Table Of Content

REGIONAL STUDY Michael Masnick Michael Ho GERMANY | FRANCE | UK | ITALY | RUSSIA | SPAIN GERMANY | FRANCE | UK ITALY | RUSSIA | SPAIN REGIONAL STUDY BOOKS GAMES MUSIC Video MORE BOOKS ARE GAMING IS ON MORE LEGAL A RECORD YEAR BEING PUBLISHED THE RISE ACROSS SERVICES APPEAR FOR THE EUROPEAN THAN EVER BEFORE: EUROPE: EVERY YEAR: FILM INDUSTRY: 250 €6.4-billion European box office gross, 2011 150 1995 2008 0.7% since 2010 327,264 40-Million 2011* 50 1,285 EU Feature films = 10,000 562,633 produced in 2011 books = 1,000,000 *2010 data fOR gamers 07 08 09 10 11 Germany & Italy 2010 Number of Authorized Feature Films Produced Books Published by Year 95-Million Music Services in All Studied Markets GERMANY, FRANCE, UK, ITALY, RUSSIA, SPAIN Total European GERMANY, FRANCE, UK, ITALY, RUSSIA, SPAIN GERMANY, FRANCE, UK, ITALY, RUSSIA, SPAIN Gaming Population 1,200 LIVE MUSIC MARKETS EBOOK MARKETS ARE GROWING: 1000 ARE GROWING: ¼ of adults have played a video game in the Live Revenues by Country last 6 months (2010) 800 2010 2013 PROJECTION & Y.O.Y. CHANGE FROM 2007 05 06 07 08 09 (millions of euros) 351 Gaming isn’t just for the GERMANY – $2.16B 20% young. Almost 30% of 30 Films by Country 2009 to 49-year-olds are gamers. France – $1.2B 15% 2009 TOTAL & Y.O.Y. CHANGE FROM 2005 196 2008 GERMANY – 216 48% 117 Game Consoles In UK – $2.69B 10% Europe, 2006-11 France – 230 4% Total European ITALY – $800M 15% Digital Book Market 150-mil UK – 126 19% RUSSIA – $1.47b 105% eBook Market 75-mil ITALY – 131 34% SPAIN – $654M 11% Growth by Country RUSSIA – 253 57% 06 07 08 09 10 11 Live Music Revenues GERMANY 77% (2010-11) with 2013 Projection SPAIN – 186 31% France 315% UK, France, Italy, Spain, Germany, Russia (2010-11) $9-bil UK 54% REVENUES TREND (2010-11) UPWARDS IN ALL TV MARKETS $8.5-bil ITALY 740% (2010-11) STUDIED MARKETS: ARE GROWING: $8-bil RUSSIA 30% (2009-10) Total Video Game Television Revenues SPAIN 37% Industry Revenues $7.5-bil in All Studied Markets (2010-11) 07 08 09 10 11 12 13 GERMANY, FRANCE, UK, ITALY, RUSSIA, SPAIN GERMANY, FRANCE, UK, ITALY, RUSSIA, SPAIN $15-Bil $100-bil $10-Bil $80-bil $5-Bil $60-bil 06 07 08 09 10 11 06 07 08 09 10 11 12 FACT SHEET Germany REGIONAL STUDY Video Games Game Industry Revenues Source: PwC » Social gaming upstart Wooga has $3-bil already hit 45-million monthly users since it launched in 2009 $2.5-bil » In 2009, the two fastest-growing IT $2-bil companies in Germany were video game companies $1.5-bil 06 07 08 09 10 11 Music Video Authorized Online Music Services FIlms Produced Source: UNESCO 250 2007 2011 68 175 11 518% 100 05 06 07 08 09 2011 Digital Music Revenues 2012 Box Office Gross €247-million 21% €900-million 4.1% Source: BVMI Books Number of Books Published 2010 Book Industry Revenues Source: UNESCO $6.3-billion 5% OVER 2008 2010 1995 95,838 » According to a Börsenverein study, 74,174 2-million ebooks were sold to 540,000 29% ebook consumers in 2010. FACT SHEET France REGIONAL STUDY Music Digital Music Revenues Live Music Revenues Source: IFPI With 2013 Projection. Source: PwC $1.2-bil 2011 2010 $275m $1.1-bil $215m 27% $1-bil 07 08 09 10 11 12 13 Video Video Games Television Revenues Game Industry Revenues Source: IHS Source: PwC $20-bil $4-bil $15-bil $3-bil $10-bil $2-bil 06 07 08 09 10 11 12 06 07 08 09 10 11 2011 Box Office Record » France has had tax breaks for video game developers since 2007, long €1.4-billion 27% before most European countries Books Number of Books Published » France was the first EU nation to Source: UNESCO reduce VAT rates on eBooks to be on par with printed books 2011 » The market share of eBooks in 1995 France grew from just 0.2% in 2010 62,278 34,766 to nearly 2% in 2011 79% » Amidst economic turmoil, publishing revenues held steady from 2008-10 FACT SHEET United Kingdom REGIONAL STUDY Video Box Office Gross Television Revenues Source: IHS £1-bil $25-bil £0.8-bil $20-bil £0.6-bil £0.4-bil $15-bil 00 01 02 03 04 05 06 07 08 09 06 07 08 09 10 11 12 Music Books Authorized Online Music Services Number of Books Published Source: UNESCO 2007 2011 2011 71 14 1995 149,800 101,764 407% 47% » UK digital music revenues surpassed physical revenues, leading to music » eBook market share