Digital erosion — a myth all along?

Majority of growth in European creative sector fuelled by digital with increase of £26bn in revenue to £42bn between 2003 and 2013

London, May 21, 2015 – Digitisation and the internet are often cited as the root causes for some of the creative industries’ biggest problems — but a report released today by Strategy&, part of the PwC network, and commissioned by Google Inc., has found that the vast majority of all growth generated in today’s creative industries is digital. Effectively debunking the myth that the “for free” culture of the internet has led to a slowdown in growth and a loss of jobs in the European creative sector.

This will be good news for the UK whose creative industry accounted for 1.71m jobs in 2013, 5.6 percent of total UK jobs. In addition, the returns of digital are being felt beyond just one isolated sector — a 2015 study conducted by the World Economic Forum with support from Strategy& found that a higher degree of digitisation benefits consumers and the economy at large; with the UK being ranked 8th in 2015, up one place on the leader board from 2014.

The report titled: The digital future of creative Europe provides a comprehensive view of the impact that digitisation has had on the creative industries as a whole, including its effect on consumers, creators, distributors, and publishers. All of the business segments across the creative sector have one thing in common: the digital side of their business is growing, enabling a 1.2 percent annual growth for the creative sector overall since 2003. This growth is primarily driven by direct consumer payments, which rose 22 percent between 2003 and 2013 — underlining the point that consumers continue to be willing to pay for creative content.

Olaf Acker, Strategy& Partner and report co-author, said: “In addition to growth being fuelled by direct consumer payments, we also found a positive story against employment in the sector which overall has been stable over the past 10 years at 1.2 million, whether that is despite digitisation or more likely because of it. We also found that digitisation has significantly benefited consumers with access to creative products and services having increased, and so has consumers’ use of them.”

He added: “Depending on the sector, the non-digital part of the business is generally stagnating or even shrinking, but the overall revenue picture is strong. We believe that digital is and will be at the heart of the future of the creative industries, if only because the consumer has decided it should be.”

Key findings from the report:

  • Consumer media usage continues to grow at a 4 percent annual clip, and across all the European countries we studied.
  • Overall, creative industry revenues in the EU-27, including digital and non-digital businesses, grew 1.2 percent compounded annually between 2003 and 2013, a total gain of 12 percent during the period, from £126.68 billion (US$190.5 billion) in 2003 to £142.7 billion in 2013.
  • All of the growth in the creative industries comes from digital. Creative sector revenues grew by £16 billion between 2003 and 2013. Non-digital revenue was down £10 billion during that period, to £101 billion, but the loss was offset by an increase of £26 billion in revenue from digital, to £42 billion.
  • With revenues increasing 12 percent compounded annually, digital gaming has outgrown all other sectors. The film and television sector shows a steady 3 percent increase, and book publishing comes in at 1 percent, right around the industry average. Periodicals and music have seen a 2 percent average decline, a trend that is continuing for periodicals, but that is slowly turning around for music, which has been growing slightly from its low point in 2010.
  • Music sector revenues going to artists and labels remained constant between 2003 and 2013, because their percentage of the total doubled, to 66 percent.
  • Between 2003 and 2013, advertising-based revenues dropped by an average 1.5 percent annually, offset by 2 percent average annual growth in pay-based revenues such as subscriptions, streaming fees, and purchases of digital content.
  • The overall number of jobs in the creative sector in Europe has been stable at 1.2 million. Gaming and film and television added jobs, while all other sectors shed jobs.

Looking ahead, digitisation will bring changes in industries far beyond the media and entertainment sector. For example, innovation in digital fabrication (including 3D printing), machine-to-machine communication, and wearable computing will lead to the emergence of an “Internet of Things” in which material goods become far more fungible and customisable than they are today. The issues facing the creative sector now will pose challenges to every industry in just a few years. By putting the right kinds of measures in place to understand the effect of digitisation on the creative industries today, society has an opportunity to ensure that the continued rollout of digital development will be beneficial to all concerned.

Sources for press release:
The World Economic Forum’s Global Information Technology Report 2015, produced with support from Strategy&
Creative Industries Economic Estimates January 2015, released by the UK Department for Culture, Media and Sport.

Note – figures were converted from Euro to Pound Sterling and rounded up on Tuesday 19 May, due to currency fluctuations these may not correlate to US Dollar equivalents.


About Strategy&

Strategy& is a global team of practical strategists committed to helping you seize essential advantage. We do that by working alongside you to solve your toughest problems and helping you capture your greatest opportunities. We bring 100 years of strategy consulting experience and the unrivaled industry and functional capabilities of the PwC network to the task. We are part of the PwC network of firms in 157 countries with more than 208,000 people committed to delivering quality in assurance, tax, and advisory services.

Contact Deirdre Flynn
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Strategy&
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