BizResearch

File-Sharing and Copyright

The advent of file sharing has considerably weakened effective copyright protection. Today, more than 60% of internet traffic is made up of consumers sharing music, movies, books and games. Yet, despite its popularity, a recent working paper from the Harvard Business School argues that file-sharing technology has not undermined the incentives of artists and entertainment companies to create market and distribute new works.  While policy discussion surrounding file-sharing has largely focused on the legality of the new technology and the question of whether declining sales in music are due to file-sharing, the paper suggests that the debate has been too narrow. Copyright protection exists to encourage innovation and the creation of new works—in other words, to promote social welfare.  The working paper analyzes the landscape and identifies areas for more research.

Main findings:

• Empirical work suggests that in music, no more than 20% of the recent decline in sales is due to sharing.

• Digital technology has lowered the cost of producing movies and music and allowed artists to reach their audience in novel ways.  It’s difficult to argue that weaker copyright protection has had a negative impact on artists’ incentives to be creative.

• File-sharing has not discouraged authors and publishers. The publication of new books rose by 66% during 2002-2007. Since 2000, the annual release of new albums has more than doubled, and worldwide feature film production since 2003 is up by more than 30%.

• File-sharing has been shown to increase the demand for complementary goods (such as concerts, electronics, and communications infrastructure) adding to artists' incomes.

Click on the link to read the paper in full (HBS Working Paper Number: 09-132)

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Global Books

Global books from Datamonitor provides an industry overview for the book publishing market, which includes the sales of academic and professional textbooks, general readers books (fiction and non fiction) and other traded books.  For the purpose of this report the global figure is deemed to comprise of the Americas, Asia-Pacific and Europe.

Highlights from the report:

The global book market generated total revenues of $119.1 billion in 2008, which represents a compound annual growth rate (CAGR) of 2.6% for the period spanning 2004-2008.

General readers/trade sales proved the most lucrative for the global book market in 2008, generating total revenues of $51.1 billion, equivalent to 42.9% of the market's overall value. In comparison, sales of student’s textbooks generated revenues of $38.4 billion in 2008, equating to 32.3% of the market's aggregate revenues.

Growth within the mature global books market has been sluggish over last years, and prospects for the future growth are not promising, meaning new players will have to face increased rivalry from already established competitors. Pearson, Bertelsmann AG, or Reed Elsevier publishers represent the leading players within the market; they benefit from large scale of geographically diversified operations, and may compete more intensely on price.

Possibilities of substitution exist within the book market. The scope of publishing has expanded and includes variety of media formats and entertainment forms, such as the electronic versions of books (so called e-books) and periodicals, as well as websites or blogs, etc.  They may present significant indirect competition to established traditional channels moving forward, however at present they represent a relatively small proportion of distribution. Such substitutes have their advantages – usually it is less expensive to reproduce them and they are eco-friendly since they are delivered to customers in digital form and there is no need for paper, ink or other resources that are used to produce print books. Also they take less physical storage space and are easy to travel with since hundreds of them may be carried on one device and easy to read in the dark with a back-lit device.

This market report, plus a range of country-specific overviews for this industry are available to current London Business School staff, students and faculty from Marketline which can be found on the A-Z list of library databases via Portal.

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Global Trends in Venture Capital: 2009 Report

Are venture capitalists battling the global recession blues or feeling optimistic about the new opportunities for investing in technology?  When Deloitte conducted the first global venture capital (VC) survey five years ago, the community was recovering from the tech bubble bursting and was just beginning to see significant movement toward globalization of the industry. Given the severity of the current global recession, this year’s survey focused on issues surrounding its impact on venture capitalists. The survey questions asked how the global recession is affecting strategy; how future investments are being planned, both by sector and region; what the anticipated size of the next fund will be and who VCs think their limited partners will be. This year’s report looks broadly at the results in a global context, but an appendix is included that breaks out survey responses by geographic regions.

The survey was conducted with venture capitalists (VCs) in the Americas, Asia Pacific, Europe and Israel. There were 725 responses from general partners of venture capital firms with assets under management ranging from less than $100 million to greater than $1 billion.  Multiple responses from the same firm were allowed, as the survey was a general measurement of the state of global investing from all general partners, not attitudes of specific firms. If respondents did not answer a question, the count for the question was adjusted accordingly.

The findings uncovered that globalization of the venture capital industry will intensify in coming years, posing significant competitive questions for the United States, and opportunities for emerging markets such as China. Additional findings include:  The clean tech sector is poised to become the leading investment category.  Levels are more likely to increase in countries outside the US Governments of all countries have a crucial role to play in fostering competitiveness and innovation.  Just over half of VCs surveyed remain optimistic that it is a terrific time to invest in promising entrepreneurial companies.