grew from just revenue growth of 2.7% from 2011-12 2-3% in 2010 to 7% in 2011 Video Games Game Industry Revenues Source: PwC » Video games have the highest growth rate of all creative industries in the UK $5-bil » Video games account for a third of all $4-bil creative industry exports » In 2009, video game sales exceeded $3-bil consumer spending on films $2-bil 06 07 08 09 10 11 FACT SHEET Italy REGIONAL STUDY Music Digital Music Revenues Live Music Revenues Source: IFPI With 2013 Projection. Source: PwC $800-mil 2011 2010 $49m $700-mil $42m 16% $600-mil 07 08 09 10 11 12 13 Video Video Games Television Revenues Game Industry Revenues Source: IHS Source: PwC $15-bil $1.5-bil $12-bil $1.2-bil $9-bil $0.9-bil $6-bil $0.6-bil 06 07 08 09 10 11 12 06 07 08 09 10 11 Films Produced in 2009 » The Italian government has proposed tax breaks for video game developers, 131 27% OVER 2005 though EU regulations could interfere Books Number of Books Published » The market share of eBooks in Italy Source: UNESCO grew from less than 0.1% in 2010 to about 1% in 2011 2010 » Amidst economic turmoil, publishing 1995 revenues held steady from 2008-10 57,558 34,470 67% FACT SHEET Russia REGIONAL STUDY Video Films Produced Television Revenues Source: UNESCO Source: IHS $8-bil 2009 2005 253 161 $6-bil 57% $4-bil 06 07 08 09 10 11 12 Music Video Games Live Music Revenues Game Industry Revenues With 2013 Projection. Source: PwC Source: PwC $1.5-bil $1.2-bil $1.2-bil $1-bil $0.9-bil $0.8-bil $0.6-bil $0.6-bil 07 08 09 10 11 12 13 06 07 08 09 10 11 » Digital music revenues imploded from » Electronic Arts predicts the Russian 2010 to 2011, falling by 41% to $43-mil. game market will hit $1.5-bil by 2015 Books Number of Books Published eBook Readers Sold Source: UNESCO Source: India & Russia Report/Marina Rozhkova 2008 2011 2010 60,000 1995 122,915 470,000 33,623 266% 683% FACT SHEET Spain REGIONAL STUDY Music Live Music Revenues Authorized Online Music Services With 2013 Projection. Source: PwC $700-mil 2011 2007 31 $600-mil 9 244% $500-mil 07 08 09 10 11 12 13 Books Video Games Number of Books Published Game Industry Revenues Source: PwC Source: UNESCO $2-bil 2011 1995 $1.5-bil 74,244 48,467 53% $1-bil 06 07 08 09 10 11 » Spain’s book market lost some ground » In 2010, 52% of 16-29 year olds and during the global recession, falling from 27% of 30-49 year olds played video $2.3-billion in 2008 to $2-billion in 2010 games (Source: ISFE/GameVision) Video FIlms Produced Source: UNESCO » The 2011 Spanish film No Habrá Paz 200 Para Los Malvados found success without content windows: it was 150 released simultaneously in theaters, on DVD, on pay-TV, and online. 100 05 06 07 08 09 Introduction At the beginning of 2012, we released our report, “The Sky is Rising,” which looked at the state of the global entertainment industry, focusing on four key creative sectors: music, books, video and video games. What we found, in going through a significant amount of data, was that contrary to the stories of doom and gloom concerning content, we are actually living in a true renaissance period of abundance, with each industry growing in terms of revenue — but even more impressively in terms of content output, often expanding at unheard of rates. We looked at traditional metrics as well as some new business models that were either catching on, or which were at least drawing significant interest. What we found was a world full of opportunity and growth. At the same time, we noted that there were significant challenges for content creators: mainly in learning to navigate this new world where (1) the process for becoming successful was not as clear on a map — even if there were many more opportunities to succeed and (2) that there was much greater competition, both within the specific field they were in, but also across other fields of entertainment. In our follow-up report, which you’re now reading, we wanted to focus in on a few additional countries to get a better understanding of whether or not the same patterns are true within specific economies. The concern, of course, is that within the larger aggregate data, it’s possible that significant differences in cer- tain countries could skew the overall data. For this