
EY | December 2014 5 Interestingly, the highest revenue At the time, the roles of these sectors is generated by a purely cultural o]j]afkm^Õ[a]fldq`a_`da_`l]\$Yf\ sector: visual arts — much more l`]ajhgl]flaYddYj_]dqmf\]j%]phdgal]\& l`Yfl`]Õdeaf\mkljq$^gj]pYehd]$ I am happy to see that in the past according to the study. Economists few years, an increasing number of and politicians have long overlooked EU countries have been developing the importance and potential of the strategies to fully tap the potential of cultural and creative sectors. Their these sectors. So have a large number apparent heterogeneity — ranging of European regions and cities, from ^jgedYj_]Õdehjg\m[lagf[gehYfa]k Wallonia to Catalonia and from Berlin to tiny SMEs, and from architecture to Tallinn and Turin. I am sure that to video games, as well as performing the compelling evidence in this new Xavier Prats Monné arts and publishing, has slowed their study will be a further inspiration Director General for Education, Culture, recognition as an economic sector. Youth and Citizenship to decision–makers at all levels. Yet, they are bounded and fueled by The study also arrives at a useful time Few people would doubt that one common factor: creativity, a free for the EU: in 2015, the Europe 2020 culture and creativity are essential and renewable source of energy — strategy for growth and jobs will be elements of the European identity. a resource which is abundantly j]na]o]\&F]odqmh\Yl]\Õ_mj]kgfl`] This study shows — brilliantly present in countries of the European contribution of the cultural and creative so — that they are just as essential Union. Creativity feeds on culture sectors at the EU level are important for the European economy. in its widest possible sense: the and timely. So is the demonstration ]pljYgj\afYjq\]hl`Yf\Zj]Y\l`g^ This is the relevance of this study — that the creative economy has shown European culture is a tremendous because not enough citizens and resilience during the economic crisis asset, a common good which must decision-makers know that culture and that it is a dynamic and fast- be protected and promoted. and creative industries employ 7 growing sector which contributes million people, that they generate Since the adoption of the European ka_faÕ[Yfldqlgqgml`]ehdgqe]fl& 4.2% of EU GDP, and that they are Agenda for Culture in 2007, a key None of this would be possible without such powerful sources of jobs and objective of the European Commission creators and creation. The competitive growth that they provide jobs for has been to promote a European advantage of our cultural and creative nearly 2.5 times more Europeans cultural space — to foster smart, sectors depends on maintaining a than the automotive industry. inclusive and sustainable growth, virtuous cycle of creative talent, while safeguarding and promoting The cultural and creative sectors Yjlakla[]phj]kkagf$]flj]hj]f]mjk`ah our European cultural diversity. Ydkg[gfljaZml]ka_faÕ[Yfldqlg and investment, as well as proper youth employment, employing, on In a 2012 policy communication, reward and remuneration for average, more young people than the Commission invited EU creators. Enhancing this cycle by any other sector. When it comes countries, regions and major fostering the right environment for to sectors, visual arts, performing cities to promote their cultural cultural diversity and creativity in a arts and music account for about and creative sectors for creating digital world will surely be a key task half of all employment in the opportunities and enhancing growth. for the European Commission. cultural and creative sectors.
6 Creating growth | Measuring cultural and creative markets in the EU Cultural and creative industries in Europe unlock their full potential
and realities, developing their own L`]kYe]_g]k^gjl`]Õdeaf\mkljqYf\ particular business models. Each CCI the other cultural and creative sectors. is unique and its future depends on a Creators are at the source of the complete understanding of its needs creative economy value chain. They and how it works. However, all CCIs are also the most vulnerable part of it, spring from an artistic and creative Ykl`]qYj]$af^Y[l$l`]Õjklafn]klgjk& ]phj]kkagfhjgl][l]\Zqafl]dd][lmYd They create works that often bring property. In this regard, raising ÕfYf[aYdj]lmjfkgfdqa^$Yf\o`]f$ European citizens’ understanding and l`]qÕf\l`]ajYm\a]f[]Yf\Yj] awareness of the value of copyright [gee]j[aYddq]phdgal]\&9ml`gjkÌja_`lk and related rights as enablers, and are, in effect, delayed payments of an encouraging all stakeholders to play ]plj]e]dqmf[]jlYaffYlmj]$\m]lgl`] Christophe Depreter their role in developing a thriving uncertainty of creative success itself. CEO of SABAM and President of GESAC legal market for European content should be high on the agendas of Thanks to its long history and a A growing body of evidence shows that national and European authorities. [gehd]peapg^hgda[qkmhhgjlYf\ the cultural and creative Industries private investment, Europe has a CCIs have impacts that go far (CCIs) are sources of growth and jobs, tradition of creativity that fosters beyond leisure, entertainment, Z]f]Õlaf_dg[Yd[geemfala]k$j]_agfk market growth. Michelangelo, jobs or economic growth. They also and states. This study aims to point Rousseau, Damien Hirst or Adele — provide invaluable social cement; gmlo`]j]l`]k]af\mklja]kÕlaflg each, in their own manner, embodies they contribute to the feeling of the economy and society in Europe. the creativity hotspot that Europe belonging to a society; in short, Policymakers really need a reliable tool has always been. Moreover, they help forge a European identity. to assess the true value of a sector Europe is globally renowned for its The rich tapestry of European that is still woefully under-promoted. ]p[]hlagfYd\an]jkalqg^[j]Ylagf$ culture based on shared values is Greater awareness should result in springing from its diversity of YZmdoYjcY_Yafkl]plj]eakeYf\Y the development of a more supportive languages and local, regional, means of overcoming the European environment and appropriate tools interregional and national cultures. for fully tapping the potentials of MfagfÌk[mjj]flÖY__af__jgol`& With this in mind, GESAC (the European the CCIs in the decades ahead. The most striking fact about the Grouping of Societies of Authors), creative economy is that creators Europe is weathering a serious which links together 34 European are the nucleus of the economy. economic, social and identity crisis authors’ societies and consequently Their ideas, creativity, talent and with stubbornly high unemployment. speaks for some 800,000 individual entrepreneurship are what make it But the CCIs are a dynamic sector authors, is especially proud of having possible for producers, publishers, with a bright future and a key role to been able to contribute to this study. play: they are part of the solution. distributors and retailers to generate value. Obvious though it may seem, the CCIs embrace a wide range of sectors emka[af\mkljqogmd\fgl]pakloal`gml and activities — content creation, songwriters, composers and musicians. publishing, production, distribution and conservation of goods and k]jna[]k_gn]jf]\Zqkh][aÕ[dYok
EY | December 2014 7 E]Ykmjaf_[mdlmjYdYf\[j]Ylan]eYjc]lk^gjl`]Õjkllae]
Marc Lhermitte Bruno Perrin Partner, EY Partner, EY
L`akÕjkl][gfgea[gn]jna]og^ Yet, despite the prominence of For the way we buy, distribute and cultural and creative industries their output in our daily lives, the “consume” cultural “products” within the EU stems from our creative industries have long played is changing fast. So, rather than intuitive sense that culture and the role of the last-minute winner in producing another white paper, EY creativity can become a powerhouse an economy where manufacturing, and GESAC set out to provide an of economic growth in Europe. business services and the public overview of the cultural and creative With an annual revenue of €535.9 sector capture the limelight. economy and the trends that should be billion and more than 7 million workers, Until now, reliable information on the taken into account when considering the creative and cultural industries are k[Yd]Yf\ka_faÕ[Yf[]g^l`][j]Ylan] policy options affecting the sector. today central to Europe’s economy and and cultural sectors as a whole has To tell the stories of these industries competitiveness. Their importance been scarce. It was only in 2009 and their actors, their performance and potential to create jobs and fuel that a working group coordinated by Yf\\a^Õ[mdla]k$o]dggc]\Yl)) economic growth are recognized Dmp]eZgmj_ÌkEafakljqg^;mdlmj]È consumer markets for the creative by the European Commission1. the European Statistical System and cultural goods and services As this report shows, their Network on Culture — was set up to that people and companies development is reinforcing Europe’s promote statistical cooperation and consume in 28 EU countries. harmonization with a view to producing position as a global hub of creativity We cross-checked these eleven reliable cultural statistics. Yf\lYd]flk&AlYdkgÖY_kf]ooYqk “vertical pillars” against the wide L`akj]hgjlj]Y^Õjekl`] in which Europe can enhance spectrum of creative activities which methodological challenge that still its attractiveness in a globalized generate economic value and jobs in lies ahead in measuring the economic economy where countries compete Õ]d\kkm[`Yka\]Y[gf[]hlagf$\]ka_f$ importance of the creative and cultural not only on costs but also on ideas, production, distribution, performance, sectors, and focuses on an urgent need innovation, entrepreneurship and broadcasting and management, and for further statistical consolidation creativity. The creative sector will with activities relating to education and harmonization at an EU level. play a key role in Europe’s economic and tourism, where applicable. recovery, especially within the 1. European Commission (2010), Europe 2020, a Strategy for Smart, Sustainable and Inclusive Growth and European framework of the Lisbon strategy. Commission Green Paper (2010), Unlocking the Potential of Cultural and Creative Industries.
8 Creating growth | Measuring cultural and creative markets in the EU Subsectors of CCIs
Books Authors, specialized book stores, public and academic libraries, book publishing, etc.
Newspapers and magazines Newspaper industry, journals and periodical publishing industry, news agencies, etc.
The study summarizes and builds This work, carried out under the Music upon available information on the guidance of EY teams, has been a Sound recording and music publishing activities, music composers and lyricists, economic scale of the cultural and collective project, embracing the music radio stations, TV music channels, creative sectors at both national and thoughts and contributions of GESAC etc. European levels. Though there have and its partners for this study with the Performing arts been many studies on the creative common aim of understanding and Performing arts, supporting activities ][gfgeq$Y[geegf\]Õfalagf`Yk developing our cultural and creative and venues, etc. only very recently been agreed. industries. We would like to thank TV Our report includes: GESAC and its partners (IMPALA, Television programming, production, IFPI, SAA, Eurocopya, IVF, FIAPF and post-production and distribution • Comparative, qualitative and creators working in the TV industry, etc. EVA) and its prime supporters (FEP, quantitative analyses aimed at AER, ACE, AEC, EACA, ECSA, EGDF, Film understanding the economic role of the EPC, FERA, FSE and IMPF) for their Motion picture production, post- creative and cultural sectors in Europe production and distribution; creators technical and methodological insights. working in the movie industry, etc. • Key factors that will affect the global evolution of creative and We hope that this report serves as a Radio cultural sectors and players starting point for a better and wider Radio broadcasting activities, etc. understanding of the central role • Ways by which creative and cultural Video games activities can help encourage growth, played by creators and creation. Developers, publishers, retailers and distributors, etc. youth employment and innovation and strengthen Europe’s position globally. Visual arts Creators of visual arts, such as photography, design, art and crafts and museums, etc.
Architecture 9j[`al][lmjYdÕjek$]l[&
Advertising Advertising agencies, etc.
EY | December 2014 9 C]q^Y[lkYf\Õ_mj]k
Turnover
With revenues of €535.9b, the creative and cultural industries (CCIs) contribute to 4.2% of Europe’s GDP. The sector is its third-largest employer, after construction and food and beverage service activities, such as bars and restaurants.
Turnover (€b) - 2012
127.6
93 90 70.8
Source: EY analysis EY Source: 36.3 36.2 31.9 25.3 17.3 16 10.4
Visual Advertising TV Newspapers Books Architecture Performing Music Film Gaming Radio arts & magazines arts
Employment
More than 7m Europeans are directly or indirectly employed in creative and cultural activities — 3.3% of the EU’s active population. Performing arts (1,234,500), visual arts (1,231,500) and music (1,168,000) employ more than 1m people ]Y[`$^gddgo]\ZqY\n]jlakaf_ 0)0$(((!$Zggck .,.$(((!Yf\Õde .,)$(((!&
Employment (in thousands) - 2012
1,234,5 1,231,5 1,168
808
646 641 603,5 493 483,5 Source: EY analysis EY Source: 108 97
Performing Visual Music Advertising Books Film TV Architecture Newspapers Gaming Radio arts arts & magazines
LglYd^gjbgZkYf\eYjc]lk`Yn]Z]]f]klaeYl]\Y^l]jj]egnYdg^\gmZd]%[gmflaf_&>gjeYjc]lk$l`]kmeg^k][lgjkÕ_mj]k$ Ò--,&/Z$]p[]]\kl`][gfkgda\Yl]\lglYd$Ò-+-&1Z jgmf\]\Õ_mj]!&>gjafklYf[]$dan]emka[ak[gmfl]\afZgl`H]j^gjeaf_ arts and Music sectors (see Methodology).
10 Creating growth | Measuring cultural and creative markets in the EU The 11 cultural and creative markets in the EU28
Markets Sales (€b) Jobs
Books 36.3 646,000 F]omk]j]ph]ja]f[]kYj]j]afn]flaf_l`]Zggcaf\mkljq
Newspapers & magazines 70.8 483,500 Facing and embracing the challenges of the digital age
Music 25.3 1,168,000 Innovating to lead creative diversity in Europe
Performing arts 31.9 1,234,500 Audiences love live concerts and festivals
TV 90 603,500 The most popular medium is thriving
Film 17.3 641,000 Resilience fueled by the digital transformation
Radio 10.4 97,000 Still the most trusted medium and available in many new ways
Video games 16 108,000 KmjÕf_l`]oYn]g^gfdaf]Yf\egZad]_Yeaf_
Visual arts 127.6 1,231,500 Brightening Europe’s appeal for tourists and art investors
Architecture 36.2 493,000 Coping with the aftermath of the construction sector slump
Advertising 93 818,000 Total CCIs (after removal of double-counting) 535.9 7,060, 000 EY | December 2014 11 12 Creating growth | Measuring cultural and creative markets in the EU Benchmarking the cultural and creative industries In terms of jobs, CCIs in the EU employ as many people as the food and beverage service industry does. They provide work for nearly 2.5 times more people than automotive manufacturers and 5 times more than the chemical industry. Employment (in thousands) - 2012 Construction 15,348 Food and beverage service activities 7,274 Source: Eurostat Source: CCIs 7,060 Metal and steel industries 4,972 Food products (including beverages) 4,753 Automotive industry 3,014 Chemical industry 1,346 Telecommunications 1,204 Leaders and leadership Europe has had many international leaders, thriving mid-sized companies and successful start-ups, for instance. Books Pearson, Reed Elsevier, Wolters Kluwer, Random House, Hachette Livre, Grupo Planeta, Holtzbrinck Newspapers & magazines ?#B$9p]dKhjaf_]j$K[`aZkl]\$J;KE]\aY_jgmh$\]H]jk_jg]hhmZdak`af_Y[lanala]k$:gffa]j$=_egfl$>L$KYfgeYE]\aYYf\ news agencies Thomson-Reuters and AFP Music Universal, Deezer, Spotify Performing arts Donauinselfest Music Festival, Sziget Music Festival, Avignon Festival, Edinburgh International Festival, La Scala, Opéra de Paris TV Endemol, BSkyB, TF1, RTL Group, BBC, France Télévisions Film Gaumont, Nordisk Film, Pathé, Wild Bunch, Zentropa, Kinepolis Radio BBC, Radio France Internationale Video games Ubisoft, Kingn Rovio Entertainment Visual arts Christie’s, Dorotheum, Van Ham Architecture Aedas, Foster and Partners, Sweco Advertising WPP Group, Publicis EY | December 2014 13 01 Creative force: markets and jobs in the cultural and creative industries in Europe In this section: • 11 markets at a glance • Untapped potential for youth employment • Europe’s leaders • Reshoring creative activities in Europe’s regional clusters 11 markets at a glance: more than the sum of their parts Revenues of the 11 creative and cultural industry sectors total €535.9b The three biggest activity areas in 2012 were the visual Overlaps occur at the creation level among authors, arts (€127b), advertising (€93b) and TV (€90b), which composers, visual artists, designers, directors, screenwriters together accounted for more than half of the CCIs. and writers; at the production level, between TV and Publishing — of newspapers, magazines and books — in Õdek$nakmYdYjlkYf\na\]g_Ye]k3Yko]ddYkYll`] the meantime generated a combined revenue of €107b. distribution level, with the emergence of various platforms The 11 sectors analyzed are distinct, yet many ^gjeap]\%e]\aY\akljaZmlagf&9f\l`]Y\n]jlakaf_k][lgj [gff][lagfk]paklZ]lo]]fl`]eYlf]YjdqYddd]n]dk has close business links with most of these market of the value chain. A novel written as a book may be segments: advertising income is an important revenue Y\Yhl]\aflgYÕdegjYna\]g_Ye]$gjYemka[YdeYq stream for the radio, TV and newspaper industries. lYc]l`]^gjeg^YÕde$h]j^gjeYf[]gjj][gj\af_& Digital technologies have reinforced these connections and accelerated collaboration across sectors. Turnover (€b) 127.6 93 90 70.8 Source: EY analysis, 2012 analysis, EY Source: 36.3 36.2 31.9 25.3 17.3 16 10.4 Visual Advertising TV Newspapers Books Architecture Performing Music Film Gaming Radio arts & magazines arts A dynamic and fast-growing industry, even in tough economic times The resilience of the creative economy was evident during the economic crisis: job creation in CCIs grew on average by 3.5% a year from 2000 to 2007, and continued to grow at 0.7% annually between 2008 and 2012, even as the number of jobs in the rest of the economy fell 0.7%1. A fast growing sector...... that withstood the economic crisis 2000-2007 2008-2012 CCI EU27 Source: EY Source: +3.5% per year +1% +0.7% -0.7% per year per year per year 16 Creating growth | Measuring cultural and creative markets in the EU 01 | Creative force: markets and jobs in the cultural and creative industries Untapped potential for youth employment The biggest employers among Europe’s CCIs were visual arts, performing arts and the music industry. They accounted for about half of the 7m CCI jobs in the EU in 2012. Number of jobs 1,234,500 1,231,500 1,168,000 808,000 646,000 641,000 603,500 Source: EY analysis, 2012 analysis, EY Source: 493,000 483,500 108,000 97,000 Performing Visual Music Advertising Books Film TV Architecture Newspapers Gaming Radio arts arts & magazines ;j]Ylan]Y[lanala]k[gfljaZml]ka_faÕ[Yfldqlgqgml`]ehdgqe]fl In 2013, the creative and cultural sectors employed, People under 35 accounted for 41.4% of creative on average, more 15-29-year–olds than any other employment in this world-class metropolitan region, sector (19.1% of total employment in CCIs versus but just 36.7% of jobs in the wider economy3. 