Download Economic value creation and the growth of media industries A

Economic value creation and the growth of media industries
A quantitative comparative study across media systems and
national economies
Annual Conference, Media Economics, DGPuK 2011
Castulus Kolo (MHMK) and Reimar Müller (PwC)
München, 12. November 2011
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology, hypotheses
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 2
Rationale, related studies, theoretical context
Rationale
z
Diverse studies
Di
t di on iindividual
di id l media
di systems,
t
ii.e. specific
ifi countries
t i (i
(industrialized
d t i li d as wellll as
newly industrialized, transitional and developing economies)
z
Regular and conclusive studies on the correlation of advertising and general economic
d
development
l
t (f
(for different
diff
t countries,
ti
advertising
d ti i media
di and
d periods
i d off titime))
z
A large body of econometric research (and theory building) on the dependence of economic
growth of a variety of factors - with media playing only a minor role as a factor (e.g. civil
liberties, religion, cultural diversity, geography)
z
Rather qualitative studies on the role of media in (economic) development (e.g. in post-soviet
states)
z
Relatively rich information available on the performance of media industries for a large number
of countries (i.e. statistics on audience, revenues)
z
Econometric perspective on the mutual relationship of media industries‘ performance and
general economic value creation
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 3
Rationale, related studies, theoretical context
Related studies (1/2)
Compared to the complexity of the role of media in economic development the impact of
economic growth on media is more straight forward
Economic
value creation
Development
of media
industries
z
Correlation of advertising spending and gross domestic product well proven for decades until now
(e g van der Wurff,
(e.g.
Wurff Bakker,
Bakker and Picard 2008)
2008), though with differences across media industries
z
By definition consumer spending (and in turn also consumer spending for media) also related to
economic value creation and growth respectively
Economic
value creation
z
Development
of media
industries
Both depend on some identical (hidden) variables: e.g. civil liberties central condition for the
development and maintenance of transparent and honest government and durable economic
growth ((see for example
g
p Sen 1984 or Kilman 2006)) and at the same time for the freedom of the
press and hence (possibly) for the development of prospering media industries
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 4
Rationale, related studies, theoretical context
Related studies (2/2)
Role of media in facilitating economic progress has only in the last decade begun to
receive attention – with econometric studies being the exception
Economic
value creation
Development
of media
industries
z
Growth theories as cornerstones of economic theorizing (from its origins e.g. Smith 1776)
z
M
Many
explanations
l
ti
ffor growth
th or itits ffailure
il 1; media
di only
l to
t a minor
i
extent
t t and
d mostly
tl qualitative
lit ti 2
z
Last extensive publication dedicated to the role of media in econ. dev. by the World Bank (2002)
z
Before as well as after only partial aspects3
z
On the other hand many case studies on the role of the media industry in specific countries4
z
No extensive econometric study comparing different national economies, media systems and
media industries
1 Among
2 E.g.
other factors lack of foreign financial aid/investment (e.g. Easterly 2001), culture (Lal 1998). geographic location (Gallup et al. 1998);
on free press as a central condition for the development and maintenance of transparent and honest government and hence durable economic growth by Sen 1984
3
E.g.
E
g impact on government transparency
transparency, accountability by Stiglitz 2002,
2002 solving the principal agent problem by Besley et al.
al 2002,
2002 public policy Spitzer 1993 and corporate governance Dyck and
Zingales 2002; the media as a watchdog of government and the corporate sector by Coyne and Leeson 2004, 2009; function as transmitters of new ideas and information by Mansell 1998)
4 E.g.
Gross 1996, O’Neil 1997, McAnany 1980, Paletz et al. 1995, Lent 1980, Anam 2002, Potts 2009).
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 5
Rationale, related studies, theoretical context
Theoretical key concepts
Economic
value
T t
Text
creation
z
z
z
z
Media industries
z
z
Media system
z
z
Gross domestic product (GDP) at purchaser
purchaser's
s prices as the sum of
gross value added by all resident producers in the economy
Plus product taxes, minus subsidies (not incl. In value of products)
Without deductions for depreciation
p
or depletion
p
and degradation
g
of
natural resources
Synonymously used with “media markets”
U d t d as iin Albarran
Understood
Alb
(2009) : “Industry”
“I d t ” nott merely
l as a group
of sellers offering the same or similar products, but differentiating as
aggregate of similar product segments per firm per country
Based on the defining criteria discussed by Hallin and Mancini (2005)
and the pioneering work of Siebert, Peterson and Schramm (1956)
Comprises aspects of media usage, availability and accessibility
(also in economic terms) with general level of education (e.g.
literacy) as well as regulatory/political framework conditions like
the freedom of the press
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 6
Rationale, related studies, theoretical context
Key questions
1
2
3
To what extent is the development of media linked to the general econ.
econ value creation
and what are differences for countries on different levels of economic development?
