The Northern Ireland Digital Content Strategy Moving Forward

Transcription

1 The Northern Ireland Digital Content Strategy Moving Forward DRAFT COPY FOR CONSIDERATION

2 Contents 1.0 Executive Summary The Digital Content Opportunity 1.2 Digital Circle 1.3 Digital Circle Moving Forward Business Networks Accelerator Centre 1.4 Targets 2.0 Policy Context European Perspective 2.2 UK Policy Context 2.3 Northern Ireland Policy Context 3.0 Market Overview Introduction 3.2 The Digital Content Industry 3.3 The Global Market Opportunity 3.4 The Northern Ireland Digital Content Strategy Digital Circle Review 3.7 Next Steps 4.0 The Digital Content Strategy Market Opportunity 4.2 Key Themes Leadership and Communications Investment and Funding Innovation and Creativity Skills and Training Export and Internationalisation 4.3 Targets 4.4 Road Map 2

3 5.0 Conclusions 25 Appendices Appendix A The Northern Ireland Digital Content Strategy Road Map 3

4 1.0 Executive Summary 1.1 The Digital Content Opportunity Digital content offers a clear and present opportunity for industry in Northern Ireland to develop a globally competitive position in the market and make a strong contribution to the development of the knowledge economy in the region. The emergence of the app economy, platform agnostic web applications and cloud services offer opportunities that this region is well capable of exploiting based on a number of key strengths including talented staff, innovative ideas, competitive pricing and a first class communications infrastructure. Digital content refers to any content that is published or distributed in a digital form, including text, data, sound recordings, photographs and images, motion pictures, and software. The digital content industry describes a set of companies that develop and deliver high-value digital products and services for diverse markets including mobile and web content, software, digital animation and post-production, e-learning, digital publishing, games, film and television content and music. In June 2011, PwC published the annual edition of their Global entertainment and media 1 that estimates global market demand for products and services in this sector, which includes digital content. The total global market opportunity in 2010 is estimated at over $1.4 trillion and it is projected to grow to over 1.8 trillion by According to the report, digital content has become the new norm. The entertainment and media industry has crossed a psychological and behavioural tipping point by moving from the essentially traditional business with a growing digital element to a new paradigm where digital is acknowledged as the central driver of future operating models, consumer relationships and revenue growth. Digital currently accounts for just over 25% of total industry revenues. Over the next five years this figure will rise to 58.7%. 1.2 Digital Circle In 2008, Invest NI working in partnership with representatives from the Northern Ireland digital content industry and Momentum, the trade association representing Northern Ireland s Information, Communications and Technology (ICT) industry developed and published a digital content strategy for the region 2. This strategy recognised that digital content potentially offered a real opportunity for growth the region but that substantial development of the sector was required to realise this opportunity. In particular, weaknesses existed such as lack of company scale, low levels of IP creation, low levels of foreign investment and low levels of international sales. To address these weaknesses, there was the need to build the capability of the industry and promote collaboration between individual companies. 1 PwC Global Entertainment and Media Outlook The Northern Ireland Digital Content Strategy

5 The digital content strategy included a three-year implementation plan to address the sector weaknesses identified above. Key to this plan was the establishment of an Industry Advisory Panel (Steering Group) to oversee the development and implementation of the strategy and the appointment of a full time network facilitator. Shortly after formation, the initiative was branded as the Digital Circle. Digital Circle operates as a network within Momentum, the trade association representing Northern Ireland s ICT industry. It has grown to now represent 190 creative businesses, the great majority of which are micro-businesses. Digital Circle companies operate primarily in Web Design and Development, Mobile App Development, Software, Games Development, E-Learning, Film, Television, Radio, Animation, Post-production and Music but also includes other areas such as Publishing, Fashion, Advertising and User Interface Design, where the input is digital. Over the three years since its formation, the network has exceeded the targets set in the 2008 strategy and has established itself as the voice of digital content with government, academia and industry. 1.3 Digital Circle Moving Forward Digital Circle has delivered real, tangible contributions to growing the sector and addressing weaknesses. The challenge is to maintain and accelerate sector expansion and global competitiveness so as to ensure Northern Ireland can truly compete on the world s digital content stage. Chapter 4 of this document describes the strategy for the next three years, This strategy continues the focus on identifying key themes around which targeted initiatives will be delivered to increase industry competitiveness. These themes are: Leadership and Communications; Investment and Funding; Innovation and Creativity; Skills and Training; and Export and Internationalisation. Associated with each of these themes is a set of actions. These actions are described in Chapter 4 and form part of a road map presented in Appendix A which also includes responsibilities for delivery and timescales. A number of these actions are considered key to achieving a step change in the expansion of the sector over the next three years. 5

