Creating a Digital Academy in Dublin

© Kieran O’Hea November 2002 1. Introduction We live in a digital world, powered by content. Digital is shorthand for a new approach to business, one that is fast-paced, connected, non-linear, virtual and technology enabled. These are characteristics not just of digital devices but of the business environment itself. Underlying the digital revolution are the transactions, exchanges, products and services – all of them content based – that characterise the knowledge economy. Proficiency in the creation, management and trading of digital content may contribute significantly to our future competitive advantage. This proposal concerns the creation of a Digital Academy, operating under the patronage of a major publishing organisation, where digital content companies can experiment, learn and trade in digital assets, working in a collaborative environment of mentors, peers and customers. 2. The Digital Opportunity The drivers of the digital market have been the low cost availability of advanced digitally based communications and entertainment platforms to businesses and consumers. The scope of these platforms encompasses cellular phones, game consoles, PCs, CD and DVD players to name a few. In tandem with the availability of platforms, a wide-ranging transformation of the Technology, Media and Telecommunications industries that support them has occurred. This transformation has brought about the convergence of the TMT sectors. This has in turn accelerated the development of new types of businesses and also new opportunities for existing businesses and stakeholders, including publishers. This is referred to as the digital opportunity. Once digitised, content can be regarded as a new form of software. Ireland is the biggest exporter of computer software in the world and has built a thriving indigenous localisation industry that customises software for international markets. The growth of digital content will mirror the growth of the software and localisation industries. The electronic delivery of software, music, books, games and video accounted for a mere 3 percent of such online sales in 1999, but a recent Forrester Research report predicts that digital downloading will garner some 22 percent of online sales in these categories by 2004, totalling $2.9 billion.

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Fig. 1 Digital Media Diversity 3. Digital Content Market Potential The recently published report from Forfás “A Strategy for the Digital Content Sector in Ireland” draws attention to the potential global demand for digital content and frames this in the context of the development of the sector in Ireland. The vision is to develop a world class digital content industry based on the targeted development of a number of clusters at the intellectual property end of market, namely enabling technology and high-value content and applications. While Forfás will not be drawn on the estimated size of this sector, other informed sources predict that under the right circumstances the digital content sector in Ireland can grow to be worth more than €1 billion by 2007. This prediction is partly based on the injection of funds by the government into the Digital Hub, which is intended to grow the sector to 7000 jobs and a value of €600 million by 2005. This valuation is based on the anticipated growth of the indigenous sector. However the eventual value of the Irish digital content sector could be a much more significant percentage of the predicted global forecast of 400 billion Euro, provided incentives are put in place to attract significant numbers of multinationals to locate content related activities in this country. These activities may be productivity related such as the creation and distribution of content and also fiscal, such as digital asset management, rights trading and collecting income from royalties. The next five years therefore provides Ireland with an important window of opportunity.

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4. Factors Inhibiting Growth The way things are now, however, this growth simply will not happen because there is an inadequate support structure in place for digital content companies. Research carried out in Ireland and in Europe shows that these companies need a collaborative platform within which to develop ideas, hone their business skills, secure deals and plan marketing and distribution campaigns. What is therefore needed is for a major publishing group to act as champion, combining hands-on expertise and infrastructure with global reach and the necessary leverage to overcome the many obstacles that digital content companies encounter when trying to ply their trade in Ireland.
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Failure to define the digital opportunity. The intangible nature of digital media. The broad scope of digital activities and influences. Failure to create sustainable business models. Hesitancy on the part of the investment community. Lack of champions in the public and private sector. Lack of cost-effective broadband Failure by the sector to articulate its offerings. Poor knowledge of funding schemes. Failure to properly exploit intellectual property rights. Under developed use of networking. Immaturity and lack of basic business sense.

