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Regulation vs. Revenue Generation in Search Advertising

Valerie | 18 Jun 2009, 15:05

Google has come under fire again for its encroaching dominance in the media industry, this time as a result of not supporting an expansion of Advertising Standards Authority (ASA) regulation for new media platforms in search advertising, the Guardian reports.

Despite controlling 80% of the search-advertising market, which makes up 58% of all online advertising spend in the UK, Google does not support the payment of levies to the ASA for policing the ads which appear on its site. As the Guardian explains:

“Advertisements aired on television and radio, or run on billboards or in print products, are regulated by the Advertising Standards Authority and advertisers pay a levy - typically 0.1% of their annual marketing budgets - to fund the ASA’s system. However, while the ASA regulates all paid-for online search advertising - the sponsored links that pop up on the right-hand side of a browser window on Google, for example - no levy is paid on the cost of that advertising.”

The UK advertising trade body, the Isba is calling for greater self-regulation in search advertising and for the ASA’s remit to be expanded accordingly to so it can regulate the content of websites that consumers are finding through search engines but says search advertisers need to begin paying into the levy system in order to fund such an extension.  A standoff has emerged from a disagreement over how much the levy would be, who would collect it and whether all search advertisers should be forced to pay.

Depending its position, Matt Brittin, the managing director of Google UK argued that the company had been “constructively engaged ... throughout the process” and supports an increase in the ASA’s remit and the scope of the levy to fund it. But he is also concerned that the charge “is not levied on smaller advertisers, which make up the bulk of our advertisers”.

The dispute highlights the challenges of regulating the emerging digital landscape whilst taking advantage of the huge creative and commercial possibilities it creates, which will be a key talking point at the forthcoming c&binet forum.

Digital Britain for the Video Games Industry: new Ratings System unveiled

Valerie | 17 Jun 2009, 10:17

Photo: Getty

Whilst focusing on the implications for the less-interactive media, the Digital Britain report also offered some positive news for the UK games industry.

Unveiled by new Creative Industries Minister Siôn Simon yesterday as part of the Digital Britain report, the Government announced its overhaul of the video games classification rules which will see the adoption of the PEGI (Pan European Game Information) system, a self-regulatory system currently used in most European countries in which publishers themselves recommend an age rating for games. This will replace the BBFC games ratings as the sole method of classifying video games in the UK and will make selling a video game rated 12 or over to an underage person illegal for the first time.

The decision was welcomed by video games trade body ELSPA and games publishers including Nintendo, Ubisoft UK and Sega Europe as “absolutely the right decision for child safety”.

The Digital Britain report also acknowledged the upward trajectory predicted for the UK video games industry and featured a pledge by the Government to work with the video games industry to collect and review the “evidence” for tax breaks that would help support and sustain the creation of “culturally British” video games in the UK.

An article in the Independent earlier this week indicated that many MPs were ‘receptive’ to tax breaks for video games developers, with John Whittingdale, chairman of the House of Commons Select Committee on Culture, Media and Sport urging fellow MPs from all parties to act fast in offering greater incentives to British developers.

Launching the Play Together initiative with Tiga earlier this week, which will focus on “fostering innovation, collaboration and communication between UK video game companies and with other creative industries such as music and film, Jon Kingsbury, creative programme director at NESTA said:

“We believe the UK video game industry is one of the shining lights of digital Britain. We want to foster this creativity and help the industry become even more successful in the future. What is clear is that innovation in all aspects of the business process is essential if Britain’s creative industries are going to remain competitive in the global market.”

Enabling collaboration between the Creative Industries is a key priority for c&binet and the forum in October will be dedicated to bringing together creative business leaders to share best practice and address shared challenges collectively.

Digital Britain Report: Building Britain’s Digital Future

Valerie | 16 Jun 2009, 17:03

The UK Government has today published its action plan for ensuring that the UK is at the leading edge of the global digital economy.  The Digital Britain Whitepaper sets out the importance of the Digital Economy to the nation’s economic future, and how it will drive future industrial capability and competitiveness.

Although many of the headlines focused on universal broadband access, the creative industries made up a considerable proportion of the Digital Britain report, published earlier today. There were four key issues addressed in chapter 4 – Creative Industries in the Digital World - namely:

Recognition of the economic importance of the UK’s creative industries

–  “We need… a commitment to the creative industries grounded in the belief that they can be scaled and industrialised in the same way as other successful hi-technology,  knowledge industries such as bio-sciences have been”

The importance of protecting and rewarding creativity in the digital world, meeting the mutual interests of creators, aggregators, distributors and consumers

–  The Government’s objective is to see the creation of an effective online download and streaming market of scale, providing content that is highly affordable, easily and conveniently accessible to consumers

–  Digital Britain proposes an equitable framework to bring content-creators, rights-holders, aggregators, distributors and consumers together to create workable and effective online download markets of scale

Extending public policy framework to embrace interactive content

–  Government consultation to give Ofcom a duty to police unlawful file sharing through notification of unlawful activity and for repeat infringers, a court based process of identify release and civil action

–  Bolstering action against illegal file sharers through technical measures, specified in legislation, and could include Blocking (Site, IP, URL); Protocol blocking,  Port blocking and Bandwidth capping

–  If voluntary action does not reduce illegal file sharing after 12 months, Ofcom should use its backstop powers to introduce these additional measures

Ensuring that existing interventions are digital ready

–  Government acknowledgement that the scope for modernisation of the current UK copyright framework is “heavily constrained within the EU copyright framework”, with “further work that remains to be done”

The full Digital Britain report is available online and further details can be found on the latest news and publication page of the DCMS website.