2).In Eastern and 18.6% in the rest of the economy These estimates underline two convergent trends: Central Europe, the trend is even more pronounced: on • The cultural and creative sectors are highly attractive average, young people account for 1.3% more jobs in for young people the creative economy than in the rest of the economy. • L`][mdlmjYdYf\[j]Ylan]Õ]d\kYj]gh]flgqgmf_ogjc]jk National estimates in the UK and France show that the and absorb them easily. proportion of young people employed in the creative ][gfgeqafl`]k][gmflja]kakka_faÕ[Yfldq`a_`]jl`Yf For both these reasons, the cultural and creative in the Western European economy overall. In the UK, industries have a strategic role to play in the economic 20–29-year-olds hold 22.6% of jobs in the creative sector, recovery and growth of Europe, especially in providing above their 22.3% average in the economy as a whole. jobs and career opportunities to young Europeans, who are hard-hit by unemployment in the EU. The Paris region was Europe’s second hotspot for creative jobs after Greater London in 2010, according to the European Cluster Observatory. EY | December 2014 17 Europe’s leaders Thanks to a dense population, a strong market for culture, its world-class cultural heritage and a highly talented creative class, Europe has long been a source of corporate leaders in the creative industries. Be it renowned international corporations, mid-sized companies or successful start-ups, many European businesses are in the global vanguard. In the music industry, Universal leads, as does Endemol in But there is no room for complacency. Many governments TV. Hachette Book Group claims the top position in book around the world have awoken to the high economic and publishing, Ubisoft and Supercell in video games, and ]ehdgqe]flhgl]flaYdg^[j]Ylan]ÕjekYf\k]]clg\]n]dgh Publicis and WPP in advertising. Europe is also an innovation their cultural industries through targeted policies. Though a hotspot, creating, developing and testing new business `glkhgllg\Yq$=mjgh]^Y[]kaf[j]Ykaf_dqÕ]j[][geh]lalagf models like those of Sweden’s Spotify and France’s Deezer in from both developed and developing countries. Policy tools online music streaming services. These are typical success jYf_af_^jgelYpZj]YcklghmZda[afn]kle]flYj]\]hdgq]\ stories born in the minds of European entrepreneurs. by governments everywhere to attract these high–value– Kge]g^=mjgh]Ìkd]Y\]jk`Yn]_jgofZq]phYf\af_l`]aj Y\\af_Y[lanala]k&Afgf]fglYZd]]pYehd]$l`]?gn]jfe]fl activities across several market segments. Vivendi Group g^Im]Z][$af;YfY\Y$g^^]j]\Y+/&- lYpZj]Yc^gjna\]g is at the forefront of music production and publishing, as game developers. Video game employment there rose by is Bertelsmann in media and books. The European cinema 33% during 2008–10. Meantime, many jobs were lost in af\mkljqjYfckl`aj\$ZqfmeZ]jg^Õdekhjg\m[]\$Z]`af\ the UK video games industry: the largest transnational 1. l`gk]g^Af\aYYf\l`]MKÈYf\k][gf\Zq]phgjlk$Y^l]j companies relocated a share of their activities to Quebec l`Ylg^l`]MK&=mjgh]Ydkg`YkYka_faÕ[YflhghmdYlagf Policymakers within the EU must, therefore, respond of mid-sized companies — in TV, music, video games and to global competition and adopt strategies to ensure Yj[`al][lmj]^gj]pYehd]Èl`YleYq]e]j_]Yk^mlmj]ogjd\ Europe remains a world leader in the creative economy. leaders. With aggressive commercial strategies and thriving creativity, they draw high–quality employees, discover creative talent and seek new opportunities in global markets. Reshoring creative activities in Europe’s regional clusters Though a handful of sectors, including video games, The regions that showed the highest concentrations are at risk of offshoring, most jobs in the cultural and of creative activities were those that proved to be creative sectors depend on workers and creators most resilient during the post-2008 economic turmoil: who are located within European borders and are London and Paris enjoying the highest concentrations working in professions closely related to the local of creative employment3 held up well, as did Rome, economy, such as museum staff, visual artists, script Stockholm, Madrid, Munich and Budapest, while writers, DJs, show hosts, journalists or architects. mid-sized cities and rural areas suffered more. In a 2010 study, the European Cluster Observatory Partially thanks to this resilience, CCIs are increasingly demonstrated a very close relationship between viewed as a key component of local economic development. the development of creative and cultural At the crossroads of art, business and technology, economic activities and regional prosperity2. they act as a catalyst and an innovation engine, with Z]f]Õlkl`Ylklj]f_l`]fl`]ZjgY\]j][gfgeq& 18 Creating growth | Measuring cultural and creative markets in the EU 01 | Creative force: markets and jobs in the cultural and creative industries 1. www.gamesindustry.biz/articles/2012-01-19-40-per- cent-of-lost-uk-game-jobs-relocate-overseas 2. Priority Sector Report: Creative and Cultural Industries, The European Cluster Observatory, 2011. 3. The European Cluster Observatory only uses databases ^jge=mjgklYlYf\fYlagfYdg^Õ[]kg^klYlakla[kYk its main sources of data on creative and cultural employment. Its methodology slightly differs from the methodology adopted in this report insofar as it covers more NACE codes. EY | December 2014 19 02 Creating Growth: future drivers of the creative economy in Europe In this section: • Everything digital: a revolution in the creative ecosystem • Disruptive business models: paving the way for new forms of consumption • Valuing and protecting creativity: more than paying lip service to creators • Supporting businesses: the vital yet diminishing role of government • Helping small business: weaving a strong fabric of dynamic SMEs • Fueling growth: the indirect power of the creative engine Everything digital: a revolution in the creative ecosystem The future of Europe will be shaped by the digital transformation now underway in our economy and society. Just as creation itself is now often digitized, the creative industries have also invented new business models that integrate high-value content and communication technologies, both within their business and the services they provide. Once seen as largely a matter of technology, innovation has evolved to embrace aesthetics, functionality and content. The creative industries have become afl]_jYdlgl`]\a_alYd][gfgeq&Lg_]l`]j$l`]qa\]fla^qYf\^mdÕddf]omk]k^gjl][`fgdg_qYf\Y\Yhl lg[`Yf_af_[gfkme]jZ]`YnagjYf\]ph][lYlagfk& In this new ecosystem, the way in which Europeans consume Internet penetration rates in Europe media and interact with brands has changed. Thanks to a rapid upsurge in time spent online, the average European now spends more than 30 hours a week watching TV or 87% using the internet. Cross-media engagement is growing Northern in importance: consumers use several media, sometimes Europe Yll`]kYe]lae]$Yf\eYq^gj]pYehd]$kmj^gjlo]]l while watching TV — leading to new ways of interacting oal`[j]Ylan]ogjckYf\[j]Ylaf_f]oÖgokg^nYdm]& 2012 – MediaScope IAB Europe Source: 81% Over the past decade, digital revenues have driven growth Eastern 55% of the creative sector, adding €30b to its revenues between Western Europe 2001 and 20111.This trend is set to continue, further Europe transforming many of the sector’s business models. 61% DYj_]koYl`]kg^l`]af\mklja]kYj]afÖmp$[Yklaf_Yjgmf\ for new digital sources of revenue, even as the technological Southern revolution devours their traditional markets. Creative Europe activities, and especially media companies, increasingly resemble tech companies that use and transform data and online content into high-value services to consumers. More than 50m Europeans now go online on tablets and European consumers are some of the most “digitally savvy” 68% own an internet-enabled mobile phone — up 46% since 2010. That is facilitating a change in the way people read, in the world. Western Europe has 197m smartphone users2, the second-highest concentration in the world, and 73.1% watch and listen to media, culture and much else. This new of Europeans use the internet, leaving the Americas (61.8% ecosystem is driven by cultural content: games top charts g^l`]egklhjgÕlYZd]YhhkafegZad]\gofdgY\klgj]k4. in 2013)3ljYadaf_&@go]n]j$hjgdaÕ[gfdaf]k`ghhaf_Yf\ high levels of data consumption in Northern and Western Two of the top seven categories of goods and services Europe should not overshadow much lower usage levels purchased online are cultural. Books are the items most- in Southern, Central and Eastern Europe, where some EU purchased online: 35% of shoppers have already bought books in this way. Concert, festival and theater tickets rank newcomers have much lower levels of internet uptake. seventh, and 25% of online shoppers visit venue websites As mobile devices become more capable and easy to and other ticket retailers. But online technologies make use, Europeans are changing the way they consume, several cultural works unlawfully accessible. This is a critical including the way they access media and culture. issue that threatens the economic viability of many cultural market players, and is forcing them to seek new ways of ensuring that they are paid for their creative efforts. 22 Creating growth | Measuring cultural and creative markets in the EU 02 | Creating Growth: future drivers of the creative economy in Europe Disruptive business models: paving the way for new forms of consumption New services and technologies that enable people to access and enjoy creative works appear every day. On one hand, intermediaries such as search engines and platforms for user-generated content owe their success mostly to the access they provide to creative works, but do not share the value they create fairly with creators and creative industries. On the other hand, creative industries are often the early adopters of these new service models and technologies, and thus forerunners of our emerging digital society. More than any other sector, the CCIs have undergone • Community: Social networks and the digitization of `meYf]p[`Yf_]k`Yn]^Y[adalYl]\l`]]e]j_]f[]g^Y massive structural transformation to adapt to the community-based economy, in which friends may be more omnipresence of the internet and its impact on business ljmkl]\l`Yfafl]je]\aYja]kÌ[gehd]pYd_gjal`ek& models, consumption patterns and content creation • Involvement2L`]jgd]g^[gfkme]jk`YkZ]]f]pl]f\]\& processes5&Kaplj]f\kkmeeYjar]l`]k]]ngdmlagfk They contribute to the production, diffusion and marketing and highlight how new business models have been of cultural and creative works. able to combine the vitality of creative activities and entrepreneurs with innovation in information technology: • Illegal content: Digital technologies and the internet have enabled the emergence of many unauthorized services • Abundance: The abundance and immense diversity of and usages. Unlawful dissemination deprives creators and content is now taken for granted by today’s consumers. entrepreneurs of revenues, in some cases making it hard • Personalization: The creative industries embody our lgj][gmhafn]kle]flYf\j]\m[af_l`]ÕfYf[aYdaf[]flan]k appetite for more and more personalized content and to create. consumption. • Aggregation: The emergence of “time and content consumption crossroads,” such as Google and Facebook, has fueled market segmentation enabled by big data and the renewed search for relevance. :ggckYnYadYZd] F]lÖap ?gg_d]k]Yj[`]k FmeZ]jg^>Y[]Zggc ėe[gdd][l]\Zq]flj]hj]f]mjk gf9eYrgf kmZk[jaZ]jk h]jq]Yj users gfCa[cklYjl]j x9 +690% x1.9 +750% x12 Source: EY analysis EY Source: 2005 2012 2005 2012 2005 2012 2005 2012 2005 2012 1. “Media & Entertainment Knowledge Center” EY International. 2. eMarketer calculations, June 2014. 3. “Key 2005–2014 data for the world by geographic regions” International Telecommunication Union. 4. European Games Developer Federation. 5. “Sept ans: l’âge de raison ? – 2005/2012: les raisons d’espérer à l’ère du numérique”, Forum d’Avignon, 2012. EY | December 2014 23 Valuing and protecting creativity: more than paying lip service to creators Activities that rely heavily on intellectual property drive European growth1,and deliver 38.6% of EU ? The protection afforded by intellectual property law is This is undermining the economic viability of many critical to sustaining creativity and ensuring a return on cultural and creative operators.While a tiny minority of investment for creators and their business partners. The star creators make a decent living, the majority struggle EU has created a consistent legal framework to provide with short-term and multi-employer contracts and intellectual property protection through directives poor returns on their intellectual property. Often, they implementing international treaties and rules, such as the must combine several occupations to make ends meet. TRIPS Agreement and the Berne and Rome Conventions. Undervalued products and increasing pressures on One result is that royalty collection from collective rights hjg\m[lagf[gklkjYak]ka_faÕ[YflZYjja]jklgafn]kle]fl management organizations in Europe accounts for and value generation. These problems are especially ka_faÕ[YflZ][Ymk]l`];;Akaf[dm\]nYklfmeZ]jkg^ 60% of the worldwide total2,80% of which is collected in the music industry. But, value transfers along the keYddZmkaf]kk]kl`YlYj]gfdqeYj_afYddq%hjgÕlYZd]&Afalk chain of the creative economy are reshaping long- *()+klm\qg^Y[[]kklgÕfYf[]^gj[mdlmjYdYf\[j]Ylan] 3,the European Commission showed that half of established business relations: today, internet players services all enterprises in the CCI sectors employ just 1–3 people. and technical intermediaries are taking more and egj]nYdm]Yll`]]ph]fk]g^[gfl]fl[j]Ylgjk& 1. “Intellectual property rights intensive industries: contribution to economic performance and employment in the European Union,” L`]G^Õ[]^gj Harmonization in the Internal Market 2013. 2. CISAC. 3. ÉKmjn]qgfY[[]kklgÕfYf[]^gj[mdlmjYdYf\[j]Ylan]k]jna[]k%=nYdmYl]l`]ÕfYf[aYd_Yhg^\a^^]j]fl[mdlmjYdYf\[j]Ylan]k][lgjklgkmhhgjll`]aehY[l assessment of the Creative Europe Program,” European Commission, 2013. 24 Creating growth | Measuring cultural and creative markets in the EU 02 | Creating Growth: future drivers of the creative economy in Europe Supporting businesses: the vital yet diminishing role of government Parts of the creative economy and its sectors are underpinned by public support through purchases, ÕfYf[aYdYf\Õk[Ydaf[]flan]k$kmZka\a]k$da[]fk]^]]kgjhmZda[]ehdgqe]fl&Af*()*$Y[[gj\af_lg Eurostat, governments in the EU28 devoted €62b of spending to cultural services. However, many governments have been under severe Though modest, government support has a vital pump- pressure in recent years to cut public spending priming effect, leveraging private investment or support and and reduce support for cultural services, especially anchoring the economic vitality that the creative economy in Southern, Central and Eastern Europe. `Ykk`gofl`jgm_`gmlkapq]Yjkg^][gfgea[lmjegad& Before the 2008 crisis, public spending on cultural Egj]gn]j$[mdlmj]Zjaf_keYfqhgkalan]$fgfÕfYf[aYd services was growing by 5% a year: since then returns to people’s lives, which are largely unmeasured. it has fallen on average by 1% annually. ;mdlmjYdkh]f\af_Zq_gn]jfe]flk_]lkY`a_`hjgÕd]$ yet accounts for only 1% of government outgoings in the EU28 — a share unchanged during the decade to 2012 and far behind defense (2.9%) and education (10.7%). Total government expenditures on cultural services (€m) -1% +5% 63,409 61,062 61,085 61,305 61,323 62,047 56,938 53,812 49,154 50,869 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Eurostat - General government expenditure by function (COFOG) EY | December 2014 25 Helping small business: weaving a strong fabric of dynamic SMEs The diversity of business models within the CCIs, ranging from self-employed creators to giant global companies and public interest organizations, contributes to their resilience. But small or very small enterprises and organizations are the norm. 26 Creating growth | Measuring cultural and creative markets in the EU 02 | Creating Growth: future drivers of the creative economy in Europe Fueling growth: the indirect power of the creative engine Creative and cultural sectors are also powerful catalysts for other vital industries. Across the EU, the holiday plans of one out of every three tourists is heavily shaped by available cultural attractions. In France alone, culture-oriented tourism generated On tablets, they spend, on an average, 70% of their time €18b of revenues in 2011, and accounted for 35% “consuming” creative works. And, they spend 50% of their of tourists’ consumption decisions. Culture is also a smartphone–time not making calls, but playing games, cornerstone of digital innovation: many digital companies watching videos, listening to music or browsing the internet. and apps are created around cultural works and their Accelerated innovation in the creative sectors has fostered distribution, recognition and curation. This in turn faster innovation in electronic devices: creative works have fuels innovation in the creative and cultural sectors. encouraged the take-up of smartphones and tablets. The The availability of digitized cultural and creative works creative sectors are frontrunners in introducing consumers has accelerated the diffusion of electronic devices among to the new business models of the digital era, paving the consumers. EU consumers have become accustomed way for other sectors that are shifting services online. to listening to music, catching up with a TV or radio program and playing games on mobile devices. What are the most important considerations when deciding What are the economic impacts of cultural and creative on holiday destination or accomodation? content on sales of smart connected devices? Value for money 44% €13.92b Tablets €9.4b Cultural attractions 31% Place 27% 24% €43.99b Other Smartphones Source: Gfk - EY estimation - EY Gfk Source: €22.27b Source: Eurobarometere 2009 Eurobarometere Source: Quality of service 23% Safety 12% €27.35b Social considerations 10% PCs €10.35b Ecofriendly 10% Don't know 3% Europe retail sales (2013) Estimated indirect impact of cultural and creative contents Several answers possible (videos, games, music, etc.) EY | December 2014 27 03 Creative diversity: understanding the 11 market segments that make up the cultural and creative economy In this section: • Books • Film • Newspapers • Radio and magazines • Video games • Music • Visual arts • Performing arts • Architecture • TV • Advertising Books New user experiences are reinventing the book industry 646,000 €36.3b Employment (2012) Turnover (2012)2 €m Book publishing activities 135,000 Book sales in Europe3 33,621 Book specialized stores 32,000 =pljY=M*0]phgjl 2,637 Public and academic libraries 266,292 Total turnover4 36,258 Authors1 150,000 Employment in non-specialized stores 51,598 Book selling induced employment 11,235 Total employment 646,125 1. The estimate does not take into account indirect employment (printers, graphic designers, etc.). 2. Main sources used for this section are: A report on market trends and developments, 2013 / IDATE News on E-book, IDATE, 2011 / European book Publishing Statistics, Federation of European Publishers, 2013 / Cultural Access and Participation, 2013, European Commission / Statistical, Ecosystems and Competitiveness Analysis of the Media and Content Industries: the Book Publishing Industries, 2012, European Commission. 3. L`]ZggceYjc]laf[dm\]kÕ[lagfYf\fgf%Õ[lagfogjck$km[`YkY[Y\]ea[$[`ad\j]fÌkYf\[gea[Zggck$Yko]ddYkkh][aYdlqZggck%e]\a[Ydgjd]_Yd& 4. Sources: The Global eBook Market, 2013. Rüdiger Wischenbart / Market Access Database, 2014, DG Trade. 30 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today Books remain a pillar of the creative and cultural economy… With sales of more than €36.3b, the book market There are an estimated 150,000 authors is a big contributor to the European creative af=mjgh]$Ydl`gm_`l`]ljm]Õ_mj]eYqZ] ][gfgeq$jYfcaf_Ykl`]Õ^l`%dYj_]kleYjc]l$ higher since there is no single database of book Y`]Y\g^l`]Õdeaf\mkljqYf\h]j^gjeaf_Yjlk& writers — and for many writing is a sideline. It employs almost 650,000 people across Europe, jYfcaf_Õ^l`afl`];;AkÌbgZkd]Y_m]lYZd]& ÁZmllglYdkYd]k`Yn]\][daf]\gn]jl`]hYklÕn]q]Yjk According to the Federation of European Language barriers tend to make books a Publishers (FEP), book sales revenue fell 5% “domestic” product, mainly sold within between 2008 and 2012. The economic crisis homogeneous linguistic areas. An estimated has had an effect, but the drop may be partly *( g^kYd]kYj]]phgjlk$g^o`a[`)* Yj] ]phdYaf]\Zq\a_alYdkYd]kkmZklalmlaf_^gjhjafl ]phgjl]\oal`afl`]=MYf\0 Z]qgf\l`] sales at lower prices, eroding publishers’ turnover. Union. Book distribution remains focused on Though digital platforms may increase sales bookstores and general stores. In France there overall, often aided by aggressive pricing, they are still 25,000 bricks-and-mortar booksellers, may also affect cultural diversity, contributing af[dm\af_)-$(((oal`ka_faÕ[YflYf\j]_mdYj to a focus on best-sellers while simultaneously sales activity5.The “resilience” of physical improving availability of the little-read titles. klgj]kj]da]kgfl`]]ph]jlak]g^j]lYad]jko`g Reading books remain popular — it is the second advise readers and act as trusted critics. most common cultural activity among EU citizens. One-click purchases on online platforms may be the norm, but the autumn publishing season remains a key moment in the cultural calendar. Reading a book is the second most common cultural activity declared by the EU citizens - 2013 Have you at least once… Watched or listened to a cultural programme 72% on TV or on the radio Read a book 68% Been to the cinema 52% Visited a historical monument or site 52% Visited a museum or gallery 37% Been to a concert 35% Visited a public library 31% Been to the theatre 28% Seen a ballet, a dance performance or an opera 18% Source: Cultural Access and Participation (Eurobarometer 399). Sample of about 1,000 about 1,000 of Sample 399). (Eurobarometer and Participation Access Cultural Source: 5. France Cultural and Creative Industries Panorama, EY, 2013. EY | December 2014 31 Books Tomorrow EU consumers are slow adopters of e-books Distribution channels for books, as for other New e-book distribution services and devices cultural works, are increasingly digitized, as have recently been launched in national markets shown by the growing popularity of reading on across the EU, such as Libreka in Germany and tablets and e-readers. Yet, the e-book market is Elib in Scandinavia. With its many linguistic still emerging in Europe, where it only accounts zones, cultural diversity and growing familiarity for 3% of sales. Meantime, says the Global oal`=f_dak`$=mjgh]akdac]dqlghjgn]Y[gehd]p eBook Market 2013 report, US consumers market in which e-books have considerable have proved to be early-adopters: e-books hgl]flaYd&L`Ylogmd\Õloal`l`]lj]f\g^kgda\ accounted for almost 20% of total US book sales global growth: e-book sales worldwide are by late 2012. One in four Americans now reads forecast to grow 30% a year during 2010–15. e-books and the switchover from print to digital 1. Global eBook - A report on market trends and developments, Rüdiger Wischenbart, 2013. 