170918_FINALReport_TheChangingCreativeLandscapeandMCOEinsights_v1.0 (toegevoegd 11 oktober 2024)

September 2017

A research study for Hilversum Mediastad

The Changing Creative Landscape & MCoE Insights Final Report

www.pwc.nl/digital Strictly private and confidential

This report has been prepared by PricewaterhouseCoopers Advisory N.V. based on the instructions provided by the municipality of Hilversum (gemeente Hilversum) for the purpose of conducting a research study. We do not, in issuing this report and/or giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Table of contents

Date: Version: Status: Content:

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September 18th, 2017 v1.0 FINAL Report The changing creative landscape and MCoE insights

Executive Summary Objective of Study Media Centres of Excellence (MCoE) Classification Trends in the Creative Industry (quick scan) MCoE Benchmark Assessment & Insights Selected Case Studies Co-creation Session Insights Appendix

PwC’s Digital Services PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

p. 3 p. 6 p. 7 p. 10 p. 18 p. 25 p. 30 p. 33

PIETER VERHEES Contacts:

Partner Consulting – Telecom Industry Leader O +31 (0)88 792 1908 M +31 (0) 610934201 pieter.verhees@pwc.com VIENNA SELTENRIJCH Senior Consultant O +31 (0)88 792 1256 M +31 (0) 620258572 vienna.seltenrijch@pwc.com

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Executive Summary (1/3) The evolution of digital media, changing legal requirements, the powerful voice of the consumer and fast developing technology are a few significant drivers influencing the creative industry. The objective for Hilversum Mediastad is to transition to a new, digital creative industry driven by local resources and capabilities, and inspired by international ambition and learnings. This research study aims to help Hilversum Mediastad in formulating next steps for becoming a vibrant creative valley by identifying relevant industry trends and learnings from other Media Centers of Excellence (MCoE). The term MCoE refers to the functional concept of a “media park” in terms of their form of appearance which depends on ownership, purpose, reputation and location, whereas “Media Park” refers to a specific local physical place or virtual platform. The creative industry is changing continuously driven by a multitude of developments, which leads to new opportunities and challenges for industry players The relevant trends in the creative industry described in this report are provided from a media consumption and an industry development perspective. The trends illustrate how quickly the habits of consumers change, and what businesses and other stakeholders do to provide innovative services and create value for their direct environment.

The analysis shows how complex and multidimensional the creative industry is becoming driven by aspects such as technology advancement, blurring industry boundaries, and the fight for talent. As media has become more omnipresent in our society, it is engrained in our daily lives where boundaries are becoming less apparent. The birth of “influencers” and “power consumers” through user-generated content, peer-to-peer sharing, and the exponential reach of social media creates new dynamics in the creative ecosystem. Thus, this development forces businesses to rethink their business model and position in the value chain. The challenge is largely about monetization of customer value and how to retain trust and build sustainable customer relationships. Businesses are heavily investing in technologies like Artificial Intelligence (AI) and Internet of Things (IoT) to improve their services. Consequently, the convergence of media and technology has given rise to issues in data privacy and security, complex business models, and unclear governance & control. Besides the benefits, the market will need to invest heavily in safeguarding the use and application of technology in the creative industry. One of the accompanying developments of technology advancement is the impact on talent and employment. The outlook for the global creative industry is that it will experience a war for talent.

In general, creative businesses have a short-term focus on profitability and lack of focus on the required innovation strategy – in part this has lead to a structural deficiency in the skills needed to combat technological developments. PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

The role of MCoE is evolving and expanding across new territories In the global creative industry, there are MCoE with wide-ranging roles and functions facilitating, on behalf of public and/or private organisations, value creation for (local) stakeholder groups. When looking closer at the historic development of MCoE, it can be noted that the purpose and ambition of MCoE can differ significantly. It is evident that conventional and most prominent form of media park continues to be centered about media production – however MCoE explore other sectors, niches, and services as well. Some MCoE are initiated for helping businesses to stay relevant in this industry such as nextMedia.Hamburg, whilst others like FilmbyArhus are developed for a societal or economic development purpose. This development is partially due the relevant “front row” position, where they have a broad view on market demand, risks and opportunities. For the international benchmark, four MCoE were chosen in addition to Hilversum Mediastad, which are 1) nextMedia.Hamburg, 2) Creative Valley Hainaut, 3) FilmbyArhus, and 4) Vancouver Film & Media Centre and Film Commission.

These MCoE are chosen against a few criteria, which includes among others: a specific industry/ sector specialisation (entertainment & media production), a favourable location in Europe or Canada and a strong focus on driving economic and social value for the local environment and greater ecosystem. Additionally, the different forms of the chosen MCoE provide a broader perspective for Hilversum Mediastad. The proliferation of digitisation revitalises the role of MCoE As the creative industry is becoming more dynamic and versatile, it brings new opportunities and challenges for MCoE. Whereas a physical location may have been essential to the success of MCoE in the past, now the digital world allows for the growth of more touch points, ultimately offering unprecedented levels of synergies and connectedness. Virtual platforms can facilitate this – allowing for channels that assist in knowledge sharing, development of new ideas and connecting individuals and organisations. MCoE are no longer restricted to their once traditional mediating role. Now, they can contribute along the entire value chain, aiding in building a coherent approach for topics such as market research, best practice sharing, and innovation governance.

Learnings for Hilversum Mediastad The value that local MCoE create or facilitate for their direct environment is driven by four factors: a) knowledge cultivation, b) employment stimulation, c) cultural heritage conservation, and d) collaboration.