Fig. 2 Growth Inhibitors in the Digital Content Sector The digital content community has specific needs and requires a special approach that few people outside the sector are capable of understanding or providing. Digital micro-enterprises have many creative ideas but inadequate time and resources to develop them. They are often ill equipped to deal with investors and content commissioners. The success of the digital content sector relies heavily on developing sufficient creative talent to satisfy the demand for diverse and compelling content. While their work is recognised and flagged as being at the forefront in terms of innovation and content, digital media innovators and entrepreneurs need an intellectual infrastructure that will support business growth in this dynamic sector.

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Investigation of what NEW CONTENT and types of content can be and what will really take advantage of and work on new platforms and technologies, specifically creating original 'made for the medium' not versioned content. PLATFORMS / TECHNOLOGY - understanding the platforms and tools, the systems, and the skills needed to develop for them in the most creative way. Costs involved are often prohibitive for small new companies. INTERNATIONALISATION - The need to work with systems and technologies that work across national boundaries. Issues to be investigated include language versioning, the internationalising of product, the consistency of technology standards from region to region, testing issues, different types of system and content for different audiences. NEW BUSINESS AREAS in terms of funding, markets and distribution. All the way from finding out who from/how to get funded/commissioned to suggesting business models and helping potential commissioners/distributors to understand possibilities. Also understanding their perspectives, markets and strategies both domestically, transnationally across Europe and the world. All aspects of DEAL-MAKING including IP, rights, contracts, etc. Existing print/TV/film people understand these in terms of their own media which is not necessarily conducive to production of original 'interactive' content and because they are big and established, digital micro-enterprises are having to learn their languages and adapt to them in order to deal.

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Fig. 3 Where Digital Content Companies Need Help

5. Proposed Solution According to the Harvard Business School 2nd annual Internet Conference, “Success on the Internet is no longer driven purely by technology, first mover advantage and buzz. Rather, it is much about quality of management and the ability to grow successfully in an increasingly competitive market”. Digital content is the most readily exportable product in the world, lacking only a shop window and a proper distribution platform. A Digital Academy based in Ireland would provide a launch pad to success for digital content companies, allowing them to gain exposure for their products, forge links with established multinationals and create a powerful source of attraction for the world’s top digital talent.

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The Digital Academy will aim to provide improvements in the digital content sector in the following key areas:     Improvement of quality of business models Better business networks for digital content Benchmarking of good practice in the sector Support for IPR and financial issues

The Digital Academy is not necessarily an incubator, more of a finishing school, one where promising content companies and digital entrepreneurs can hone their business propositions under the patronage of a major media company. Most digital content companies, including those who have been operational for a number of years, are ill prepared for investment or for the rigours of corporate life. In Ireland 95% of them can be characterised as being ‘micro’ in size, meaning less than ten people. On the other hand, digital content companies are usually generous in nature, and are willing to do deals and make compromises, often it has to be said to their own disadvantage. They would almost certainly agree to participate in a scheme that would furnish them with the facilities they need most, including bandwidth, investment and business support, in return for a share of their equity. In terms of their willingness to collaborate, they could be classified as “user-friendly”. 6. Academy Structure & Services Despite the inevitable association of content with creativity, the digital academy will be primarily a business centre. Creativity and bandwidth alone will not guarantee a successful future for the digital content sector, whose Achilles Heel has always been poor business-models. Many digital ventures have proved unsustainable and this has impeded the growth of the sector, deterred investment and, because it is dependent on the availability of compelling content to sell, has adversely affected the growth of e-business. It is in publishers interests to help robust business models to emerge, driven by market demand for quality content products and services. Without a proper business culture, no amount of creativity and bandwidth will make a successful digital content sector, in an era when everyone has the technical capability and competitiveness is essential. The Digital Academy will address the following challenges, which are associated with helping Irish digital content companies to access the global market:   Developing business knowledge of how to provide continuity of supply and how to protect, harness and exploit intellectual property rights. Finding cost-effective ways for emerging talent and talented products, works or programmes to be showcased internationally.