6 1.3.1 Business Networks Digital Circle has attracted a wide range of companies from across the spectrum of technologies and markets that are classified under the digital content banner. Through the networking activities organised by Digital Circle, clusters of companies, focussed on specific technologies and/or markets, have emerged. Facilitating the transformation of these clusters into business networks of companies who partner to address market opportunities offers a particularly effective and exciting way for the industry to achieve scale and market credibility and competitiveness. Clusters that have already emerged are a group of companies focussed on the development and delivery of mobile applications and a group focussed on the development of web and mobile games. Other clusters are emerging, including one focussed on e-learning Accelerator Centres Digital Circle proposes to work with stakeholders from the public and private sectors to establish a number of physical locations which will act as hubs for the community and a catalyst for industry expansion. The Accelerator Centres will support the growth of high potential start-ups and provide incubator and collaboration space for digital companies. The location for the first Accelerator Centre will be Belfast City Centre. It is recognised that other towns and cities in Northern Ireland are exploring the establishment of similar such centres. Digital Circle will encourage such developments and will actively pursue a strategy of creating a linked network of these facilities that share support capacity and capability. 1.4 Targets The targets defined below are for the period They are based on targets specified in the Digital Content Strategy and on the performance of Digital Circle in achieving these. It is believed that these targets are challenging, especially since all industry sectors, including digital content, are weathering a global recession. Nevertheless, the growing opportunity offered by digital, coupled with the strategy to grasp this opportunity outlined in this document suggests that these targets are achievable. Establish four Accelerator Centres across the province. Develop four business networks focussed on specific technologies and/or markets. Increase the turnover of indigenous tier 2 digital content companies by 20% per annum. 6

7 Grow the Digital Circle network to over 500 businesses (sole traders and limited companies). Promote 10 new high potential start-ups in digital media per annum. High Potential, in this context, refers to companies producing products or services, which have a potential to grow to over $50M per annum. 7

8 2.0 Policy Context The importance of the Digital and Creative Industries to the development of a strong, competitive, knowledge-based economy is widely recognised across Europe and in the UK. Since the Northern Ireland Digital Content Strategy Building the Foundations was launched in 2008 there has been an increase in strategic emphasis, particularly with regard to Digital and Creative Industries. 2.1 European Perspective In 2006, the European Commission published the results of a study, The Economy of Culture in Europe. This was an attempt to assess the impact of the cultural sector of Europe, and to suggest some potential direction in terms of EU policy-making. The Commission s use of the term cultural and creative sector was established and some of the difficulties of defining statistical data for the sector were opened up. The study included A Strategy for a Creative Europe, which outlined stark challenges for the European Union if it is to achieve a goal first set in 2000, to make the EU the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion 3. The publication of the Lisbon Treaty the following year further consolidated the cultural and creative sector as a focus for policy. The treaty identifies creativity and innovation as capable of providing industry with a competitive advantage. Article 173 states that the Union and Member States shall ensure the conditions necessary for the competitiveness of the Union s industry exist, and that action shall be aimed at fostering better exploitation of the industrial potential of policies of innovation, research and technological development. Furthermore, articles 179 to 190 contain a number of action points which specify the coordination of research into digital technology 4. The EU Green Paper, Unlocking the potential of cultural and creative industries, published in 2010, was intended to stimulate debate and propose a number of ideas for the development and growth of the cultural and creative industries. The paper discusses how these industries can contribute to local, regional and global development, and the kinds of investment needed to develop the industry. Europe is characterised by a digital economy of some significance and with the potential to create further economic growth and jobs 5. 3 Directorate General for Education and Culture The economy of Culture in Europe. 4 European Union. March Charter of Fundamental Rights (The Treaty of Lisbon). Consolidated Treaties 5 A useful summary of the Green Paper is provided by Volante QNB on behalf of 8