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Executive Summary (2/3) Knowledge cultivation

Key takeaways for Hilversum Mediastad

Nearly all MCoE stimulate knowledge building and sharing via partnerships or cooperation with university programs and other knowledge institutes. All MCoE understand that it is relevant to anticipate industry developments, and thus, proactively organise knowledge events to educate and share insights with the (future) work force of creative professionals. Some MCoE like the Creative Valley of Hainaut leverage specific niche expertise like Numediart University’s global expertise in sound, image and video treatment and the specialisation of slow-motion film. Building a distinctive reputation and specific expertise can have a pull effect towards market players.

Hilversum Mediastad has a strong legacy in cultural heritage conservation, accompanied with a focus on knowledge cultivation and employment stimulation. When looking closer at the similarities and differences of other MCoE, there are a few learnings which are relevant for Hilversum Mediastad.

Employment stimulation Globally, the creatively industry is expecting a higher demand for specialised skills in coming years. The MCoE recognises the need to mediate on the job market, cultivate new talent and rent spaces for startups and freelancers. The latter is seen in MCoE such as FilmbyArhus and Hilversum Mediastad, where the demand for more flexible work spaces and the rise of “digital nomads” is anticipated. Cultural heritage conservation

Hainaut is one of the MCoE which has a strong focus on cultural heritage conservation. It uses interactive media applications to showcase their cultural heritage and provide city experiences to rediscover the historic culture of Hainaut. In addition, the city has a rich cultural programme and the museums function as ‘creative connectors’. Moreover, Hainaut hosts approximately 35 highlights and 300+ events. The city of Mons has 12 museums and is about to open 5 new ones. The digitization of museums tie together a number of media formats including the use of IoT, web documentaries and citybranding like VisitMons application for tourists exploring the city. Driving collaboration Finding partners and initiating collaborations has been an essential task of an MCoE. Creative Valley Hainaut is a strong driver within their ecosystem and has strong synergies with other European cities to boost mobility and value across international boundaries. Programmes like Café Europe fosters social innovation and creativity across shared experiences. In addition, the MCoE is involved in Mons 2025 City project to increase collaboration among citizens, creatives and the municipality. A great example of cross-border collaboration is given by FilmbyArhus.

The MCoE drives innovation and knowledge sharing across industries, projects include application of VR and AR in the health, education, and tourism sector. PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

A strong purpose and distinctive brand positioning is essential in today’s creative industry Other MCoE like Aarhus have a strong, clearly defined mission and strategic plan complemented with SMART formulated performance metrics. As the European Capital of Culture 2017, Aarhus has a coherent brand positioning and strong presence in the on- and offline world. The global positioning is recognised by international audiences and have led to international partnerships such as the North Sea Region. With a strong list of cultural events and programs, it is expected that Aarhus will slowly emerge from Copenhagen’s shadow as the emerging cultural city of Denmark. With a focus on media & entertainment, it is more difficult for MCoE like Hilversum Mediastad to stand out from other MCoE as boundaries of the media sector are blurring. Building a distinctive positioning further within the Dutch creative industry enabled by a consistent story and proposition across the penta-helix will contribute to a stronger pull effect to Hilversum Mediastad. A physical location contributes to value creation but it is not fundamental to the success for all MCoE The virtual operations of the MCoE within Hamburg and Aarhus complements existing physical clusters and activities across the cities.

Hamburg has a track record in cultivating print media, journalism and related domains, which has a strong physical presence in the city. However, the purpose of nextMedia.Hamburg is to drive initiatives to foster sustainable business models in the digital economy. So far, nextMedia.Hamburg creates value by focusing on a virtual platform for various services like consultancy and business networks. Drive cultural experiences and societal development by applying new tech Creative knowledge and skills is no longer restrained to the creative industry, but can be used as a lever for urban development, societal innovation and value creation across the penta-helix. FilmbyArhus recognizes this and has initiated projects, events and master classes to further enhance their contribution to the local community and even beyond their industry. By opening up and bringing competence expertise to other industries, Aarhus has taken the first steps into becoming a true creative ecosystem.

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Executive Summary (3/3) Rethinking urban development in anticipation of a sustainable future Can the built environment be part of our strategy against premature aging? Does architecture add to our creative mind-set? These questions were asked by the MCoE of Aarhus. This MCoE has made it their mission to tackle urban challenges by increasing their scope of work in contribution to their local environment and community. FilmbyArhus commit themselves to an integral, multidisciplinary approach across the penta-helix and leverage their physical and digital assets to contribute to a higher level purpose than their MCoE. A stronger collaboration across the penta-helix leads to a more sustainable and vibrant ecosystem Vancouver Film & Media Centre and Film Commission have strong ties with the local government to ensure a stable tax and geopolitical environment to sustain an attractive environment for local and international organizations. The tax incentive programme has contributed to more international film production scene in Vancouver. Another example of collaboration from a complementary skills perspective, nextMedia.Hamburg has advisors who act as ambassadors of the MCoE and are committed to assist in advancing Hamburg as MCoE. These advisors are experts in their fields and mediate among stakeholders to formulate goals, facilitate new connections and initiate projects.

Hilversum Mediastad has grew into a large behemoth, of which it size and legacy has been limiting organisational agility, innovation capability and market pull. To reposition Hilversum as Mediastad of the Netherlands, the MCoE should consider the following steps: •

Formulate a strong, distinctive ambition and market positioning which is not coinciding with other Dutch cities or creative platforms;

•

Establish reciprocal collaborations with stakeholders across the penta-helix to stimulate joint commitment towards talent development, employment creation and knowledge cultivation;

•

Steer and operate Hilversum Mediastad from one management organisation to simplify and manage diverse stakeholder functions and interests;

•

Formulate a sustainable value proposition and operating model to anticipate market developments, technological innovation and changing consumer needs;

•

Formulate a stakeholder strategy (e.g. citizen, consumer, business) to identify the primary stakeholder groups and formulate a coherent brand strategy accordingly.

