European Content for the 21st Century:
A Forecast to 2005

Nick Moore, Acumen

Summary

The future development of the European content sector will be determined by the interaction between technological change and shifts in demand. The content sector will continue to undergo significant change as digitisation leads to convergence and so produces new products, opens up new markets and encourages new industrial alliances.

The future development of a European information society will depend on the effectiveness of the information content sector and the Commission has an important role to play in stimulating and supporting both the public and the private sectors of the industry.

Contents

The Pressures for Change

Technology and demand
Development of the content sector will take place as a consequence of the interactions between two factors: technological change and shifts in demand. Technological changes make new forms of information possible. But, new services only succeed if they satisfy consumer demands. The pattern of demand, however, is also changing, partly in response to the new services that the technology makes possible, partly in response to broader socio-economic trends. Both factors are leading us towards a radically different form of society

Technological change

From infrastructure to content
The content industry is more affected by technological change than most. Digitisation and the expansion of communications and computing capacity have begun a process of fundamental change that will continue into the future. We have reached a point where Europe has a widespread communications infrastructure that will provide the basis for continued expansion and increasing capacity. We can also see continuing increases in the performance and penetration of cheap and reliable computers.
The Internet
These developments have led to the creation and dramatic take-up of the Internet with its two killer applications: e-mail and the World Wide Web. The effect of these developments has been to shift attention from the infrastructure to content. They have opened up the path to networked multimedia content. CD-ROM and its derivatives are, however, continuing to evolve.
Voice recognition and automated translation
A number of developments will have an impact on the future of the content industry. Voice recognition technology is becoming more advanced and, when generally introduced, will change the ways we interact with computers. Automated translation is also becoming more reliable and, in due course, this could help to overcome a big obstacle to the development of a single European content market.
Digital TV
Digital television technology will reduce the differences between personal computers and televisions and will open up new access routes to digital content. Similarly, satellite and mobile communications will make new forms of access possible and are likely to increase the information services aimed at people on the move.
Open systems
There is increased pressure to develop open systems that provide high levels of interoperability. Many of the solutions are technology-based, others depend on regulation and agreement.
Interactive content
In combination, these developments will enhance our capacity to develop interactive content, opening up new possibilities for personalised electronic publishing, electronic commerce and transaction services.

Demand shifts

Geography and demography
The demand for information content will shift in response to a number of changes. Enlargement of the European Union, for example, will increase the overall size of the European market. It will also, however, increase the number of languages that are used within the Union and the religious, ethnic and cultural diversity. Changes in age structure will also alter patterns of demand. There will be a steadily increasing number of people who have become familiar with information and communication technology at work or through their education. There will also be a significantly larger number of people aged over 65, many of whom will have sufficient time, interest and resources to make them a significant potential source of demand for content.
Information-intensive organisations
The demand for content will also be affected by the development of Europe as an information-intensive society. The competitiveness of the European economy will depend to a great extent on the ability of organisations in both the public and private sectors to use information as a management resource to improve productivity and quality. The successful organisations will be those that can transform data into information and information into knowledge. This will lead to increased demand for relevant content particularly scientific and technical information and information about markets and consumers. European firms will also make heavy use of electronic commerce and will have to create substantial amounts of content to support this new form of commercial activity.
Education and training
It is clear that a European information society will increase the demand for education, training and re-training. The educational and training market is already a significant segment of the market for print publishing. Digitisation and electronic delivery open up considerable new possibilities for distance and self-directed learning and demand for educational and training content is likely to expand considerably.
The demand for television
One area where supply is likely to grow faster than demand is in television. Technological change will increase greatly the amount and range of programming that is available throughout the day. Yet there are signs that viewing figures have reached saturation point and, in some countries, they are declining. This is likely to have a significant impact on the future market for broadcast television services.

The Future Shape of the Content Sector

Market conditions
The European content sector is a fast-growing element within the European economy. It competes successfully in the global market for information content, yet it is over-shadowed by content producers in the USA. The main reason for this is the fact that in the content industries there are significant economies of scale and the USA is in the fortunate position of having a large, homogeneous home market, in contrast to the European market that traditionally has been fragmented into a series of linguistically- and nationally-defined markets.

