May 2010 Tour BriefingCreative and Media Overview

Tony Hughes

Tony Hughes, May 2010

Digital ContentBriefing Overview

Sector Focus

Market trends

UK Strengths

Investor Opportunities

Other key selling messages

Case Studies

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Digital ContentKey Industries

Games Media Publishing Film/Animation

Digital Content Platforms

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PC Mobile Console TV

Sector FocusInternet as Channel

Sport Creative agencies Auto Consumer Products Film Finance FMCG Gaming Music Publishing Radio Television Travel

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Market TrendsMajor themes

Creative Agencies – interactive broadcasting, social media, behavioural targeting and measurement

Film – digital distribution, interactive broadcasting, micropayments Gaming – digital distribution, interactive broadcasting, proliferation of

devices, social media and micropayments Music – digital distribution, social media, micropayments, measurement

tools and tracking Publishing – digital distribution, proliferation of devices,

micropayments, real time measurement tools and social media Radio – interactive broadcasting, proliferation of devices,

micropayments and measurement tools Television – interactive broadcasting, proliferation of devices,

micropayments, measurement tools and social media

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FilmConnected services

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FilmMonetising Media

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GamesIncreasing size and scope of consumer base

MusicMobile consumer

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Graphic – Universal/EMI

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PublishingDigital distribution

RadioInteractive broadcasting

Referred by a friend on Facebook

Checked out the official site

Watched the show

Search beyond official site fan-sites, Wikipedia

Downloaded samples

Inspires furthernet ‘research’

Spreads the word toothers via Facebook

Who watch & feed back

TelevisionInteractive broadcasting

UK StrengthsGeneral

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Access to Creative and Tech Talent High spending & early adopter consumer market Centre of Europe’s Advertising, Publishing, Telecoms &

Media Industries Substantial investment in fixed broadband and mobile

infrastructure Ease of doing business - ranks No.1 in Europe Good communications routes Home to larger % of EHQs than rest of Europe

UK StrengthsCreative Agencies

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Multiplicity of agency specialists Articulation of digital opportunities to Ad

agencies Pull the converging industry models together Increasing reliance on digital production in UK

than outsourced

UK StrengthsFilm

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Market: The UK has more digital cinemas than any other European country – 365 and counting

Spend: UK box-office takings are at record-breaking levels, worth £944 million in the UK in 2009, up 62% from 2000

Variety: There are over 100 production studios in the UK, ranging from large studios capable of housing the biggest sets to small studios catering for music videos and commercial work.

Talent: The UK film industry directly employs almost 44,000 people, with extended employment impact of 95,000 jobs

Warner Brothers recently acquired Leavesden studios in Hertfordshire, making it the only major Hollywood studio to have a permanent base outside of the USA.

UK StrengthsGames

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Innovative and ground breaking IP Largest developer pool in Europe High % of employers with first or higher degrees Multiplatform development expertise Attracted major global publishers Cross media links growing Growth in online and casual gaming sub sectors Developing Serious Games and Virtual World clusters High spending, engaged consumer market Broadening demographic playing casual games Trusted and flexible payment mechanisms

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UK Strengths Music

Largest market in Europe for music downloads

Centre of Europe’s music industry Global music players all present Thriving live events sector Melting pot for technologist and music

collaboration

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UK Strengths Publishing

Largest single creative industry generating over £20bn

164,000 employees and over 8,000 companies in the UK

In its quality, diversity and reach, UK publishing leads the world

Despite the world economic downturn there is a positive outlook for the publishing industry in the UK. The PPA calculates that more than one billion consumer magazines were sold in 2009

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UK Strengths Radio

Radio audiences increasing across different platforms

Internet radio seeing largest increases in each segment

¼ listening through digital devices The UK consumer is responding to the

advantages of digital radio, with ownership of DAB increasing 14% year on year, with 16.6m households having a DAB receiver, compared to 14.5m a year ago.

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UK Strengths Television

The UK television industry contributes around £12 billion to the UK economy, with exports approaching £500 million.

Best supply chain structure in the world outside LA

London is second only to LA in the size of the post production sector servicing TV and Film

Digital switchover creating more channels BBC is a world leader in programme quality and

broadcast innovation (e.g. Project Canvass).

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Investor Opportunties

Expanding consumer base for paid for content (games, video, social media)

Leading expertise across Creative, Business and Technical disciplines Client base across Creative Industries and related sectors

For example:

Publishing: real time tracking tools and marketing TV – content, download and multiplatform tools Games – development applications, mobile flash games, social gaming Film – online, interactive and post production tools Radio – strong consumer interest for new and innovative interactions Music – social media applications and live event link-up applications

OpportunitiesTelevision

OpportunitiesTelevision

OpportunitiesTelevision

OpportunitiesMusic

OpportunitiesRadio

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OpportunitiesAll

OpportunitiesGames

Selling messages

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UK Consumer Demand for Broadband

Through their broadband connections, consumers are able to access and interact with a wide range of content and services and businesses can exploit new market opportunities. The current generation of broadband services in the UK have become a success story with competition, based largely on the use of local loop unbundling, driving choice and innovation, low prices and high take up.

The increasing number of consumers using their broadband connections for activities such as downloading or streaming videos and music, is beginning to limit the current networks. New networks being introduced today, using fibre optical cable to deliver super-fast broadband services, are expected to deliver significant benefits to UK consumers.