Research methodology

The city of Aarhus is not only known as the European Cultural City of 2017, but it also houses innovation initiatives such as Agro Food Park (an innovation centre for the agriculture and food sector), The New University Hospital (with a focus on MedTech and education), and Navitas (an education and research centre for CleanTech). The innovative image of Aarhus boosts the city’s mission to sustain its internationally recognized role of European Creative City of 2017.

The focus of the research study is to provide an objective view on industry trends and an objective comparison of selected Media Centres of Excellence. Consequently, the report provides fact-based insights identified, analyzed and formulated for Hilversum Mediastad. This report is by no means a recommendations document, but merely provides input for the Economic Outlook for the municipality of Hilversum.

Next steps for Hilversum Mediastad

The observations and insights of this research study are collected through a) primary research via experts interviews (i.e. experts from PwC), b) secondary research via desk research, application of web and social tools and PwC’s Entertainment & Media Outlook. The research is conducted from August 7th up until September 11th 2017. The derived insights from the interviews supplements the secondary research that was conducted. The list of experts that we interviewed for this research study includes local industry experts from Hilversum Mediastad and international PwC experts.

The positioning of Hilversum Mediastad in the creative ecosystem is fragmented, and inexplicit among other Dutch cities. Within a traditional ecosystem of multiple owners and a divers group of stakeholders with mixed interests, it has been difficult to form a coherent perspective on the future ofHilversum Mediastad . Despite a strong physical presence and ties with many stakeholders across the penta-helix, it has become more difficult for the MCoE to leverage assets, resources and relationships to generate relevant value. The pull effect towards Hilversum Mediastad has diminished over time as other cities and initiatives are drawing talent, startups and corporates away. In principle, Hilversum Mediastad has all the traits of becoming a vibrant Media Centre of Excellence when compared to other MCoE in the world. PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

On September 11th, a co-creation session was organised to inform selected stakeholders of the municipality of Hilversum. The discussed topics and outcomes are captured in a separate chapter of this report, whilst other relevant insights from the workshop are integrated in the main document.

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The goal of the study is to provide an objective view on selected drivers of Media Centres of Excellence and to identify which learnings are relevant for Hilversum Mediastad The current situation

The ambition

The evolution of digital media, changing legal requirements, the powerful voice of the consumer and fast developing technology are a few significant drivers influencing the creative industry. The objective for Hilversum Mediastad is to facilitate the transition to a new, digital media sector driven by local resources and capabilities, and inspired by international ambition and learnings.

As identified in the implementation program “Tipping Point” Mediavision 20162019, the ambition is to reposition Hilversum and the Media Park as part of the new, digital creative industry.

The objective of this study In this document, we provide an objective view on the drivers of Media Centres of Excellence (MCoE) and the key insights to relevant areas for Hilversum Mediastad. Firstly, it is important to look at the definitions of a MCoE for which it can be concluded that the core definition is both multifaceted and ambiguous. The definition is based upon the differentiating factors: ownership, focus, reputation and location and the main value drivers, knowledge cultivation, employment stimulation, driving collaboration and cultural heritage cultivation. From these we identified five categories of Media Centres of Excellence (MCoE). Secondly, to formulate the role and ambition for these MCoE it is necessary to identify and understand the trends and drivers in the creative industry. Therefore, we have conducted a quick scan to illustrate relevant industry developments which we foresee for the coming years. The majority are likely to happen on a global scale, while some developments are dissimilar in local territories. We have selected two perspectives and associated insights which are relevant for the benchmark study and next steps for the media consumption and media industry developments of Hilversum Mediastad . Thirdly, in order to substantiate the objective view, we selected MCoE in Vancouver, Aarhus, Hamburg and Hainaut for the international benchmark.

The benchmark will provide insights on the distinct focus points of each MCoE, and will detail how each builds differently on the value drivers in shaping the future of their local creative industry. This is informative on building both learnings, and points of differences to be observed across MCoE. In addition, we will provide examples of good practices on several topics to show how these MCoE are progressing in their journey. Finally, this research report will be wrapped up with an overview of key insights and learnings, which will also be shared during an inspiration session with key stakeholders of Hilversum Mediastad and the media park itself to prepare for the next step in the Economic Outlook and in building a bright future for the new digital creative valley in Hilversum.

PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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Media Centres of Excellence (MCoE) Classification FORMS OF APPEARANCE OF MCoE

PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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Media Centres of Excellence (MCoE) can be defined based on their purpose and value drivers… Purpose of Media Centres of Excellence (MCoE)

Value drivers of Media Centres of Excellence (MCoE)

Based on literature, desk research and consultation with industry experts, we can conclude that the definition of a media park is ambiguous and multifaceted. We therefore defined Media Centre of Excellence (MCoE) based on the following distinctive factors that are relevant for the creative industry and the MCoE:

Based on extensive research, we defined value drivers for Media Centres of Excellence (MCoE). The interpretation, strategy and execution of these value drivers differ among the different types of MCoE.

Knowledge cultivation

Employment stimulation

 Location: The focus on physical and or virtual location and collaboration.

The development of knowledge within MCoE and the application, maintenance and cultivation of it. This includes the degree of specialisation, distinction and technological. developments

The stimulation of employment and the way MCoE foster entrepreneurship and talent development. This includes educational opportunities and the extent to which businesses are pulled towards it.

 Reputation: The international importance & recognition and branding and the degree of media knowledge sharing and its information accessibility on national and on international scale.

Cultural heritage conservation

Driving collaboration

The maintenance, security and development of cultural heritage and the way it reacts to future developments. This includes spill-over across other creative industry segments.

The MCoE composition, the formation, the nature of collaboration and the role of the stakeholders. This includes (international) partnerships, universities, professionals, startups, living-labs etc.