9 The creation of new spaces for experimentation, innovation and entrepreneurship in the cultural and creative sector, such as laboratories where different disciplines can work together, and intermediaries and brokers between different sectors; Better matching of the skills needs of the cultural and creative industries, communication of these skills to banks and financial institutions, and improving partnerships between schools, universities and businesses; Enhancing access to funding by, for example, educating banks and investors about the potential of the cultural and creative industries, and gathering cross-sectoral expertise to evaluate companies and their products; A number of proposals aimed at enhancing the potential of the cultural and creative industries to contribute to local and regional development. This section also stresses the importance of building strategies on a year term, and not considering investments in the cultural and creative industries as a luxury or isolated policy option; Establishing a better understanding of how to improve the mobility of both artists and creative works; Providing support to small and medium-sized enterprises in order to help them to promote themselves abroad, and increase the levels of cultural exchanges and international trade in creative goods. 2.2 UK Policy Context At a UK level the Department of Culture, Media and Sport (DCMC) set cultural policy. However, given that the devolved administrations are largely responsible for digital and creative industries work by DCMS relates largely to England. The DCMS Staying Ahead: The Economic Performance of the UK Creative Industries report 6 published in June 2007 outlines the specific reasons why the creative industries are strong in the UK. Producers of creative content working in English as a native language is a key advantage. The diversity and economic strength of London as a global powerhouse for creative producers is also contributing to rapid growth. Another advantage is the propitious public infrastructure of support and the rich institutional heritage, including the Arts Councils, BBC, art and design schools and museums etc. The report also refers to a rapid growth in the demand for creative products during with a growth in disposable income fuelling demand in the domestic market for products. The report also sets challenges for the industry and these include, Market Volatility, Management Challenges, Copyright and Rapid Adaptation. 6 Staying ahead: the economic performance of the UK s creative industries June

10 Eight key drivers are also identified in the report and these include demand, greater diversity, a level playing field, education and skills, networks, public support and grants, intellectual property and building greater business capacity. In 2008, the Department for Culture, Media and Sport also launched the Creative Britain strategy. This sets out a vision of dynamic, innovative, successful creative businesses providing prosperity and fulfilling job opportunities across the country. A total of 26 commitments were made in the strategy, structured around the themes of education, the job market, research and innovation, business development and accessing finance, protecting intellectual property, and maintaining the right support structures for the creative industries 7. The Creative Industries Council was created in May 2010, by the UK Government. This is a UK-wide body with membership formed from across the creative, publishing, broadcasting and new media industries. Among the companies and bodies represented are the BBC, Google, Amazon, Arts Council England, ITV, and UK Music. All meetings are co-chaired by the Secretary of State for Culture, Media and Sport, and the Business Secretary. The purpose of the group is to provide a forum for action by the industry and will ensure that it has a strong voice in developing a partnership with the Government' Northern Ireland Policy Context The Northern Ireland Executive s European Priorities document acknowledges the significance of the 2010 EU Green Paper. The Executive sets out a number of key aims to help position Northern Ireland advantageously with regard to these European policy developments. These key aims are as follows 9 : Promote greater private sector R&D investment; Encourage entrepreneurship, creativity and innovation; Promote science, technology, engineering and mathematics (STEM) and educational and creative industries that encourage young people to study STEM subjects; Promote translational research, knowledge transfer/exchange and STEM between firms and between the research base and firms; Promote cross-sectoral collaborations between the creative and cultural industries and with other business and research sectors to stimulate innovation, job creation and expert-focused growth; 7 Department of Culture, Media and Sports Creative Britain: New Talent for the Economy Northern Ireland Executive European Priorities pp

11 Nurture the development and exploitation of new technologies, ideas and ways of working in our companies, universities, the research base and elsewhere in the public sector; Make fuller use of information and communication technologies; Promote deployment and use of modern accessible online services; Leverage our significant public investment in the health sector, including in skilled employees and clinical trials infrastructure, to realise economic outcomes. The paper then presents a number of objectives to address these aims, among which are: Stimulate growth of the creative industries by nurturing creative talent and creative enterprises and by encouraging innovative cross-sectoral collaborations. Harness the potential of the creative and cultural industries to support export-focused economic growth, job-creation and positive spill over impacts into areas such as health, education and social cohesion. The Economic Strategy consultation document 10 published by the Northern Ireland Executive in November 2011 identifies Creative Industries as having the potential to make an important contribution to the Northern Ireland economy. And as a result set a target of support for 200 projects through the Creative Industries Innovation fund by Economic Strategy Priorities for sustainable growth and prosperity 11

12 3.0 Market Overview 3.1 Introduction The premise behind this strategy is that the market for digital content offers a clear and present opportunity for industry in Northern Ireland to develop a globally competitive position in the market and make a strong contribution to the development of the knowledge economy in the region. The emergence of the app economy, platform agnostic web applications and cloud services offer opportunities that this region is capable of exploiting based on a number of key strengths including talented staff, innovative ideas, competitive pricing and a first class communications infrastructure. 3.2 The Digital Content Industry The content industry describes a set of companies that develop and deliver high-value digital products and services for diverse markets including mobile and web content, software, digital animation and post-production, e-learning, digital publishing, games, film and television content and music. The industry is helping transform traditional business processes in health, education, finance and architecture and is generating new opportunities throughout the economy. 3.3 The Global Market Opportunity In June 2011, PwC published the annual edition of their Global entertainment and media outlook that estimates global market demand for products and services in this sector, which includes digital content 11. The total global market opportunity in 2010 is estimated at over $1.4 trillion and it is projected to grow to over 1.8 trillion by According to the report, digital content has become the new norm. The entertainment and media industry has crossed a psychological and behavioural tipping point by moving from the essentially traditional business with a growing digital element to a new paradigm where digital is acknowledged as the central driver of future operating models, consumer relationships and revenue growth.. Digital currently accounts for just over 25% of total industry revenues. Over the next five years this figure will rise to 58.7%. 11 PwC Global entertainment and media outlook

