Dr Martin Smith Special Adviser, Ingenious International Creative MBA Conference London, 30 March...
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Transcript of Dr Martin Smith Special Adviser, Ingenious International Creative MBA Conference London, 30 March...
Dr Martin Smith
Special Adviser, Ingenious
International Creative MBA Conference
London, 30 March 2012
Finance, Investment and the Creative Industries
Our Credentials
• Ingenious: $10 billion plus invested in creative assets since 1998
• More than 5,000 investors
• Investments, Ventures, Corporate Finance and Asset Management
• More than 80 films financed or co-financed, including Avatar
• More than 350 hours of prime-time TV drama financed
• Other investments in music, theatre, film, TV production, games, publishing,
and marketing services
• Largest independent investors in creative content in Europe
www.ingeniousmedia.co.ukSlide 2 Ingenious
Structure of the Presentation
• Introduction: conceptual frameworks
• Entertainment industries and the digital revolution
• Exceptional risk profile of creative content businesses
• Main challenges for private investors
• Main challenges for policy-makers
• Qs pre-submitted by UCA
• Concluding reflections
www.ingeniousmedia.co.ukSlide 3 Ingenious
Conceptual Frameworks
• Relatively new stuff!
• Binary divides and contested terminology
─ Art and commerce: show (+) business!
─ Cultural value, economic value
─ “Culture” and “entertainment”
─ Public subsidy, private investment
• Cultural economics/the economics of culture
• Technology, consumer behaviour and the creative process
www.ingeniousmedia.co.ukSlide 4 Ingenious
Entertainment Industries and the Digital Revolution
• Schumpeter and “creative destruction”!
• The impact of digital: (1) the “disintermediating” value chain
• Unparalleled opportunities for new entrants
• The ideology of “free” and consumer power
• Implications for the global majors: the breaking stranglehold of the
“gate-keepers”
• The meteoric rise and power of the aggregators
• The impact of digital: (2) poor visibility on revenues and profits of new
entrants
www.ingeniousmedia.co.ukSlide 5 Ingenious
Technology and the Creative Process
www.ingeniousmedia.co.ukSlide 6 Ingenious
Source: Technology Strategy Board.
Main Challenges for Private Investors
• Exceptional risk characteristics of creative content investment
- Not to be confused with creative services businesses
• Problem of valuing intangibles/IP in a “hits” and “misses” environment
• Fragmentation of markets and audiences
• Media owners having to work far harder to pay for content creation
• Collecting “raindrops” of revenue: licensing fees, royalties and
micro-payments
• Shortage of matching business talent in the UK (contrast USA)
• Chasm of understanding between creative and financial communities
• How to compete against “free”!
www.ingeniousmedia.co.ukSlide 7 Ingenious
Exceptional Risk Profile of Content Businesses
• Our focus is on the economic drivers behind the creative content business
model – not the content genre
• Exceptional risks of creative content businesses:
• This risk profile is a distinctive barrier to investment not suffered by other
industries, even other knowledge economy industries
www.ingeniousmedia.co.ukSlide 8 Ingenious
High Sunk Costs “Hit Driven” Business
Wildly Uncertain Revenues
Portfolio Approach Necessary
Main Challenges for Policy-makers
• Industrial policy, or leave it to the market?
• Poor data, especially on economic “spill-overs”
- Dangers of “lobbynomics”
• Outdated IP regulation: the DEA and Hargreaves (UK)
• Maintaining public investment and creative infrastructure in an age of
austerity
• “access to finance” and lack of business capacity: domestic and inward
investment
• The skills agenda and the mobility of talent
• Fiscal policy: intense global competition
www.ingeniousmedia.co.ukSlide 9 Ingenious
Qs Pre-submitted by UCA
• What do you see as the key challenges to finance for UK creative
industries?
• What and who do Ingenious Media invest in?
• What are the key things you look for when investing in a business?
• Do you only finance blockbusters?
• Can education support in the development process?
www.ingeniousmedia.co.ukSlide 10 Ingenious
Concluding Reflections
• The UK is a great feeding ground for creative talent
• But it has lost positions of business leadership in the global creative
economy
• In music, film and games we have become a giant and successful off-shore
“facilities house”
• Much of the commercial upside/serious profits generated by our creative and
technical talent base goes overseas
• Are we content with that?
www.ingeniousmedia.co.ukSlide 11 Ingenious