32 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy European national markets continue to adapt to an increasingly global book market, with risks for the creators European national book markets are being The emergence of national distributors suggests disrupted by global distribution companies l`YlZqY\Yhlaf_$fYlagfYdhdYq]jk[Yf[g]pakl that now dominate digital distribution and with globalized distribution companies. Z]f]Õl^jgelYpghlaearYlagfghhgjlmfala]k& Digitization and the ongoing transformation In their contest with global companies, national g^l`]nYdm][`YafYdkg[`Ydd]f_]l`]ÕfYf[af_ =mjgh]Yfgh]jYlgjk ]p[]hl^gjl`]MChdYq]jk! of creation. For instance, Amazon offers are handicapped by linguistic fragmentation a publishing service targeting writers and that limits market size, and by ending of authors that would allow them to bypass retail price maintenance or its undermining traditional publishers. It also offers unlimited by online vendors. Long-standing business access to its e-book catalog for a monthly models underpinned by legal frameworks subscription. Though most authors prefer to peculiar to the industry are being challenged by Z]ZY[c]\ZqYd]_Y[qhmZdak`]j$ÕfYf[af_Yf\ technology and new business models that test redistribution-to-author models are changing. both law and competition rules. But, European businesses remain at the forefront of efforts to satisfy the demands of national consumers for choice of books and editorial diversity. Leaders and leadership European groups dominate the global book industry Oal`*,g^Õ[aYdkhgc]fdYf_mY_]kafl`] on retailers and, in some cases, capturing large EU and more than 60 indigenous regional parts of the retail market, internet and tech 1. Europeans and languages2, Europe’s book market has companies, such as Amazon and Apple, are their languages, EC, Eurobarometer 386 historically been fragmented. Nevertheless, now broadening the scope of their activities, (2012). the European publishing sector is the world’s and competing with book publishers. Publishing 2. FEP analysis. 3 3. Pearson, Reed Elsevier, biggest , and seven of the top ten book houses are adapting to this new technological Wolters Kluwer, 4 Random House, publishers in the world are European . Yf\[geh]lalan]]fnajgfe]flZq]ph]jae]flaf_ Hachette Livre, Grupo with new business models, consolidating Planeta and Holtzbrinck The past few years have seen the emergence - Publishers weekly, and offering ever-more digital content. 2013. of new players in the book sector: after taking EY | December 2014 33 Books Inside track How do you see the publishing Of course, we love it when the industry in Portugal and cinema takes one of our books and across Europe? decides to make it into a movie. After several years of crisis, It attracts new readers and puts publishing is stable and seems to be the author in the spotlight. slowly improving though Portugal With new ways to interact with readers, has relatively few book readers. especially through the internet, Af=mjgh]$l`]kalmYlagfakeap]\2 we are increasing and developing countries where readership is more new services and new values for developed tend to be more resilient. readers and for our authors. ¡A]nYFYna[cYalĶ One shared feature, though, is our Henrique Mota (left) faith in innovation to improve book What is the future of employment CEO of Principia Editora and newly elected Vice publishing and distribution, whether in the book industry? President of the Federation of European Publishers gfdaf]gjg^Öaf]&L][`fgdg_qak[]fljYd Our President Pierre Dutilleul, Director to many processes. We also believe g^=pl]jfYdYf\Afl]jhjg^]kkagfYd Pierre Dutilleul (right) that books are absolutely essential Relations at Editis, the second-largest President of FEP for the cohesion of our societies, French publishing group, said, “We since they enable citizens to better shouldn’t forget that publishing is a understand society and themselves. service industry and hence a creation industry, and as the people in charge, What trends do you see and how we have to locate, ease, attract and are publishers responding? develop the loyalty of those talents Publishing is diverse and each book which makes the book, even in times genre is unique. We need to work of crisis, a priority good.” He is right. on encouraging everybody in the Publishing is both local and population to read. Studies have shown international. Seven out of the that citizens who read books are better ten largest publishing groups are equipped socially and professionally. European and many of us have On the retail front, we need a international ties. Publishers and competitive and fair environment, all of the staff of publishing houses where all retailers obey the laws of need to know the local market, ]Y[`[gmfljqYf\^mdÕddl`]ajÕk[Yd and in some cases, international obligations, equally. As publishers, ones. Our publishing houses have we need a varied network of moved into the digital world (even if booksellers to encourage cultural people still very much enjoy printed diversity. Booksellers ensure books) so we hire more and more hjgpaealqlgj]Y\]jk$o`a[`aknalYd& young, technically-savvy people. They also play the essential role of stockholding and marketing books, so we need to ensure their survival. 34 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy EY | December 2014 35 Newspapers and magazines Facing and embracing the challenges of the digital age 483,500 €70.8b Employment (2012) 1 Turnover (2013) €m Newspaper industry 190,969 Newspaper 39,307 Journals and periodical publishing industry 289,850 Advertisement revenues 19,260 Others 2,860 Direct sales and online revenues 20,047 Total employment 483,679 Consumer magazines (B2C) 24,358 Advertisement revenues 8,642 Direct sales and online revenues 15,715 B2B magazines 6,600 (direct sales, ad spend and direct revenues) Others 525 Total turnover 70,790 1. Sources: Annual report, European Newspaper Publishers’ Association (2012) ; European Commission: Statistical, Ecosystems and Competitiveness Analysis of the Media and Content Industries: The Newspaper Publishing Industry ; World Magazine Trends, FIPP (2014). 36 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today A huge business that is part of our everyday lives Though employing fewer than 500,000 people, Magazines, including consumer and B2B the newspapers and magazines industry has a titles, account for about 40% of total sales. total revenue of more than €70b, making it the But magazine publishing is less dependent fourth-largest creative business. Newspapers on advertising revenues. Magazines sell bought at the kiosk or corner shop or delivered for higher prices, and advertising provides on subscription account for 60% of total only around a third of revenues. sales. Half of publishers’ revenues come from advertising, and advertising has been a critical element of their historic business model. Revenues of newspapers and magazines (sales and advertising) in Europe (€b) - 2012 CAGR 100,000 Newspapers -5.7% Magazines 80,000 Total 60,000 Source: WAN IFRA, FIPP, EY analysis FIPP, EY IFRA, WAN Source: 40,000 20,000 0 2008 2009 2010 2011 2012 A growing consumer appetite, thanks to the combination of print and digital Newspaper and magazine markets in Europe have Despite this, newspaper and magazine publishing Z]]f]ph]ja]f[af_eYbgj][gfgea[\a^Õ[mdla]k^gj remains a key sector, employing almost half a years and total sales have fallen, on an average, million people and producing — according to WAN by 5.7% a year since 2008. This downtrend has IFRA — an estimated 100m national, regional and been accelerated by the emergence of digital local newspapers, sold and distributed in Europe platforms and content, including websites offering every day. Digital publication is growing in Europe. free news, blogs and user-generated content. Digital technologies have enabled information The circulation decline threatens the publishers’ Yf\imYdalqf]okÖgol`jgm_`eYfqegj] two main sources of revenue: sales receipts and channels, including print and digital platforms, advertising. Newspapers’ share of the advertising with interactive websites, dedicated newspaper market has fallen from 35% in 1997 to less than apps and social media. But as in the US and 20% in 2012. Meantime, the shift to advertising other developed countries, digital publication online offers only limited recompense, since is yet to compensate for the fall in revenues the largest share is taken by search engines. from physical sales and the ongoing migration of advertising away from the printed page. EY | December 2014 37 Newspapers and magazines Tomorrow New consumer preferences stemming from the proliferation of devices and low-cost communication channels The spread of smartphones and tablets has driven Publishers are therefore developing change in the way news is consumed. People “freemium” strategies under which core want to access media and news “with any device, content is free online but users are encouraged anytime, anywhere.” In response, the industry to subscribe to their digital services to has shifted from a paper-only business model to a access additional, premium material. eapg^hjaflYf\\a_alYd&L`]\]n]dghe]flg^mk]j% Newspapers and magazines can leverage their generated content, especially social networks ZjYf\kYf\]ph]jae]floal`f]ohjg\m[lkYf\ and blogs, reinforces this trend. Consumers services that have strong connections with have become news providers and makers, readers. Some major European press groups, creating their own channels of information, such as Norway’s Schibsted Media Group or stories, pictures and analysis, though variable 9p]dKhjaf_]jaf?]jeYfq$`Yn]km[[]]\]\af quality still gives trusted sources an edge. reinventing their business models, anticipating Digital publishing enables publishers who l`]gfdaf]k`a^lg^[dYkkaÕ]\Y\n]jlakaf_ succeed in involving readers to enrich their and adding business to business (B2B) and value proposition and learn from their behavior, business to consumer (B2C) services to who, in some cases, are also becoming viewers monetize their online audience — thus building and listeners. Those who can combine data ^gmf\Ylagfk^gjafl]jfYlagfYd]phYfkagf& analytics on both print subscribers and their The consumer magazine market is also in online audience may uncover a valuable asset. transition as publishing houses build strong Newcomers in this market using different magazine brands and offer quality content on (typically digital-only) business models have digital platforms and devices. Though markets changed the traditional purchasing behavior remain challenging, the multimedia approach, and made readers less inclined to pay for combined with a strong focus on content, has content. Newspaper publishers need to continue strengthened their appeal: EU magazine readers to develop new products, business models now spend 3% longer each week with their and organizational structures, following the magazines than in 2010. Magazine audiences lead of innovative digital platforms already still attract advertisers. The development available for consumers, such as apps and of lifestyle magazine supplements, heavily digital kiosks. supported by advertising, underpins this appeal. 38 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Leaders and leadership Europe is the world’s leading newspapers and magazine market The EU28 long afforded the largest world Some of the most successful new business market: in 2012, almost a third of the models are also European: weekly newsmagazine world’s magazines were sold there, ahead Der Spiegel has effectively managed the of the US (24%) and Japan (11%). transition toward new platforms and digital But Asia now accounts for a third of global content. The web edition, employing 60 circulation after a 16% surge over 5 years, journalists, is read by 5.6m unique visitors while circulations in Western Europe and North every month and, unlike the print edition, Der America declined 17% during the same period. SpiegelÌko]Zkal]`YkZ]]fhjgÕlYZd]kaf[]*((-& Meantime, digital offerings from The Guardian, Nevertheless, two of the largest global press a London-based newspaper, and its cross-town agencies, AFP and Reuters, are of European rival MailOnline have become global hits. origin. EY | December 2014 39 Music Innovating to lead creative diversity in Europe 1,168,000 €25.3b Employment (2012) Turnover (2012) €m Sound recording and music publishing activities 44,660 Physical sales 3,693 Musicians, song writers 650,000 Digital sales 1,686 =fl]jlYafe]flogjc]jk hjgÕlk][lgj! 375,239 =phgjlkg^j][gj\]\emka[ 439 =fl]jlYafe]flogjc]jk fgfhjgÕlk][lgj! 81,466 Dan]emka[h]j^gjeYf[]j]n]fm] hjgÕlk][lgj! 7,793 Live music performance Employment in non-specialized stores 9,133 4,860 HmZda[dq^mf\]\'fgfhjgÕlk][lgj!1 Employment in music radios 5,714 Synchronization 93 Employment in music TV channels 1,884 Music radio stations 3,175 Total employment 1,168,096 Music TV channels 1,722 Copyright/author’s right 1,880 (background music, other radio and TV) Total turnover 25,341 1. L`]dan]emka[k][lgj`YkZgl`YhjanYl]$^gjhjgÕl$[gehgf]flYf\YhmZda[dq^gmf\]\ [gehgf]fl$o`a[`akYdkgj]^]jj]\lgYkfgf%hjgÕl&O]mk]Zgl`l]jekafl`akklm\q& 40 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today The third biggest employer in the European creative economy Activities accompanying the music industry’s calculated that there are 650,000 registered recorded and live value chains are numerous musicians, composers and songwriters. and diverse. Employees include composers, Collective rights organizations are key players songwriters, lyricists, performers, backing in the musical economy. They redistribute more musicians, producers, publishers, sound than €4.3b every year to their members, the engineers, recording studio staff, technical creators and publishers who constitute the workers, managers and workers at music Õjkldafcg^l`]emka[k][lgjnYdm][`Yaf& radio stations and TV music channels. In alkZjgY\]kl\]ÕfalagfÈj][gj\]\hdmkdan] Thousands of European music companies, both performance revenues — the music industry majors and SMEs, invest heavily in new artists, generates revenues of more than €25b. and produce thousands of new releases every year. The contribution of SMEs in particular, Composing and performing musical works in terms of releases and jobs, helps make the occupies most of almost 1.2m people sector a key employer and is a source of great working in the music industry. Based on diversity in new music. Europe is home to four data from national rights management of the ten biggest music markets worldwide organizations and entertainment workers, we (Germany, UK, France and Italy) and some of the most important music companies. A market made of recorded and live music The live and recorded music markets function in It also generates cultural capital and a strong symbiosis. Performance of live music (venues, territorial anchoring, through national and festivals and concerts) has been growing in regional opera houses, such as the Paris the past few years. The slight (0.6%)20 increase Opera, La Scala of Milan, and the Royal Opera in overall recorded music trade revenues in House in London, as well as national and 2013 suggests that European direct sales regional orchestras which play a major role for retain the ability to grow in the future. contemporary creation and the life of musical Both the recorded music and live music sectors repertoires (see Performing Arts section). are important providers of jobs that cannot be relocated. Live music in Europe also has a ka_faÕ[YflhmZda[dqkmhhgjl]\[gehgf]fl$o`a[` produces great economic value and employment. 2. IFPI. EY | December 2014 41 Music The European recorded music market is driven by growing digital markets1 Digital recorded music sales grew by Globally, downloads are a crucial source of 109% in Europe between 2009 and 2013. income. In 2013, they accounted for 67% of Overall, physical and digital sales were digital revenues, while streaming, whether ZjgY\dqÖYlaf*()+ Yf]l\][daf]g^ ÕfYf[]\ZqkmZk[jahlagfkgjY\n]jlak]e]flk$ just 0.3%) compared to 2012, helped by provided 27% of digital revenues. solid digital growth (+12%) in 2013. In Europe, streaming has grown robustly to Europeans remain among the world’s deliver 38% of digital revenues in 2013. largest consumers of recorded music, Ad-supported and subscription streaming with 4 EU countries among the 10 revenues are growing strongly and are biggest markets worldwide in 2013. ]ph][l]\lg]phYf\l`]ajk`Yj]g^l`]=mjgh]Yf According to IFPI, an industry body, digital sales digital market over the coming years2. accounted for 39% of global recorded music trade revenues in 2013 and 32% of those in Europe. Total music sales (retail prices) in the EU 28 (€b) Music subscription vs music downloads in Europe, 2012 47% Sweden 7% -16% 36% France 9% 32% Italy 15% Source: IFPI – EY analysis IFPI – EY Source: Source: Ipsos MediaCT - IFPI MediaCT Ipsos Source: 12% 5.49 4.79 4.30 3.69 3.47 Germany 21% 22% UK 33% 23% +109% USA 27% 0.91 1.08 1.38 1.69 1.90 2009 2010 2011 2012 2013 Internet users paying music subscriptions in the past six months Internet users downloading music in the past six months Digital sales revenues Physical sales revenues 1. Calculations based on IFPI data and recalculated to estimate retail prices. 2. Source : SACEM. 42 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy The music sector leads creative industries in testing and inventing new business models The music industry continues its transformation through ad-funded parts of the service (when into a global digital business. Recording such a choice is offered), are a growing part companies are successfully delivering music of the revenue stream. Revenue from music through digital channels, broadening the world of subscription streaming services surged 51.3% in licensed music, and innovating to bring artists to *()+$]p[]]\af_MK )Z_dgZYddq YhhjgpaeYl]dq a global audience. In terms of monetizing its core Ò/-(e!^gjl`]Õjkllae]&Alak_jgoaf_kl]Y\adq product for the digital world, the music sector across all major markets. Within Europe, still leads the way for other creative industries, consumer behavior varies. Sweden, France af[dm\af_ZggckYf\Õdek&=eZjY[af_Yf\ and Italy are “streaming subscription-friendly,” creating digital business models have been crucial while Germans prefer downloads. In Sweden, to the success of the European music industry. home of Spotify, half of all internet users pay a The shift to online music sales is taking place subscription to access millions of music tracks across Europe, but consumer preferences vary. through streaming services. German music Music streaming services, for which consumers lovers prefer to download tracks from platforms ]al`]jhYqYÕp]\%Yegmfl^gjmfdaeal]\ such as iTunes. In the US, a country often seen Y[[]kklgYf]plj]e]dq]pl]fkan][YlYdg_g^ as a bellwether, consumers are also moving music (most streaming services offer more to the “access” model offered by streaming than 20m tracks, and some have about 40m subscriptions, although Europe is leading the way. tracks available) or which they can use for free According to Nielsen, an information and measurement company, interactive music and video streaming was up by 35% in 2013, with 34.28b streams. This music and video streaming boom raises the fundamental question of how to better redistribute advertising revenues captured by video platforms to content creators and their partners. Video platforms facilitate the largest scale consumption of music, with YouTube, a video platform, being the world’s biggest music streaming platform. EY | December 2014 43 Music Tomorrow Supporting employment Musicians, songwriters, lyricists and Many hold second jobs, combining multiple composers are at the heart of the music roles into a portfolio career. This needs to industry. Though statistics are limited due be understood and enabled by laws and lgl`][gehd]palqg^Ykk]kke]fl$klm\a]k social security rules that grant protection in France and the UK highlight a lack of similar to that enjoyed by employees job security for music professionals. in other sectors of the economy. A sector founded on cultural diversity The European music market is made up of a In Denmark, France and the Netherlands, 80% diverse group of dynamic national markets of the top ten albums in 2013 were by locally- dominated by their national repertoire. Classical signed artists. The proportion in Spain was 80%, and contemporary music crosses national and almost 90% in Italy and Sweden. boundaries seamlessly, and classical artists In terms of overall album sales, national and recordings follow suit. Popular music, on repertoire accounts for 70% of the Finnish market the other hand, is generally more successful in and 65% of the French market1&L`][g]pakl]f[] countries where the language spoken is the one in of original and diverse musical cultures which the song is performed. Many markets show contributes to the cultural richness of Europe. a clear preference for their “national” music. Music services are key innovators in monetizing creative content Users have taken up listening to music “on-the- This shift toward targeted recommendations go” via wireless electronic devices in addition and a more personalized music offer is based to listening at home and on their computers. on rapid innovation by streaming platforms, Music services have led this rapidly changing which are diversifying their subscription market. Consumers have grown accustomed offers to meet consumer demand. to the unparalleled breadth of catalog There is still much to do to tackle piracy, available across digital services. Competition which has damaged the industry and artists among service providers also occurs on and hampered the take-up of legitimate the basis of curation and personalization, services for years. Music companies support offering tailored recommendations new distribution and marketing channels for and helping with music discovery. music through individual or collective deals with online music providers, but it remains 1. The evolution of music in Europe, IFPI, 2014. 