 Ownership: The ownership structure and whether this is private, public or owned by the people both in terms of operations and financial investment.  Focus: The degree of internal and external focus and the specialisation and distinctiveness within creative industry.

Source: PwC analysis, Robert Picard – Media Clusters, Media Management and Transformation Centre, Understanding “Cultural Ecosystem” in Creative Industries Policies PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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… and exists in different flavours MCoE come in different forms of appearance depending on their focus, ownership, location and reputation…

Media Park

Media Campus

Media Cluster

Creative Valley

Focus on profit

Focus on profit & talent development

Focus on synergistic relationships

Focus on fostering creativity

A Media Campus is an extension of a media park but incorporates the additional main focus of knowledge cultivation, stimulation and sharing. It concentrates on skills development as well as fostering new talents and thinkers in the media industry often in a physical campus location. Another distinguishing factor is the tendency to have ownership or dominant stakeholders consisting of educational institutions, municipalities and government institutions.

A Media Cluster is a network of physical locations and virtual platforms (media parks, media campuses and projects), which develops synergistic relationships and networks with the goal to enhance the clusters’ success factors such as efficiency, creativity, innovation and profitability. Media Clusters don’t necessarily have ownership and are often initiated by privately owned Media Centres of Excellence and build upon its relationships with other stakeholders to drive value.

A Media Park is most distinguishable through its physical location and the traditional value chain focus on profit. The main goal is to create content and production is based on connecting supply and demand. Most Media Parks are a combination of public and private ownership but run as a business entity with a strong internal focus and with performance metrics driving the media park. (i.e. media park specific revenue and reputation). Although having a spillover effect in stimulating employment and increasing innovation these are not the main goals of the parks.

A Creative Valley is an agglomeration of both physical media parks and/or clusters as well as virtual platforms and initiatives encompassing everything creative and media related ranging from journalism, art, cultural heritage, start-ups to creative business services. A Creative Valley is both public and privately owned with the main goal of enhancing the creative industry as a whole and fostering innovation on a creative and media industry level. Start-ups and business modelling, financing and networking are additional main functions and objectives of the Valley.

Creative Ecosystem Focus on improving living standards and city reputation A Creative Ecosystem is the virtual interconnected and overlapping network of all platforms and physical locations related directly to other industries than only the creative industry. Its main goal is to enhance creativity and better society as a whole through not only incorporating the goals of the media parks, campuses, clusters and valleys, but also by directly stimulating employment, improving the standard of living and bettering the reputation of the city. The Ecosystem is not owned but its governance and driving force comes from various bodies including the government, municipalities, institutions as well as private investors and from the citizens themselves.

*During this study these different forms of appearances of MCoE are defined based upon a bottom-up research approach by means of interviews with subject matter experts, existing literature and desk research. The different forms are a reflection of the current market, which is subject to change due to different internal and external market dynamics Source: PwC analysis, Monitor Creative Industry 2016 iMMovator, Robert Picard – Media Clusters ,Media Management and Transformation Centre, Understanding “Cultural Ecosystem” in Creative Industries Policies PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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Trends in the Creative Industry (quick scan) TWO PERSPECTIVES: MEDIA CONSUMPTION AND INDUSTRY DEVELOPMENT

PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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Quick Scan Trend Analysis To formulate the role and ambition for Media Centres of Excellence, it is necessary to identify and understand the trends and drivers in the creative industry

The themes described in this quick scan illustrate relevant industry developments which we foresee for the coming years. The majority are likely to happen on a global scale, while some developments are dissimilar in local territories. With our Annual Entertainment & Media Outlook, we monitor and analyse the trends from different perspectives, including the influence of technology, economic developments, social value and regulations. For our perspective on the global entertainment & media industry 2017-2021, please click here to access our thought leadership. For this study, we have selected two perspectives and the associated insights to these, which are relevant for the benchmark study and next steps for media city Hilversum.

Perspective 1 - Media consumption Influenced by advanced technology and content explosion, consumers seek better content anytime, anywhere through unique experiences tailored to their needs. As consumers are becoming more vocal, empowered and selective in their choice, it is necessary to understand “the what” that makes them tick and, more importantly, to uncover what their true needs and desires are. In this chapter, the following topics will be covered: consumer lifestyle & behaviour, content creation, technology and experience.

PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

Perspective 2 – Industry developments The creative industry is changing continuously, leading to new opportunities and challenges for industry players who want to stay relevant in the next decade. The speed in which technological advancements are embraced and adopted by organisations is astounding. It has assured some organisations who thrive on unique service propositions, where others are struggling to retain their client base. In this chapter, the following topics will be covered: convergence of industries, continuous learning, industry regulations, the value of creativity, fight for the consumer, and media shapes culture

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Media consumption (1/3) Influenced by advanced technology and content explosion, consumers seek better content anytime, anywhere through unique experiences tailored to their needs

Consumer perspective 1. Media, omnipresent in society

1. Consumer lifestyle & behaviour

Consumption and spending on media and entertainment has never been so high and is predicted to continue increasing. Media has become omnipresent in our society surrounding and influencing our daily lives on a continuous basis. Additionally, media-multitasking has become the norm, with consumers engaging in 3+ media activities simultaneously, such as watching television, browsing the internet and replying to text messages.

2. Prosumers - the new consumers

2. Content creation

The creative industry is shifting from industry produced media content to user generated (media) content (UGC). The ability to produce content anywhere, anytime and to concurrently receive and stream live content is giving rise to the "prosumer“ – persons who both produce and consume content. This is resulting in more choice of specialised media content, and thus special interest groups, which are led by the likes of "influencers", the new age (digital) "celebrities" - and anyone can be one..

