The Digital Britain review has been an ambitious attempt to develop a comprehensive action plan for the media and communications sectors, securing the UK’s place “at the forefront of innovation, investment and quality” by developing a set of proposals for legislative and non-legislative measures “that can drive the upgrading of our digital networks, significantly enhance our national competitive position in these critical markets, secure competition for choice and quality in content, connect with the interests of the rising, digital generation and improve access, affordability and inclusion for all”.
Undoubtedly, these are attractive but challenging goals and, for many ‘traditional’ UK media owners, it is clear that the Digital Britain review has been timely.
The media sector is experiencing a period of turbulence and dramatic change, creating immense challenges for many companies. The proliferation of digital channels, services and devices has increased the intensity of competition for consumers, who now have access to a far greater diversity of choices and can be far more selective about what they do, when they do it and who they do it with – we have more channels, more web sites, more video games, and many more ways of consuming the news, listening to music, interacting with friends and watching our favourite television shows.
UK consumers can access digital content, applications and services from around the world and have benefited enormously from the investments made by major international digital businesses such as Google, Wikipedia, Facebook, Yahoo!, eBay and Microsoft, as well as from the activities of an ever-expanding universe of venture-backed start-ups, open source initiatives, public and third-sector institutions, social enterprises and technology innovators.
Perhaps most importantly, the collective, collaborative efforts of the people we used to refer to as the audience (“Here comes everyone …”) are transforming the media and communications landscape. Traditional broadcasting and publishing models are fusing with communications networks, enabling new forms and formats. Coase’s floor is falling. Large-scale, distributed, networked collaboration, aggregation and social interaction, combined with dramatic reductions in the costs of producing, distributing and sharing media, in all of its many forms, will be disruptive of the mass media economics that have underpinned the media landscape.
UK media owners, many of whom have historically operated in relatively closed markets, relying to some extent upon established, reliable behaviours and patterns of consumer demand, are adapting to a more complex, competitive and challenging market environment. The pressures are most acute for ‘traditional’ media products or experiences that were undifferentiated, lacking in uniqueness, easily substitutable and available, cheaply and often in superior form, through digital platforms.
Fragmentation – the redistribution of consumption and other behaviours over an expanding universe of properties and activities – is also making it more difficult for many media owners, from commercial Public Service Broadcasters to major newspaper groups, to generate the same kinds of commercial returns from their investments in some kinds of content, especially in markets that have relied heavily upon advertising revenues. These challenges are more acute in some areas than in others: for broadcasters, the economics of scripted comedy and high-end drama are becoming more challenging; for newspapers, the deteriorating market environment is making it more difficult to invest in local, investigative and international reporting and journalism. The challenges are being exacerbated by consumers’ belief that most forms of digital content should be available for free, and by the severity of the current downturn.
Clearly, there are risks of overstating the extent, progress and significance of many of these changes – the future may be arriving, but it is still unevenly distributed, and there are elements of technological determinism, reductionism and internet utopianism in contributions to many recent debates.
Television in particular, remains powerful, perhaps more so in a fragmenting digital market; and has proven its ability to adapt to challenging markets. Importantly, television viewing isn’t falling, it is growing, with new on-demand platforms providing consumers with much greater choice and control over their viewing. Although many multichannel broadcasters are likely to struggle, the major commercial broadcasters are adapting their commissioning strategies and schedules to reflect the changing market environment and are still generating large audiences. A large majority of UK consumers still regard television, print and radio as their main sources of news and entertainment and offline remains one of the most important drivers of online activity – much of what is currently being consumed online is essentially redistributed content that has been produced elsewhere, for television or for print publications, and would not otherwise be available online. Offline and online are increasingly intertwined.
It is also clear that many so-called ‘traditional’ UK media owners are adapting successfully to the new digital environment, investing heavily to develop world-class digital properties such as the iPlayer, and pioneering new initiatives such as 4iP. However, the commercial returns generated by these investments have – to date – been limited, with many UK companies struggling to build scale or to generate strong commercial returns from their investments in digital media.
As the Digital Britain Interim Report pointed out, new business models are emerging, but these are not yet compensating for declines in many ‘traditional’ revenue streams. Where sizeable returns are being generated, the beneficiaries have tended to be major international digital businesses who have been able to invest across many territories – Google, the major US online networks, aggregation platforms and social networks, the Hollywood studios, major games companies – rather than UK companies. Even so, many major international businesses are loss-making.
To some extent, these commercial challenges are unsurprising: as UK media owners move from relatively ‘closed’ analogue markets into more open ‘digital’ markets, their returns are likely to fall as competition intensifies, fragmentation grows and the supply of inventory increases. In many respects, the new digital media market appears to be far kinder to individual entrepreneurs, innovators and artists, who have become less reliant on gatekeepers and can, on occasion, generate sufficient returns to live on, than it is to major media owners. However, the openness of the internet, which makes it easy for new companies to enter the market, also ensures that the scale of the opportunity for most individual players especially in the UK is small, potentially limiting their ability to invest and innovate.
It is not yet clear what the market will or won’t be able to provide on a commercially-sustainable basis. As sectors consolidate, it is possible that the winners may emerge more powerful than before. Many major media companies will survive and thrive in Digital Britain, but there will be consolidation, with fewer large-scale commercial media owners investing in original content, a more international, American flavour to much of our media, and a new universe of mostly small-scale, often innovative, engaging and inspiring online properties. The ability to produce high-quality content and services at low cost will be increasingly important. Hits will be bigger, everything else will be niche.
For policymakers, these dynamics create challenges. It is likely that public subsidy, direct or indirect, will be required to support the provision of media in some areas, such as local journalism. However, there are tensions and trade-offs between public subsidies, maintaining an open, competitive international market, supporting innovation and entrepreneurship, and helping UK companies to build strong national and international digital businesses. It will be difficult to safeguard the positions of established incumbents, important though their contributions are, while also encouraging innovation and the emergence of new world-class digital businesses.
A more healthy debate would acknowledge these tensions. Digital creates many new opportunities and holds the promise of a new, more inclusive media. The decline of many of our national media institutions will come at a price. Proliferation will not necessarily lead to more ‘good stuff’. The new world is still taking shape.
Jon Watts is director and co-founder, MTM London
This essay is one of a collection of viewpoints which will be published to launch NESTA’s ‘Reboot Britain’ programme. Reboot Britain will explore the role new technologies and online networks can play in driving economic growth and radically changing our public services. The programme will begin with a one day event on 6th July which will look at the challenges we face as a country and how the combination of a new digital technologies and networked 'Digital Britons' can produce innovative solutions to tackle them. For more information please visit www.nesta.org.uk