You can also follow additional commentary on the Digital Britain Forum, Twitter feed and here on the c&binet blog where, over the coming days, we will be looking in more detail at what the measures outlined in the report mean for the Creative Industries.

Virgin steps up antipiracy enforcement with DRM-free music service

Valerie | 16 Jun 2009, 08:37

Virgin Media has partnered with the world’s biggest music label, Universal Music, to launch an unlimited music download service with a difference.

Signifying the latest retreat from the major record companies from DRM, for a monthly fee, the new music subscription service will enable subscribers to download or stream as many tracks and albums as they want in MP3 format and keep the music they have downloaded even if they stop paying the monthly fee. It builds on similar “all you can eat” download services such as Nokia’s Comes With Music and comes as the UK Government outlines its plans on Britain’s digital future in a report out today.

As part of the deal, Virgin has pledged to aggressively police usage to stop the MP3 tracks turning up on file-sharing networks. This will include educating users but for persistent offenders, the last resort would be a temporary suspension of a customer’s internet connection if that person consistently ignored warnings about their activity.

In a statement, Neil Berkett, Virgin Media’s CEO proclaimed that the new service was an industry first:

“In terms of both convenience and value, our new music service will be superior to anything that’s available online today and provides a fair deal for both consumers and artists.”

The deal was also welcomed by industry trade bodies. IFPI Chairman John Kennedy said the new Virgin-Universal deal was “the kind of partnership” between a music company and an internet service provider (ISP) that he expects to shape the future of the music business internationally.

However, entertainment lawyers said the service was unlikely to solve the global music industry’s problem of billions of dollars lost to music piracy, and would need to offer content from big-name entertainers to be attractive to consumers.

The content industry has been urging ISPs to act as copyright enforcers for some time so the music industry will be watching the experiment carefully. As PA observes, “if content creators can get ISPs and service providers to do copyright enforcement work, they may be willing to publish more content in DRM-free formats that are more appealing to consumers”.

According to PaidContent, Virgin said it would be “negotiating with other UK major and independent music labels and publishers to ensure it can offer a complete, compelling catalogue by the time it launches” later this year.

Are downloads really killing the music industry?

Valerie | 15 Jun 2009, 14:44

Research commissioned by the Strategic Advisory Board for Intellectual Property published in the Guardian recently revealed that 7 million people “use” illegal downloads in the UK, “costing the economy billions of pounds and thousands of jobs”.

It followed the news that a coalition of creative industries organisations, including Pact, the broadcasting and entertainment union Bectu, the BPI and the UK’s biggest trade union, Amicus/Unite had, in a letter to the Daily Telegraph, outlined its calls for increased pressure on the government to act against illegal downloading in the forthcoming final Digital Britain report, stressing that failure to act would lead to widespread job losses in the creative industries. A consumer poll also found that the majority of British adults would back stronger government intervention against online piracy if it helped protect media industry jobs.

However, an article in the Guardian asks whether it is disingenuous to count each of the millions of music files downloaded each day as a “lost” sale. Instead, Guardian writer Charles Arthur argues that perhaps filesharing isn’t music’s biggest foe.

Comparing sales figures for consumer spending on entertainment, which includes music, DVDs sales and rentals and video games, he proposes that what appears to be hurting the music industry most is growing competition from the games industry. The figures show that whilst total spending has grown – music spending is being squeezed, with spending rising dramatically in the games industry, from £1.18bn in 1999 to £4.03bn in 2008. 

Summing this up, he said:

“... the reality is that nowadays, one can choose between a game costing £40 that will last weeks, or a £10 CD with two great tracks and eight dud ones. I think a lot of people are choosing the game - and downloading the two tracks. That’s real discretion in spending.”

Clearly there is much the music industry can learn from the games industry – Arthur suggests for example that consoles / new business models that lock consumers into buying its products is perhaps the way forward.  With subscription-based services from the likes of Spotify growing in popularity, innovation has an important role to play in helping the music industry to fight for a larger share of the consumer’s wallet and ensure customers keep coming back. It is this alongside the file sharing challenge that the industry needs to address if it is to survive and prosper.

UK Gaming Industry receives boost with new Parliamentary Group

Valerie | 12 Jun 2009, 11:32

The UK Government has announced it will form the first ever cross-party group dedicated to raising the profile of the burgeoning video games industry.

The news comes as the new Culture Secretary, Ben Bradshaw confirmed the Government’s recognition of the importance of the video games industry to the economy at a House of Commons debate earlier this week.

The remit for the All Party Parliamentary Group will be to “provide a forum to discuss business issues affecting video games software developers, to develop policies to enhance the sector and to champion an industry that responsibly creates content for an audience ranging from children to adults.”

To be chaired by Labour MP Bill Olner and MP John Whittingdale with Tiga, the national trade association for games developers in the UK as secretariat, its membership stretches beyond 20 MPs, Lords and industry representatives, including Lord Puttnam of Queensgate and MP Philip Davies.

Tiga CEO, Richard Wilson welcomed the announcement:

“The establishment of the All-Party Group on the Computer and Video Games industry will ensure that issues affecting the sector, including the tax system, skill needs and industry academia links are raised still more effectively in Parliament and Government.”

As c&binet recently reported, the video games industry currently contributes more that than £1 billion to Britain’s gross domestic product.  The future success of the video games industry will be a key theme for the forthcoming c&binet forum, which will consider the creative and regulatory structure that will help the sector to thrive beyond the recession.