The full report can be downloaded from the Deloitte website

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Entertainment in the UK in 2028

This latest report from Ofcom assesses the spectrum requirements for both the distribution and production of entertainment by 2028. It compares spectrum demand with likely supply, identify problems of increased scarcity, and suggest possible ways of dealing with them.  For the purposes of this study the term entertainment covers four main headings: watching, listening, reading and playing

The main trends which shape Ofcom’s scenarios for 2028 include the following:

There is an enduring consumer need for entertainment. The average consumer spends 4.5 hours per day consuming various entertainment services, a figure which is likely to grow slightly as the UK population ages and becomes more sedentary

The revenues generated by entertainment are in decline. Revenues shrank by 0.7% per annum over the last five years1 while UK GDP grew at 2.2% per annum. The decline reflects a shift in advertising spend, away from entertainment-based and toward search-based Internet advertising. Public funding and end user spend, the other two components of entertainment revenues, have remained roughly constant over the past five years.

Consumers’ willingness to pay for entertainment has changed with the growth of Internet-based entertainment. Large amounts of what was premium video content are now available free of charge on the Internet, albeit often in low quality formats. So the basis on which consumers are willing to pay for entertainment is shifting towards a high-quality viewing experience and physical ownership.

Entertainment on the move is increasingly important to consumers as ownership of personal devices like the MP3 players, net books and iPhone-like personal devices grows. But most consumers prefer to read or to listen rather than to watch on the move. Those who own mobile devices with Internet capability are more likely to use them to check e-mails or browse the web than to watch streaming videos.

In combination these trends suggest that we might see radical changes to the business models used to deliver entertainment over the next 20 years. For example it might be reasonable to expect that:

• Internet-based entertainment will lead to disruptive new value chains
• Targeted advertising will help shape future value chains. In particular the organisations which are best able to collect information on entertainment consumption patterns are likely to exert strong control over the entertainment value chains.
• There will be a move from value chains based on vertical integration and bundling to value chains based around horizontal specialists.
• Mobile personal devices will play an important, but uncertain, role in the delivery of entertainment services in future.

The report can be downloaded from Ofcom’s website

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Consumers in Europe

The 2009 edition of Consumers in Europe presents a comprehensive set of data and related information concerning consumer markets and consumer protection issues within the European Union. The aim of the publication is to bring together the most relevant and useful information for the evaluation and development of consumer policy, not only as a tool for policy-makers, but also for those interested in end-markets and consumer affairs, such as representative organisations, public authorities, or suppliers of goods and services. Much of the data that has been used will feed into the consumer markets scoreboard which has been designed to monitor outcomes in the single market and to make European Union policy in this area more responsive to the expectations and concerns of consumers.

The publication starts with an overview of the single market from the consumer’s perspective, presenting a profile of European consumers and the retail network, as well as issues relating to access and choice, before looking at key indicators for consumption and prices. The overview also presents information on consumer satisfaction, the quality and safety of goods and services, as well consumer representation and protection. The remainder of the publication is devoted to 12 specific consumer markets:

• Food and non-alcoholic beverages
• Alcoholic beverages and tobacco
• Clothing and footwear
• Housing, water, electricity, gas and other fuels
• Furnishings, household equipment and maintenance
• Health
• Transport
• Communications
• Recreation and culture
• Education
• Restaurants and hotels
• Miscellaneous goods and services

Each chapter covers one top-level heading within the classification of individual consumption by purpose (COICOP), the main classification used to provide detailed data on consumer prices, price levels and consumption expenditure. The chapters are structured in a similar manner to the overview, in an attempt to present harmonised data and a range of key indicators that may be compared across the publication.

Click here to read the report in full

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Economic Survey of the United Kingdom 2009

The OECD has just published the 2009 economic survey for the United Kingdom. The surveys are published every 1½-2 years, providing assessment and recommendations on the main economic challenges for each of the OECD countries.

Selected highlights from the survey

The United Kingdom, like most OECD economies, is experiencing a severe economic downturn, and there is enormous uncertainty about the macroeconomic outlook. Business investment will decline owing to the challenging prospects and tight financial conditions. While sterling has depreciated by around 20% in effective terms since 2007, exports will decline due to the sharp fall in external demand. However, imports are expected to fall faster meaning that net exports will contribute positively to growth.