The private sector

Disruption through technology
The private sector of the content industries is undergoing considerable disruption as a result of technological change. Established industry structures are being challenged, producing a wave of acquisitions, mergers and new alliances. This process of change is likely to continue well into the next century.

Print publishing

The traditional print publishing industry must be capable of supplying a wide range of information content to meet demands that will expand steadily. Print on paper will be the dominant medium for some years to come with steadily increasing volumes of production. The proportion of content published in printed form will, however, decline significantly. Print retailing will decline, producing a shift in the value chain and increasing the importance of content creation.

New content sources
Publishers will be required to bring new sources of content to the market, many of them from the public sector. They will also need to respond quickly to new forms of demand.
Competition
Established publishers will face competition from new entrants but, through merger and market knowledge, they should consolidate their position. Greater threats will come from the US where publishers seek to dominate the European market through acquisition and merger and by exploiting the economics of scale offered by a large homogeneous home market. The biggest threat will come from the few mega-corporations that merge content with communications.
Export opportunities
As their economies grow and the education systems expand, there will be major export opportunities in East Asia and South America.

Electronic publishing

The electronic publishing segment of the content sector will grow steadily in importance. The demand for electronic information is increasing rapidly, particularly in the corporate sector. Technological change is also increasing the range of options open to electronic publishers.

The new value chain
The convergence of digital media is causing the evolution of a new interactive content value chain. In traditional publishing, much of the value was added at the publishing, distribution and retailing stages. The electronic publishing business is different. Most of the value is added through the creation of the intellectual property. Packaging, distribution and retailing are much less significant, particularly for products that are delivered over the Internet. As more content is delivered over the networks, so the value structure of the industry will change. Electronic publishers will also be able to cover many of their costs through advertising revenues.
WWW - the killer application
The migration of electronic publishing to the Internet will accelerate in the coming years. The main attraction of the Internet is, in fact, the World Wide Web which provides an open, interoperable and easy-to-use interface for electronic information products. Already many online publishers are switching to the Internet and in the near future it will be the dominant means of accessing digital content.
CD-ROM
CD-ROM will continue to be a useful publishing medium for software and very large products that are not time-sensitive. But, as access speeds and communication capacities increase, its advantages over Internet access will decrease. With it will go the static retailing function for electronic content.
Constraints
The two major constraints will be shortages of skilled information professionals capable of creating high quality products and access to capital investment.

Radio, and television

Broadcast radio and television will undergo major changes in the coming years as they switch to digital transmission, whether terrestrial, satellite or cable. The effect will be to reduce transmission costs and to open up the prospect of an almost infinite number of stations. Each football club could have its own television station and each small town a radio station.

More may mean less
It seems unlikely that the volume of content will expand to fill the increased transmission capacity. It will not be easy to increase the number of creative people and technicians required to produce the programmes. Nor will it be easy to find the capital required to invest in new production capacity. Very successful programmes will find a large number of potential outlets bidding for the right to transmit. These will absorb more and more of the broadcasters' budgets leaving less available to cover the production costs of all the other programmes that will be required to fill the air-time. The temptation will be to compromise on quality and we face the prospect of endless re-runs of once-popular programmes and low-grade cheap programmes like quiz shows.
Revenue streams
Popular shows and major sporting events will attract large revenues from advertisers and from pay-per-view arrangements. Such programmes will be able to attract high prices from the broadcasters. But there is little evidence that people are inclined to spend more of their time or their money on broadcast media. Also, as the number of channels and stations increase, so the audience will be spread more thinly. Even if advertising expenditure increases, it will also be spread more thinly over the increased number of stations. This will put more pressure on programme budgets and may accelerate the decline in quality.

Cinema and video

The prospects for the European cinema industry are good. The number of screens is increasing throughout the Union and audiences are up. Video sales and rentals are increasing and the expansion of television will increase the demand for movies.