Super fast broadband (i.e. broadband with speeds greater than 24Mbps) has the potential to deliver speeds of 50 to 100Mb/s (megabits per second) and enhance new consumer services such as broadcast quality video services, High Definition and 3D TV and interactive fast, fibre optic broadband has the potential to deliver speeds of 50 to 100Mb/s (megabits per second) and enhance new consumer services such as broadcast quality video services, High Definition and 3D TV and interactive online gaming.

Source: OFCOM 2010

BT has launched its super-fast broadband product and plans to cover 40% of the UK by 2012 and Virgin Media has rolled out 50Mb/s to 46% of the UK population and has recently launched a 100Mb/s service. Other smaller companies are also investing in these products including IFNL and H20.

Ofcom's Chief Executive, Ed Richard said: “ Super-fast broadband is starting to be a reality in the UK, with very significant advances in recent months in the speeds some providers are offering. Ofcom's proposed regulatory framework is intended to support the next phase of development by promoting investment, competition and innovation for consumers across the UK”

Availability of super-fast broadband in the UK (some 46% of homes) is now ahead of most large economies where deployments have been funded commercially. In the US, AT&T and Verizon have upgraded their networks to cover 17% and 12% of households respectively, while cable company Comcast is approaching coverage of around 35% of US households with super-fast cable broadband. In Europe, super-fast networks are available to 21% of households in France and 23% of households in Germany.

UK consumers and businesses have benefited from the development of broadband to date. Commercial investments in super-fast broadband are now well underway and almost half the UK population today has access to at least one super-fast broadband network which places the UK in a favourable position internationally.

• Broadband is becoming increasingly central to the lives of UK consumers and the success of businesses.

Availability of selected mobile services

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UK market developmentsMobile Internet Use

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European Headquarters (EHQs) in the UK

0

100

200

300

400

500

UK GERMANY

NETHERLANDS

SWITERLAND

FRANCE

IRELAND

BELGIUM

DENMARK

SPAIN

•Sources: European Investment Monitor, September 2008, UKTI 2010

•N

um

ber

of

EH

Qs

The attractions of the UK include its:–stable economic and political environment;–good international transport links;–world-class communications infrastructure;–highly skilled and flexible workforce;–sound legal and regulatory environment; and–ready access to finance.

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The UK is Accessible

An integrated system of airports, road and rail allows ease of movement between major cities in the UK, and internationally.

The UK has the largest air transport system in Europe, accounting for 211 million passengers and having 6 of the top 10 busiest international air routes. The leading airports in the UK are London Heathrow , London Gatwick and Manchester Airport. Other major international airports in the UK include Birmingham International, London Stanstead, Glasgow and Liverpool.

The UK offers the perfect location for accessing partners throughout Europe. Almost all of Europe’s leading ICT markets can be reached in under two hours from any one of the international airports serving the South of England such as London’s Heathrow Gatwick, City, Luton and Stansted.

The UK is home to many low cost Airlines offering incredibly competitive prices on Air Travel throughout the whole of Europe.

The UK also has a modern and privatised railway that links all UK and European mainland locations through the world class Eurostar rail service. There is also an advanced and comprehensive road system that links all locations throughout the UK.

Sources: Eurostat, 2008; UKTI 2009

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Ease of Doing Business It’s easy to do business in the UK

In an assessment of 183 countries, the World Bank ranks the UK as the leading European economy, and 5th globally, for ease of doing business, significantly higher than Germany.

The UK has received more investment from foreign companies than any other country in Europe.

The UK is the easiest place to set up and run a business in Europe. Setting up in the UK takes 13 days; the European average is 32 days.

The UK has one of the most open, competitive and transparent tax, security and regulatory environments in the world.

The UK has the most flexible labour market amongst all the major European economies.

The UK has one of the most supportive legal systems in the world for business.

The UK has the best international accessibility in Europe with a world-class transport network offering rapid links to mainland Europe and the rest of the world.

Source: UKTI 2010; World Bank 2010; UNCTAD World Investment Report, 2009

•“Combination of UK investor opportunities, government support and a highly skilled workforce are very conducive to successfully establishing a new base in a short time.”

•Kirk Adriano, VP R&D, Inion (Finland)

Country Global Rank

UK 5th

Germany 25th

The figures above show the UK is rated as a significantly easier place to do business than Germany.

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Case Studies/Testimonials

‘UKTI have been an invaluable source of industry contacts and connections, as well as helping me investigate Investment opportunities in the UK.’

Tom St John, CEO, Kontexto

‘The UK is the gateway, and most important market Europe. If it succeeds here, it trickles elsewhere’

David Yarnton, UK General Manager – Nintendo UK

"UKTI's support has been invaluable in helping Sohu Games establish ChangYou.com in the UK and gaining an appreciation of the market and potential partners. For creative content companies it is always difficult to enter new territories and UKTI have enabled us to speed up our progress and rightly inform our decision making.”  

Aileen Yang, UK General Manager – ChangYou.com

‘The UK games development industry has many of the most experienced game designers, programmers and artists in Europe. From the first tentative steps of "Bedroom" developers to today's cross-pollination with the UK Film Industry, there is an incredibly strong development tradition’  

Colin Robinson, Vice President - EA Partners Europe

Thank you!

tony.hughes@pera.com tony@focusinnovation.co.uk

August 2009