House prices have fallen after an extended period of large increases which left many households over-extended. Financial conditions are tight, and the financial market crisis has threatened the stability of the financial system. External conditions are also highly unfavourable. The recovery is likely to be slow and unemployment is expected to climb significantly reaching close to 10% by 2010. Both monetary and fiscal policies have eased to cushion the severe downturn with the policy rate now at historically low levels and quantitative easing measures under way. The authorities have also moved quickly to introduce a wide range of measures to stabilise the financial system.

In the short term, the policy priority must be to further improve conditions in credit markets. This is essential for reviving the economy. Alongside this, policy should aim at damping the severity of the downturn and its impact, particularly on the labour market. Policy actions that could undermine longer-term objectives need to be avoided. Over the medium term, fiscal consolidation needs to be underpinned by an effective fiscal framework and financial market regulation and supervision needs to be overhauled. The financial crisis and its consequences are likely to lead to a permanent fall in the level of potential output. Therefore, measures to raise long-run living standards will have renewed importance.

The full report is available to current London Business School staff, students and faculty from SourceOECD which can be found on the A-z list of library databases via Portal

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The Western European Gas Market Outlook 2009

This latest market research report from Business Insights provides profiles for 19 countries detailing the supply, demand regulation and infrastructure for the gas market.
 
Selected highlights from the report:

France: The dominance of nuclear power in France means that gas has traditionally played a comparatively minor role in the energy mix. However, this role is growing at a slow but steady rate, with gas now accounting for 15% of primary energy consumption. France’s already low levels of gas production continue to decline, meaning that imports and rising storage capacity will become increasingly important in the coming years.

Spain: Strong gross domestic product (GDP) growth from the late 1990s onwards, combined with rapid industrialization, has contributed to above-average growth in both gas and power demand in Spain. This has boosted the role of gas in the primary energy mix from 7% to 21% over a decade. Despite economic growth slowing down in recent years, gas demand is likely to continue to grow. Gas for use in power generation has driven much of the growth in Spain's demand, and will continue to do so in the coming years

Sweden:  Gas plays only a very small role in the Swedish energy mix owing to the strong dominance of both hydro and nuclear power. Gas has only been consumed in the country since 1985. All gas consumed in Sweden is currently imported from Denmark, although scope does exist to diversify supply sources when required. Sweden’s major gas importer Nova Naturgas was renamed Swedegas in early 2007.

UK: Since natural gas production from the UK Continental Shelf (UKCS) first began flowing in the mid-1960s, natural gas has played an increasingly vital role in the UK energy mix. Demand growth was strong in the decades following the discovery of gas in the UK, but the maturing of the market has brought with it a considerable slowdown in the earlier growth rates. Traditionally, indigenous supplies have allowed the UK to be a net exporter of gas. However, the UKCS has now reached production peak, resulting in the UK becoming a net gas importer of gas at the end of 2004. This decline in indigenous production has resulted in a growing need for gas imports from other parts of the EU, Russia and Norway, as well as other more distant supply sources in the form of liquefied natural gas

This report is available to current London Business School Staff, students and faculty from the Business Insights database on the A-z list of library databases via Portal

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2009 World Wealth Report

Capgemini and Merrill Lynch Global Wealth Management have released the 13th World Wealth Report. The annual report looks at the macroeconomic factors that drive wealth creation in order to gain a better understanding of the key trends that affect High Net Worth Individuals (HNWIs) around the globe. It covers 71 countries, accounting for more than 98% of global gross national income and 99% of world stock market capitalization The model used for these calculations is built in two stages: first, the estimation of total wealth by country, and second, the distribution of this wealth across the adult population in that country. Total wealth levels by country are estimated using national account statistics from recognized sources, such as the International Monetary Fund and the World Bank, to identify the total amount of national savings in each year.

Highlights from this years report:

At the end of last year the world’s population of high net worth individuals (HNWIs) was down 14.9% from the year before, while their wealth had dropped 19.5%. The most significant declines in the HNWI population in 2008 occurred in the three largest regions: North America (-19.0%), Europe (-14.4%) and Asia-Pacific (-14.2%). But behind the aggregate numbers lie some interesting developments in the HNWI populations of those regions. The number of HNWIs in the US fell 18.5% in 2008, but the US is still the single largest home to HNWIs, with its 2.5 million, which is 28.7% of the global HNWI population.

