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Finance, Investment and the Creative Industries

Finance, Investment and the Creative Industries . Dr Martin Smith Special Adviser, Ingenious International Creative MBA Conference London, 30 March 2012. Our Credentials. Ingenious: $10 billion plus invested in creative assets since 1998 More than 5,000 investors

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Finance, Investment and the Creative Industries

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  1. Finance, Investment and the Creative Industries Dr Martin Smith Special Adviser, Ingenious International Creative MBA Conference London, 30 March 2012

  2. Our Credentials Ingenious: $10 billion plus invested in creative assets since 1998 More than 5,000 investors Investments, Ventures, Corporate Finance and Asset Management More than 80 films financed or co-financed, including Avatar More than 350 hours of prime-time TV drama financed Other investments in music, theatre, film, TV production, games, publishing, and marketing services Largest independent investors in creative content in Europe www.ingeniousmedia.co.uk

  3. Structure of the Presentation Introduction: conceptual frameworks Entertainment industries and the digital revolution Exceptional risk profile of creative content businesses Main challenges for private investors Main challenges for policy-makers Qs pre-submitted by UCA Concluding reflections www.ingeniousmedia.co.uk

  4. Conceptual Frameworks • Relatively new stuff! • Binary divides and contested terminology • Art and commerce: show (+) business! • Cultural value, economic value • “Culture” and “entertainment” • Public subsidy, private investment • Cultural economics/the economics of culture • Technology, consumer behaviour and the creative process www.ingeniousmedia.co.uk

  5. Entertainment Industries and the Digital Revolution Schumpeter and “creative destruction”! The impact of digital: (1) the “disintermediating” value chain Unparalleled opportunities for new entrants The ideology of “free” and consumer power Implications for the global majors: the breaking stranglehold of the “gate-keepers” The meteoric rise and power of the aggregators The impact of digital: (2) poor visibility on revenues and profits of new entrants www.ingeniousmedia.co.uk

  6. Technology and the Creative Process Source: Technology Strategy Board. www.ingeniousmedia.co.uk

  7. Main Challenges for Private Investors • Exceptional risk characteristics of creative content investment • Not to be confused with creative services businesses • Problem of valuing intangibles/IP in a “hits” and “misses” environment • Fragmentation of markets and audiences • Media owners having to work far harder to pay for content creation • Collecting “raindrops” of revenue: licensing fees, royalties and micro-payments • Shortage of matching business talent in the UK (contrast USA) • Chasm of understanding between creative and financial communities • How to compete against “free”! www.ingeniousmedia.co.uk

  8. Exceptional Risk Profile of Content Businesses High Sunk Costs Wildly Uncertain Revenues “Hit Driven” Business Portfolio Approach Necessary • Our focus is on the economic drivers behind the creative content business model – not the content genre • Exceptional risks of creative content businesses: • This risk profile is a distinctive barrier to investment not suffered by other industries, even other knowledge economy industries www.ingeniousmedia.co.uk

  9. Main Challenges for Policy-makers • Industrial policy, or leave it to the market? • Poor data, especially on economic “spill-overs” • Dangers of “lobbynomics” • Outdated IP regulation: the DEA and Hargreaves (UK) • Maintaining public investment and creative infrastructure in an age of austerity • “access to finance” and lack of business capacity: domestic and inward investment • The skills agenda and the mobility of talent • Fiscal policy: intense global competition www.ingeniousmedia.co.uk

  10. Qs Pre-submitted by UCA What do you see as the key challenges to finance for UK creative industries? What and who do Ingenious Media invest in? What are the key things you look for when investing in a business? Do you only finance blockbusters? Can education support in the development process? www.ingeniousmedia.co.uk

  11. Concluding Reflections The UK is a great feeding ground for creative talent But it has lost positions of business leadership in the global creative economy In music, film and games we have become a giant and successful off-shore “facilities house” Much of the commercial upside/serious profits generated by our creative and technical talent base goes overseas Are we content with that? www.ingeniousmedia.co.uk

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