3. The convergence of Media & Technology

3. Technology

The eight essential technologies: Augmented Reality (AR), Artificial Intelligence (AI), the Internet of Things (IoT), Virtual Reality (VR), drones, robots, Blockchain and 3D printing are reshaping the media industry in how consumers are consuming, producing and ultimately experiencing media.

4. The shift from activity to experience

4. Experience

Communities and “tribalism” based on personal preferences and interests are allowing for shared media experiences. Consumers are no longer seeing media as a passive activity, rather they want to engage and immerse themselves fully into new experiences, engaging all senses and allowing for an all-round user experience. Examples are Virtual Reality arcades and eSports, which showcase that technologydriven experiences have been an important boost for the next phase in gaming.

Impact on media landscape Media consumption is becoming more and more embedded in our lives, where habit-forming services are becoming more prevalent. The shift to subscription based business models, such as Twitch in gaming, Musical.ly in video production and Audible in ebooks, show that consumer value lies in “quality features” which brings benefits like “convenience”, “always accessible”, “easy to share”, “latest update” and lasting experiences and habits.

To gain access to and maintain market share in the media industry has become increasingly difficult. The birth of “influencers” and “power consumers” through individual user-generated content has increased the need for more ecosystem management, e.g. understanding and building relationships with customers, vendors, partners and competitors. The challenge is how to monetise customer value and grow business value for the industry and its stakeholders. Technology has accelerated the rate of content production and its reach, enhancing the effectiveness and efficiency of distribution and targeting. It is integrally related to monetization and customer engagement. Consequently, the convergence of media and technology has given rise to issues in data privacy and security, complex business and pricing models, and governance & control. Besides the obvious benefits, the market will need to invest heavily in safeguarding the use and application of technology in the creative industry. Consumer behaviour has changed from seeing media as a one-dimensional activity (such as going to the movies) to consumers actively seeking real-time, experiences (like going to ComicCon). Additionally, the multi-sensory experience is expanding through technology, which is interesting for niche communities and special interest groups.

This introduces the “long tail” of new or adapted products and services targeted to niche groups.

PwC Advisory Sources: NCE media 2016, The Guardian: The digital apocalypse 2016, Statista 2017, PwC Strategy&, 2016 Entertainment and Media Trends, OTV Nielson 2017, Socialblade 2017 Confidential information for the sole benefit and use of PwC’s client.

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Media consumption (2/3) Influenced by advanced technology and content explosion, consumers seek better content anytime, anywhere through unique experiences tailored to their needs

•

•

•

1. Consumer lifestyle & behaviour

2. Content creation

Media, omnipresent in society

Prosumers - the new consumers

Consumption and spending on media is constantly increasing with its reach and impact on society gaining in value. We are directly and indirectly subjected to the influence of media on a continuous basis through what we see on the streets, on our mobile devices, what we hear from our friends and what we find online. Media is going beyond multichannel by creating meaningful experiences in a omnipresent way. Media consumption and spending has increased and consumer expenditure has never been so high in the creative industry, reaching 780 million euros in the Netherlands. The digital mobile trend is taking over with 71% of media consumption coming from mobile device usage. (Online) subscription based models are becoming standard. Media multitasking has become the norm as 90% of consumers are now multitasking while watching TV. An average of three additional activities including internet browsing, reading email and text messaging are completed while watching television. Between the age of 16-24, 64% of the total media time spent is already online. More and more people are also starting to watch content out of home (OOH). For instance, 26% of OOH impressions were attributed to viewers aged 18-34, while 32% stemmed from those aged 55 and up with OOH consumption even expected to rise.

The global creative industry by revenues & employment

600 500 400 300 200 100 -

Source: World Economic Forum 2015 PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

Number of jobs (000) 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000

Number of jobs (000)

Sectors by revenue (USD bn)

Sectors by revenue (USD bn)

•

•

• •

The creative industry is experiencing a change where individually produced content (UGC) is becoming in some domains – as big as industry produced content. To produce and share content in real-time, anywhere via (peer-to-peer) platforms is enabling users to simultaneously consume and create content. As a result, more special interest groups arise next to mainstream content and media “influencers”, who are becoming the modern (digital) celebrities – and anyone can be one. Content creation is expanding and is including individual users as well as large corporations. Usergenerated, personal and real-time content creation is taking over through social platforms such as Facebook and Twitch. Additionally, personalised content from wearables such as Fitbit or consumer data generated through preferences from purchase history are being continuously generated, creating new business models for customer insights. All access to broadcasting platforms and the freedom of expression is changing the media landscape. P2P streaming technologies are designed to turn every video consumer into a video node, enabling users to simultaneously consume and deliver the stream. Media production is seeing a shift from consumer to prosumers with influencers becoming main drivers in content creation.

For instance, Michel Phan who partnered with Endemol Beyond to launch Icon Network and her beauty and wellness-themed video content has become symbolic in the way young people consume content. Co-creation with prosumers, and other stakeholders in the value chain, is the new value driver in media business models. The importance of relationship building and stakeholder management and the reach of influencers ranging across all industries cannot be ignored in the modern media landscape. No. subscribers of influencer Michelle Phan (in millions

No. subscribers of influencer Lily Singh (in millions) 10,7 +41% CAGR*

+38% CAGR

7,5

7,4

1,7

1,9

2012 2013 2014 2015 2016 *CAGR: Compound Annual Growth Rate

8,8

2016

2017

5,2

4,7 1,9

8,3

1,8 2017

2012

2,6

2013

2014

2015

13 Sources: PwC Strategy&, 2016 Entertainment and Media Trends), OTV Nielson 2017, Socialblade 2017

Media consumption (3/3) Influenced by advanced technology and content explosion, consumers seek better content anytime, anywhere through unique experiences tailored to their needs 3. Technology

4. Experience

The convergence of Media and Technology

The shift in media from activity to experience

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    





Virtual Reality (VR): computer generated simulated environments encompassing all fields of media and technology from books, art, theatre, gaming and music, allowing the user to have a dynamic, connected and multisensory experience. In addition, applying serious gaming and gamification techniques, these experiences can enhance the application, for example in education and entertainment Artificial Intelligence (AI): the application of different automation and algorithm techniques and technology to be able to change the way we consume and produce media, e.g. automated machine translation, robot painters, and personal DJs Drones: Drones equipped with cameras allow for extensive use in media production as well as broadcasting, in the professional as well user generated content space. They allow for autonomous application and are packed with sensor technology (Physical) robots: Robotics in a physical form are used in interactive media, IoT and other related domains allowing for personal and impactful experiences Internet of Things (IoT): by connecting objects (like devices, cars, and other physical objects), humans and data, more personalised and relevant experiences and services can be created. For example, advertising can be targeted on individual level instead of target group level.