Digitisation
The digitisation of movies will increase the distribution opportunities. Digital television, in particular, will increase the availability of cinema in the home. It seems likely, however, that initial distribution through cinemas will continue and audience reception in cinemas will determine long-term popularity of movies. In due course, digital distribution through broadcast television and possibly through the Internet will erode the market for videos but for the foreseeable future, sales of videos are likely to remain buoyant, although discs will almost certainly replace tapes
Competition from Hollywood
The cinema market in Europe is still, however, dominated by Hollywood. It is hard to see any erosion of this dominance in the coming years. All the time that Hollywood can rely on revenues from its large home market, it will be able to buy the level of advertising and promotion that will ensure its mass popularity.
A European identity?
The problem that the European cinema industry faces is that it operates in a series of linguistically and culturally defined markets, not in a single, homogeneous one. All the time this condition prevails it will be difficult to challenge the dominance of Hollywood, even though the quality of European productions is acknowledged to be superior in many respects.

The music industry

Distribution
The main impact of the new technologies on the music industry is likely to be on the distribution element of the business. Music content has effectively been digital for some years and the possibilities for exploiting this potential are becoming apparent. The first effects will be felt by music retailers. Recordings are ideally suited for sale by mail order and the Internet now provides the key. Mail order retailers can publish large catalogues on their websites, increasingly they can accept secure payments and distribute the discs by post. This is likely to mark the end of specialist recorded music retailing, leaving room only for high-volume retailers offering a limited range of the most popular titles.
Cutting out the retailers and manufacturers
It is now becoming feasible to distribute recordings over the Internet direct from the publisher to the user, thus cutting out both the retailer - whether town centre-based or mail order - as well as the disc manufacturer. It is perhaps here that we will see the most extreme example of the new value chain in operation.

The public sector

Information is the business of government
The public sector is an important element within the overall content industry. Information is the business of government and public bodies are responsible for collecting enormous quantities of information, much of which is later published. They are also important publishers, often operating within commercial markets.

Information dissemination

Demand and supply
The public sector disseminates large quantities of information to citizens and companies. As information society developments make us more conscious of our information needs, so the demand for public information grows. The supply of content is also expanding as public bodies disseminate more and more information in digital form. Throughout Europe, the public sector has experienced an enormous take-up of information provided through websites.
From print to electronic
Printed information will continue to be the principal means of dissemination for some years but increasingly the public sector will rely on electronic publishing using the Internet. This is already beginning to change the relationship between citizens and the state as people have better access to information and are able to offer their opinions and views more easily.
Public-private synergy
Most public bodies recognise that they need to work jointly with the private sector to publish effectively. Increasingly the public sector recognises that it is the custodian of large amounts of data and information that, if released to the private sector, can be brought to the market. In the coming years there are likely to be many more examples of this synergy.

Transactions

The information activities of public bodies do not end at dissemination. Much of their work involves transacting business with citizens and corporate bodies. Until now these transactions have been paper-based and the public sector has accounted for very large volumes of printed forms and manuals.

Electronic government
Digitisation offers new opportunities to conduct these transactions electronically and the next five to seven years will see a concerted effort on the part of the public sector in Europe to develop electronic forms of service delivery. This will have a knock-on effect on employment in the public sector as fewer staff will be required to process the transactions. Productivity will increase but jobs will be lost.
Public education
Electronic provision can transform education. The public sector, as the major provider of educational services should take the lead in developing educational content in electronic form. The public and private sectors have traditionally collaborated in the production of educational content. This collaboration will continue although traditional educational publishers will need to develop skills in electronic publishing.

Public service broadcasting

Guarantors of quality
Public service broadcasters will continue to play an important role in establishing and protecting quality standards in broadcasting. Market economics will strengthen the need for such public services as revenue streams in the commercial sector become more fragmented and lead to a decline in quality.

Themes and Issues

A number of common themes will affect the future development of the European information content sector. As they do, they will raise issues that will call for a response from the European Union, from its Member States and from the players in the content industry.

Globalisation, localisation and customisation

Globalisation
We are rapidly moving towards a global economic system. Information and communication technologies are removing geographical constraints. The effect of this will be felt keenly in the information content sector. Digital information can be accessed and delivered almost anywhere in the world almost instantly.
Export opportunities
The European content industry is well-established. It therefore faces a major opportunity to expand into global markets. The main competition for these markets in the immediate future will come from the USA. Globalisation also represents a threat. Europe generates a significant proportion of the world demand for content and players from outside Europe will want their share of the market, and so competition within Europe will increase.
Local content
Technological change is increasingly making it feasible to create content for much smaller, local markets, which may be defined geographically, linguistically, culturally or on the basis of religion.
Personal packages
The technology is also making it easier to develop customised packages of information designed to meet the needs of closely defined groups and even individuals. The increased use of push technology in the future will open up new markets for customised content.