44 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy \a^Õ[mdllg[geh]l]oal`^j]]mfda[]fk]\ including several digital and European-born services that do not remunerate artists. international leaders like Deezer (France) and Major and independent labels have proved Spotify (Sweden), underpinned by copyright, has lgZ]affgnYlan]YlÕf\af_f]ooYqklg_jgo$ helped transform the industry. The availability \]n]dghaf_Zmkaf]kkeg\]dk]p]ehdaÕ]\Zq of music at different price points and in diverse global rights agencies, including Merlin for the packages appeals to consumers, contributing to an increasing willingness to pay for music online. independents. The emergence of a wide range of legal music streaming and downloading services, Leaders and leadership A leader in sales and innovation Europe is home to the world’s leading such as YouTube, GooglePlay and Rdio. Europe record company — Universal Music Group – is also home to thousands of independent and two leading music streaming service music companies, which are also key providers — Swedish-based Spotify and Deezer employers and investors in new creative works, from France — which are global leaders, something crucial to musical diversity. competing with leading US players European creators and artists succeeding at unprecedented levels Two European bands were among the 2013 authors’ rights via collective societies to their top ten global recording artists, winning members: authors, composers and publishers. success with a global audience. UK-based One Even in a globalized music market, local EY | December 2014 45 Music Inside track What future trends are emerging? with subscription services accounting Today, music lovers have unlimited for 54% of digital revenues). and immediate access to most of Digital is a wonderful opportunity for the music ever recorded, across all the creative sectors, and, of course, the genres and regions of the world, at a creative sectors are a great opportunity reasonable price and often even for for the digital economy. Digital allows free. They also have access to devices new and more sophisticated ways of delivering better audio quality than communicating, reduces the distance ever before. This could be a dream- between creators and their public, and come-true for musicians, composers, enables the greatest diversity of works music producers and fans if — and only to be published and distributed, as if — online services treat every piece long as the “pipes” are not choked by a Michel Lambot of music with equal respect and return handful of powerful global gatekeepers. Co-founder and Co-president of [PIAS] equal value to creators. If not, online services will be the new gatekeepers, What is happening to What has been happening deciding what music can be published, employment in your sector? in your industry? how much an artist can earn and what The process of making music involves a L`]emka[k][lgjoYkgf]g^l`]Õjkl music genres the public can access. chain of skilled individuals: composers, to be confronted with the advent of the This places a heavy responsibility on lyricists, music publishers, performers, internet as a new distribution platform, those who will decide the outcome. backing musicians, sound engineers, ZY[cafl`]dYl]Ë1(k&9lÕjkl$l`ak record producers, recording studio disruptive technology had a dramatic How important is digital staff, artist managers, and graphic impact on the music market in terms technology in your sector? artists, as well as lawyers, accountants, Online music services have developed of jobs, growth and retailing. Seeing it IT and new media specialists. enormously in Europe in the last few as an opportunity rather than a threat, years. By 2013, more than 230 music There are very few specialized schools however, independent record labels services were available in Europe, that offer training for a career in decided to take a very forward-looking offering more than 37m tracks in the music business. That is why our approach to this new tool, seeing every EU country. Digital made 32% of industry tends to educate its new it as a real asset for music creators European recorded music sales, while workers itself. Workers are, on average, and authorizing new entrants to physical sales accounted for 56% in younger than in most other industries. develop systems and test the market. 2013. In certain countries, the share My company is being approached This year, the European-recorded g^\a_alYdak]n]f`a_`]j$^gj]pYehd]$ more by artists wanting to sign with music market returned to growth Sweden (70%, with subscription us and by young people wanting to ^gjl`]Õjkllae]afgn]jY\][Y\]$ services accounting for 94% of digital work with us than ever before. indicating that we are now at a tipping revenues) and the Netherlands (35%, point where the growth in digital is helping drive the market back up. 46 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track How has your industry changed What future trends are emerging? in the last few years? How has it We at Spotify are convinced that adapted to digital technologies? streaming, rather than possessing, is At Spotify, we are at the heart of the future of music, creating a new the digital revolution in the music model of listening, based on instant and industry. When Martin Lorentzon unlimited access to music. We believe and Daniel Ek decided to create it is more adapted to our current digital Spotify, their analysis was that in habits and connected environments. the 2000’s people were consuming Streaming’s market share has more and more music, thanks to the been growing fast for the last few internet, but at the same time the q]Yjk$Yf\o]]ph][lallg[gflafm] music industry was falling apart. Jonathan Forster gaining ground in the near future, When we started, online music was becoming one of the industry’s leading Managing Director, Spotify Nordics essentially piracy and download. But sources of revenue. In Sweden, the advent of streaming has been one Spotify now generates nearly 70% What is Spotify? of the biggest music industry shifts in of the industry’s total revenues. Spotify is the leading music streaming l`]hYklÕn]q]Yjk&L`]oYqo]k`Yj] service in the world. The company and discover music have completely What does the future hold for was founded in 2006 in Sweden and changed and we have really tried to employment in your sector? the service was launched in 2008. integrate these changes into Spotify What we are seeing in Sweden is Today, Spotify gives access to more by not only being a music player but amazing. Labels and majors are now than 20m tracks on every device also a social network and a place where hiring more engineers, often from tech with two versions: a free one paid by you discover the music you will like. companies rather than people with Y\kYf\Yhj]eamegf]ÕfYf[]\Zq ljY\alagfYdemka[af\mkljqhjgÕd]k& We are still at the beginning of the subscriptions. Spotify is now available I think that the music industry is streaming era. Today, we are really in 57 markets globally, up from 15 two turning into a world of digital natives! proud to count 40m users with more years ago, when we were limited largely than 10m paying subscribers, but to Europe and the US. Europe was there is still plenty of room for us to o`]j]o]]phYf\]\afalaYddq$YkaloYk grow and to become the primary way natural and easier for us as a European of consuming music. We really believe company. Now, we are in almost all that Spotify and streaming in general countries of the European Union are the future, and we are working and we have also launched in South really hard to realize that vision! America and Asia. Our goal is to be ]n]jqo`]j]oal`afl`]f]pllogq]Yjk& EY | December 2014 47 Performing arts Audiences love concerts and music festivals 1,234,500 €31.9b Employment (2011) Turnover (2011) €m Fgf%hjgÕlk][lgj 271,554 Fgf%hjgÕlk][lgj 14.726 Performing arts activities — production and 213,122 Performing arts activities 10.014 creation Venue revenues 4.712 Supporting activities to performing arts 40,247 HjgÕlk][lgj 17.153 Venue activities 18,185 HjgÕlk][lgj 962,783 Performing arts activities 11.664 Performing arts activities — production and Venue revenues 5.489 755,613 creation Total turnover 31.879 Supporting activities to performing arts 142,694 Venue activities 64,476 Total employment (estimate) 1,234,338 48 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today The performing arts span four main A strong tradition and local presence of theaters activities: modern and classical dance, and concert halls underpins this high level theatre, live music and circus arts. The of employment. By its nature, the activity is Õ]d\ak\aklaf_mak`]\ZqYhgdYjarYlagf labor-intensive and a striking 78% of employees between the public and private sectors. are creators and performers and another Providing an estimated 1,234,338 jobs 15% technicians, while just 7% are involved in venue management and organization of in Europe, the performing arts sector1 is the largest employer among the ballet, music and stage performances. continent’s cultural and creative industries, hjgna\af_egj]l`Yfgf]bgZafkap& <][j]Ykaf_Ym\a]f[]Õ_mj]k]phdYaf]\Zq[gfkljYaf]\`gmk]`gd\Zm\_]lk Attendance in theaters and concert halls fell ]Yjda]j&L`]egkldac]dq]phdYfYlagf^gjl`]^Yddak between 2007 and 2013, according to the the pressure on household budgets arising from Eurobarometer, for cultural participation in a prolonged period of slow economic growth and Europe. The number of Europeans saying they austerity. Attending live performances can be had been to the theatre at least once during ]ph]fkan]$Yf\akZ][geaf_j]dYlan]dqegj]kg 2013 fell to 28%, down from 32% in 2007. The at a time when the internet offers free or cheap proportion reporting they had been to a concert, access to many recorded performances. Live meantime, slipped to 35%, from 37% 6 years h]j^gjeYf[]k`Yn]Z][ge]Ydmpmjq^gjeYfq& A dynamic sector driven by live music and outdoor festivals Concerts and music festivals generated more the performing arts arena are becoming more than a third (37%) of global performing arts [gfÕ\]flYZgmlalkhjgkh][lk$Y[[gj\af_lg revenue in 2011. With revenues growing two business surveys. One study found that regularly since 2010, festival and concert more than 45% of respondents described the activities have now recovered to pre-crisis European festival market as “healthy,” and 40% d]n]dk&L`akj][gn]jqj]Ö][lkY\qfYea[_jgol` said the economic crisis had not affected their lj]f\$Yf\^mjl`]jhjg_j]kkak]ph][l]\af investment and development plans very much. *(),&=p][mlan]kg^[gehYfa]kgh]jYlaf_af Concert and music festivals revenues in Europe (€m) 8,000 UK 7,000 Germany 6,000 France 5,000 Other Western Europe Eastern Europe 4,000 1. Performing arts include all forms of artistic ]phj]kkagfaf^jgfl 3,000 of an audience. In this sector we look at 2,000 dancing, opera, theatre (classical, contemporary 1,000 and street art), opera and live music (classical and contemporary), 0 including festivals. 2008 2009 2010 2011 2012 2013 Source: EY International Multimedia and Entertainment Knowledge Center EY | December 2014 49 Performing arts Tomorrow Declining public support threatens local activities The wave of state-spending cuts that swept With public subsidies shrinking and production =mjgh]afl`]oYc]g^l`]ÕfYf[aYd[jakak`Yk costs rising, promoters have tended to hike ticket hit the creative industries hard. Amid rising hja[]klgeafaear]dgkk]kgjeYaflYafhjgÕlYZadalq& unemployment and upward pressure on The “belt-tightening” especially affected local social security budgets, many governments and micro-theaters, which depend most heavily `Yn]lYc]fYfYp]afkl]Y\lg\ak[j]lagfYjq on public subsidies. Theaters and concert spending on support for the arts, resulting halls with national and international visibility in a squeeze on public subsidies to theaters, Yhh]Yjj]kada]fllg][gfgea[\a^Õ[mdla]k& opera houses and orchestras. Funding of Indeed, during 2011 theatre audiences h]j^gjeaf_Yjlkakg^l]fZmadlYjgmf\Yeap in Barcelona, a favorite European leisure of sponsorships (e.g., private donations and destination, reached a record 2.8m1. fundraising), ticket sales and public subsidies. ?j]Yl]j[geh]lalagf^gj^]klanYd_g]jk]f[gmjY_]k\an]jkaÕ[Ylagf and higher quality Competition for the budgets of festival goers Intensifying competition could also encourage is increasing. On being questioned about organizers to innovate in the way they the outlook, 21% of festival organizers said organize, market and run festivals. Use [geh]lalagfogmd\Z]YeYbgjakkm]^gjl`]f]pl of digital technologies, including cashless few years. This will put downward pressure on payments, and provision of high-speed wireless entrance prices and push up production costs internet is likely to increase, and we should as organizers hire big-name acts and strive to ]ph][legj]imYdalq%gja]fl]\g^^]jk$km[`Yk improve facilities for those attending. This could “premium” hosting facilities. The strategy of lead to more imaginative funding mechanisms: segmenting customers and offering a higher- some festivals have sought to bolster income in quality product to those willing to pay more — recent years by developing branding, naming a practice known as “premiumization” — can and other advertising-based revenues. Z]k]]fafÕdeaf\mkljqYf\]dk]o`]j]& 1. L`]Ylj]Ym\a]f[]kaf=mjgh]Ög[clghdYq\]khal]l`]][gfgea[kim]]r]$L`]?mYj\aYf$*()*& 50 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy A growth engine for cultural tourism Culture is a powerful driver of tourism, motivating to the theatre, a musical, opera or ballet2. Local national and cross-border visitors within performances, in parks, pubs, restaurants and Europe and drawing many overseas visitors to even camp sites are an essential element of the content. A rich built and cultural heritage Europe’s tourist appeal. Even when cultural in many European countries and capitals is activities are not the primary reason for travel, reinforced by the dynamism of contemporary performing arts may be an important part of [mdlmj]$]phj]kk]\afeg\]jfYjl$ZYdd]lk$ l`]`gda\YqYf\ljYn]d]ph]ja]f[]$Yf\l`]j] theater and music. The performing arts play is ample scope for further development of an important role in attracting people: for these activities in cultural tourism strategies. instance, 9.2% of tourists visiting the UK went Leaders and leadership Europe – home of major music festivals… According to an MTV ranking, 5 of the 10 most-attended international festivals take place in Europe: • Donauinselfest, Austria • Paléo, Switzerland (attendance: 3.2m in 2013) (attendance: 230,000 in 2013) • Przystanek Woodstock, Poland • Exit, Serbia (attendance: 550,000 in 2012 (attendance: 385,000 in 2012) • Sziget, Hungary (attendance: 385,000 in 2012) … and a prime opera, theatre and ballet destination With world-renowned venues, such as La Scala And Europe’s long history of performing arts in Milan, the Royal Opera House in London, and and leading role in artistic creations is shared Staatsoper in Vienna, Europe has many of the best- through institutions, such as the Comédie known opera and ballet houses and companies in Française and Shakespearian theatres in the world. Ancient venues in Italy or Greece have London and Stratford-upon-Avon3. become highly sought-after tourist attractions. 2. The contribution of the arts and culture to the national economy, CEBR (2013). 3. 9kaY$^gj]pYehd]$Ydkg`YkYdgf_ljY\alagfg^Yjlakla[h]j^gjeYf[]afBYhYf]k]CYZmcao`a[`klYjl]\afl`])/l`[]flmjq3Yf\;`afY[j]Yl]\Yfaeh]jaYd opera house during the 8th Century Tang dynasty. EY | December 2014 51 Performing arts Inside track Famous for its quirkiness and What future trends are discernible? multicultural atmosphere, you’ll It is not easy for a big festival to survive meet almost every nationality, afl`]afl]fkaÕ]\[geh]lalan]kalmYlagf& from Irish and Dutch to Turkish and The key lies in specialization. Until French, bringing their own music, now, we have seen a huge quantitative theatre groups, food and culture. development in this sector. Now we’re shifting more to a qualitative What changes have your sector development era. The big open- undergone in recent years? air music events attract audiences In the last, say, 10 years, the number from a wider, cross-border territory, © sziget.hu of both local and international open- so organizers must highlight what air music events has quintupled, is unique very clearly. In a smaller Károly Gerendai and this has led to unprecedented country, such as Hungary, there is an Managing Director of Sziget Cultural competition among festivals. The 80%–90% overlap in the performer Management and Founder of Sziget Festival good news is that the number of lineup of music festivals. To attract attendees has also risen, though not more festival goers, events must offer What is the European dimension as fast as the supply side — I would unique attractions and features that of the Sziget Festival? say that attendance has doubled. complement their musical offerings. This massive eight-day music festival brings together more than 65,000 How has your sector integrated What is the future of attendees per day, and has been taking digital technologies? employment in your sector? place annually since 1993 in Budapest. 52 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track the Avignon, Barcelona, Athens and How has your festival integrated Istanbul festivals, we work together digital technologies? and collaborate to share the costs of We mainly developed a digital strategy having European and international toward communication with our companies perform in our festivals. audience to promote the festival program. We are also working with What is your economic situation schools and using digital technologies and how has your festival changed? to make our festival and its venues on We’ve suffered some budget cuts in archeological sites known to kids. recent years but we have found new © Michel Cavalca resources, thanks to the Niarchos What are the main challenges foundation and other sources of for the future? Yorgos Loukos funding that help to balance the First, the festival season is a great President of the Athens & Epidaurus Festivall budget. But it is important to underline opportunity for local people: we go that ticket revenues are important. from 12 to 350 people working for us, What is the European dimension Gmjla[c]lhja[af_hgda[qj]Ö][lk hiring many ticket vendors, ushers, of the Athens & Epidaurus Festival? the local economy, with a range of and so on. And then, there are local economic spinoffs which are huge in The Festival was born right after the tariffs (cheaper tickets for young and Greek civil war, with a triple economic, unemployed people and introduction terms of tourism — even boosting sales artistic and touristic objective: g^Õ\]dalq[Yj\k!Yf\akYj]Ydkm[[]kk$ of local honey, olive oil and orange opening up to Western Europe, with an increasing number of tickets marmalade. That is why it is important drawing back our great artists (like sold every year. We went from 40,000 for us to encourage closer European collaboration in terms of tourism and Marias Callas, who was at La Scala to 180,000 spectators within 5 years in Milan and Dimitris Mitropoulos, and 70% of them are under 30. We culture, which are interrelated, to who was conductor of the New have also moved many of our venues \]]h]fl`]Z]f]Õlk^gjZgl`k][lgjk& York Philharmonic Orchestra) and from archeological sites to more promoting our great archeological diverse and modern sites, such as sites in Athens and Epidaurus. abandoned factories. And casting theater productions with big names The festival aims at promoting such as Kevin Spacey playing Richard contemporary young Greek creators AAAgjAkYZ]dd]@mhh]jlafYEYjanYmp alongside European creators to build play attracts a wider audience. international bridges. We want to bring the new generation to the foreground Art is a great antidote to crisis, and and provide a platform for the enables creators to think differently ]e]j_af_^gj[]kafYjlk&>gj]pYehd]$ while it gives people a real appetite through the Kadmos project associating and enthusiasm for culture. EY | December 2014 53 TV The most popular medium is thriving 603,500 €90b Employment (2013)1 Turnover (2012) €m Employment in television programming activities 288,288 Pay TV2 and public license fees 60,479 Employment in television production, Advertising revenue 27,934 243,340 post-production and distribution Video on demand (VOD) 484 Creators working in the TV industry 72,000 =M*0]phgjlk 1,058 Total employment 603,628 Total turnover 89,955 1. Main sources used for this section are: World Television Market, IDATE, 2011 / European video: the industry overview, European Video Yearbook 2013, International Video Federation 2013 / Statistical, Ecosystems and Competitiveness Analysis of the Media and Content Industries: European Television in the New Media Landscape, Joint Research Centre European Union, 2013. 