What influence has the underlying media system therein?
How do the former two interrelations show up in different media industries?
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 7
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 8
Data sources, scope, methodology
Data sources
National economies
z
World bank (from 2005 to 2009)
– GDP
– GDP per capita
– GNI per capita at purchasing
power parity (PPP)
– Population
– Growth rate (CAGR 2005 to
2009) for all variables
Media industries
z
PwC (from 2005 to 2009)
– Total consumer spending for
media & entertainment 1
– Total advertising spending for
media &entertainment 1
– Data for four sub-segments
• Newspapers (“traditional
media”)
( new media”)
media )
• Internet (“new
• B2B (“information media”)
• Music/film/games
(“entertainment media”)
– Growth rate (CAGR 2005 to
2009) for all variables
1
Media systems
z
z
z
Freedom House/ Reporters
Without Frontiers (only 2009)
– Freedom of the press index
UNDP (only 2009)
– Human Development Index
(including education)
World Bank from oth. primary
sources (from 2005 to 2009)
– Internet user (per 100 people)
– Mobile phone subscribers
(per 100 people)
– Daily newspapers (per 1.000
people)
In nominal terms (includes the effects of inflation); industry specific spending consists of advertising and end-user spending directly related to entertainment and media content (no hardware,
software and services to access content) and comprises revenues from TV (including subscriptions,
subscriptions license fees and advertising)
advertising), recorded music,
music filmed entertainment
entertainment, radio
radio, consumer magazine
spending, newspaper publishing, consumer and educational book publishing, B2B media, Internet access and advertising (mobile and wired), video games and out-of-home-advertising; spending is
counted at end-user level (not wholesale), and includes retail markups when applicable; advertising measured net of agency commissions (except for USA)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 9
Data sources, scope, methodology
PwC data
Historic PwC data is collected from various sources – the most important being industry
associations
z
The media industry is represented in most countries by various
industry associations (books, publishing, music, etc.)
z
Industry associations typically publish industry data once a year
z
Telecommunications data (subscribers, lines, etc.) are tracked by
government bodies or statistical bureaus
z
This information is also publicly available
C
Company
iinformation
f
ti
z
Sectors that are dominated by a few large companies (online
advertising), PwC also bases its information on company data
PwC calculation
z
For those sectors where no official data is available, PwC estimates
market sizes based on experience from other countries (analogy)
Industry associations
Government statistics
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 10
Data sources, scope, methodology
Selection of countries
We selected data for 30 countries from around the world representing developed and
developing countries alike (set possibly to be extended in future analyses)
in scope
out of scope
z
Largest countries (GDP)
of each world region
(precision/ relevance
higher)
z
Selection of 30 largest but at least one per world
region1 and > 80% of total revenues
1
World regions: North Africa and Arabian countries (“Panarabian countries”), rest of Africa, Turkey and Israel and Turkey are clustered separately (most industrialized economies of the Near East,
for Central and Eastern European economies only Russia and Poland were taken into account (out of 5),
5) Asia is represented by China,
China India,
India Indonesia,
Indonesia Japan
Japan, South Korea
Korea, Malaysia,
Malaysia Pakistan
and Vietnam (out of 13), Europe by Germany, France, UK, Italy, Spain, Sweden, Norway, and Finland (out of 16), Latin America by Mexico, Colombia, Venezuela, Brazil, Argentina (out of 6 ),
Canada and United States as the two North American countries of the full data set and Australia as the only Pacific country (out of 2).