Cultural and linguistic identities

Richness of diversity
One of Europe's great riches is its diversity. The European Union consists of a wide range of cultures, religions, languages and ethnic groupings. Technological development will increase the opportunities to satisfy the demands that arise from this diversity - a diversity which will increase significantly following enlargement.
The hegemony of Hollywood
At the same time, the globalisation of information, and the domination of a culture manufactured largely in Hollywood, represents a real threat to Europe's cultural and linguistic heritage.

Coordination of policy and regulation

Global harmonisation
The European information content sector will need to be able to function successfully in a global market. It will, therefore, be necessary to ensure that European policy and regulations harmonise with the global regime. The Union should, however go further and should lead the introduction of an international charter so that the global framework operates to the advantage of the European content industry.
Within Europe
Within Europe there is a pressing need to ensure that all member states have legislative and regulatory regimes that are compatible. It will be important to ensure that these conditions apply to new Member States following enlargement. Attention should be given to what are becoming known as intellectual rights of citizenship: intellectual property rights, data protection, privacy, access to information and the right to be protected from harmful content. Of these, intellectual property rights are likely to present most problems in the future. Technological change is such that we will probably need to develop a completely new approach to intellectual property rights.
A competitive market
Newly emerging markets offer opportunities for unscrupulous players. There will be a pressing need for regulation to ensure fair competition in a market that is not dominated by a few large players; that is open to new entrants; that stimulates and rewards entrepreneurial flair and that operates in the consumer interest.
Market failure
There will be instances where conventional market mechanisms do not apply - much social information comes into this category. In such cases, governments should act, where necessary subsidising services so that they can be provided free at the point of use.

Access and ability to use

Access by all
The European information society will require all citizens to be able to handle increasing amounts of information. Digitisation will make it possible to present this information in a range of different formats, and so make it accessible to more people. European citizens have a right to expect equal access to information.
Access to technology
Multimedia content requires access to technology. Currently, information technology is unevenly distributed across the Union and the situation will worsen following enlargement. The proportions of homes and small businesses with personal computers and access to the Internet varies widely. Of perhaps greater significance is the variation in the proportion of schools that are adequately equipped and linked to the Internet. Even where access is available in public places, low levels of penetration in schools, homes and workplaces will mean that a proportion of the population will be unable to develop the skills and familiarity required to sustain and encourage use.
Linguistic access
Access will also be limited by linguistic barriers. The overwhelming proportion of electronic content is in English. English speakers are thus at a significant advantage compared with everyone else. In due course, developments in automated translation will help overcome this problem but for the foreseeable future it will remain significant.
Basic literacy
Access to information alone is not enough. Information is a means, not an end and people must be able to make use of the information that will become available. An essential requirement will be a basic level of literacy and at present, depressingly large numbers of people in Europe lack functional literacy skills.
Information skills
It will, however, be necessary to go beyond a basic ability to read and write. People will need to be able to interact with information technology - and that implies more than simple keyboarding skills. They will also need higher level skills to be able to manipulate and evaluate the information they receive. Ensuring that the basic education system throughout Europe equips everyone with these skills will be one of the challenges of the future.
Information specialists
The development of the European content sector will be constrained by the availability of skilled information professionals. Already there are significant shortages of skills in a number of areas and these are likely to become more severe in the future. The capacity of the education and training system will need to be expanded considerably. The provision of such education and training, however, represents a major export opportunity, particularly if it is delivered electronically.
Workers and managers
Workers of all kinds, but particularly managers, will also need a high level of information handling skills, in particular, the ability to transform information into knowledge. The development of such skills should be an integral part of vocational education, training and re-training.
Electronic educational content
The provision of educational and training material will be a major growth area for electronic publishers. WWW technology, in particular, is ideally suited to the delivery of educational content.