2. Pay-TV is an umbrella term including subscription based services and , pay-per-view, which may be described separately. 54 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today New growth factors energize TV broadcasting activities With the total reaching €90b and the total (for pay-TV, see graph) and general license employee count reaching 600,000, the European fees. Advertising revenues accounted for TV market — the world’s second-largest after that more than 31% of total revenues of TV of the US and ahead of Japan’s — grew on average broadcasters. No details of online revenues Zq)&0+ Yq]Yj^gjl`]hYklÕn]q]Yjk&9\][daf] from broadcasters’ websites are available at in advertising revenues (down by €3b from 2008 the European level, but recent estimates in the to 2012) has been compensated by increased UK suggest that they are still very marginal. income from TV license fees and subscriptions EU markets have effectively embraced new technologies The distribution channels of broadcast TV are This conversion is fueled by the emergence of af[j]Ykaf_dq\an]jkaÕ]\&:q*((1$kYl]ddal] a new audience landscape: even though TV broadcasting accounted for 31% of the EU TV remains a mass medium enabling advertisers market, cable for 30%, digital terrestrial TV for to reach a massive range of audiences, growing 25% and Internet Protocol Television (IPTV) audience fragmentation allows television for 5%. Western Europe is the largest IPTV channels to target their audience more precisely market in the world, accounting for 40% of and helps broadcasters secure revenues from global subscribers in 2010. France is the leading advertising designed for a particular audience. country in the world for IPTV (23% of the global total), followed by China (16%) and the US (16%)3. Paying viewers have become the leading source of revenues The growth of overall TV revenues is primarily Afl`][geaf_q]Yjk$l`aklj]f\ak]ph][l]\ \jan]fZqaf[j]Ykaf_Ögok^jgehYq%LN&Mflad to increase as digital advertising spend 2008, advertising was the biggest source of goes up and TV broadcasters secure more funding for the industry, generating about revenue through subscription plans4. 47% of the sector’s revenues, while 44% There is increasing pressure on national came from pay-TV and 9.4% from public Zm\_]lk3Yf\Ydl`gm_`hmZda[ÕfYf[af_jgk] funding. The situation began to reverse in 6.9% in 2010, it still accounted for less than 2009, and in 2010 pay-TV accounted for 10% of total television revenues. Public service 48% compared with 43% for advertising. broadcasters in several European countries `Yn]j][]fldq]ph]ja]f[]\\a^Õ[mdla]kYjakaf_ TV market revenue, Europe (€m) ^jgel`]][gfgea[[jakak&HmZda[ÕfYf[af_ 100,000 is an essential source of funding for public Exports service broadcasters, and in turn for their 80,000 VOD suppliers — the small and medium enterprises Advertising revenue from which programs are commissioned. 60,000 Gross revenue 40,000 20,000 0 3. Green paper on the online distribution of audiovisual works in the 2008 2009 2010 2011 2012 European Union: opportunities and challenges towards a digital single market, European Commission, 2011. Source: European Audiovisual Observatory 4. As estimated by IDATE. EY | December 2014 55 TV Tomorrow Many in the TV industry believe consumers will be increasingly watching programs on devices other increasingly willing to pay for “premium” content than TV sets. In an era where multitasking diverts featuring enriched programs and live events, TV audiences away from the main TV set, “second or for service make it easier to catch up on the screen” strategies — delivering program-related broadcasts they missed. So services that provide content on dedicated apps — are being developed Y[[]kklgLNhjg_jYekYko]ddYkÕdekYj]Z]af_ in an effort to keep the viewer involved. reshaped so that viewers are charged for what New technologies have helped this change. With they are willing to pay for, while other content the development of over-the-top (OTT) video remains free. Some traditional broadcasters have and connected TVs, new kinds of companies, enhanced traditional offerings with so-called such as independent content aggregators, are nonlinear services such as catch-up TV and video- increasingly competing with television channels, gf%\]eYf\YnYadYZd]gfYf]n]j%]phYf\af_YjjYq cable networks and broadband operators to of channels, platforms and devices. People are \]dan]jhjg_jYekYf\ÕdeknaYl`]afl]jf]l& Pay-TV platforms have resisted the swift emergence of streaming platforms EYfq]ph][l]\l`]YjjanYdg^d]_Ydgfdaf] >gj]pYehd]$F]lÖapoYkdYmf[`]\afl`]MCaf streaming platforms, enabling internet users to 2012 into a market where online TV was already access a very large catalog of TV programs and YnYadYZd]&:ml]paklaf_hYq%LNk]jna[]k$km[` Õdek$lgmf\]jeaf]]paklaf_hYq%LNk]jna[]kÈ as BSkyB, which maintained constant 10.6m where present — and attract their customers. subscribers between 2012 and 2013,were 1&L`]dYmf[`g^F]lÖapk]jna[]kaf But that has not happened. The arrival of unscathed France this year will provide a new opportunity online subscription-based operators such as to observe the impact of a legal streaming F]lÖapafFgjl`]jf=mjgh]Yf\l`]MC\a\ platform in a country that already has pay- not lead to a massive shift away from other TV services as well as subscription-based subscription services. Most viewers seem to services such as FilmoTV and CanalPlay. regard the new subscription services not as an alternative, but as a complementary offer to other pay-TV and subscription services. The new services mostly attract consumers without pay-TV subscriptions or consumers taking more subscription-based services. 1. BSkyB Facts and Figures, BSkyB activity reports. 56 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Maintaining the popularity of TV in the digital era European consumers still love TV, watching on a wide range of programs to watch on TV. average 3 hours and 48 minutes a day in 20102, Increased viewer choice has helped grow demand despite tough competition from the internet. Yf\j]n]fm]k$Zmlakfgdgf_]jkm^Õ[a]fllg But the amount of time spent watching TV is maintain the trend. As in the music industry, declining in some European countries: the French TV companies may choose to develop online watched 8 minutes less TV a day during 2014 lggdklg`]dhna]o]jkÕf\hjg_jYekl`]q compared with 2013 and Britons 18 minutes less. want to watch among the growing number of With almost 10,000 TV channels established options. These might include recommendation in Europe, and increasingly segmented tools that learn from viewing behavior and programming thanks to the emergence of highlight relevant content, replacing printed specialized channels, many consumers have and electronic program guides, and providing strong and easy-to-identify editorial lines. Some TV programs cross borders but TV activities remain mainly national Though TV markets remain essentially national, =phgjlkYj]Ydkg^Y[adalYl]\Zql`]\]n]dghe]fl a growing number of European TV programs and of series designed for audiences in more than ^gjeYlkYj]Õf\af_Ym\a]f[]kafgl`]j=mjgh]Yf one country, as well as documentary and TV countries. Series such as Downton Abbey or k`go[g%hjg\m[lagfk$mf\]jhaff]\ZqÕfYf[aYd Borgen are sold around the world. Big European and technical partnerships to share costs and production companies are also able to replicate know-how between European TV producers and programs that have done well in one country public or private broadcasters, including ARD and adapt them to address local audiences and and ZDF in Germany, the BBC and BSkyB in the lYkl]kafgl`]jk&>gj]pYehd]$`alk`gokkm[`Yk UK, and France Televisions. Partnerships and Big Brother (produced by Endemol), Pop Idol strategic alliances are also set up at a global (FremantleMedia) or Strictly Come Dancing (BBC) d]n]dYkl`]\]YdÕfYdar]\afG[lgZ]jZq;]flmjq are better known in France as Loft Story, Nouvelle >gpYf\9hgddg?dgZYdEYfY_]e]fllge]j_] Star and Danse avec les Stars respectively. Endemol, Core and Shine demonstrates. 2. TV Worldwide, Eurodata. EY | December 2014 57 TV Leaders and leadership The second-largest regional television market Europe was estimated to account for 29.2% of global TV revenues in 20101.That makes it the world’s second-largest TV market after North America (37%). Only three countries, the UK, Germany and France, generate more than half of this turnover (53%). The European television industry is a successful ]phgjl]j$\]khal]l`]_dgZYdklj]f_l`g^MK ]phgjlk&:ml1( g^=mjgh]Ìkafl]jfYlagfYd revenues come from the thriving British TV af\mkljq&:jalak`LN[gfl]fl]phgjlkjgk]lg £1.2b in 2012, having almost quadrupled since 20042. The sophistication and quality of leading UK television productions gives them international appeal, however rivals are emerging and Scandinavian countries have recently made a big impact on the global stage, with successful TV series such as Borgen, Real Humans, The Bridge and The Killing. 1. A<9L=Ogjd\L]d]nakagfEYjc]l *())!$9hjgÕd]g^[mjj]flYf\^mlmj]Ym\agnakmYdYm\a]f[]$=mjgh]Yf;geeakkagf*()*3?j]]fhYh]jgfl`]gfdaf] distribution of audiovisual works in the European Union: opportunities and challenges towards a digital single market, European Commission 2011; European Television in the New Media Landscape, European Commission 2012; Television, cinema, video and on-demand audiovisual services in 39 European States, European Audiovisual Observatory 2013. 2. `llh2''ooo&hY[l&[g&mc'YZgml%mk'f]ok'mc%l]d]nakagf%]phgjlk]p[]]\%)*Zf' 58 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track Social TV and second screens have What are the challenges created real opportunities (mostly for the future? interactivity and sponsor possibilities), The challenges are multiple. First, we and social media have created a must deal with new digital ways of TV powerful way to market shows and program consumption, working with channels. But the real change is lower budgets (which means being more still in the future, because – in the Ö]paZd]!Yf\c]]haf_`gd\g^gmjja_`lk$ Netherlands at least – funds are at a time when broadcasters seem to scarce. Also, we need to be aware be more powerful than ever. Another that although the second screen may challenge is that the same broadcasters © Roland J. Reinders © Roland help the primary screen by offering sometimes prefer in-house productions. meaningful and successful content And we see new competition Laurens Drillich (participation TV through your mobile from people who create their own Managing Director, Endemol or tablet) quite often the second (or content at home and distribute it Nederland Mediagroep third) screen in the house is used for online (and via mobile phones). What changes has your sector other platforms than TV (shows). undergone in the last few years? Television has become a global market. What are the employment More people watch TV at other And where this may not be true for trends and what is the future of moments than the original time slot at some very distinctive markets like employment in your sector? which it was originally broadcast and on The sector favors young people and Japan or India, the rest of the world, other devices, more advertising money the market demands super talents to and especially Europe and Australia, goes to digital, and many broadcast and run productions, so we have to identify, watches the same type of content production companies have teamed attract and retain these employees. We probably 75% of the time. As an up, while at the same time there is YdkgljqlgZ]Ö]paZd]$o`]j]hgkkaZd]& ]pYehd]$l`]*-Za__]klLNk`gok a constant stream of new, smaller :ml EY | December 2014 59 TV Inside track What is Arte and what are at the heart of the new editorial its special features? policy that we launched in 2012: Arte is a singular project: the unique innovating without abandoning our Franco–German cultural channel convictions. This strategy is bearing with a European mission. Financed fruit in France and also in Germany 95% by the French and German where Arte is achieving record ratings. license fees, it has two production centers, one in Paris (Arte France), What are the implications of and one in Germany in Baden- digital technology and what Baden (Arte Deutschland), and future trends are emerging? © Miguel Medina Yfg^Õ[aYd`]Y\imYjl]jk[Ydd]\D] Technological innovation is changing Central: its broadcasting center the way people watch and use TV, Véronique Cayla in Strasbourg (Arte GEIE). especially the way they used to watch President of Arte programs sequentially, as they were Arte France employs about 250 broadcast. Digital technology offers people, 70% of them women, at all great opportunities for diversity levels of the organization. Arte is and creativity, for spreading and a very female-supportive channel, sharing the arts and culture. It is and has added many women in top also an opportunity for the entire positions in the past couple of years. broadcast industry with Arte in the Arte is a double utopia. First, it is vanguard, for ours is a dual-country an audiovisual utopia because it channel that was quick to adopt digital broadcasts simultaneously the same technologies and that can rely on programs in two languages in France strong and distinctive programs. and Germany (40% of the programs Yet, we have to be wary of the are produced by Arte France, 40% by strategies of the major internet Arte Deutschland and 20% via the players, particularly Google, Apple, GEIE). It is also a political utopia that Facebook and Amazon, which are aims at bringing together the people of unregulated, less concerned about Europe through their culture. Opening cultural diversity than economic to other cultures, to their diversity, performance, and inclined to act as to the most varied creation and the “digital predators.” Europe must be renewal of its forms and genres are 60 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy careful and has to adapt its regulatory To reshape Arte for a digital world, system so as to protect not only its we have drawn upon our values and heritage and cultural wealth, but `aklgja[klj]f_l`klg]klYZdak`Õn] also its advertising revenues and digital services. Arte Concert was personal data. When our continent launched at the beginning of the is going through a bruising identity year and has since achieved record crisis, culture must now more than Ym\a]f[]kl`Ylj]Ö][l9jl]Ìk[gn]jY_] ever be protected, supported and of Europe’s summer festivals. Arte strengthened and creativity be Creative is our cultural leader. Arte promoted. That is the idea behind Future carries science content the Tandem project developed by and programs. And this year we Arte: stimulating production of launched two new services. One Franco–German scripted programs is Arte Info, which brings together and enhancing and tightening the all our news content, showcasing bonds between our two countries — Arte’s special international character. favoring European coproduction as And Arte Cinema, the latest in our we look to the future together. _YdYpq$`a_`da_`lkYf\]f`Yf[]kgmj Afkm[`YhjgdaÕ[Yf\_dgZYdar]\k][lgj$ enthusiasm and support for art- Arte needs to be supported so that it house cinema from around the world. can achieve its cultural promise in this Arte’s goal is to become a beacon new digital era. It also needs to develop of European culture on the internet, its European dimension, accentuating diffusing the cultural identities of the quality and attractiveness of our continent to strengthen their its programs. We have developed a afÖm]f[]Yf\[gfljaZml]kljgf_dqlg powerful digital strategy, articulated the “European forum” that we need l`jgm_`l`][j]Ylagfg^YÉ_YdYpqÊg^ now more than ever. We are now Õn]\a_alYd[`Yff]dk&GmjYeZalagfak seeking support from the European to establish a new model for public Commission to subtitle our programs television that is, more open, more in other EU languages, which we participative and which enables real- believe would turbo-charge our drive time and delayed viewing to evolve lgZ][ge]YÖY_k`ahg^=mjgh]Yf in an interwoven and enriching way. culture. EY | December 2014 61 Film Resilience fueled by the digital transformation 641,000 €17.3b Employment (2012) Turnover (2012) €m LglYd]ehdgqe]flafÕdehjg\m[lagf$ :gpg^Õ[]_jgkkj]n]fm] 6,298 573,555 postproduction and distribution Physical home entertainment 6,747 Employment in nonspecialized retail stores 31,205 (DVD and Blu-ray rental and sales) Advertising revenue 671 9ml`gjkogjcaf_afl`]Õdeaf\mkljq 36,000 1 VOD revenue 1,380 Total employment 640,760 =M*0]phgjlk 2,176 Total turnover 17,272 1. Estimate of the number of authors receiving royalty payments irrespective of the year the works were completed. Method of calculation: the SAA represents 120,000 authors working in the audiovisual industry. CISAC estimates that 10% of these authors are deceased, leaving a total of 108,000 living Yml`gjk&LYcaf_Õ_mj]k^gj>jYf[][gehad]\ZqK9;=EYkY_ma\]$o][Yf]klaeYl]l`YlYml`gjkogjcaf_afl`]Õdeaf\mkljqYegmfllgYl`aj\g^l`aklglYd& L`]j]akYdY[cg^\YlYYlZgl`fYlagfYdYf\=mjgh]Yfd]n]dkgfl`]]pY[lfmeZ]jg^]fl]jlYafe]flogjc]jk& 62 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today A €17b market employing almost 650,000 decline in receipts from the sale of DVDs, which h]ghd]$l`]Õdeaf\mkljqakl`]fafl`%dYj_]kl have fallen from 50% to 32% of the total in the covered by this report. Its biggest single source of same period. Though many employees are highly revenues is the sale of cinema tickets — referred skilled, and the industry’s stars are household lgYkÉ_jgkkZgpg^Õ[]j]n]fm]kÊÈo`a[` names, many employees are in distribution, in 2012 was 36.5% of the total. These have including manning cinemas and retail operations. grown modestly since 2008, but not enough Even so, there are thought to be 36,000 to compensate for a substantial and continuing Yml`gjk[j]Ylaf_ÕdeeYl]jaYdY[jgkk=mjgh]& Cinema admissions remain high Kaf[]*((0$Zgpg^Õ[]j]n]fm]k`Yn]af[j]Yk]\ for cinema goers and underpinned ticket by an average of 2.4% a year in the EMEA region. price increases almost everywhere, helping In 2012, European cinemas earned almost Zgpg^Õ[]j]n]fm]j]Y[`f]oj][gj\k2gf €6.3b of receipts, unchanged from 2011, from average, EU consumers paid €6.90 for a seat 930m admissions. While Finland (+19.7%) and in front of the big screen during 2012. Romania (+15.4%) saw outstanding growth, F]o[gfkme]j]ph]ja]f[]kYj]Z]af_ the mature markets, and most notably France — developed by cinemas, including 4D (in which the largest market in Europe, with 203m Ym\a]f[]k]ph]ja]f[]kaemdYl]\]^^][lkkm[` admissions — saw total admissions stagnate as rain or vibration), operas, plays and live or fall slightly. Going to the cinema remains broadcasting of concerts. Faced with intensifying very popular among EU consumers, though competition from home entertainment and ticket sales only amount to 3% of total sales the internet, cinemas are upgrading their of creative and cultural goods and services. afl]jagjkYf\]ph]jae]flaf_oal`\a^^]j]flaYl]\ Innovations such as 3D and digital screens [gfkme]j]ph]ja]f[]k$af[dm\af_ÕjklYf\ `Yn]hjgna\]\Yf]f`Yf[]\]ph]ja]f[] second class services and tickets. CAGR -1% 18,148 17,990 17,889 17,506 17,272 ;af]eY_jgkkZgpg^Õ[]j]n]fm]k 5,329 6,194 6,269 5,992 6,298 9,078 5,484 9\n]jlakaf_ 7,883 7,226 6,433 NG<eYjc]lÇÕde Source: European Audiovisual Observatory EY analysis EY Observatory Audiovisual European Source: Exports 2008 2009 2010 2011 2012 EY | December 2014 63 Film The economic sustainability of an investment-hungry industry In contrast, digitization and new consumption sometimes inadequate. European producers very trends (including piracy) have severely affected often use co-production to share costs and draw physical sales. Since 2008, physical sales of DVDs mhgfhj]%\akljaZmlagfkYd]kafY\\alagflg]pl]jfYd and revenues from their rental have declined support by public authorities. The production steeply by 12% a year. Sales of discs in the Blu- sector is volatile and largely reliant upon small ray format have been rising on average by 50% production companies. These companies are a year, but starting from a low base remain too jYj]dqYZd]lgafn]klYkem[` h]jÕdeYf\af modest to compensate for this fall. The slide lglYd!afÕdehjg\m[lagfYkl`]MKklm\agk$ in DVD sales has undermined the economic which form an alternative production model. naYZadalqg^em[`g^l`]=mjgh]YfÕdeaf\mkljq& L`]ÕfYf[aYdjakckg^Õdehjg\m[lagfYf\ L`gm_`alkk[Yd]ak\a^Õ[mdllgimYfla^q$hajY[qak distribution are usually shared or outsourced reckoned to be among reasons for the big fall in by selling distribution rights in advance (before DVD sales. The UK Federation Against Copyright l`]ÕdeakeY\]!lg]flala]kkh][aYdar]\af Theft (FACT) estimates pirate DVDs and illegal marketing and distributing audiovisual works downloading cause an industry revenue shortfall in different languages, and via the various equal to 15% of the value of legitimate sales. distribution channels. Investment partners Oal`egkl=mjgh]YfÕdekZ]af_hjglglqh]k$ have to be attracted by the creative strength YlljY[laf_hjanYl]^mf\af_^gj=mjgh]YfÕde% and commercial potential of a project. Further eYcaf_ak\a^Õ[mdlkaf[]j]lmjfkYj]mf[]jlYafYf\ development of this funding model may help to j]\m[]l`]^jY_adalqg^l`]=mjgh]YfÕdeaf\mkljq& Digital distribution models are growing fast, but remain marginal Though it is still a small part of the total, digital J]n]fm]ak]ph][l]\lgaf[j]Yk]ka_faÕ[Yfldq revenues from VOD platforms (TV, cable and in the coming years as distribution satellite based) have increased sharply in recent hdYl^gjek\]n]dghYf\[YlYdg_]phYf\& q]Yjk&NG<`Yk_jgof^jgeYdegklfgl`af_Õn] years ago to account for around a quarter of total Zgpg^Õ[]kj]n]fm] Ò)&,Zg^Ò.