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Supporting small companies to secure international distribution deals and to provide a compelling global online presence. Creating networks and partnerships that allow digital media companies to establish profitable working relationships with a range of clients

The proposed structure of the Digital Academy is represented graphically on page 7 of this document. 6.1 Support for Indigenous Industry There is a verified need in the digital content sector for support in the areas of collaborative marketing, fundraising, mentoring and content production. The availability of these resources will help to build scalable business by ensuring continuity of supply and proper quality. A type of co-operative for the 21st Century, the Digital Academy will aim to support the aspirations of digital enterprises on a collective basis. This will fulfil the growing need for an appropriate physical, virtual and intellectual space in which digital content companies can equip themselves to do business and which helps them to articulate their offering to potential clients and investors. 6.2 Business Training The academy will provide a programme of business support to digital content companies with the aim of promoting best practice in business management. The programme will impart knowledge on business development, branding and intellectual property rights. It will also encourage companies to exploit the resources around them, such as academic support, R&D facilities and business-to-business networking and collaboration opportunities. The contributors will include established digital content companies and experts in business, law and finance. 6.3 Attracting Inward Investment The Digital Academy can become the home of digital content in Ireland as well as a means of attracting international talent to the country. As Science Foundation Ireland is endeavouring to do in attracting the world’s leading scientists to carry out primary research in this country, so will it be possible to provide an attractive environment and appropriate financial incentives to attract world-class digital talent to our shores. Thus we will eventually be able to boast an international centre of excellence and a renowned productivity centre which together with the right infrastructure and appropriate trading incentives will provide the world’s leading content companies with a compelling argument to base their European operations here. Ideally what will emerge will be a successful economic cluster with home grown digital content companies forging successful relationships with multinationals in their own back yard.

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6.4 Knowledge Base A dearth of knowledge about the digital content sector and the risks and rewards associated with it is hindering investment, another problem the academy will be in a position to address. As it develops a deep pool of knowledge, the academy will be in a position to offer advice on a commercial basis to organisations outside the content sector, such as government departments and major corporations, helping them to realise the potential benefits of digital content and how it can impact on their policies and organisations. 6.5 Intellectual Property Rights Encouraging the development of new intellectual property by Irish companies must be a major thrust of future economic policy. Digital content is an IP intensive business and must therefore be positioned as a sector with high growth potential in this context. To have economic consequences however, IP needs to be protected and leveraged on a wide scale. Ireland has traditionally been poor at doing this. Poor business education, ineffective systems for promoting Irish innovation and the second lowest level of patent registration in the EU have brought about this situation. Digital content is by its very nature even harder to protect than analogue material. Digital content may not lead to many patents being registered but a large amount of trade will be based on licensing and royalty payments. Negotiating the best deal possible can be an intimidating challenge for digital enterprises particularly when trying to negotiate with large clients who have access to significant legal resources. The Digital Academy will lobby for effective legislation and financial incentives, operate an IPR awareness programme and provide digital trading systems that will help digital content owners to secure a fair return on their assets. 7. Investment & ROI As the academy patron, the publisher will be expected to fund the creation of a centre, which is fully equipped for digital content business. Companies will pass through the academy’s different competence zones – creativity, production, business, marketing – attaining credits along the way before emerging as fully-accredited academy members. This process will equip them for doing businesses in world markets and also make them more attractive to prospective investors. It will also entitle them to become shareholders in the academy. What the publishing company will get from this is as follows. The publisher creates a platform (the Academy) through which digital content companies can reinforce their business propositions and showcase their capabilities. Any company coming into the academy will sign an agreement with the publisher entitling the latter to equity. The amount of equity will depend on the estimated ROI and on the nature of support provided by the publisher. At a minimum the publisher will provide all occupants of the academy with workspace, state-of-the-art bandwidth capability and asset management facilities. In addition to its equity arrangement, the publisher has the right to a percentage of royalties accruing through content sold or broadcast through its distribution platform.