Employment

Structural change
There will be considerable structural change in the European employment market in the years to come, some of it attributable to the changes taking place in the content industries.
Growth
There is likely to be some growth in the content industries themselves resulting from the extensive development of new media products. The increased use of technology, however, means that productivity is rising steadily and so the rate of employment growth will lag significantly behind the growth in turnover. There will also be a growth in information-related posts in organisations of all kinds as staff are recruited to manage websites and meet the internal information needs of the organisations. Altogether there is likely to a growth of about one million jobs in multimedia-related industries in the ten years leading up to 2005.
Decline
As more and more information content is converted into digital formats there is likely to be a reduction in the number of administrative and clerical posts. This will be felt most severely in the commercial sector - the financial services sector, for example has already shed many thousands of jobs - in retailing and in the public sector. There is also likely to be a slight decline in employment in the traditional print and publishing industries as content increasingly becomes available in electronic form.

Electronic commerce

A major driver
Electronic commerce will be a major driver of developments in the content sector. It will change the nature of the value chain, reducing significantly the importance of distribution and retailing. It will also generate significant demand for new forms of content. If goods and services are to be sold electronically, then they will need to be described, evaluated and compared electronically. This will call for new skills in information design.
Language
If electronic commerce is to take-off across the single market of the European Union it will be necessary to present information in the full range of languages. This will represent a significant additional demand for translators and, eventually, for automated translation.

Research and development

Basic research
The European information content industry is subject to considerable technological change. Its competitiveness will depend, to a great extent, on its ability to develop and apply advances in technology and in information and language engineering. The Commission has a major role to play in supporting basic research in these areas.
Applying innovation
New techniques and developments need to be applied in the market place. The speed with which companies can bring new products to the markets is critical and steps should be taken to strengthen the content industry's ability to do this.
Market research
The market for content is volatile and many products are being introduced for the first time in conditions of considerable uncertainty. Also, many of the very innovative companies are small and cannot afford extensive market research. There is, therefore, a role for the Commission to play in supporting market research and its dissemination so that the development of the content industries is informed through access to reliable data.

Internet and the killer applications

The World Wide Web
The Internet has been a phenomenal success and its take-up seems set to continue well into the future. This is largely due to the success of the World Wide Web and e-mail. The WWW provides an open, interactive, interoperable and easy-to-use system which makes content of all kinds accessible to everyone. It will come to dominate the process of communicating information.
Bottlenecks
Despite the great advances in capacity and compression, the speed at which WWW sites can be accessed continues to be a problem and a constraint on development of the content sector. One cause of the problem is the architecture of the Internet and its origins in the USA. These, and the preponderance of US content, mean that there is a considerable amount of international traffic with congestion building up at certain bottlenecks. To overcome these problems there is a case for establishing a European network infrastructure that could host mirror sites and decentralised databases with local, regional and national content.
E-mail
The second killer application is e-mail. This provides the communication links that will be required for electronic commerce and for interactive transactions. There is, however, work to be done in the coming years to improve its interoperability and ease of use. It then stands a good chance of becoming the preferred medium of communication in business and between individuals.

Conclusion

The overall goals
The content industry will play an important role in the future development of a European information society. By 2005 we should aim to have a content sector that can satisfy all but a small proportion of the demand for information within Europe and that leads the world in the innovate application of multimedia technology. The private sector should achieve a balance of trade with the USA and become the world leader in global markets. The public sector should be an active player facilitating the functioning of an informed democracy.
Three drivers
Three developments will be critical in driving development towards this goal. First it will be necessary to exploit more effectively the information content role of the public sector. It must be more active in the creation of information needed by citizens and businesses and it must work more closely with the private sector to bring public information resources to the market. Secondly, electronic commerce offers enormous potential for the European economy but the speed at which it takes off will be determined by the availability of appropriate content. Thirdly, the Internet will become the dominant channel for content and commerce and the European content sector must be in a position to exploit fully the potential it offers
Technology
To achieve the goal and to stimulate the three drivers, the Commission should support actions that will enable the content sector to take full advantage of the opportunities offered by the new technologies. This should include support for research and development and, where necessary, support for investment in new products and production facilities.
Demand
It will also be necessary to stimulate the demand for information within organisations and households and to support actions that will reduce the uneven access to content. This will include the development of information-handling skills at different levels.
Legislation and regulation
The operation of the content market will require a legislative and regulatory framework that accommodates both technological change and globalisation. The Commission should lead the efforts to ensure that this framework stimulates the operation of fair competition; that it is harmony with global frameworks and that it is applied evenly across the Member States.