&+Z!af*()+& 64 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Tomorrow Tailor-made funding schemes L`]=mjgh]YfÕdeaf\mkljqak]kk]flaYddqY dgYfk$kmZka\a]k$lYpZj]YckYf\fYlagfYd producer of prototypes, and each must pass content quotas, designed to promote national or fail the critical test of cinema audiences. [mdlmj]Yf\mf\]jhaffYlagfYdÕdeaf\mklja]k& :][Ymk]l`]hjg\m[lagfg^ÕdeYf\Ym\agnakmYd With a revenue generation of €2b a year works requires substantial up-front investment, from EU member states (in soft loans, grants alafngdn]kka_faÕ[YflÕfYf[aYdjakcÇegj]kg Yf\lYpaf[]flan]k!$hmZda[^mf\af_j]eYafk l`Yfgl`]j^gjekg^[mdlmjYd[gfl]fl&9ÕdeÌk nalYdlgl`]=mjgh]YfÕdek][lgj1. Public hjgkh][lk^gjkm[[]kkYj]n]jq\a^Õ[mdllgYkk]kk2 funding has helped reduce risks and attract l`gm_`YÕde[Yfkge]lae]k\]dan]jYZgfYfrY investments from third parties, in particular to investors, others can lose money or it can through co-productions between several take many years to recoup the development, countries and private equity investors. Yet the production, marketing and distribution costs. =MÕdehjg\m[lagfk][lgjakk]]fYkjakcqYf\ This has led to state intervention, including afkm^Õ[a]fldqhjgÕlYZd]ZqeYfqhjanYl]afn]klgjk& L`]=MÕdeaf\mkljq[YfkladdZ]f]Õl^jgeÕfYf[aYdghhgjlmfala]k L`][`Ydd]f_]^gj=MÕdehjg\m[lagfoaddZ]lg by appropriate means, the production of and YlljY[lYf\k][mj]ÕfYf[aYd[geeale]flk^jge access to European works. To check that the new online distribution operators at the current regulatory framework remains up-to- hj]%ÕfYf[af_klY_]& \Yl]$YJ=>AL]p]j[ak]ak^gj]k]]f^gj*()- Article 13 of the EU’s AVMS directive to review the effectiveness of the Directive. (Chapter IV “Provisions applicable only to The European industry is increasingly developing on-demand audiovisual media services”) ÕdeYf\Ym\agnakmYdhjg_jYekoal`afl]jfYlagfYd requires member states to ensure that on- appeal. This is seen as a way to reach new demand media service providers under their eYjc]lkYf\lg[j]Yl]f]oÕfYf[aYdghhgjlmfala]k jurisdiction promote, where practicable and Zqk]]caf_ÕfYf[af_hYjlf]jkZ]qgf\=mjgh]& Consolidation of cinema ownership, fueled by the switch to digital cinemas 1. Source: we calculated hmZda[ÕfYf[af_afl`] four main countries Ownership of European cinemas has consolidated including virtual print fees that allowed those (UK, France, Germany, KhYaf!&HmZda[ÕfYf[af_ afl`]hYkl^]oq]Yjk&Ka_faÕ[Yflafn]kle]flk in the value chain to share the investments, in these countries provides the vast `Yn]Z]]feY\]afdYj_]emdlahd]p[af]eYklg backed by direct public funding. Consumers majority of public enable digital projection, and some smaller, [gflafm]lgnYdm]l`][gdd][lan]]ph]ja]f[] kmhhgjllgl`]Õde industry in Europe. We af\]h]f\]fl[af]eYk`Yn]kljm__d]\lgÕf\ g^oYl[`af_Õdekafl`][af]eY$\]khal]]Ykq believe public funds in these four countries the necessary funds. However, funding vehicles access to movies on digital devices at home. provide 80% by volume of public support. were used in many European countries, EY | December 2014 65 Film Leaders and leadership =mjgh]YfÕdehjg\m[lagfakY_dgZYd^gj[]Á Oal`Ydegkl)$+((Õdekhjg\m[]\af*()*$l`] International sales agents, such as Fortissimo, =MakYd]Y\af_Õde%hjg\m[af_j]_agf& Nordisk Film and Wild Bunch, as well as EU and Europe’s growing visibility on the worldwide worldwide festival networks, highlight both cinematographic stage stems from a combination =mjgh]YfZdg[cZmkl]jkYf\Yjl%`gmk]Õdek& g^^Y[lgjk&LYd]fl]\=mjgh]YfÕdeeYc]jkYf\ 9f\kge]=mjgh]YfÕdek`Yn]ogfZgl`[jala[Yd producers, including EuropaCorp and and commercial success internationally, such StudioCanal, have increased their global as the French comedy-drama Intouchables presence. or British-made drama The King’s Speech. Breakdown of total EU admissions per country of origin (% of admissions) Where do the European movies watched in Europe come from ? 2.1% 33.6% 62.8% 13.3% 8% 2.9% 1.5% 0.1% European Audiovisual Observatory - Lumière database analysis database - Lumière Observatory Audiovisual European EU Other Europe Other US Eur inc/US co-prod. 2.8% 6.2% ÁZmlMKÕdekj]eYafhghmdYjaf=mjgh][af]eYk Af*()*$)/g^l`]*(egklhghmdYjÕdek Meantime, the share of US movies declined 1 1. L`]k]Õ_mj]kk`gmd\Z] in Europe were produced by the US. from 67.1% of total admissions to 62.8% . treated with caution as L`gm_`MKÕdekkladd\geafYl]la[c]lkYd]k By country of origin, French movies captured they depend strongly on blockbusters’ af=mjgh]Yf[af]eYk$=mjgh]YfÕdekYj] 13.6% of European cinema seats and UK market performance , ^gj]pYehd]$l`]`m_] gaining market share. In 2009, European movies 8%, while Italy came third with 2.9%. success of Skyfall helped EU market ÕdekYlljY[l]\*. g^lglYdY\eakkagfkaf share to grow sharply in 2012. Europe: by 2012, it had risen to 33.6%. 66 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track involved in production, broadcast and What’s happening to employment? distribution of content, but crucially The UK employs 259,000 people to the intellectual property and afalkÕdeYf\LNk][lgjk&L`] invention of creative individuals, such creative industries as a whole as writers, directors and producers. accounted for 1 job in every 18 in The entire media industry rests on the UK in 20133.Investment in skills the talents, ideas and achievements and career development is key to of creative individuals, the vast ensuring that British creatives are majority of whom are freelancers. supported and able to continue to deliver world-class productions. © Beryl Richards What are the challenges currently One of the big challenges for facing audiovisual production? employment is diversity. In 2013, Beryl Richards Audiovisual production has been gfdq+- g^YddÕde'LNbgZkafl`]MC LNYf\Õde\aj][lgj$Na[]%;`Yajg^ EY | December 2014 67 Radio Still the most trusted medium and available in many new ways 97,000 €10.4b Employment (2012)1 Turnover (2012)3 €m Employment in radio broadcasting activities 96,897 Advertisement revenues 4,810 Total employment2 96,897 Other revenues (public radio license fees) 5,597 Total turnover4 10,407 1. L`]k]Õ_mj]k\gfglaf[dm\]^j]]dYf[]jY\agZjgY\[Ykl]jk& 2. This estimate includes both commercial and public radio stations. 3. Main sources used for this section are: Media Use in the European Union, 2012, European Commission / The Future of Radio Broadcasting in Europe, Radio spectrum Policy Group, 2010 / Public radio and New media Platforms, European Broadcasting Union, 2011 /The Future of Digital Radio, European Broadcasting Union (2011) / The Future of Radio is Multi-Platform, Association of European / Radios (2014). 4. =p[dm\]\^jgel`akYfYdqkakYj]ËYkkg[aYlan]jY\agkÌ&L`]q[]jlYafdqYj]kljgf_dqYf[`gj]\Yll`]dg[Ydd]n]d$Zml`Yn]YkeYddk`Yj]g^l`]=mjgh]YfYm\a]f[]& 68 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today Popular, inclusive and resilient In 2012, radio was the second most widely listeners through an enriched offer including used medium by European consumers, after complementary access to programs and television5&>gmjgmlg^Õn]=mjgh]Yfkdakl]f additional content available via podcasts, mobile to radio for two hours or more every day, a devices and social media — becoming a “multi- habit unchanged between 2010 and 20126. platform” medium. Radiobroadcasters have been But with revenues of €10b and “only” 97,000 canny in embracing the digital revolution and jobs, it is a relatively small force in the EU developing a multimedia offer, drawing upon economy. Omnipresent, but with only modest advertising revenues to ensure their services direct economic impact, radio broadcasting are web-friendly and provide enriched online targets national and regional audiences, and is content. This large and loyal audience underpins anchored by language and culture. It delivers the sector’s remarkable resilience throughout local information (and advertising) to local the economic crisis. Although revenue slipped audiences. The richness of the radio industry 4.4% between 2008 and 2012, employment j]ka\]kafalk\an]jkalq2eqjaY\hjg_jYek]phdgj] rose 2.2%. Advertising revenue, which made and address almost every aspect of daily life, up to 46% of radiobroadcasters’ turnover in from politics and sport to culture and health. 2012, has shrunk by 7.3% since 2008. Market Despite greater competition for leisure analysts say that the growth of rival media time, radiobroadcasters have succeeded in raises the risk that advertising spending might retaining their audiences, while attracting new be diverted from radio to other distribution channels that offer a more targeted audience. Public service and commercial models coexist Everywhere in Europe, public and private ZjgY\[Yklaf_k]jna[]k[g]pakl&HmZda[ radiobroadcasters, typically part-funded by license fees, had a 37.1% audience share in 2010. Commercial broadcasters funded their operations from advertising revenues totaling €4.8b in 2012. Advertising was the leading source of revenue for both private and public radiobroadcasters. 5. When the internet is seen not as a medium in itself, but as a conduit for media such as TV, radio and newspapers. 6. Source : Association of European Radios. EY | December 2014 69 Radio Tomorrow A more integrated, creative and connected radio New complementary technologies such as social In the UK, a technology alliance comprising the media and mobile devices offer opportunities BBC, Global Radio and Bauer Media is behind to share additional information and content, Radioplayer, which offers listeners a single online Yf\hjgna\]Zgl`g^Öaf]Yf\gfdaf]k]jna[]k& portal to every radio station in the country, and Social networks enable radiobroadcasters is available as an app on a plethora of devices. to get even closer to their audiences, with Developing digital services is essential gfdaf]]p[`Yf_]k[gehd]e]flaf_dgf_% to enabling European radio groups to standing audience interaction via phone- retain or grow audiences and offer cross- in shows and listener competitions. media packages to their advertisers. Integrating new technologies enriches The internet has also enabled would-be dakl]f]jkÌ]ph]ja]f[]g^jY\ag&AfalaYlan]kkm[` broadcasters to overcome constraints as RadioDNS, which enables additional services imposed by limited frequency availability Yf\Yhhda[Ylagfklg]paklYdgf_ka\]ZjgY\[Ykl through the launch of web-only radio streams, combine the best features of analog stations, which make it possible to reach and digital broadcast (high quality, robustness, more segmented audiences more cheaply. reliability) and the internet (tagging, visuals). Online services offered by public radio broadcasters - 2013 Kgmj[]2=mjgh]Yf:jgY\[Yklaf_Mfagfkmjn]q Visual radio 19% Communities (on own website) 32% Voting (online) 42% Comments 42% Catch-up streaming 45% Blogs 52% Discussions forums (on own website) 55% RSS feeds 61% Smartphone/tablet application 68% Participation/ 68% info on external social media sites Podcasting 87% Live streaming 100% 70 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Leaders and leadership =phgjlg^jY\agZjgY\[Yklaf_Yf\[gfl]flak in many countries worldwide. Radio France limited, though microstates such as Monaco Internationale (RFI), with similar roots, is another Yf\Dmp]eZgmj_`Yn]dgf_]phdgal]\l`]ajjY\ag ]pYehd]g^Ykm[[]kk^md]phgjl]j&Oal`,(&-e spectrum allocations to reach wider audiences. weekly listeners worldwide, including 33.1m On a more ambitious scale, the BBC World in French-speaking Africa, it plays a valuable K]jna[]akgf]g^l`]^]o]pYehd]kg^_dgZYdar]\ role in sharing information and culture2. But radio broadcasting activities. A legacy of empire the political power of radio and its ability to get and the cold war, it retains 188m weekly listeners close to its audiences has proved inimical to the and in 2009 broadcast in 32 languages1. Some development of global radio groups. Audiences of its programs have gained a global reputation, prefer stations they can identify and relate with, Yf\alkJY\ag)=kk]flaYdEapak\gofdgY\]\ Yf\hjgpaealqak[jala[YdlgjY\agÌkkm[[]kk& 1. ::;Hj]kkG^Õ[]$*((1& 2. TNS Sofres, 2011. EY | December 2014 71 Radio Inside track Success stories are built at country • Digital broadcasting: This really level and cannot be cross-border. depends on the national market. It is However, there are general trends: crucial for us and our listeners that • JY\agak]plj]e]dqhghmdYj&GfYn]jY_]$ analogue and/or digital broadcasting 80% of the EU population listens to is maintained, as it is the most the radio for 2 to 3 hours per day. ]^Õ[a]fl$jgZmklYf\[`]Yhe]Yfk Radio is one of the last mass-media. to reach everyone, everywhere. • Radio is robust. When there is a Radio has seen its audience erode a little catastrophe, radio broadcasting is with the development of music services g^l]fl`]ÕjklYf\hgkkaZdql`]gfdq online. However, radio has maintained media channel to provide information. its unique tie with its listeners, thanks • Radio is usually much more to its simplicity: people want to listen Hans-Dieter Hillmoth cost-effective to deliver a to the radio because of how it is done CEO and Programme Director, HIT RADIO FFH, message than other media. and because of its diverse content. Planet Radio, harmony.fm and FFH Digital What are the big challenges and The biggest challenge for radio currently questions for your sector? is to remind lawmakers of its particular What does your work consist of? Radio follows its listeners. Radio has [`YjY[l]jakla[k2^gj]pYehd]$YjY\ag I am the program director and CEO of always been and will continue to be advertisement is image free, and on-air three FM radio stations in Germany, mobile, ubiquitous, free-to-air, and fun. content must be short and adapted Ydd[gee]j[aYdYf\ÕfYf[]\gfdq You can listen while doing something to the local situation. Regulators by advertising. We create radio else and it is very interactive. As must think about the implications programs and strategies for FM and the world becomes more and more of their rules for radio because it web radio, and work with music digital, radio is confronted, as any is not an audiovisual medium. artists, music and concert agencies other medium, by this new era. In and other radio groups in Europe. the radio world, digital means digital What about employment online and digital broadcasting in your sector? How important is radio in (DAB/DAB+). So besides FM, which Radio is considered as a locally based Germany and Europe? How do will stay with us at least 10 years “university” for media careers. Many you explain radio’s success? more, digital covers two realities: famous show hosts started their Across Europe, most commercial career at a local radio station. It is radio stations are small- and medium- • Digital online: Radio is already digital j]Yddq\a^Õ[mdllgkYq`goeYfqh]ghd] sized players. In Germany, we have and has been present online since the are working in commercial radio 16 Länder (states), each with its internet spread in the mid-’90s. Today across Europe, because markets vary own media law, regulations and it is grasping the full potential of the enormously. To my knowledge, there media commission. There is no real internet: The sector’s technological are around 6,000 people working nationwide radio. Our business model creativity is bubbling with Radioplayer- in the commercial radio sector in is based almost entirely on advertising type portals being developed in the UK, Germany, including editors, composers, revenues funding free-to-air broadcast France, Germany and other markets, DJs, technicians, producers, web services. The success of radio is the hybrid use of analogue and digital developers, advertising people, graphic based on music, good entertainment broadcasting and online offerings. ]ph]jlk$kgmf\]f_af]]jkYf\gl`]jk& and local infotainment (radio is near lgl`]dakl]f]j!$oal`n]jq]^Õ[a]fl teams at local and regional level. 72 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track What is RFI Romania and what on our different media: radio and the trends can you see in your sector? website. The enormous amount of news RFI Romania is the local radio service that we receive is also a challenge: too of RFI. It employs about 25 people, much news may just kill the news. including 15 journalists and several presenters and technicians. All have What role does digital play graduated from university in journalism, for RFI Romania? We told the Romanian authorities we political sciences, history and other Yj]c]]flgZ]Yegf_l`]ÕjkljY\ag Õ]d\k$Yf\`Yn]h]j^][l]\l`]ajkcaddk stations to join in the development of through many internships. The average ©RFI Romania digital terrestrial television that will age is 35. RFI Romania broadcasts be available in 2015. We are already 13 hours a day in Romanian and 11 Cornel Ion active in the digital world, with a mobile hours in French. Compared to other Director of RFI Romania phone app that allows anyone in the local and national radio stations that world to listen to RFI Romania 24/7. are mostly music radio stations, RFI And our website is available in both Romania is a news station, broadcasting desktop and mobile versions. We are both national and international news. also present on various social networks The internet and digital media have a with their ever-growing communities. dglg^afÖm]f[]gf`goo]ogjc&9ddgmj The RFI Romania website gets more journalists are digital professionals: they Yf\egj]nakalk2ljY^Õ[\gmZd]\af are working for the radio and also post a year to reach 200,000 visits a on the station’s website. Every article month. We have more than 5,000 we broadcast will be posted online as followers on Twitter and the contents RSS feeds and podcasts have become on our YouTube channel have been an integral way to communicate watched more than 168,000 times. our contents to the audience. Our We have also created several technicians also have video skills: RFI blogs supporting the main website JgeYfaYakYÕde]\jY\agk]jna[]& with specialized themes such as We no longer provide just sound. music, gastronomy, agriculture We enrich that content with online or web documentaries. pictures, videos and documentaries. What challenges do you foresee in the future? The biggest challenge comes from the way the news world is changing. How should we develop when news is YnYadYZd]]n]jqo`]j]$Yf\]ph][l]\ to be virtually free? Increasingly we have to put events in perspective, we have to analyze and order the news EY | December 2014 73 Video games KmjÕf_l`]oYn]g^gfdaf]Yf\egZad]_Yeaf_ 108,000 €16b Employment (2012)1 Turnover (2012) €m Developers and publishers 67,916 Home console video games 3,965 Retailers and distributors 25,000 Handheld video games 1,594 Employment in nonspecialized stores 15,100 G^Öaf][gehml]jkg^loYj]eYjc]l 601 Total employment 108,016 Online computer software market 5,087 Mobile games 2,016 =pljY=M*0]phgjlk 2,727 Total turnover 15,990 1. Main sources used for this section are: :gjf 74 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today A small business playing in a global arena With just more than 100,000 employees Though small, the gaming industry is one of the and €16b of annual sales, the video game most innovative labs in the digital economy. It is industry is an adolescent with a global punch. afl`]nYf_mYj\g^\]n]dghaf_Yf\]ph]jae]flaf_ Today, online computer software provides the oal`f]o\a_alYdk]jna[]k$gfdaf]$g^Öaf]Yf\ industry’s premier revenue stream. In 2012, it especially mobile, that are reaching a growing accounted a third of sales, but its role is growing share of the population. According to surveys by as the industry adapts rapidly to evolving IPSOS MediaCT, 25% of EU consumers play video technologies and gaming habits. Gaming has games at least once a week. Swedes, Finns and become a global market, and Europeans are the French are Europe’s most devoted gamers, YZd]hdYq]jk&9ffmYd]phgjlkZ]qgf\=mjgh]g^ with 6 out of 10 citizens playing regularly. almost €3b make video games the most traded Innovation combined with high participation of Europe’s cultural goods. The biggest game helps and a vibrant start-up scene all over Europe developers are reckoned to achieve more than keep the industry among the global leaders. half their sales on international markets. Video game market revenue, worldwide (2012–15) US$m CAGR 120,000 +8.9% PC games 100,000 Mobile games – Gartner IDATE Source: 80,000 Handled video games Video game console 60,000 40,000 20,000 0 2012 2013 2014 2015 Growth driven by online and mobile gaming The growth of the video games sector is rapid. supplant dedicated devices. The rapid spread The video gaming industry is one of the most and evolution of mobile multifunction devices, dynamic in the cultural sector, with growth notably smartphones and tablets, is driving g^1 ]ph][l]\Z]lo]]f*()*Yf\*()-& growth by enabling gamers to play anywhere. :mll`]gn]jYdd]phYfkagf[gf[]Ydkhgo]j^md In 2013, the turnover of the two biggest trends. Mobile games (+137%) are booming, European mobile game developers was console games (+47%) and PC games (+49%) bigger than the combined turnover of all growing strongly, and handheld video games mobile game developers in 20121. (–30%) in rapid decline as mobile phones 1. Source: European Games Developer Federation EY | December 2014 75 Video games Tomorrow Developing and retaining highly skilled talent is vital Unlike most cultural industries, the video game government policies in Canada and Australia k][lgj^Y[]kÕ]j[]afl]jfYlagfYd[geh]lalagf$ designed to attract the most talented game especially with heavyweight US and Japanese developers from countries with less advantageous developers and publishers. Improving the quality lYpj]_ae]k&=mjgh]f]]\klgj]lYafl`]egkl of education and training of developers and creative companies and talent and stem further reinforcing the highly fragmented European relocations of studios outside Europe like that industry through knowledge-sharing cooperation of Ubisoft, which relocated some operations between the hundreds of independent studios from France to Canada to take advantage should be top industry priorities. European g^Õk[Ydaf[]flan]k^gj_Ye]\]n]dgh]jk& cooperation seems the best response to Growing diversity in users’ experience through gaming Born digital, the industry is growing by This combination of technological and market offering user-friendly, intuitive services to innovation enables the industry to reach new consumers. Because global competition clients far removed from the stereotype home ak]plj]e]dqÕ]j[]$_Ye]\]n]dgh]jkYj] player using a TV set or home computer. world leaders in creating new tools, methods Gaming and game techniques can speed the and business models for human–computer adoption of e-government, e-health, e-culture interactions that often subsequently and e-education, and make each more effective. become mainstream. So digital games are L`]kg%[Ydd]\_YeaÕ[Ylagfg^k]jna[]kg^^]jk driving innovation in consumer markets. f]o]ph]ja]f[]klg[gfkme]jkYf\[alar]fk& Powered by innovation in software, ways of Improved human–machine interfaces, such doing business and content in its entertainment as the use of sensors in the Wii, can revitalize products, the industry is widening its scope, \]na[]kYf\g^^]jf]o_Yeaf_]ph]ja]f[]klg progressing via casual and more serious consumers. But disruptive technology change games, into “advergames” containing product is sporadic, pushing EU game developers to advertisements and into deliberately teaching constantly reinvent themselves and diversify through gaming — so-called “edutainment.” their activity portfolios — and keeping the industry at the cutting edge of technological, content and business innovation. 