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As a stable of talent develops, the publisher can host open days for potential investors and customers. They can assess the quality of the companies and services on offer and any subsequent deals done with academy members, whether through investment or by purchase of products and services, will prove beneficial for the publisher. The academy could also be instrumental in launching a business expansion scheme (BES) for the digital content sector. 8. Contribution to Sector Development The Digital Academy will contribute to the creation of a sustainable and profitable digital content sector by operating on two parallel, mutually dependent development paths, one designed to build an indigenous core of digital talent and the other to attract a critical mass of multinational investment to these shores. In this way the Academy will actively support government strategy calling for the development of a vibrant digital content sector. The following shows how these two paths might develop with the Government driving PATH 1 and the private sector driving PATH 2, through initiatives such as the Digital Academy. The successful integration of PATH 1 and PATH 2 will be assured by close co-operation between the public and private sectors. PATH 1: Focus on Inward Investment   Invest in marketing campaigns aimed at  attracting the best international companies. Offer tenancy deals which will appeal to  research facilities and multinationals and tie them in for the long term Target established media companies with  digital media departments – film companies, advertising agencies etc. Create an international hub for the creation,  storage, localisation and distribution of content Create packages based on fiscal incentives and  on physical infrastructure, aimed at attracting multinationals. PATH 2: Focus on Indigenous Development Invest in local talent aimed at developing a strong indigenous base - starting now. Focus on subsidised bandwidth, the currency of the digital media sector, allowing companies to get on with what they do best – making content Target riskier independent digital media companies who often tend to be involved in more groundbreaking work. Create a knowledge base where new forms of content are being created, new delivery techniques developed and new business models tested. Grow a digital content sector organically, by consulting with companies and providing opportunities for networking and resource sharing.

Fig. 4 Sector Development Scenarios As well as reflecting national policy in relation to the development of the digital content sector, The Digital Academy is aligned with the objectives of the European Commission who have recently launched a €100m programme to stimulate the development of a dynamic European
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market for digital content. Over the next three years the Commission will provide significant support in the following areas:     Access to available investment capital A unified European approach to online rights trading for multimedia production Support for the development of a common vision on market trends and developments Creating a favourable environment for the creation, distribution and commercialisation of European digital content.

By aligning itself with the actions being taken at the European level, the Digital Academy can increase the chances of participation of Irish companies seeking to take part in European projects while at the same time giving greater prominence to Ireland’s digital content policy.

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THE
The academy will offer a range of commercial services to resident and non-resident companies

DIGITAL ACADEMY
OPEN DAYS, MARKET PLACE & INTERNATIONAL SHOWCASE CONTENT SERVICES, NETWORKS & COLLABORATIVE PLATFORMS

The Digital Academy is a fully equipped digital business centre set up and managed under the patronage of an international media group

Major emphasis is on creating ways in which academy members can showcase their talent

External companies can access the Academy knowledge base in areas such as content quality and certification

NONRESIDENT COMPANIES (CLIENTS
FOR

SERVICES)

RESIDENT ENTREPRENEURS & DIGITAL CONTENT COMPANIES (ACADEMY MEMBERS)

MULTINATIONALS, GOVERNMENT AGENCIES & OTHER ORGANISATIONS S.

Interfacing with policy makers and potential investors is carried out by Academy management

Facilities must be state-of-theart with enough bandwidth to deliver the full potential of digital content

- PHYSICAL INFRASTRUCTURE – W ORKSPACE, BANDWIDTH & TECHNOLOGY SUPPORT. CREATION, MANAGEMENT &DISTRIBUTION SYSTEMS - INTELLECTUAL INFRASTRUCTURE – BUSINESS DEVELOPMENT, MENTORING & KNOWLEDGE BASE LEGAL SUPPORT (IPR, CONTRACT NEGOTIATION)

Business skills and business models are the areas that need most attention in the digital content sector.

Lack of access to capital is a serious growth inhibitor

- FINANCIAL INFRASTRUCTURE – INVESTOR READINESS & FINANCE APPLICATIONS IN-HOUSE INVESTMENT

Fig. 5 Proposed Operational Structure of Digital Academy

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