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 11
Data sources, scope, methodology
Methodology
For analyzing and interpreting the data we applied (non)linear univariate and multivariate
quantitative methods – explorative approach
(Non)linear
univariate
regression
Stepwise
multivariate
regression
(Econometric
modeling)
Interpretation, Discussion
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 12
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 13
Diversity of economies, media systems and industries
Diversity of the objects of investigation
Selected variables representing the national economy, the media industry as well as the
media system underline the overall diversity
Growth of media industries (total in percent)
30
Colour code for Freedom of
Press
free (index<10)
partly free (index 10-35)
insufficient (index>35)
Vietnam
25
Panarabian
Countries
Indonesia
20
Bubble diameter ∼
sum of media industries‘
revenues
Chi
China
India
15
Brazil
Venezuela
10
Argentina
Pakistan
Malaysia
South Africa
Russia
Turkey
Colombia
South Korea
Poland
Mexico
5
Israel
Australia
Canada
France
Italyy
Norway Finland Sweden
Spain
Japan
Germany
USA
UK
0
0
0,5
1
1,5
-5
5
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 14
2
2,5
3
3,5
4
Total media industries‘ share of GDP (in percent)
Diversity of economies, media systems and industries
Contribution of selected sub-segments
sub segments
While less developed countries rely more on newspaper, developed countries use to a far
larger extent the internet
Newspaper sector as a share of total media industry (for 2009 in percent)
36,7
25,4
23,1
18,9
20,7
15,2
17,2
13,6
13,3
8,2
6,3
7,9
12,7
7,5
21,3 21,4 19,3
15,0
11,7
18,2
14,0 12,0
11,8 12,0
7,6
6,6
9,9
8,6
Internet sector as a share of total media industry (for 2009 in percent)
19 4
19,4
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 15
6,4
Russian
n…
Australia
a
Un
nited States
s
1,3
Canada
a
4,1
a
Argentina
1,9
Brazil
Israel
2,1
Ven
nezuela, RB
B
5,7
a
Colombia
5,2
Turkey
y
Norway
y
Sweden
n
11,9 11,6 12,3
9,4
Finland
d
11,6
6,5
Spain
n
Italy
y
5,8
United
d…
France
e
0,1
Germany
y
0,1
Vietnam
m
Korea, Rep.
K
Japan
n
1,3
Pakistan
n
7,1
0,0
Indonesia
a
India
a
2,7
13,8
7,8
a
Malaysia
6,8
China
a
4,1
SaudiArabia//…
South Africa
S
a
1,1
10,2
13,4
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 16
Media development and general economic value creation
Correlations
Multiple cross-correlations complicate the disentanglement of direct and indirect
dependencies among variables
Correlation
coefficient1
Growth of
GDP
Growth of GDP share Human De- Freedom of
total media of tot. med. velopment Press
GNI at PPP industries industries Index
Index
GDP per
capita
Growth of GDP
1
-0,54
-0,63
0,67
-0,70
-0,57
0,59
GDP per capita
-0,54
1
0,97
-0,78
0,61
0,85
-0,71
GNI at PPP
-0,63
0,97
1
-0,85
0,69
0,92
-0,74
0,67
-0,78
-0,85
1
-0,62
-0,80
0,73
GDP share of total
media industries
-0,70
0,61
0,69
-0,62
1
0,69
-0,67
Human
Development Index
-0,57
0,85
0,92
-0,80
0,69
1
-0,71
0 59
0,59
-0
0,71
71
-0
0,74
74
0 73
0,73
-0
0,67
67
-0
0,71
71
1
Growth of total
media industries
Freedom of Press
Index
1All
correlations are highly significant at a level of at least p=0,01
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 17
Media development and general economic value creation
Drivers of growth for media industries
Growth in media industries is driven by general economic value creation as well as by the
maturity of the media industry („catching up“)
Growth in total media industries (percent)
30
Linear regression
25
20
15
10
Growth in media ∼
5
(growth in GDP))
(g
0
-5
5
10
15
20
25
-5 0
Growth in GDP (percent)
Growth in total media industries (percent)
30
Linear regression
Growth in media ∼
Power function
25
1 / (share of media)
20
15
10
5
0
1
2
3
4
-5 0
Share of media of GDP (percent)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 18
Growth in GDP (percent)
25
Bubble diameter ∼
Growth in total media
industries (percent)
20
15
10
5
0
0
-5
1
2
3
4
Share of media of GDP (percent)
Media development and general economic value creation
Dependence on GNI
Both drivers of growth in media depend on the wealth of the country (wealthy countries
grow slower and have a more mature media industry) – after all one factor dominates
Growth in GDP (percent)
25
Linear regression
Power function
20
Growth in total media industries (percent)
30
Growth in GDP ∼
1 / (GNI)a
Linear regression
15
Power function
25
Correlation significant
at level p<0,05
10
5
Correlation significant
at level p<0,05
20
0
Growth in GDP ∼
1 / (GNI)c
-5 0
10000 20000 30000 40000 50000 60000 15
GNI (US$)
Share of media industries of GDP (percent)
10
30
Linear regression
25
20
15
Correlation
significant
at level
p<0,05
10
5
Share of media ∼
(GNI)b
5
0
0
0
-5
-5
5
15
25
GNI (US$)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 19
-5
20000
40000
60000
GNI (US$)
Media development and general economic value creation
Stimulation of GDP growth
After modeling media growth with GNI as one factor, an impact on GDP remains (optimum
fit with two independent variable GNI and GDP growth)