Blockchain: The consumer can expect a securer, easier access to an abundance of content developed by more content creators. Additionally, the experience will be more on a personal and granular level. For content creators, they can be creative with payment models as well as expecting simpler attribution, payment, and distribution systems. Furthermore, this allows for the introduction of the concept of “digital scarcity”. Also, industry challenges like piracy, IP ownership and copyright issues can be addressed 3D Printing: the application of 3D printing could be used for prop creation in media production as well in animation and the creation of prototypes. Another example, consumers can also print merchandise or other objects of their favourite brands or characters to make their online experiences more tangible Augmented Reality (AR): the application of digital layers of information, graphics and other data over real world objects to enhance our ‘analogue’ world

Source: PwC The essential eight technologies PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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





Social interaction has always been a strong component driving the success of media, however the TV industry as compared to the social media landscape, has arguably given young adults only few opportunities to interact on a social level when consuming media content. Recent developments are however drafting a bright future for media activity as it is becoming increasingly experience based. The age of the mega platform is over… the next generation raised being always-”on” will embrace digital tribalism. This generation will move away from the massively commercial social networks and are migrating to more personal social networks based on less complex ecosystems. The rise of niche interest groups and thematic communities such as comic-con, an international convention on popculture ranging from comic, games e-sports to board games, paves a way to niche content creation both online and offline. Furthermore, the rise of the gaming industry is seen as the digital apocalypse which is disrupting a number of industries of which media and entertainment is one. The rise and the adoption of the concept of multi-users VR and AR is seen as the next development in the entertainment industry. For example, the Toybox Touch experience from Oculus demonstrates the possibility to interact with another individual in virtual reality playing for instance pin-pong.

In the gaming sector, e-sports has recently emerged as a spectator activity with increasing number of attendees and viewers. The global market for e-sports grew to US $696 million in 2017 and may exceed $1.4 billion by 2020. ESPN, FOX Sports and other leading sports networks have introduced eSport competitions to their broadcasting repertoire, partnering with major gaming companies such as EA sports, Riot and Blizzard. eSport Global Market Revenue 1600

Revenue Mn USD

There is a strong tendency towards media and technology convergence, which will continue to influence the creative industry

1488

+29% CAGR

1400

1187

1200 941

1000 800

+40% CAGR

600

325

400 200

696 493

130

194

2012

2014

0 2015

2016

2017

2018

Sources: NCE media 2016, The Guardian: The digital apocalypse 2016, Statista 2017

2019

2020

14

Creative industry developments (1/3) The creative industry is changing continuously, which leads to new opportunities and challenges for industry players want to stay relevant in the next decade

Convergence of industries Blurring boundaries of the creative industry  Organisations such as Tencent and Amazon are providing services which encompass multiple industries like media, retail, and technology. These multi-faceted organisations are breaking industry boundaries to deliver better experiences for the customers.  An important driver for these multi-faceted organisations are Mergers & Acquisition deals. In the past years, the main motivations factors for M&A are a) consolidation driven by adjacent services and customer base (value chain integration) and b) capability extension.

Continuous learning

Industry regulations

The value of creativity

Fight for the consumer

Media shapes culture

Need for more tech enabled creative professionals

Pushing the boundaries in the digital world

Tech-driven creativity

Use of data to personalize experience

New era of media-driven culture

 Media and production agencies are becoming technology organisations, who use Artificial Intelligence (AI) for example to create campaigns, script writing, and automated machine translation.

 Media organisations continue to navigate the fine line between delighting consumers and annoying them. Where usability and emotion are value drivers, privacy and security are mostly value detractors.

 Where the focus once was on mass media and intuition, now media professionals focus on personalisation and micro data to create consumer profiles. This transition has resulted in a demand for more tech-driven media professionals, such as data scientists, AI developers, VR specialists, neuromarketeers, etc.

 Whereas net neutrality is less of a hot topic in the Netherlands, privacy and monetisation are highly discussed topics. The enforcement of General Data Protection Regulation (GDPR) in May 2018 will have significant impact on organisations who are rely on third party data, and do not have a direct relationship with customers.

 Technology has been changing the creative industry. The success and thus value of media concepts do not solely rely on pure creativity, but on understanding micro moments in the lives of today’s consumers. For example, Netflix knows exactly when viewers get ‘hooked’ on a TV show and which movies are best suited to the mood of their viewers.

 Media preferences are highly influenced by the dynamics and diversity of culture, language, income, and regulation. It has affected companies’ ability to monetise investments and their position in the value chain more than ever before.

 Back in the day, media channels were limited to companies who used them as vehicles for delivering messages to mass audiences – shaping opinions, behaviour and ultimately culture. Nowadays, consumers can produce and share content themselves and thus shape opinions amongst themselves.

 The value of media will continuously be challenged. Technology can lead to more commoditisation in media, and thus, more abundance and lower perceived value.