76 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy 9hgl]flaYdj]k`m^Öaf_g^l`]nYdm][`Yaf The development of gaming on diverse everyday afn]kl]\af_Yeaf_lg]fja[`l`]]ph]ja]f[]g^ mobile devices opens doors to new types of their customers. The shift to online gaming lowers games and new competitors for industry ]fljq[gklkYf\afl]fkaÕ]k[geh]lalagf& champions. That could lead to changes in the New market dynamics encourage game gaming industry value chain and create new developers to develop new games in partnership intermediaries. Web portals, internet service with movie makers, sports federations and others providers and telecom operators, handset Yk_Ye]k]pl]f\l`]ajj]Y[`aflgegj]Ykh][lkg^ manufacturers and social networks have all our lives. Leaders and leadership Europe is third in the world… Thanks partly to public support for video Historically, Europe’s absence from the game development, Europe ranks number development of hardware, including consoles three in the world for video game production and handsets (produced in Asia) has been a after the US and Japan. The European Games handicap, but this could matter less as gaming Developer Federation says digital distribution spreads online, and onto mobile devices. Also and the adoption of so-called free-to-play these platforms are setting limitations on the business models, especially in mobile games, content they allow to be published through have enabled European game developers to their platforms based on non-European values, break value chains previously dominated by seriously hindering the freedom of artistic strong US- and Asia-based publishers. Europe’s creation for European content creators. success is based upon creating game content. … thanks mostly to its creativity The recent successes of European games such The European industry is also a leading supplier as Candy Crush Saga (developed by King Digital of the game engines, or “middleware” software, Entertainment, a British company) or Angry Birds on which games are created and developed. (developed by Rovio Entertainment of Finland) And it is home to many developers’ studios, demonstrate the remarkable position that Europe often small and highly creative companies enjoys. Games and video games have become one found mainly in the UK, France, Germany, the g^=mjgh]Ìkegkl]phgjl]\[mdlmjYd_gg\kYf\l`] Fgj\a[[gmflja]kYf\$lgYd]kk]j]pl]fl$KhYaf& largest developers have half their business overseas. EY | December 2014 77 Video games Inside track What is Rovio and how important How has Rovio changed is the game industry in Finland? in recent years? Rovio, founded in 2003, is an We’re doing a pretty good job in entertainment media company and =mjgh]Yf\Al`afcalÌk\a^Õ[mdl^gj creator of the worldwide number Silicon Valley to compete with us. one downloaded app of all time — Some Europeans think that you need Angry Birds. Following its success to go to Silicon Valley or the US to in mobile gaming, Angry Birds has succeed. Maybe that’s because there ©2014 Rovio Entertainment Ltd. All right reserved Ltd. Entertainment ©2014 Rovio ]phYf\]\jYha\dqaf]fl]jlYafe]fl$ are more success stories there but publishing and licensing to become we have good ones here in Europe, an international brand. While Finland and Rovio is one of them. We went hosts about 200 game companies from a pure games company to an Peter Vesterbacka employing more than 2,000 people, entertainment company, and we have Rovio Entertainment at Rovio we employ 800 people \]n]dgh]\ogjd\oa\]oal`g^Õ[]k worldwide. Of these, 750 are based in Finland, Sweden, the UK, China, in Finland, drawn from more than Japan and Korea as well as the US. 40 countries around the world and That is why we now have the biggest especially Europe (France, Spain, etc.). animation studio in northern Europe. O]Yj]Yka_faÕ[Yfldg[Yd]ehdgq]jaf More people play games than ever, Finland’s world-class entertainment the market is worldwide and getting af\mkljq&Gmj]ehdgq]]kYj]Yeapg^ bigger and bigger, and more than 2b qgmf_h]ghd]Yf\egj]]ph]ja]f[]\ [gha]kg^gmjÖY_k`ah_Ye]9f_jq ones. They bring together many Birds have been downloaded. \a^^]j]flkcaddkj]Ö][laf_Yddl`]bgZk (designers, coders, audio specialists What are your challenges and composers, etc.) and activities for the future? at Rovio, including animation, We want to make sure that we keep consumer products and licensing. doing things fast enough, that we keep Finding talent in Europe is pretty our pace and agility as we grow. Our easy as the company attracts many biggest challenge is ourselves. We do applicants, and Europe is full of not worry about competition as long talented professionals, often with as we stay active in games and all our specialist skills, such as the strength activities. We’ll produce many more of animation in France and Spain. 9f_jq:aj\k%ZjYf\]\]ph]ja]f[]kYf\ we need to create great new games to keep the brand relevant and fresh. Europe is a good place to do that. 78 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy EY | December 2014 79 Visual arts Brightening Europe’s appeal for tourists and art investors 1,231,500 €127.6b Employment (2011)1 Turnover (2011)2 €m Art sales and galleries activities 329,940 Photography 8,689 Visual arts creation, including photographic Design 19,294 activities, design activities and art 793,288 craftsmanship Museum revenues 7,717 Museums and heritage 108,176 Art sales and gallery activities 15,600 Total employment 1,231,404 Arts and crafts 46,337 Visual arts creation 29,907 Copyright/author’s right 10 Total turnover 127,554 1. For the purpose of this study, “visual arts” includes all artistic activities related to graphic creation ( painting, sculpture, art crafts, photographic activities and special design), arts sales, gallery activities, museums and what is generally referred to as “heritage”, such as ancient sites and monuments. <]khal]l`]`]l]jg_]f]alqg^l`akk][lgj$k]n]jYd[geegf^]Ylmj]kYf\eYjc]llj]f\k[YfZ]a\]flaÕ]\l`Ylbmkla^ql`][gehgkalagfg^l`ak[Yl]_gjq& 2. Main sources used for this section are: The International Art Market in 2011 - Observations on the art trade over 25 years , The European Fine Art >gmf\Ylagf$*()*'=p`aZalagf Emk]meYll]f\Yf[]kmjn]q$nakalgjkÕ_mj]k*()*$L`]9jlF]okhYh]j$*()+'Nga[]k^jgel`]Emk]me2Kmjn]qJ]k]Yj[` af=mjgh]ÌkFYlagfYdEmk]mek$=mFYEmkj]hgjl$*()*'FYlagfYdklYlakla[kg^Õ[]k& 80 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today A potpourri of activities that together form the nub of the European creative economy Employing more than 1.2m people across Art sales, galleries and auctions alone employ the EU and generating revenues of more 330,000 people and form a market worth than €127b, visual arts account for almost more than €15b. Though world-renowned a quarter of the creative economy. Though auction houses such as Christie’s and Drouot data is scarce, visual arts, craftsmanship and capture the limelight, this economic sector related activities embracing painting, pottery, is made up of myriad small art galleries, sculpture, furniture design and jewelry together many serving local communities. generate about €75b of annual sales in Europe. 25 years of dynamic growth With an estimated €15.6b of sales by dealers crisis and with 5% growth in transaction volume and auctions, Europe commands 34% of the during 2011, the art market was recovering global art market. Taking off in the mid-’90s, it to pre-crisis levels. The resurgence has been emdlahda]\Ydegklkap^gd\^jgealkfY\ajaf)11) aided by an upsurge in Chinese buyers and the to its peak in 2007. Though sales historically _jgoaf_aehgjlYf[]g^Õf]YjlkYd]ko`]j]]Y[` l]f\]\lgj]Ö][loa\]j][gfgea[lj]f\k$l`] masterpiece commands a spectacular price. sector recovered quickly after the economic Global market share (by value, 2013) Source: ITEFAF 7% 3% 6% UK 9% France 34% Switzerland 29% 17.5% Germany 64.5% Italy 30% EU + Switzerland China USA Rest of the world EY | December 2014 81 Visual arts Museums are key in making visual arts available to all citizens Museums account for only a small part The Louvre in Paris pulled nearly 10m visitors of overall visual arts turnover (6.1%) and in 2012, and all contenders drew more than employment (8.8%), but play a particularly +eh]ghd]$[gfÕjeaf_emk]mekÌeYkkYhh]Yd important role in making art accessible to all. for both national and international visitors. Seven of the world’s most visited art When questioned, visitors to several European museums are in Europe, with Paris and museums told one study they seek entertainment London sporting three apiece. and pleasure (28%), education and training (26%) and a gateway to history (17%). Top 10 international museums (millions of visits, 2012) ”Ministère de la Culture et de la Communication“ Culture Etudes N°2” 2013 F]okhYh]jÉNakalgjÕ_mj]k*()*$ Source: Visitor Figures 2012, Exhbition & museum attendance survey in 2012,2013, The Art Louvre 9.72 Metropolitan Museum of Art 6.12 British Museum 5.58 Tate Modern 5.30 5.16 National Gallery Vatican Museums 5.06 National Palace Museum 4.36 National Gallery of Art 4.20 Centre Pompidou 3.80 Musée d'Orsay 3.60 European museums 82 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Tomorrow Emerging nations join the art market The growing number of wealthy buyers of bigger marketplaces, while international big-name art in the developing world has “labels” have gained prominence. Art Basel, d]\lgka_faÕ[Yfl[`Yf_]kafl`]_]g_jYh`a[ one of the top contemporary art shows, \akljaZmlagfg^kYd]k&Gf[][gfÕf]\dYj_]dqlg is now also held in Miami and Hong Kong. the US and Europe, the art market now looks This “gravity effect” could lead to further increasingly to also serve customers in Asia concentration of major international events and Latin America. The globalization of the afYjleYjc]l`glkhglkÈYll`]]ph]fk]g^ art market has concentrated sales in fewer, smaller ones such as the FIAC in Paris1. Museums are embracing new technologies, informing visitors more, and collaborating Emk]mekYj]]ph]jae]flaf_oal`l][`fgdg_qlg gZb][lkgf\akhdYqYf\]ph]ja]f[]YjlgZb][lkaf enhance access to their collections, enrich the new ways: on the website of the Louvre in Paris, nakalgj]ph]ja]f[]Yf\\]n]dghl`]aj]\m[YlagfYd visitors can zoom in on masterpieces and tour role. Social media and electronic devices have virtual galleries2. European museums are also enabled museums to provide complementary ]ph]jae]flaf_oal`f]olqh]kg^[gddYZgjYlagf$ and real-time information while the visitor is including branding, and sharing collections, strolling around the venue. Digital devices offer witness the opening of the Louvre Abu Dhabi, visitors the chance to discover far more about the Guggenheim Bilbao, and similar ventures. Digitization also raises questions of intellectual property Digital technologies facilitate wider access to when museums want to share public collections, visual art objects, but for some industry actors but threatens revenues of contemporary artists, also raise concerns about how best to protect especially those using photographic techniques intellectual property. Digital technologies make it that are easily pirated and counterfeited3. easy to copy many works of art. That is a virtue 1. Mondialisation et Uniformisation du Marché de l’Art, Philippe Dagen, Le Monde, 2014 2. Time to Lose Control, Andras Szanto, The Art Newspaper, 2010 3. Images available on the internet often fail to identify their author or copyright ownership EY | December 2014 83 Visual arts Leaders and leadership A global destination for the visual arts, Europe is the world’s leading art market With 34% of the global art market by value, Yf\Yflaim]ko]j]]phgjl]\^jgel`]=M$ Europe (including Switzerland) is the world Yf\Ò-Zaehgjl]\&L`akj]Ö][lk=mjgh]Ìk leader in art sales, ahead of China (30%) strategic role as a global hub for art sales. and the US (29%). The European art trade Despite intensifying global competition, is dominated by the UK (with 65% of the Europe continues to lead market trends: EU market), followed by France (17%) and Dmp]eZgmj_ÌkYajhgjloaddgh]fgf]g^l`] ?]jeYfq - !&Dgf\gf[gfÕjekalkhgkalagf Õjkl^j]]hgjlk\]\a[Yl]\lgYjlaf*(),& as an art hot spot with a global audience; Christie’s, based in the UK, is the world’s Europe is not only leader in trading art, a leading auction house and including its private unique artistic and cultural heritage and kYd]kalklmjfgn]j]p[]]\]\MK /Zaf*()+& world-class museums give Europeans Y[[]kklg]p[]hlagfYdYjlakla[j]kgmj[]kYf\ Within this highly international market, the attract millions of international visitors1. =MakYf]l]phgjl]j&Af*()($Ò.&*Zg^Yjl 1. French order of Architects 84 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track 9ddg^l`]Hd]pa_dYkogjckYj]mfaim] for the resale right, it goes without pieces — a single twist, a single drape. saying: it should be recognized in all Much like a company, I enable others to countries! It is not only a right, but make a living. An artist who creates is a duty and a mark of recognition much like a company with employees, that we owe to all artists. ]ph]fk]k$lYp]kYf\lmjfgn]j& Artists who wish to improve their What are the challenges and visibility also have to take on the issues with which you are faced? We are currently living in the era of responsibility of distributing their works, ”Bonbon chromo réglisse”, 2011 digital and 3D. A large part of my © ADAGP, Paris,2013 - Cliché : © Laurence Jenkell which is what I do in Cannes during the Portrait: © Emmanuel Juppeaux work is created from sketches, but G20 summit, in Azerbaijan, in Slovakia, I sometimes transpose the more etc. This should fall under the remit of Laurence Jenkell [gehd]pgf]kaflg+<afgj\]jlg galleries, but the task often falls to the Visual artist and sculptor better understand the technical artist, with all the personal and material \a^Õ[mdla]kl`]qea_`l]flYad& investments that it entails. Cultural What exactly does administrations should also provide It must be recalled that artists your work entail? artists with support for displaying their are economic players and need to I am a sculptor, and happy and proud works. One could imagine a scenario surround themselves with partners. to be a female French artist, and to in which, when a foreign artist displays Their work is not simply that of be able to practice my profession their works in a museum in France, the creating, of dreaming: economic within my own country and share artist’s country of origin might offer j]Ydalq]paklk$al[YffglZ]a_fgj]\& it with an international audience. to display a French artist’s works in an The visual arts are an industry in ]p`aZalagf&AlakYdkgj]_j]llYZd]l`Yl My “sweet” sculpture captured their own right and which should artists’ works are often only put on attention worldwide. It is not my only not be underestimated: this industry display in museums after their deaths. piece — I also create paintings, ADN provides many jobs and contributes to economic activity and the economic works, buildart and robots — but it has Tell us about your place in become renowned on the international future, not only of the artist’s country Europe and the world. of origin, but also internationally. stage. My works are currently My sculptures have become rather displayed in 25 countries (galleries, valuable: I am in the Artprice report’s institutions, private collections, etc.). Top 500 artists in the world, and am All of my works are produced with listed on the secondary market. My the help of my assistants in my works, much like other artists’ works, workshop in Vallauris, near Antibes. must be visible on the international I work with smelters for my aluminum stage in order to be known by the and bronze sculptures in Europe. general public and collectors alike. As EY | December 2014 85 Architecture Coping with the aftermath of the construction sector slump 493,000 €36.2b Employment (2013) Turnover (20122) €m Registered architects1 492,930 Revenues of architectural agencies – building design, spatial program design, construction 36,212 Total employment in architectural agencies 492,930 monitoring, etc. Total turnover of architectural agencies 36,212 1. L`akÕ_mj]gfdq[gn]jkYj[`al][lkj]_akl]j]\affYlagfYdYkkg[aYlagfkg^Yj[`al][lk&Alaf[dm\]kZgl`k]d^%]ehdgq]\Yf\]ehdgq]\Yj[`al][lk& It does not cover related employment in architectural companies 2. Market size and employment data were mainly based on the Architects’ Council of Europe’s own estimates. Data has been cross-checked with national statistics and other local sources. 86 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today With almost half a million registered architects and architectural agencies employ many more in Europe and revenues reaching €36b, people in support activities, including town Yj[`al][lmjYdY[lanala]kYj]Yka_faÕ[Yfl planning, building engineering and information business in the European creative economy. technology. Numbers of architects show 9j[`al][lmj]akl`]kapl`%dYj_]klaf\mkljqafgmj surprising variations between countries: Italy has study and matches the book industry in scale, a smaller construction industry than Germany _]f]jYlaf_loa[]l`]j]n]fm]kg^Õdekgjna\]g or France, yet almost 135,000 registered games. Architects also play a pivotal role in the architects, compared with 26,000 in France. construction industry, Europe’s biggest, though =pljYhgdYlaf_^jge\YlY_Yl`]j]\af>jYf[]Yf\ they account for only 1% of its revenues. the UK, between 700,000 and 1,000,000 people Our estimate of total employment is undoubtedly may work in European architectural agencies. too low, since it counts only registered architects, High dependence on the construction sector Global construction output is forecast to contracted faster than the fall in construction grow more than 70% to €11.5t by 20252. output — which in turn fell faster than GDP. L`akkmklYaf]\]phYfkagf$gmlhY[af_ According to the Architects’ Council of Europe, global GDP growth, will be concentrated demand for architectural services hinges upon in China, India and the US. new building. In 2011, some 73% of French The industry is at a tipping point, Yj[`al][lmjYdÕjekÌj]n]fm]oYk_]f]jYl]\Zq with more than 50% of construction new construction, whereas refurbishment and activity now in emerging markets. j]ljgÕllaf_Y[[gmfl]\gfdq^gj*/ g^j]n]fm]3. :ml=mjgh]Yf[gfkljm[lagfak]ph][l]\lg Half of European architects’ activities hinge fall 5% by 2025 from 2007 levels. That is upon private residential development. Its share partly because two-thirds of construction in is growing again, reaching 51% in 2012, up l`]=M`Yhh]fkafÕn][gmflja]kÈ?]jeYfq$ ^jge,, af*()(&<]ka_faf_k`ghkYf\g^Õ[]k the UK, France, Italy and Spain — where provides 29%. The share of commissions from building was dramatically scaled back in the the public sector, mainly for social housing, oYc]g^l`]ÕfYf[aYd[jakak&9j[`al][lmj] is declining. They provided 26% of architects’ is highly cyclical. During the economic revenues in 2010 but just 20% in 2012. turmoil, demand for architectural services Tomorrow Consolidation looms Though a handful of international companies Fragmented national markets contribute to the achieve sales of more than €50m, most architects kmjnanYdg^eYfqkeYddÕjekl`YldY[cl`]k[Yd]lg ogjcafkeYddÕjekgjYj]k]d^%]ehdgq]\$Yf\ \]n]dghY[jgkkZgj\]jk&Af>jYf[]$^gj]pYehd]$ Yj][gfÕf]\lgfYlagfYdeYjc]lk&EYfqg^l`]k] the biggest independent practice generated less o]j]hj]nagmkdq]ehdgq]\ZqdYj_]jÕjek$Zml than 1% of total industry turnover in 20124. o]j]eY\]j]\mf\Yfl\mjaf_l`]ÕfYf[aYd[jakak& 1. ?dgZYd;gfkljm[lagf*(*-$?dgZYd;gfkljm[lagfH]jkh][lan]k$Gp^gj\=[gfgea[k 9j[Y\ak 2. French order of Architects 3. 