The report also finds that the current financial crisis and economic uncertainty has had a large impact on HNWIs and their lifestyle spending, with luxury goods makers, auction houses, and high-end service providers reporting significantly reduced demand worldwide.  Fine art has remained the primary passion investment for ultra-HNWIs in 2008 (27% of their total passion investments). Lifestyle spending rose on Health/Wellness, where 54% of HNWIs globally said they increased spending, but dropped on luxury travel and luxury consumables.

It seems that the recession has taken its toll on charitable giving as the year progressed, with little change in the first half the year but severely impacted in Q4 as HNWIs gave less and focused on fewer causes.  The outlook for Philanthropy in 2009 is poor with 60% of North American HNWIs saying they would be giving less due to the economic downturn. Japan was the only country that forecasted a growth in charitable donations.

The full report is available for downloading from the Capgemini website (pre-registration is required)

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Edgeless University: why higher education must embrace technology

British Universities have world-class reputations and they are vital to our social and economic future. But they are in a tight spot. The huge public investment that sustained much of the sector is in jeopardy and the current way of working is not sustainable. Some are predicting the end of the university as we have known it.

The Edgeless University argues that this can be a moment of rebirth for universities. Technology is changing universities as they become just one source among many for ideas, knowledge and innovation. But online tools and open access also offer the means for their survival. Their expertise and value is needed more than ever to validate and support learning and research.

Through their institutional capital, universities can use technology to offer more flexible provision and open more equal routes to higher education and learning. We need the learning and research that higher education provides. But this will take strategic leadership from within, new connections with a growing world of informal learning and a commitment to openness and collaboration. By exploiting this role, universities can harness technology as a solution and an indispensable tool for shaping their vital role in the future.

Click here to read the report

Mine: When the going gets tough...

PricewaterhouseCoopers have released their sixth annual review of global trends in the mining industry. The review provides a comprehensive analysis of the financial performance and position of the global mining industry as represented by the largest 40 mining companies by market capitalisation.

Despite a strong financial start in 2008 things quickly took a turn for the worst as the global economic crisis took hold in the last quarter and commodity prices went into freefall. So where does this leave the industry?   According to PwC the full effect of the downturn is not evident in the 2008 financial information, however first quarter releases of a number of companies report significantly reduced profits and in some cases operating losses. There is no doubt that the industry is facing tougher times, and steering a path through this downturn will require tough decisions from the leaders of the Top 40. 

Some of the key findings of the analysis include

• Despite a record year in terms of revenue and EBITDA, market capitalisation declined 62%, primarily due to the fall in commodity prices and the impact of the global economic crisis on shareholder confidence;
• Operating costs continued to rise at a greater speed than revenue, further eroding margins;
  In the current climate there is no more valuable an asset than cash, and for cash rich companies opportunities exist as asset values fall. The timing of action could be a lead indicator as to the industry's assessment of value and when asset prices have declined sufficiently to best utilise their cash resources; and
• The boom encouraged the industry to invest heavily in capital projects and grow the top line. In these more cautious times, the ability to turn the cost tap on and off quickly may be the difference between success and failure.

The full report can be downloaded from the PwC website

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European Innovation Scoreboard 2008

The European Innovation Scoreboard (EIS) has been published annually since 2001 in order to track and benchmark the relative innovation performance of EU Member States. For the 8th edition the methodology has been completely revised to present a stronger focus on services, non-technological aspects, and outputs of innovation. The analysis of trends over time is now based on changes in the absolute values of the indicators over a five year period, rather than the previous approach of measuring trends relative to the EU average.  Findings from this year’s report:

Sweden, Finland, Germany, Denmark and the UK are the Innovation leaders, with innovation performance well above that of the EU average and all other countries. Of these countries, Germany is improving its performance fastest while Denmark is stagnating.

Austria, Ireland, Luxembourg, Belgium, France and the Netherlands are the Innovation followers, with innovation performance below those of the innovation leaders but above that of the EU average. Ireland’s performance has been increasing fastest within this group, followed by Austria.

Cyprus, Estonia, Slovenia, Czech Republic, Spain, Portugal, Greece and Italy are the Moderate innovators, with innovation performance below the EU average. The trend in Cyprus’ innovation performance is well above the average for this group, followed by Portugal, while Spain and Italy are not improving their relative position.

Malta, Hungary, Slovakia, Poland, Lithuania, Romania, Latvia and Bulgaria are the Catching-up countries with innovation performance well below the EU average. All of these countries have been catching up, with the exception of Lithuania. Bulgaria and Romania have been improving their performance the fastest.