 Organisations are fighting for the consumer relationship and their data, like profile, behaviour and contextual data, the value chain has become more complex. Those like Netflix, who create consumer-centric, distinctive and habit-forming services, are more successful in creating long term (perceived) value in the eyes of consumers.

 As media channels are more accessible for consumers, organisations are forced to reevaluate their roles and responsibilities towards consumers, which goes beyond a functional role and expands into social responsibility and ethics.

So why is this relevant for players in the creative industry? The definition and scope of the creative industry is changing, which impacts the structure and dynamics of the creative ecosystem. Source: PwC Analysis

As the industry is changing more rapidly due to technological advancements, media and creative professionals will be required to constantly educate themselves with new knowledge and skills.

PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

As digitisation drives innovative services and experiences, the appropriate regulations may not exist yet. Understanding and anticipating new regulations will help to advance the creative industry.

The perceived value of media is changing for consumers, and consequently, also for media organisations. Understanding what drives consumer value and how to create it in a sustainable way is key for staying relevant in the creative industry.

Truly understanding consumers on a personal and contextual level will give organisations the competitive edge and prolong their longevity in the creative industry. MCoE will continuously need to understand who key industry players are and what their role is in the ecosystem.

The creative industry is not just about delivery, but about shaping and influencing culture and people. The role of media is becoming more dynamic and versatile, which makes the industry in turn more complex and all-encompassing.

15

Creative industry developments (2/3) The creative industry is changing continuously, which leads to new opportunities and challenges for industry players want to stay relevant in the next decade

Convergence of industries

Continuous learning

Industry regulations

Blurring boundaries of the creative industry

Why the creative industry needs to continue investing in a future-proof workforce

Pushing the boundaries of the digital world

Especially in the entertainment & media sub sector, we have seen large international deals of at least $1 billion in size that were initially announced from 2011 through 2016, such as the acquisition of Virgin Media by LGi and the acquisition of Whatsapp by Facebook. These deals were mainly executed by communications and broadcasting companies, who pursue global expansion in response to competitive pressures and growth in local markets. In 2016, Verizon announced the acquisition of Yahoo for nearly $5 billion, which targeted the portfolio of media content properties and AdTech capabilities. This deal illustrates how the lines between sub sectors such as media, communications and technology, are blurring, and perhaps will fade in the future.

As technology is seen as a driver for the industry, the impact it has on talent, recruitment and employment will be significant in the coming years. Therefore, economists are pushing for more funding in STEAM fields – science, technology, engineering, arts and mathematics – to spur innovation and economic growth. The domains art and design were recently added to the STEM acronym as it was acknowledged that art and design are missing elements in the mix. However, the expectation is that the required talent and skills will be harder to recruit in the future compared to other industries. The main barriers for future workforce planning in the creative industry are the result of focus on short-term profitability (64%) and misalignment with innovation strategy (50%).

As the creative industry continues to change, organisations develop new services with accompanying business models, which may include new ways of consumer engagement and analytics. Policy may not always be on par with the knowledge and speed of market players. An example of new regulation with significant effect on the creative industry is the EU’s GDPR, due for introduction in May 2018, which is a result of increased demand for data privacy. It will have significant impact on organisations who rely on third data, who do not have a direct relationships with customers. The current estimate is that GDPR’s potential 4% fine of global revenues.

Motivation for announced media & tech deals (> $1bn) Innovation; 5% Content; 6%

Strategies to improve talent in creative industry workforce Percentage of survey respondents who identified each given strategy Investing in reskilling current employees

Other/ Stake Ownership; 5%

77%

Target female talent

Consolidation ; 65%

Source: PwC Megadeals transforming the EMC sector 2016 PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

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Child protection; how to protect the young (professional) gamers? How to educate youngsters about responsible gaming?

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Game security; how to prevent foul play in eSports, like hacking?

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Betting market: how to prevent match manipulation?

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Doping: how to prevent the use of brain stimulants and relaxers?

46%

Collaborate, educational institutions

38%

Offer apprenticeships Capabilities Extension; 20%

As an example, the upcoming sector eSports has experienced tremendous growth in the past year, where many questions were raised around policy and regulation. A few sector challenges:

31%

Hire more short-term workers

23%

Collaborate, across industries

23%

Attract foreign talent

15%

Support mobility and job rotation

15%

Source: PwC analysis, WEF The Future of Jobs Report 2016

Source: PwC Pulse Survey, GDPR Series

16

Creative industry developments (3/3) The creative industry is changing continuously, which leads to new opportunities and challenges for industry players want to stay relevant in the next decade The value of creativity

Fight for the consumer

Media shapes culture

Tech-driven creativity

Use of data to personalise experiences

New era of media-driven culture

The amount, type, flexibility and accessibility of content to consumers have shifted the perceived value of media for consumers and organisations. The expectation is that through technology, media can be increasingly commoditised with digital templates and auto generated solutions. Nowadays, consumers can let AI generate hours of music, or can easily view artworks all over the world through VR glasses. The abundance of content and experiences could lead to a lower perceived value of the product / service. This “commoditisation” trend brings challenges to companies (i.e. how to intrigue consumers who are “spoiled”), but also opportunities to find new products and services to “fuel” this trend. An example of this challenge is the decreasing price to value ratio for TV subscriptions. Despite more premium content produced by cable companies, the need to have a TV subscription is seen as less of a necessity. The price of pay TV increased slightly, while alternatives which are inexpensive or free are stimulating consumers to find value elsewhere.

The internet has fostered the disintermediation of the value chain. Distribution of content has become less of a bottleneck due to services such as YouTube and Netflix. This has put content creators in a better position to not only monetise their content, but also to create new experiences. These developments have lead to a shift in the relative importance of players in the value chain.