9j[`al][lmj]k]jna[]kaf>jYf[]af*()*$P]jÕ EY | December 2014 87 Architecture Clients demand more creativity and technicality expertise Buildings are a leading source of greenhouse Yf\hjanYl]k][lgjk$fgo]ph][l`a_`d]n]dkg^ gas emissions, so pressure for greener buildings ]ph]jlak]af_j]]fZmad\af_l][`faim]kYf\oYfl has spurred demand for architectural services energy-saving technologies to be deployed in Yf\Y\\]\]f]j_q]^Õ[a]f[qlg\]ka_f[jal]jaY industrial, commercial, retail, distribution and previously dominated by functionality and residential projects.Amid intensifying global cost. The introduction in 2002 of tighter EU [geh]lalagfZ]lo]]fYj[`al][lmjYdÕjek$ regulations concerning the energy performance [j]YlanalqYf\]ph]jlak]Yj][geh]lalan]klj]f_l`k of buildings added constraints but inspired that EU architects could and should rely upon. creativity. Clients of all stripes, from both public =mjgh]YfÕjek`]Y\^gj^Ykl%_jgoaf_eYjc]lk Faced with soft demand in Europe, larger and acquisition opportunities in Southeast Asia, Yj[`al][lmjYdÕjek`Yn]kl]hh]\mhl`]ajk]Yj[` including Indonesia and Malaysia — to reduce for growth in Africa, the Middle East, Asia and alk]phgkmj]lgegj]eYlmj]eYjc]lk&Dac]oak]$ DYlaf9e]ja[Y&>gj]pYehd]$9lcafk$l`]MC >j]f[`[gehYfa]kYj]]phYf\af_af9^ja[YYf\l`] architectural and civil engineering company, now Ea\\d]=YklYf\KhYfak`ÕjekafDYlaf9e]ja[Y& has more than 2,000 employees in Hong Kong =n]fea\%kar]\Õjek$dac]>jYf[]Ìk>jYf gak and mainland China, and is looking for business Leclercq, are now working in Africa and China. Leaders and leadership =mjgh]YfÕjekk]]c]phYfkagfZ]qgf\fYlagfYdeYjc]lk Long-standing success in nurturing professional were suffering from a deep-rooted construction k]jna[]kÕjek`Yk`]dh]\l`]MCYf\Ko]\]f [jakak&AfKhYaf$/( g^Õjeko]j]o]a_`af_ spawn some global leaders in architecture, ]phYfkagfYZjgY\$afKdgn]faY.* $Hgjlm_Yd including Aedas, Foster and Partners, 59% and Greece 57%. However, strict and Rogers Stirk Harbour + Partners, Skanska varying national construction and professional and Sweco. The economic crisis hit demand j]_mdYlagfkjYak]ka_faÕ[YflZYjja]jklggmlka\]jk almost everywhere. By 2013, only 3% of afeYfqeYjc]lk&F]n]jl`]d]kk$=mjgh]YfÕjek Yj[`al][lmjYdÕjekaf=mjgh]ogjc]\afgl`]j `Yn]kge]Y\nYflY_]k&=pY[laf_j]_mdYlgjq countries, down from 7% in 2008. British standards and demanding clients in Europe Yf\Ajak`ÕjekYj]l`]egklafl]jfYlagfYd oblige European architects to achieve the providers of architectural services, with 14.7% highest creative and technical skills, ensuring and 12.7% working abroad, respectively. they are well-equipped to win work in both However, according to a survey by the Architects’ emerging and mature markets worldwide. ;gmf[adg^=mjgh]$ÕjekYj]Z][geaf_egj] =mjgh]YfÕjek`Yn]ogfl`]Hjalrc]j optimistic about winning work overseas. The Architecture Prize eight times since 2000. desire to seek work abroad was especially strong in southern Europe, where practices 88 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Inside track What changes has the industry The overseas market remains a lifeline undergone in the last few years? ^gjAlYdaYfÕjek&Gmjg^Õ[]ogjckaf From 2006 to 2012 investment in Venezuela, Bulgaria and Saudi Arabia. new building decreased by 43.7%, and although renewal and refurbishment What future trends do has fared better, overall construction you anticipate? investment is down 28.4% during that We believe that innovation and the period. Ever since the abolition of full use of new 3D/virtual reality mandatory fee scales for architects l][`fgdg_a]k$o`a[`gmjÕjemk]k af*()*$ÕjekÌaf[ge]`YklmeZd]\$ widely, together with the creativity for oal`egklg^Õ[]kk]]af_lmjfgn]j^Ydd which Italy is renowned, are not only Arch. Ing. Giovanni Zallocco 30%–50% over the last 2–3 years. useful but necessary to arrive at a hjg\m[ll`Yl^mdÕdkYddl`]j]imaj]e]flk President ERREGI S.r.lr Within this rather bleak picture, of cost, ease of construction and however, some positive signs maintenance but more importantly, can be found. How important is architecture contains the esthetic and functional Urban regeneration, as a program in Italy and in Europe? qualities that in the broadest Building, and the design activity it and as a necessity, has become part possible sense, provide sustainable depends upon, is a fundamental of mainstream professional and well-being, safety and quality. driving force of the economy in political thinking; but because of It is hard for architects to fully Italy, as elsewhere. With 135,000 the recession, public investment, in ]phj]kkl`]aj[j]YlanalqafAlYdqlg\Yq& registered architects, we have about many instances, is still on hold. The market, institutions and we a quarter of Europe’s architects. Guidelines or recommended fee scales architects as a profession have to Construction generates 6% of Italy’s have been recognized as necessary, focus on what we do best — overcome ? EY | December 2014 89 Advertising Driven by the rapid expansion of online revenues 818,000 €93b Employment (2012)1 Turnover (2012)2 €m Commercial communications agencies 818,182 Revenues of advertising agencies 93,000 Total employment 818,182 Total revenues 93,000 1. Main sources used for this section are: =mjgh]Yfgfdaf]Y\n]jlakaf_]ph]f\almj]$9\]p:]f[`eYj$*()*'EY_fY?dgZYd9\n]jlakaf_>gj][Yklk$*(),'=mjgh]Yf9m\agnakmYdGZk]jnYlgjq$*()+& 2. L`akÕ_mj]gfdq[gn]jkl`]j]n]fm]g^Y\n]jlakaf_Y_]f[a]k&Al\g]kfglaf[dm\]j]n]fm]^jgeY\n]jlakaf_kh]flafgl`]jaf\mklja]k& 90 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Today A huge market working across all creative and cultural industries With revenues estimated at €93b in 2012 and estimated at €100b, but because spending on 820,000 employees, the advertising business advertising is easy for companies to cut in a is a powerful force in the European cultural crisis, industry revenues have since fallen 7%. and creative industries. Generating about Total spending on advertising across various 17% of total CCI revenues, it is the second- media, including TV, radio and online, largest business after visual arts. Advertising reached almost €87b in 2012. That makes was hard hit by the economic turmoil. In it vital to the business models of many other 2008, the European advertising market was CCI industries, as our graphic shows. A sector wrestling with weak revenues and a digital transformation Advertising is an economic barometer. The substantial and ongoing switch from 9\n]jlakaf_kh]f\oYkgf]g^l`]ÕjklZm\_]lk traditional media to online advertising to be cut by businesses when the economy in search of more targeted audiences slowed. The economic crisis thus reduced has had far-reaching effects. revenues of commercial communications L`]^gddgoaf_l`j]]^Y[lgjk]phdYaf agencies by 7% during 2008–12, with knock-on the rise of internet advertising: effects upon many media businesses that rely • Consumers are spending increasing amounts upon advertising revenues. But as spending of time online, and web portals have learned upon advertising recovers, much of the money to acquire and analyze huge amounts of data is following consumers into different media. about them. Google — one of the biggest web Advertiser spending on online publicity has portals — registered more than 1.2t searches in surged by 12% a year since 2008, while 146 languages in 20122. spending at cinemas has grown by 4% a year. • Search advertising, which seeks to address the Meantime spending on TV advertising right consumer with the right ad content, has has declined by 2.5% a year, on radio blossomed. Paid search grew by 37% in 2013. advertising by 2%, and print advertising, • Social networks have gained enormous including both newspapers and numbers of users and become important magazines, by a hefty 8.3% a year. internet gateways: they attracted more than MK 1Zg^Y\n]jlakaf_kh]f\af*()+ #-0 !3. Advertising revenues are vital to the viability of many creative industries - 2012 671 4,810 TV 5,472 Internet 27,934 8,642 Newspaper Source: WARC - EY analysis - EY WARC Source: Total Magazines 87,629m Outdoor Radio 19,260 Cinema 21,139 1. Google Zeitgest 2012. 2. Magna Global Advertising Forecasts, 2014. EY | December 2014 91 Advertising Gfdaf]Y\n]jlakaf_]f[gmjY_]k\an]jkaÕ[YlagfYf\dgo]j[gklk The rise of online advertising on websites, social • New communication technologies have made it possible to mount massive advertising media platforms and via targeted communication campaigns more cheaply. Consumers’ growing is rapidly changing the nature of the advertising use of the internet has encouraged advertisers industry as well as the media where ads appear. to prioritize online channels when marketing Af*((0$gfdq), g^lglYdY\n]jlakaf_]ph]f\almj] products and services, reducing their costs — in Europe was online. Now, with a share estimated and media company revenues. at 24%, it appears to be the second-most used Advertising spending, which used to help medium to communicate and promote products ÕfYf[]l`][gklg^ojalaf_$hjaflaf_Yf\ or services. Television remains the medium most distributing newspapers and magazines, used by advertisers, thanks to its omnipresence now cross-subsidizes online services, such in our daily life, but its lead is rapidly eroding. as news, music streaming and video sharing, The rise of the internet has affected the which consumers value more highly. advertising market in two ways: • The shift from print to digital helped advertising agencies to withstand the economic crisis and helped media owners to diversify their advertising revenue streams. Tomorrow Micro-targeting seeks to enhance advertising effectiveness The successful IPO of French digital advertising work. The proportion of Facebook’s advertising agency Criteo on NASDAQ in early 2014 showed revenue from mobile advertising is estimated that micro-targeted online advertising has come to have increased from 12% in 2012 to 50% of age. Nowadays, it is easy for advertisers to in the third quarter of 2013. The advertising display a smart, targeted ad, focusing on the af\mkljqYj_m]kl`Ylea[jg%lYj_]laf_Z]f]Õlk known interests of an online consumer. By consumers because it is more relevant to them using GPS and other tracking techniques to and their habits and preferences. However, there work out a consumer’s location, advertisers are signs of a possible backlash, as consumers can now serve up advertisements about nearby becoming increasingly aware that every key shops and services or products that might be stroke they make is being tracked, recorded appropriate, a technique known as geo targeting. and analyzed, and personal information about Micro-targeting has been facilitated by the them shared with advertisers. Regulators increasingly widespread use of mobile devices, and privacy concerns could spoil the party. not only on the move, but at home and at 92 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy Consumer experience at the center of online market developments “Native advertising,” a new online advertising use of voice recognition technology to invite technique, embodies a change in advertisers’ consumers to respond to mobile phone or methods designed to capture the consumer’s internet radio advertisements by speaking back to attention. Instead of pop-up windows, the the device. Nuance, the company that developed consumer’s attention is gained and maintained Siri voice recognition for Apple, is offering by interactive ads, which seek to draw consumers this technology under its Voice Ads brand. into content, games and social sharing functions. Consumers may like it, loathe it or ignore it. Another emerging advertising innovation is the A booming mobile advertising market Now that many European consumers have That would imply that mobile advertising j]hdY[]\l`]ajÕjkl%_]f]jYlagfegZad]h`gf]k j]n]fm]koaddkgYj^jgeYZgmlMK -Zaf with smartphones, and tablets, a new *())lgMK *.Zaf*()/$[Yhlmjaf_)-&- hdYqaf_Õ]d\`Ykgh]f]\mh^gjY\n]jlak]jk& of online advertising. If the industry’s hopes According to Berg Insight, in 2017, mobile come to fruition, mobile advertising will advertising is likely to account for 4.4% of come to play a pivotal role in the interaction total advertising spending worldwide. between brands and consumers. Leaders and leadership European multinationals dominate the worldwide advertising market Europe is home to two of the world’s big The American group Omnicom, ranked three advertising groups: WPP Group second, reports revenues of €14.2b. But based in London and Publicis Groupe, beyond the champions, the European headquartered in Paris, which have turnover advertising landscape comprises a long list of €16.4b and €8.5b, respectively1. of SMEs with myriad specializations. 1. Agency Report 2013, Advertising Age. EY | December 2014 93 Advertising Inside track What is HiMedia Group? What trends are emerging HiMedia Group offers services as for the future? a digital advertising agency and The dominance of global platforms solutions for internet and mobile (American platforms today, maybe phone payments. As a service Asian ones tomorrow) leveraged company and the owner of its own from a large domestic market is a technology, its position is central in serious concern. Being number one the e-commerce chain, taking part has such an important impact in the in this process before the purchase digital market that these companies by internet users, but also afterward use their leading position to establish making sure the payment is the their own standards as a reference, most ergonomic and frictionless. imposing entry barriers that thwart Cyril Zimmermann competition. It is time for national CEO of HiMedia Group What are the trends in terms of and European regulators to take jobs in your sector and company? powers to intervene instead of merely HiMedia Group employs 450 persons saying they are powerless to act. in Europe and holds participations in different companies operating What importance does digital in Europe but also in Asia, Latin holds in your sector? America and North Africa. The HiMedia Group has been a 100% digital average age of our employees is 31 company since its creation in 1996. years, balanced between sales and Due to this dedication to the digital marketing (55%), support functions sector and because every sector and (15%), and technical services (30%). every player (companies, associations, This balance was achieved after strong administrations) is becoming digital, efforts to staff our technical support our sector keeps growing. We invested teams, R&D and our IT department. massively in our own technology and we will keep doing so. Technology does not always generate added value in itself but use by skilled professionals allows us to capitalize on these investments and take the best advantage of changes in user behavior. 94 Creating growth | Measuring cultural and creative markets in the EU 03 | Creative diversity: understanding the 11 market segments that make up the cultural and creative economy EY | December 2014 95 Methodology The impact of cultural and creative industries on our economy is often poorly measured, understood and valued. This is why GESAC requested a Europe-wide study of the economic and social impact of CCIs, particularly in terms of direct revenues and jobs. Although many surveys and studies have been undertaken in various countries and industries over l`]q]Yjk$l`akj]hgjlakl`]Õjkl[gehj]`]fkan]]nYdmYlagf$Y[jgkkl`]*0klYl]kg^l`]=M$g^)) cultural and creative markets. To describe the creative and cultural economy in the most comprehensive and clear fashion we `Yn]^g[mk]\gfÕfYd[gfkme]jeYjc]lkl`Ylmk]l`]ogjcg^[j]Ylgjk$ZmlYdkgl][`fa[aYfk$k]jna[] providers, media and retailers. Objectives <]ÕfalagfYf\k[gh] The main objective of this study is to produce a set of CCIs comprise those industries producing or distributing comparative and qualitative studies to give a snapshot of [mdlmjYdYf\[j]Ylan]_gg\kYf\k]jna[]k$\]Õf]\af the economic role of CCIs in Europe and to show how, and 2005 by UNESCO1 as “activities, goods and services, lgo`Yl]pl]fl$l`]qeYqZ]Y\janaf_^gj[]^gj=mjgh]Yf o`a[`Á]eZg\qgj[gfn]q[mdlmjYd]phj]kkagfk$ economic growth. This report also aims to aid understanding irrespective of the commercial value they may have.” of the contribution of creativity to other key industries. :]qgf\l`akZjgY\\]Õfalagf$o]`Yn]Y\ghl]\Yk][lgj% ZYk]\YhhjgY[`afgj\]jlglYc]aflgY[[gmfll`]kh][aÕ[kg^ each industry. So our report covers 11 sectors to provide an overview of the growth drivers and key challenges for each. This study is based solely upon revenues of the cultural Sectors industries themselves. It takes no account of indirect Books impacts upon related economic activities such as tourism. Newspapers and magazines The geographical scope of this study is the EU28. Music Performing arts TV Data collection Film Because reliable aggregated statistical data were Radio unavailable, we have adopted a “bottom-up” approach in Video games l`akklm\q&O`]j]Y__j]_Yl]\\YlY\gfgl]pakl$l`]klm\q Visual arts has constructed reliable estimates based on interviews Architectural activities with key organizations, sector publications and ad hoc klYlakla[YdeYl]jaYdkYko]ddYkn]jaÕ]\eYjc]lYkkmehlagfk& Advertising activities Data collection relies primarily on reliable industry sources at national, European and global levels — see bibliography for further details. With regard to turnover data, we primarily used market research analyses and Eurostat as complementary sources of statistics. 1. MF=K;G *((-!$;gfn]flagfgfl`]Hjgl][lagfYf\Hjgeglagfg^l`] 96 Creating growth | Measuring cultural and creative markets in the EU Indicators To evaluate employment, in the absence of other data, o]eY\]]pl]fkan]mk]g^]pl]jfYdkgmj[]kkm[`Yk L`akklm\qimYflaÕ]kl`];;AkÌ][gfgea[[gfljaZmlagf af\mkljqZg\a]kYf\fYlagfYdklYlakla[Ydg^Õ[]k& to the European economy, both in terms of direct impact (turnover) and employment. Data were rarely available for all 28 countries of • Lmjfgn]jÇÕfYd[gfkme]jeYjc]lk2The study adopted the EU. Consequently, we have estimated economic YfYhhjgY[`ZYk]\gfÕfYd[gfkme]jeYjc]lk$hjaeYjadq value through tailor-made assumptions: taken at retail prices, that is an approach that takes • We scaled up available data from the main markets — revenue at the end of the value chain, rather than adding France, UK, Germany, Spain, Italy, the Nordic countries up revenue from all stakeholders involved in individual and one or two others such as Poland and Hungary in parts of the value chain. Consequently, the total estimates Eastern and Central Europe. ]p[dm\]$o`]f]n]jhgkkaZd]$afl]je]\aYl][gklkoal`af each sector. As an illustration, to measure the economic • We used world data — e.g., the global market value — and value of the performing arts, support activities such applied a market share scaling-down factor. Yk]imahe]flj]flYdYf\[Yl]jaf_`Yn]Z]]f]p[dm\]\$ Our estimates have been validated with key industry players, as they can be considered intermediate costs of venue such as federations and associations. For this purpose, we management and are already included in venue revenue from ticket and other sales. Similarly, our estimates do conducted interviews with different organizations covering not include revenues from book printing, as they are the 11 sectors of this report — see further for the full list. afl]je]\aYl][gklkaf[dm\]\afl`]ÕfYdhja[]g^Zggck& Main databases used in this report are given below: Market estimates and measurements are in €b at retail hja[]k&=ehdgqe]flÕ_mj]kaf[dm\]bgZkafZgl`hmZda[Yf\ • Eurostat Structural Business Survey private sectors. • Eurostat Labour Force Survey • Jobs – permanent and temporary or part-time workers: • FYlagfYdKlYlakla[YdG^Õ[]k Employment information monitored by professional • DG Trade: Market Access Database gj_YfarYlagfkYf\=mjgklYlak]phj]kk]\affmeZ]jkg^ • WAN-IFRA Database bgZk$fglaf^mdd%lae]]imanYd]flk >L=!&L`akak]phdYaf]\ • OFCOM statistics lgYdYj_]]pl]flZql`]dY[cg^\YlYgf]ehdgqe]flaf CCI-related EU NACE codes. EU statistical frameworks fail • Creative & Cultural Skills UK to count artists and other creative content owners. Given the data available at EU and national levels, FTE estimates Totals for jobs and markets have been arrived at after would require further investigation beyond the scope of removal of double-counting. For markets, the sum of sectors this study. Õ_mj]k$Ò--,&/Z$]p[]]\kl`][gfkgda\Yl]\lglYd$Ò-+-&1Z To ensure consistency, we mainly use data recorded jgmf\]\Õ_mj]!&Dan]emka[ Ò)*&/Z!ak[gmfl]\afZgl`l`] in 2011 and 2012. Performing arts and Music sectors, music channels revenues in TV and Music sectors (€1.7b) and music radio revenues (€3.2b) in Radio and Music sectors. We also deducted €1.3b from double counted music copyright revenues. For employment, we deducted from the sum of sectors Õ_mj]k /&-e!dan]emka[ ,-.$-((!$emka[jY\ag (5,500) and music channels TV (1,500) employment following the same methodology as before. EY | December 2014 97 98 Creating growth | Measuring cultural and creative markets in the EU Contacts Marc Lhermitte +33 1 46 93 72 76 [email protected] Bruno Perrin +33 1 46 93 65 43 [email protected] Louisa Melbouci +33 1 46 93 76 47 [email protected] EY | December 2014 99 EY t9kkmjYf[]tLYptLjYfkY[lagfkt9\nakgjq About EY =QakY_dgZYdd]Y\]jafYkkmjYf[]$lYp$ljYfkY[lagfYf\Y\nakgjqk]jna[]k& The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. 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