report, we chose to focus on these six major economies: Germany, France, the UK, Italy, Russia and Spain. What we found was, as expected, not all economies are the same — and some of those economies are in serious turmoil — but that the overall trend lines are similar in direction. Even as the growth may not have been as strong or as clear in all of these countries, time and time again we found evidence that entertainment industry output and options have been expanding over the last decade. This wasn’t true in every case in every country — but even the small areas or periods of struggle appear to have been greatly outweighed when looking at the overall economy. That the same basic patterns remain tells quite a fascinating story: one that suggests that “content creation will always find a way.” There are, certainly, significant challenges that content creators and related companies face in these countries — but over and over again, the evidence showed greater and greater creativity, even in the face of these challenges. 1 Music ......................................................................................................2 2 Video ...................................................................................................10 3 Books .................................................................................................. 15 4 Video Games .......................................................................................22 Sources ...................................................................................................28 Acknowledgements ............................................................................... 29 Floor64 The Sky Is Rising Regional Study 1 1 MUSIC The music industry has been portrayed as the harbinger of doom when it comes to the creative industries. Digital file sharing caught the recording industry by surprise and disrupted the traditional economics of distributing music. Certainly, there are metrics that show a decline in sales for music on physical media, but the larger picture doesn’t suggest that music is dying or that the industry surrounding music is waning. The business landscape has definitely changed significantly for musicians, and the way forward should focus on adapting to new digital tech- nologies and business models — not looking to preserve outdated distribution methods.  MUSIC PRODUCTION The world is producing music at a greater rate than ever before. Unfortunately, it’s difficult to aggregate exact num- bers for how much music is produced every year, but several estimates point to undeniable growth. At the turn of the millenium, the US produced an estimated 27,000 albums per year. By 2009, roughly 100,000 digital albums were released in the US, more than tripling American music production in about a decade with about 1 million tracks recorded per year now. Globally, the media metadata service Gracenote has indexed over 130 million music tracks, and over the years, it has been adding about 10-15 million songs to its database in a remarkably consistent manner, year after year. This rate of indexing is not exactly equivalent to the rate of music production, however, as Gracenote’s indexing includes older music as well as newly-produced TRACKS INDEXED BY GRACENOTE 2001–12 works. Still, Gracenote’s indexing rate is a reasonable proxy for music 150 S) 130 production since Gracenote admits N O that its metadata is biased towards LI MIL 120 100 commercially popular music and is N likely to be gathered on newer mu- D (I 90 sic rather than obscure, decades- E X E 55 old music from around the world. ND 60 46 Gracenote’s mission is not to create S I K an exhaustive archive of recorded C A 30 11 music, but its database still points R T to an impressive amount of music creation. 2001 02 03 04 05 06 07 08 08 10 11 12 Gracenote’s database is, unfortunately, a proprietary product that doesn’t publish more specific data on a per country basis. (Another company with music metadata, Last.fm, also stopped allowing users access to its complete database in 2007.) However, other music collections, such as MusicBrainz, are completely open about music metadata, but cur- 2 Floor64 The Sky Is Rising Regional Study