TV subscription households – 2015Q1 & 2017Q1

The above graphic simply illustrates that other businesses in the value chain can penetrate the market at different links in the value chain – reaching consumers directly (i.e. business-to-consumer models). To be successful in this competitive environment, organisations need to win consumers by truly understanding them on a personal and contextual level. By data collection and analysis, organisations find relevant insights to create personalise content. For example, based on your listening behaviour and the playlist of other users, Spotify developed an algorithm which generates automatic playlists for users based on their taste. This distinctive feature has set Spotify apart from its competitors and contributed to its company’s success.

It is well-known that media in all its forms shapes opinions, behaviour and ultimately culture. For example, in Asia, fair skin is a standard of beauty. The media perpetuates this by glorifying men and women who adhere to that standard. Before the existence of platforms allowing consumers to produce and share content, the creative industry had a considerable amount of control in shaping and influencing a culture. However, with the proliferation of social media, consumers can absorb not only the content organisations produce and share, but also that of other consumers. Consumers now have endless (unverified) sources to shape their thoughts. Given this change, the question arises - what the role and responsibility of media should be? As an example, a while ago, Facebook was under fire for the spread of fake news on its platform, which could have influenced the US election results. Mark Zuckerberg dismissed the issue stating that fake news, of which it was a small amount, could not have influenced the election. However, more than half of the adult population utilises Facebook as a source of news, and this number continues to rise. Following this criticism Facebook has now rolled out a tool to detect fake news.

59%

41%

2015Q1

41%

59%

2017Q1

Plans to keep TV subscription Plans to cancel TV subscription

As a result, the trend of households cancelling or not even purchasing a TV subscription is becoming more prevalent, especially in single person households. An example of how tech disrupts creativity is Jukedeck, a company that uses machine learning technology to compose music and adapt music, providing people and companies with songs shaped to their needs. The company can generate unlimited music as long as no one is claiming the rights of the songs. As such, creativity is no longer a scarce resource, but can be made redundant by the means of technology. Source: PwC Analysis PwC Advisory Confidential information for the sole benefit and use of PwC’s client.

Shift in how value is distributed in the creative industries [illustrative]

In

Creators

Production

Creators

Production

Distribution

Distribution

Marketing and discovery

Marketing and discovery

Consumption and participation

Consumption and participation

Number of active Spotify users worldwide in millions 75

66% 47% +19ppt 2013

2016

140

100

+33%

Growth in use of Facebook for news in % of users

+40%

Jun '15 Jun '16 Jun '17 Source: PwC Analysis, Statista, Strategy& The digital future of creative Europe

Source: PwC Analysis, Pew Research Center 2016

17

[Belgium]

[Denmark]

Creative Valley Hainaut

FilmbyArhus

Aims at connecting cultural, digital and creative practitioners in Mons and the wider region of Hainaut.

Uses digital visual and media skills as a format to drive cultural experiences and social development.

Specialisation: Media production, film/TV, graphic design and gaming, “smart heritage” creation.

Specialisation: Digital visual (i.e. animation, AR, VR, etc.).

Progress & Growth: Social agenda and develop creative environment via ‘platform acting’ and ‘ecosystem thinking’.

MCoE Benchmark Assessment & Insights INTERNATIONAL BENCHMARK

The MCoE have been chosen based on their different form of appearance, international reputation, recognized specialization in the media industry, focus area and the distinct way they build upon the value drivers.

Progress & Growth: Collaboration and pooling together companies and knowledge institutions to actively participate in improving living standards and culture in Denmark.

Credit image: Wikimedia

Credit image: AEC

[Germany]

[Canada]

nextMedia.Hamburg

Vancouver Film & Media Centre and Film Commission

Virtual platform to assist entrepreneurs and start-ups in building digital business models that lie at the intersection of content and technology. Specialisation: Gaming and business development. Progress & Growth: Consolidate market position via userreach and develop synergistic partnerships in industry.

Commercial and profit driven orientation, facilitating mass content creation and production. Exercises healthy ties with start-ups, foreign producers and educational institutes. Specialisation: Digital entertainment and interactive industries.

Progress and Growth: Realise the industry’s potential through advocacy, investment, promotion and market positioning. See detailed benchmark framework in appendix PwC Advisory Credit image: nextMedia.Hamburg

Credit image: thecdm

Hilversum Mediastad

Within the Netherlands, there are several media / innovation clusters of which Eindhoven is recognized for its technology focus, Amsterdam for its digital creativity hubs and Hilversum for being specialised in media production across the entire value chain, from concept development to production services.

Did you know… … that there were nearly 8000 jobs in the Media and Entertainment industry in Hilversum in 2015? … that Hilversum Mediastad houses 120 - 150 companies? … that Hilversum Mediastad has 23 TV studios? … that Studio 22 is the biggest TV production studio of Europe?

MCoE progression

Performance

Status quo and ambition The physical presence of the media cluster within Hilversum Mediastad fosters collaboration between companies and propels the strong heritage and cultural values of Hilversum. The MCoE is both privately and publically owned. Synergistic relationships among stakeholders and the media networks have been created, with the aim to enhance the MCoE’s success metrics in terms of efficiency, creativity, innovation and profitability. With this in consideration, this MCoE’s could be classified as a Media Cluster type.

Cultivating Knowledge Several organisations within the MCoE stand out in the area of knowledge cultivation:  The Media Campus is an initiative that is focused on education and talent management.  The Institute of Sound and Vision preserves media within their museum by digitizing content and has a broad international knowledge network.  iMMovator facilitates network and knowledge events. These organisations also work together to facilitate knowledge sharing. For instance, iMMovator and the Institute of Sound and Vision collaborate to organize and develop Cross Media Cafés. These events provide a format for members of iMMovater and people in the network of the Institute of Sound and Vision to seek updates and have discussions on trends and developments in the media. The average number of visitors per session, to-date, has been 200.