5.1.1 Changing business models

The growth of the Internet has resulted in a marked shift in advertising spend away from outdoor, radio and TV to the Internet (Figure 12). This has opened up access for smaller businesses, but fragmented the advertising spend of larger brands. An increasingly significant proportion of advertising spend, which was traditionally reinvested by major UK broadcasters into generating new content, is flowing out of the UK to non domiciled ISPs.

Digitisation, increasing bandwidth and broadband internet connectivity have also facilitated peer-to-peer (P2P) file sharing on a massive scale, as well as offering unprecedented access to content and services. According to the International Federation of the Phonographic Industry [7], illegal P2P file sharing is now responsible for 95% of all music downloads; motion pictures and television series are available in their entirety on bit-torrent networks. File sharing (and side-loading of content to devices from hard-drives, flash-memory sticks or by Bluetooth locally) has had a dramatic impact on the ability of content producers and distributors to charge for units of content.

At the same time there is considerable tension between the open source/open business philosophy (where intellectual property is made freely available to be developed or used by others to drive further innovation) and those who continue to advocate locking it down with Digital Rights Management (DRM) technologies that enable rights holders to exercise full control over who has access and how their IP is used. As DRM solutions have proven unworkable or unpopular with consumers, and at best provide speed bumps to slow down the file sharers, businesses are increasingly looking to new ways of monetising their content.

The second half of 2008 saw announcements from the major music companies and Apple's iTunes (now the biggest retailer of music in the United States [43]) that they were abandoning the practise of offering only copy-protected files for sale by download. This serves as an indicator towards a changing commercial approach. Finding new ways to improve the quality and convenience of service, while exploring other aspects of added value, are increasingly being seen as the way to restore consumer perception of value in content.

The pace of development makes the future difficult to predict, with challenges to business models emerging within a very short timeframe to threaten well established businesses and providing a dynamic marketplace.

5.1.2 Emergence of user-generated content and social media

Equally apparent is the changing dynamic between audience and content creator. The influence and immediacy of feedback has grown with consumers increasingly interacting in live TV experiences or providing their own input to content creation. The rise of social networks such as YouTube, Facebook and MySpace has created an entirely new sub-segment in the last five years. Increasingly consumers are interacting with, generating and sharing their own content, much of which activity is also associated with mash-up or re-mix culture. Over this period, non-professionally produced, digital content has been the dominant growth media on the web. In the US User Generated Content (UGC) site, visitors are projected to grow from $69 million in 2006 to $101 million in 2011, with corresponding growth in ad revenue from $1 billion in 2007 to $3.3 billion in 2008 [9].

This rapidly emergent new approach to culture tends toward the irreverent and appears unfettered by traditional concerns about IP clearances and permissions. It frequently involves the adoption and adaptation of other existing digital work, reworking it in a highly creative fashion that undermines older notions of copyright or singular authorship. We have also witnessed the creation of self-narrative content creation in the form of live journals, blogs and Twitter entries. These highly dynamic forms of self-expression, whilst not considered of much monetary value to the creators themselves, frequently represent value to the owners of the platforms that host them.

In Europe, the UK has been quick to embrace social media and is leading the way with 77.9% of the population with access to the Internet using Social Networking sites for an average of 5.8 hours per month, compared to a European average of 56.4% and 3 hours respectively [10]. This phenomenon is helping to further fragment the media market. Although challenging the traditional approaches to advertising, it is opening up opportunities for more effective targeting and enabling brands to develop much deeper, interactive relationship with their consumers.

Social media sites such as Facebook have also opened up their platforms to enable both private individuals and businesses to create widgets that can be distributed to Facebook users and increasingly other social networking sites. They have also developed and implemented structures that support the commercialisation of these applications, the new Apple, Google, Nokia and Blackberry App stores are notable examples.

At a macro level, the sheer volume of information and services available via the Internet makes it increasingly difficult to navigate and to find useful content. This information overload is in turn prompting the development of more intelligent or semantic search technologies.

5.1.3 Personal privacy, security and service quality

There is increasing interest in the aggregated value of meta-data generated by large-scale user activities. The degree to which individual profiling is derived from data-tracking, as well as improved understanding of more generic consumer behaviour, is also raising growing concerns about the protection of personal privacy and the security of the individual's data held online. It is important to link the Creative Industries community into the activities of the Network Security Innovation Platform sponsored by the Technology Strategy Board.

5.1.4 Digital inclusion

There is also a need to consider digital inclusion and the requirement to improve digital literacy across society more generally, particularly as the Government is increasingly looking to deliver services via the Internet and other digital networks. Otherwise, there is a risk that large sections of the community will be left behind in the digital revolution, unable to access information, entertainment and increasingly important services. The Technology Strategy Board has a role to play in supporting the awareness and development of more intuitive human computer interfaces.