Growth in GDP (percent)
25
20
Correlation significant
at level p<0,05
15
10
5
0
-0,5
0
-5
0,5
1
1,5
2
Ratio of real media growth and modeled media growth
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 20
Media development and general economic value creation
Further influences of the media system
Most overall influences of variables related to the media system are already included in
economic indicators – only segment specific effects significant
Misleading correlation
Real media growth (percent)
Growth in tot. media ind. (percent)
30
25
20
15
10
5
0
-5 0
50
100
Freedom of Press Index
25
20
15
10
Colour code for Freedom of
Press
free (index<10)
partly free (index 10-35)
insufficient (index>35)
5
0
-5
0
-5
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 21
5
10
15
20
25
modeled media growth (percent)
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 22
Effects of growth in/for specific media industries
Contribution to growth of advertising versus
consumer revenues
Strong growth in media is more driven by advertising than by consumer spending
Consumer contribution to growth of total media industries (percent)
25
20
Bubble diameter = total growth
15
Vietnam
10
Pakistan
India
China
Malaysia
5
Indonesia
South Korea
Colombia
0
0
5
Panarabian
Countries
10
15
20
25
Advertising contribution to growth of total media industries (percent)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 23
Effects of growth in/for specific media industries
Traditional versus new media and purely information based
media versus pure entertainment media
High growth in media is more driven by traditional media and entertainment as by new
media and pure information media
Growth in „new media“ (Internet) (percent)
10
Growth in pure „information media“ (B2B) (percent)
4
3,5
8
6
3
2,5
Bubble diameter
= total growth
2
4
China
2Poland
1,5
Panarabian
Countries
‐5
1
Indonesia
Australia
0
Bubble diameter
= total growth
India
Malaysia
0Pakistan
5
10
Growth in „traditional media“
-2
(newspaper) (percent)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 24
Vietnam
Brazil
India
0,5
Panarabian
Countries 0
-1
-0,5
-1
Argentina
Russia
0
1
2
South Korea
3
4
Growth in „entertainment media“ (film,
music games) (percent)
music,
Content
z
R ti
Rationale,
l related
l t d studies,
t di
theoretical
th
ti l context
t t
z
Data sources, scope, methodology
z
Diversity of economies, media systems and industries
z
Media development and general economic value creation
z
Effects of growth in/for specific media industries
z
Conclusions and outlook on further research
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 25
Conclusions and outlook on further research
First conclusions
1
2
To what extent is the development of media linked to the general econ.
econ value creation
and what are differences for countries on different levels of economic development?
z
Media growth is driven by general economic growth with advertising being the dominant
contribution – mature media markets that are large in terms of share of GDP grow less
z
A media industry performing above average possibly drives economic growth in turn
What influence has the underlying media system therein?
z
3
Univar. statistics suggest an influence e.g. of the Freedom of the Press Index; however
with multivar. analyses no significant additional effect is seen (poor countries tend to have
more restrictive media systems and media industries that are less mature
mature, ii.e.
e catching up)
How do the former two interrelations show up in different media industries?
z
Split up of total media market into sub-segments and their individual growth rates show
striking differences
z
Effects discussed for overall media growth show also up differently in sub-segments (e.g.
“traditional media” and “pure information based media” possibly stimulating GDP more)
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 26
Conclusions and outlook on further research
Preliminary model
Most variables are linked in a manifold way to each other by theoretical coniderations tentative hierarchry of influences
Media growth
GDP growth
Share of media
of GDP
GNI
Freedom of
Press
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 27
HDI
Conclusions and outlook on further research
Outlook
More countries
z
Wie weiter
In depth validation of
data and relations
z
z
z
z
z
Refined modeling
z
Analysis of full data set provided by PwC
Possibly enhancing the significance of results (when overall suitability
of data is thoroughly understood)
Data for some variables and selected countries deviate significantly
from the average
They require a detailed look on possible reasons and the consistency
with other data
Qualitative insight also necessary for reliable and valid interpretation
More data points and improved understanding auf data / variables
may lead to a refined model and enable to achieve significant results
for or independent variables
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 28
Thank you for your attention!
Economic value creation and the growth of media industries I Castulus Kolo and Reimar Müller I 29