13 3.4 The Northern Ireland Digital Content Strategy In 2008, Invest NI working in partnership with representatives from the Northern Ireland digital content industry and Momentum, the trade association representing Northern Ireland s Information, Communications and Technology (ICT) industry developed and published a digital content strategy for the region 12. This strategy recognised that digital content potentially offered a real opportunity for growth the region but that substantial development of the sector was required to realise this opportunity. In particular, weaknesses existed such as lack of company scale, low levels of IP creation, low levels of foreign investment and low levels of international sales. To address these weaknesses, there was the need to build the capability of the industry and promote collaboration between individual companies. The digital content strategy included an implementation plan to address the sector weaknesses identified above. Key to this plan was the establishment of an Industry Advisory Panel coupled with Industry Action Groups to oversee the development and implementation of the strategy and the appointment of a full time network facilitator. Shortly after formation, the initiative was branded as the Digital Circle. 3.5 Digital Circle Review Digital Circle is a collaborative network funded by Invest NI under the European Regional Development Fund (ERDF). It was established to address the development of the digital content industry in Northern Ireland through achieving the targets and objectives set out in the Digital Content Strategy. Digital Circle has been funded for the period April 2008 to October In 2007 invest NI identified a total of 40 client companies as belonging to the digital content industry and a survey of these companies produced the figures in Table 2. Invest NI repeated the exercise in 2009 and the figures are also listed in Table 2. Table 1: NI Digital Content Industry Profile Number of Companies Average Turnover Average Employment Total Turnover Sales Outside NI , M 50% , M 77% 12 The Northern Ireland Digital Content Strategy Building the Foundations. 13

14 A comparison of 2009 with 2007 shows very encouraging growth in the number of Invest NI client companies and increases in both total turnover and percentage of sales outside Northern Ireland. The digital content strategy of 2008 also proposed ambitious targets for industry growth over three years to These targets are summarised in Table 3 together with actual achievements over the period. Table 2: Digital Circle Achievements against Targets Objective Target Actual achievement Grow turnover in tier 2 13 companies 50% 60% Promote new digital content start-ups Increase external/export sales in tier 2 companies Secure companies accessing Invest NI support for the first time 60% 77% Secure high quality FDI 1 0 With the exception of one inward investment project, the Digital Circle project has exceeded targets by a considerable margin in the face of challenging economic times. In 2010, Momentum commissioned PA Consulting to review the impact of the Digital Circle and create a model for evaluating success 14. PA Consulting published its report earlier this year. Their findings are summarised as follows: The Digital Circle project was delivered within the broad requirements made on Momentum. There is clear evidence of the group functioning well and providing a valuable service to its members. The work of Digital Circle is well received by all companies interviewed by PA Consulting. The companies recognise the significant role that Digital Circle has provided in making the Digital Media a credible market offering. Some cases believe their company would not have started without the influence and the confidence provided by Digital Circle. The interviews reveal support for the Digital Circle programme but more 13 Companies that are already selling into markets outside Northern Ireland and have the potential to achieve growth in these markets. 14 Digital Circle Review Model for Evaluation of success. 14

15 importantly the feeling of peer-to-peer collaboration which has been facilitated by Digital Circle. This collaboration is not always evident in other industries in Northern Ireland and is a strength which has been developed by Digital Circle. The companies interviewed show growth in terms of revenue and jobs. They also express an expectation of growth over the next three years during a period of recession. There were a number of concerns that skills must be developed further for future employees to sustain their growth. 3.7 Next Steps The Digital Content Strategy described the industry in Northern Ireland as follows: The digital content industry in Northern Ireland is embryonic and fragmented, and encompasses a broad range of digital products and services across ICT, animation, gaming, broadband content, mobile content, e-learning, streaming technology and web design. Individual companies have strengths in the use of ICT and small creative content companies exist. However, the local industry has still to make any real impact in international markets and there has been no significant inward investment in this sector. The review of the activities of Digital Circle in paragraph 3.5 clearly indicates that the project has delivered real, tangible contributions to growing the sector and addressing the weaknesses. Nevertheless, there is still much to be done if Northern Ireland is to compete on the world digital content stage. The digital content industry strongly supports continuing and expanding the Digital Circle initiative as the key way to deliver continued expansion of the industry through further improving global competiveness. The next Chapter develops a strategy for the sector for the next three years identifies the continuing role for the Digital Circle and proposes and action plan with targets moving forward. 15

