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Digital Pulse

in·no·va·tion – A creation resulting from study and/or experimentation. The act of starting something new.

dis·rup·tion – An act of delaying or interrupting continuity. An event that results in displacement or discontinuity. The act of causing disorder.

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It requires agility and flexibility to underpin a continually evolving business environment.

Industry Change – The ongoing economic, technological and social development of commercial business and market sectors.

Report: The internet’s effect on creative industries

Key takeaways

  • A study by PwC’s Strategy& shows that the internet has fueled the success of creative industries.
  • Results across a range of countries including Australia, India and Japan show that consumption of content is rising.
  • Digitisation has enabled greater entrepreneurship and export opportunities for creative content producers.

The “unlimited shelf space of the internet” has offered a boost to the creative industries, says a 2017 report by PwC’s Strategy&.

Content democratization: How the internet is fueling the growth of creative economies drew from research across five countries to uncover the effect of the internet on content providers and distributors, emerging artists and consumers.

Analysing the cultural renaissance in Australia, Japan, South Korea, India and Thailand (countries selected for representing varying levels of internet connectivity), the report hones in on five creative industries:

  • video (television and film)
  • music
  • books
  • print media
  • gaming

Although the impact of the internet on each industry and geography has been uneven, the study found that there were six common themes:

1. The time spent consuming creative products is increasing.

Across every country in the study, the amount of time devoted to both offline and online media consumption has increased, more so in countries with strong internet penetration.

Australia showed the highest rise in how much time was spent consuming media. Whereas Australians spent 6.4 hours per day in 2011, in 2013 that had risen to 9.7 hours, an annual increase of 11%. Interestingly, the rise in content consumption (in the period that was measured) doesn’t appear to have cannibalised consumption of traditional TV, radio and print. TV consumption increased by 13% from 2007 to 2013, and consumption of print media rose 7% in the same period.

Chart showing contribution of digital to time spent per day on media, Australia.

2. Users are willing to pay for creative products.

There has always been a question over whether the internet is able to provide a sustainable revenue source for the creative sector. News organisations, for example, have indeed found this to be a challenge. Many observers believe that consumers are less willing to pay for digital products than for their physical equivalents.

As consumers spend more time online, however, sales of digital content indicate that they are willing to pay for content. This is especially true if content is high quality, affordable, varied and has the convenience of ‘anytime, anywhere, anyhow’ consumption.

In every country in the study, consumers are spending more on digital creative products than ever before. Japan showed 15% annual growth between 2011 and 2015, while Australia enjoyed 35% annual growth for the same period.

Testament to the increased willingness to pay for digital content is the the rapid growth of distribution platforms such as TV streaming service Netflix – which attracted 1.6 million sign-ups and 900,000 paying users in Australia in its first six months – or music streaming services Spotify and Apple Music.

Chart showing payments for digital content in Australia, Thailand and South Korea

3. The overall value of the creative sector is increasing.

As more time is spent online and consumers can legally and more cost-effectively access content, the overall value of the creative market is growing.

The internet’s contribution to the total value of the creative sector in South Korea is particularly high — 35% in 2015 — since digital is increasingly part of most consumers’ DNA there. Japan’s and Australia’s creative sectors are moderately digitised: their proportion of digital to traditional media content is in line with that of other developed markets such as the US, UK, and France.

The creation of real value, in the form of actual revenue, however, is moving more slowly in mobile-heavy next-generation markets. Even though much more time is spent consuming content on mobile devices, money made from mobile channels through advertising and content payment falls behind revenues from larger screens such as TV and movie theatres. Still, digital media in all five countries grew at double-digit annual rates, with Australia rising by 25% between 2011 and 2015.

Overall, the creative sector grew at an average of 3% per year from 2011 to 2015, with most of the growth coming from paid digital content. In fact, digital growth represents as much as 86% of the creative market growth from 2011 to 2015, compared with 14% for traditional content over the same period.

Chart showing the breakdown of digital vs traditional content, Australia, Thailand, Japan, South Korea and India

4. Entrepreneurship is on the rise.

Traditional creative platforms offered limited inventory space and high distribution costs, giving platform owners most of the control and revenue. The internet has changed all that, allowing independent artists and small and medium-sized enterprises to build direct relationships with consumers and move closer to the revenue stream.

The low cost of digital content production — sometimes requiring no more than a smartphone — and the rise of distribution platforms have created opportunities for individual and small-scale content creators to experiment with original offerings, showcase their work, and instantaneously reach a critical mass of people.

All five industries have witnessed a growth in entrepreneurship, from video blogs, or vlogs, to indie music, microblogs, self-published e-books, and indie games.

Individual creators also benefit from the availability of alternative funding models and supporting mechanisms such as multichannel networks (MCNs), which provide assistance to new video artists when it comes to production, distribution, monetisation and audience development. This support helps create jobs and contribute to the expansion of small and medium-sized businesses.

In Australia, user-generated and independent artists’ content is widely popular; in May 2016, it made up nine of the top 10 Australian YouTube channels, seven of which are represented by MCNs.

5. Local content industries are getting stronger.

Another effect of the internet’s ability to boost entrepreneurship and reduce barriers to entry for independent creators is the increased supply of local content, which is a significant benefit to consumers.

In Australia, for example, despite ever-expanding access to international content, traffic to local sources has risen over the past few years. In 2015, 61% of total traffic on the country’s top 12 sites went to local news websites, a 55% increase since 2012. According to Nielsen, the number of visitors to .au websites is increasing faster than it is for .com websites.

6. Creative exports are soaring.

Internet platforms have removed the physical borders between markets, driving the export of creativity across all five creative industries.

In countries where a particular creative industry has traditionally been strong, connectivity has enabled easier access to international markets and yielded significant export revenues for that industry’s products.

In Australia for example, many of the new internet-based social media stars, such as Troye Sivan, Josiah Brooks and comedy trio SketchShe, have established themselves in markets across the globe. Unsurprisingly, Australia’s cultural exports are especially popular in English-speaking countries such as the UK, US, Canada and New Zealand.


Content democratization: How the internet is fueling the growth of creative economies was written by Jayan Bhargava and Alice Klat for PwC’s Strategy&. Click here to download the full 120-page report.

 

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