Click here to read the report in full

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Digital Britain: Final Report

Building a digital knowledge economy in the 21st Century is fundamental to the UK’s future prosperity according to the final report from the Department for Culture, Media and Sport and Department for Business, Innovation and Skills. The UK is already digitally enabled and to a significant degree a digitally dependent economy and society.The communications sector underpins everything we do as an economy and society. Electronic systems and new technology have transformed core elements of UK industry, the media and public services. In the City, digital technologies are vital to the billions of transactions carried out each day by the stock exchange and financial institutions. In the high street, stock ordering, inventory control and the cash tills are all completely dependent on electronic communications. As consumers, some 90% of our high street purchases are transacted by plastic which depends on wired and wireless communications to work. That is in addition to the £50bn of consumer purchases and sales through e-commerce that takes place wholly online.  

The Digital Britain Report underscores the importance of understanding, appreciating and planning for a fully digital Britain by providing an analysis of the following areas:

• The levels of digital participation, skills and access needed for the digital future, with a plan for increasing participation, and more coherent public structures to deal with it.

• An analysis of our communications infrastructure capabilities, an identification of the gaps and recommendations on how to fill them.

• A statement of ambition for the future growth of our creative industries, proposals for a legal and regulatory framework for intellectual property in a digital world, proposals on skills and a recognition of the need for investment support and innovation.

• A restatement of the need for specific market intervention in the UK content market, and what that will demand of the BBC and its role in Digital Britain. What that means for the future of the C4 Corporation. An analysis of the importance of other forms of independent and suitably funded news, and what clarification and changes are needed to the existing framework.

• An analysis of the skills, research and training markets, and what supply side issues need addressing for a fully functioning digital economy.

• A framework for digital security and digital safety at international and national levels and recognition that in a world of high speed connectivity we need a digital framework not an analogue one.

• A review of what all of this means for the Government and how digital governance in the information age demands new structures, new safeguards, and new data management, access and transparency rules.

Click here to read the report in full

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Private Equity Compensation Report 2008 - Executive Summary

The 2008 Private Equity Jobs Digest Compensation Survey was conducted in Fall 2008 and received private equity compensation data directly from hundreds of private equity and venture capital partners and employees from firms, both large and small. Some of the participating firms include: Credit Suisse, Delta Partners Group, Intel Capital, Kaiser Permanente Ventures, Lehman Brothers, Soft Bank Capital and many others.

With the shift this year in the financial markets, the results indicate that professionals in private equity and VC jobs see further trouble on the financial horizon. Similar to what we saw in the hedge fund industry, this year’s private equity and VC report reveals that 47 percent are happy with their current level of compensation – an 80 percent increase in pay satisfaction from last year! And why not? The average total compensation, industry-wide, was $255,000 USD – up 14 percent from last year’s figure of $224,000.

Read the summary

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General Insurance Performance Benchmarking Survey

General Insurance Performance Benchmarking Survey 2008

KPMG

The survey focuses on benchmarking the performance and disclosure of broadly comparable general insurers based on full year 2008 results.

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Innovations in Confectionery

This latest market research report from Business Insights analyses market data on the value growth of the confectionery market. Last year the European confectionery market was worth $66.8bn, almost twice the size of the US market, which has a value of $32.9 bn. The UK is the largest single market in Europe for confectionery with a market value of $12.3bn in 2008. With an overall growth rate of 7.5%, the UK market is projected to reach $13.2bn by 2012.

The confectionery market is segmented as follows;

Chocolate: Includes moulded bars, boxed chocolate, chocolate countlines, novelties and chocolate straightlines;

Sugar confectionery: includes caramels and toffees, hard boiled sweets, gums and jellies, medicated confectionery, other sugar confectionery, regular mints and power mints;

Gum: Sugar free gum, regular chewing gum, functional chewing gum and bubblegum;

Cereal bars: Sports and energy bars; granola/muesli bars and other bars.

Some of the key trends identified by the report:

• Ingredients that promote satiety are being used in confectionery and are forming part of a new generation of weight management products aimed to aid weight loss.

• Oral health has become a significant driver of growth in the confectionery market and this is set to continue as products with added benefits continue to be developed. Innovations such as functional gums and mints that freshen breath, whiten teeth and clean the tongue will continue spearhead this growth.

• Chocolate with a ‘high cocoa content’ is increasingly positioned as being healthy, premium and indulgent, as high cocoa content is often used to demark the quality of chocolate products.

• Heritage and tradition are being used as marketing tools to provide consumers with an alternative to mass food processing techniques which are unpopular with a number of consumers.

This report is available to current London Business School staff, students and faculty from the Business Insights database on the A-Z list of library databases via Portal.

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