16 4.0 The Northern Ireland Digital Content Strategy Market Opportunity The period since the publication of the first Digital Content Strategy has witnessed market developments that have created substantial new opportunities for the digital content industry. Possibly the most significant has been the development of smartphones and tablet computers such as the Apple iphone and ipad and Google Android powered devices from companies like Samsung and HTC. These devices, particularly those from Apple, have proven to be hugely attractive to consumers. Market demand continues to accelerate with demand from business also adding to the opportunity. One key element of their success is mobility which allows personalise, relevant information to be delivered to the user anywhere and anytime. Industry commentators are now describing mobile as the new Internet. A second element is the availability of thousands of applications, which are readily accessible and easily downloadable via app stores established by suppliers. These suppliers recognise that rich and varied content is what attracts consumers to their devices and so they actively encourage developers of digital content to create applications for their platform through providing a global distribution platform, the app store, and a mechanism for paying developers for sales of their products. Mobile devices and the app store distribution capability offer the Northern Ireland digital content industry a particular significant opportunity. In early 2012, it was estimated that the App Economy was responsible for the creation of nearly half a million jobs in the United States. 15 Based on market developments such as described above and an assessment of the current and potential competitiveness of the Northern Ireland industry in global terms, Digital Circle has identified key sectors of the digital content market which offer particular opportunity for the region. These are: Mobile applications; Games (mobile and web); E-Learning; Web design/development; Film and Television; and Music. The Film & Television and music sectors already have strategies in place drafted by the Northern Ireland Screen Commission (NI Screen) and the Northern Ireland Music Industry Commission (NIMIC). Digital Circle will work

17 in partnership with NI Screen and the replacement for NIMIC, which no longer exists, to ensure a complementary approach. 4.2 Key Themes Digital Circle has identified key themes the need to be addressed through targeted initiatives so as to realise the potential for growth of the digital content industry. These themes are: Leadership and Communications; Investment and Funding; Innovation and Creativity; Skills and Training; and Export and Internationalisation. Each key issue is discussed in more detail in sections to below. The key issues and proposed actions are developed further via the Road Map, referenced in section 4.4 and presented in Appendix A, which identifies proposed implementation responsibilities and timescales Leadership and Communications Digital Circle operates under the umbrella of Momentum which is the ICT Federation for Northern Ireland representing both multi-national and indigenous ICT companies. Together, Momentum and Digital Circle now represent over 300 companies. The partnership reflects the ever growing convergence between the digital content and software development industries. Digital Circle has, over the past three years, established a strong leadership position through building a substantial community of companies and individuals who are actively engaged and through establishing a steering group to represent and promote the interests of this community. Digital Circle is recognised across government, academia and industry as the voice of digital content. Proposed Actions The steering group will be expanded to ensure all industry sectors are represented. Work with stakeholders to establish and support physical city centre locations to act as hubs for the community and a catalyst for further expansion of the industry. These Accelerator Centres will be used to accelerate the growth of high potential start-ups and an incubator and collaboration space for early stage digital companies. Facilitate the development of business led collaborative networks from within the community focussed on specific markets. Networks currently identified are mobile applications and games development. 17

18 Develop and implement a comprehensive communications strategy to ensure the wider industry and stakeholders are kept informed. Develop annually a Northern Ireland creative showcase to promote the industry. Invite representatives from other sectors and sector bodies including music, film & television and software to attend meetings of the Digital Circle steering group. Publish a position paper each quarter on the state of the market and market trends Investment and Funding Digital content businesses in Northern Ireland are undercapitalized and unable to move rapidly to market. This is because of the dependence of the local economy as a method of bootstrapping a company rather than securing investment. Local media businesses tend to develop their business by securing service-based sales from the local economy and find it hard to break into development of indigenous intellectual property due to the time restraints of a client-led business. The market in Northern Ireland has improved over the last three years: Foreign investment from outside Northern Ireland. This was in addition to (and often in spite of) local investment initiatives. Increased knowledge and investment preparedness. Delivered by members of the Northern Ireland diaspora. Lack of industry savvy is present on both sides of a potential investment with a lack of business intelligence on the side of the investor coupled with naivety caused by inexperience on the side of the local entrepreneur. Most digital content businesses are too small and/or undercapitalized to be able to participate in European programmes. The opportunity costs for EUfunded projects are often prohibitive for SMEs and microbusinesses operating in a depressed economy. The opportunity for software and digital media is yet to be recognized in the processes within Invest Northern Ireland though the teams within the organization are committed to proving the value of the industry. A similar issue is recognized within NI Screen as only a very small percentage of the their budget is allocated to digital products (and of that, an even smaller percentage does not go to local television production for the web). Digital Circle has offered to be part of the decision process for the NI Screen Digital Media Fund. DCAL, working in partnership with Invest NI, has provided the most effective method of injecting seed investment into digital start-ups with the Creative 18

19 Industries Innovation Fund. This has provided early stage funding to fifty digital projects over the last six months with the intent of funding more over the next three years. This is closely followed by the SBRI 16 process pioneered by DETI (with the Northern Ireland Tourist Board) in early This initiative, which ushered in the first significant open data project in Northern Ireland, proves the concept that a small amount of targeted investment can create a new business as well as provide low-risk products commissioned by government and delivered by the SME sector. Despite the current economic conditions, Invest NI have supported 76 new Digital Circle members over the last three years indicating the potential for growth in the industry. Invest NI continues to support companies through the Growth Accelerator Programme (and other mainstream programmes) and this support is extremely welcome in supporting the indigenous industry. Proposed Actions An Investor Forum will be established which will include local business angels, venture capitalists, banks and government funding agencies. This forum will meet quarterly to resolve issues and to identify opportunities. Deliver training and instruction to both investors and investees on the structuring and content of term sheets appropriate to the digital content industry. Work with Invest NI on the provision of targeted support for high potential companies. Deliver a business development pipeline in order to increase the number of investor-ready companies. Work in partnership with CIIF, NI Screen DMF and other funders, local and national to secure additional digital specific funding streams Innovation and Creativity Northern Ireland industry currently makes the lowest investment into research, development and innovation (R&D&I) across all UK regions 17 and this statistic applies to the digital content sector. The Creative Industries Innovation fund, funded by DCAL and administrated by the Arts Council has supported R&D&I in digital content and Digital Circle has worked with DCAL and the Arts Council to promote the fund to industry and start to reverse the trend. The 16 Small Business Research Initiative 17 NI Economic Strategy Consultation, Jan

20 efforts have been successful, but a problem exists with other sources of funding such as the Invest NI fund for R&D&I and R&D Tax Credits. UK government policy currently restricts support from these funds for the creation of digital content. A review of this policy is urgently required. PwC in a report on the entertainment and media industry 18 states: Digital becomes the new norm. It is clear now as it was then that the coming five years will see digital technologies progressively increase their influence across the industry and that rapid change in technologies and consumer behaviors will continue. While the pace of progress still varies by country and segment, these trends will see worldwide digital spending grow at 11.4 percent compounded annually through 2015, compared with a compound annual growth rate of just 3.3 percent for nondigital spending. In our view, this reflects the fact that the industry has crossed a psychological and behavioral tipping point by moving from the old normal of essentially traditional business with a growing digital element to a new normal, wherein digital is acknowledged as the central driver of future operating models, consumer relationships, and revenue growth. While digital currently accounts for just over a quarter of total industry revenues, it will account for 58.7 percent of all growth in spending during the next five years. If Northern Ireland industry is to grasp the digital opportunity then it must invest in R&D&I so as to create globally competitive IP. Proposed Actions Define barriers to innovation and creativity and develop solutions in partnership with stakeholders. Develop a programme of catalyst events to educate digital content companies, film and television companies and the wider creative sector on the transmedia opportunities for development. Promote the use of Innovation Vouchers, Knowledge Transfer Partnerships and similar programmes to digital content companies. 18 PwC Global Entertainment and Media Outlook

21 Promote awareness of IP protection and DRM and provide specialist training, advice and guidance to support the industry. Provide facilities within the Accelerator centre for aimless innovation including hackerspaces, collaboration facilities, co-working spaces and open creative spaces. Lobby for Innovation Vouchers to be used with approved high potential companies in the Accelerator centre thus positioning the Accelerator as a non-academic research performer Skills and Training Digital content businesses in Northern Ireland are often self-taught and possess few qualifications in their industry. There is a requirement for digital creative skills to be promoted at a vocational level as well as an academic level. A lack of appropriate training and high costs mean that local businesses are much more likely to be self-taught in their disciplines. The local industry has very limited engagement with Sector Skills Councils as a whole. Skillset is overly focused on the television broadcast and film industries. Through collaboration with NI Screen and the University of Ulster, there have been some successes with the delivery of courses in 3D modeling and post-production skills. Creative & Cultural Skills have been pro-active in promoting design as a separate discipline in Northern Ireland. e-skills UK has not engaged with Digital Circle but is involved in a postprimary schools STEM project with Momentum. As they currently claim computer gaming as within their domain, there should be more opportunity for engagement. Digital Circle members reported 19 a lack of deep technical training and a lack of business savvy as serious issues for business development. This, with a question of credibility of local trainers, has left little opportunity for skill gaps to be easily repaired without recourse to international access. Digital Circle continues to liaise with local colleges to produce skills development courses supporting the industry by being inexpensive and delivered rapidly. As we have no large FDI in the games sector, it becomes much more difficult to lobby for this. There is an urgent need for flexibility as the industry changed and moves and we need to identify the training that is required to support the industry. The demand for software developers, especially in mobile, tablet and gaming is immense and currently unmet. Many 19 Digital Circle Membership Survey

22 of our start-ups in high potential growth areas are constrained by the lack of skills in these areas. FDI opportunities will increase if local companies are able to demonstrate their skills. Opportunities for local and foreign investment in jobs and wealth creation include the development of skills in games development, visual effects and animation - creating high value employment not constrained to the main cities but that benefits the entire province. Proposed Actions Carry out research into the specific technical skills and training needs of industry and update the results on a regular basis. Invite the Sector Skills Councils to present to the Digital Circle Steering Group on progress towards meeting skills targets. Promote programmes in business skills to digital content companies that meet defined needs. Nominate two representatives from the digital content industry to attend board meetings of the Sector Skills Councils. Work with Invest NI to provide access to overseas training missions designed to increase the skills and experience of attendees.. Produce an annual report on skill in the digital content industry in Northern Ireland. Deliver regular training courses through the Accelerator centres Export and Internationalisation Digital content businesses in Northern Ireland have been able to take advantage of an excellent range of in-market supports and trade mission supports with assistance from Invest Northern Ireland over the last three years as a result of close work with Digital Circle. International visits (which may include trade, training or awareness visits) include: Apple World Wide Developer Conference a week long conference on developing skills for development on iphone-related platforms, Excellently supported by Invest NI in 2009 and 2010, this conference has proved extremely difficult to attend in 2011 (and likely 2012). Timely response from Invest NI enabled local businesses and academics to develop much-needed skills and support a growing development of an app economy in Northern Ireland. SxSW though it as been a trade visit target for the music sector for 22

23 several years, in 2009 and 2010, the Interactive segment became a target for local digital content businesses. Providing awareness, market intelligence and trade contacts, SxSW remains an important event for the sector in general education about the industry. Mobile World Congress supported for several years by Invest Northern Ireland for our local telecoms and ICT industry and increasingly of interest to our local apps economy developers and in particular for content developers. Games Developer Conference this conference has been recently supported and is still, for the Northern Ireland industry, in the early stages of engagement as our companies are small, undercapitalized and still in product development. The local games industry will be submitting a proposal to the InvestNI Collaborative Network Programme to create a virtual publisher entity. This entity will handle the administration of marketing and export for the network of companies and provide collective branding as well as additional market opportunities and representation at international conferences. As a product of the Collaborative Network Programme, Digital Circle believes this is a valid targeted and non-specific support available to companies wishing to export globally. There is an additional opportunity for the development of solutions for both digital and non-digital creative products in terms of localization and export preparation. Proposed Actions Support the development of an export culture through the delivery of export workshops and promotion of supported trade missions. Encourage the development of companies producing products for export based on original indigenous IP. Ensure that Skillset and the other Sector Skills Councils address export marketing and FDI skills provision. Provide a market intelligence resource to assist in identifying new export market opportunities. Support Invest NI in identifying potential FDI target companies and attracting these companies to set up an operation in Northern Ireland. Develop a programme of export skills including languages and translation services. 23

24 Develop an area within the Accelerator Centre to provide a Soft Landing Zone for FDI companies. 4.3 Targets The targets defined below are for the period They are based on targets specified in the Digital Content Strategy and on the performance of Digital Circle in achieving these. It is believed that these targets are challenging, especially since all industry sectors, including digital content, are weathering a global recession. Nevertheless, the growing opportunity offered by digital, coupled with the strategy to grasp this opportunity outlined in this document suggests that these targets are achievable. Establish Accelerator Centres. Develop four business networks focussed on specific technologies and/or markets. Increase the turnover of indigenous tier 2 digital content companies by 20% per annum. Grow the Digital Circle network to over 500 businesses (sole traders and limited companies). Promote 10 new high potential start-ups in digital media per annum. High Potential, in this context, refers to companies producing products or services, which have a potential to grow to over $50M pa. Support digital media FDI through promotion of indigenous excellence. 4.4 Road Map The Road Map presented in Appendix A addresses the key issues for the development of the NI digital content sector as identified in section 4.2. It sets out proposed actions, responsibilities and timescales. The proposed actions are designed to deliver the above targets. Whilst the core strategy is not expected to change significantly, the road map addresses tactical issues and as such will be an evolving document subject to change. It is the responsibility of Digital Circle Steering Group to regularly review and update the strategy and the road map in response to the opportunities and challenges that arise in the rapidly changing global digital content industry. 24

25 5.0 Conclusions The development and delivery of digital of digital content to an ever-increasing array of devices offers a huge and growing global market opportunity to companies that operate in this market. The emergence of easily accessible global distribution channels typified by the app stores ensures small, remote regions like Northern Ireland to compete successfully for this opportunity. Northern Ireland, in its population has, or can develop the creative talent and the spirit of innovation to compete successfully in the digital content market provided that there is a clear agreed strategy across government, industry and academia on how the industry can develop and the support infrastructure required to achieve this. The previous Digital Content strategy was published in At this time it was recognised that the digital content industry in Northern Ireland was embryonic and fragmented, consisting mainly of micro-businesses competing for local market opportunities. The Digital Circle project, instigated by this strategy, has successfully addressed these issues through facilitating the creation of a digital content community and promoting within this community the necessity to address global markets through product led innovation in specific market areas where the industry possesses competitive skills. Despite the success of the last three years, there remains much to do as the competition for this global digital content opportunity intensifies. The strategy presented by Digital Circle in this document is designed to accelerate the development of the industry in Northern Ireland so it may become even more capable and competitive in global terms. 25

26 Appendix A Digital Content Strategy Road Map The following document is intended to provide a road map for the development of the indigenous Northern Ireland software and digital media industry. DCSG = Digital Circle Steering Group and Momentum INI = Invest Northern Ireland SSP = Stakeholders and Sectoral Partners for Music, Film, Television, Design SSC = Sector Skills Councils (currently Skillset, Creative & Cultural Skills, e-skills UK) BCC/DCC = Belfast City Council, Derry City Council The objectives listed below do not imply commitment and will, by necessity, be flexible depending on the economic climate. Leadership and Communications Proposed Actions Action on Timescale Digital Circle Steering Group to be expanded to 7 industry DCSG 1Q2012 members, with at least one representative from the following sectors: a) film and television b) mobile development c) games development d) e-learning e) web design/development Establish and support a city centre location for use as an INI, BCC, 2Q2012 Accelerator for high potential start-ups and an incubator and collaboration space for early stage digital companies. To be repeated for up to three more locations across the province. DCC A communications strategy will be developed to ensure the DCSG 1Q2012 wider industry and stakeholders are kept informed. This will include quarterly updates posted to the DC web site and quarterly updates sent both to membership (which will include stakeholders) Stakeholders and interested parties to ensure they are on the SSP 1Q2012 Digital Circle membership list for ed updates. Annual development of the Northern Ireland Creative Showcase, DCSG / SSP ongoing a showreel video showing the diversity of talent in the province. Work completed by February of each year. DCSG issue an open invite to sectoral partners for DCSG ongoing quarterlysteering group meetings. This is especially relevant but not limited to software, music and film/television sectors. DCSG to publish a position paper quarterly on the state of the market and identifying major market trends with input from SSP. DCSG / SSP 2Q

27 Investment and Funding Proposed Actions Actions on Timescale An Investor Forum will be established with an open invite to DCSG 2Q2012 local angels, venture capitalists, banks and government funders. This group will meet quarterly to highlight opportunities and resolve issues. Deliver investor and investee training and instruction on the DCSG / INI ongoing content of term sheets for investment. This should be delivered biannually. Provide targeted support for high potential companies. Suitability INI / DCSG 2Q2012 of fit to be determined by DCSG and INI in consultation Deliver a business development pipeline in order to increase the DCSG / INI 2Q2012 number of investor-ready companies. Delivery of pipeline to be facilitated by the Accelerators. Work to secure additional digital-specific funding streams by working with CIIF, NIScreen DMF and other funders, local and national. DCSG, SSP / INI / DCAL 2Q2012 Innovation and Creativity Proposed Actions Actions On Timescale Define barriers to innovation and creativity and develop DCSG / SSP 3Q2012 solutions in partnership with the SSP Develop a programme of catalyst events to educate digital content companies, film & television companies and the wider DCSG / SSP 3Q2012 / ongoing creative sector on the transmedia opportunities for development. Promote the use of Innovation Vouchers, Knowledge Transfer INI 1Q2012 Partnerships and similar programmes to digital content companies. Promote awareness of IP and DRM and provide specialist INI ongoing training, advice and locally sourced guidance. Provide facilities for aimless innovation within the Accelerator INI 2Q2012 Centres Including hackerspaces, collaboration facilities, coworking spaces and open creative spaces. Lobby for Innovation Vouchers to be used within the Accelerators, with approved high potential start-up companies. Positioning the Accelerator as a non-academic research performer. INI 4Q