digital content

Reporting on the size of the digital content industry in Japan, an AP news feed on AOL news indicates that the digital content market size in Japan has grew to 2.694 trillion yen in 2007, just under 3.4 per cent growth.

The figures come as the Digital Content Association of Japan released their Digital Content White Paper 2008, which will interest readers of Japanese, on 1 September.

According to the association’s Press Release (PDF file in Japanese), 2007 saw visual content emerge with a clear margin as the largest contributor to digital content sales, reaching 30 per cent of total sale (540.8 billion yen, an increase of 8.7 per cent). Music was down to 26 per cent of the total, showing a negligible decrease in sales to 596.5 billion yen (12.5 billion yen down from the previons year). Game software also experienced a small decrease to total 767.7 billion yen, while digital publishing sales increased by over 10 per cent to reach 789.7 billion yen.

While most digital content was still predominantly sold as packaged media (66 per cent of total), consumption through mobile phones increased to reach 21.6 per cent of the total, ahead of online sales 11.6 per cent.

Meanwhile, the whole (media) content market size stood at 13.8 trillion yen, an ever so slight increase on 2006 of 0.3 per cent. 5.8 trillion of this was in publishing, 4.84 trillion in visual content, 1.86 trillion in music and 1.29 trillion in games. With regards to distribution medium, 48.6 per cent were packaged goods, 29.2 per cent via broadcasting, 12.8  per cent through location-based distribution (cinemas, game arcades, concerts), 5 per cent online, and 4.3 per cent via mobile.

Not surprisingly, packaged media has been steadily decreasing over the past 5 years as online and mobile sales continue to grow.


With the Tokyo Games Show over, the Japan Animation Contents Meeting (JAM2007) concluding on Sunday 7th and ASIAGRAPH 2007 starting on the 11th, the content-related trade shows and festivals continue to roll as part of CoFesta in Tokyo, supported by the Ministry for Economy Trade and Investment (METI) and various industry bodies.

CoFesta continues with:

among others.

According to CoFesta site,

The Japan International Contents Festival (CoFesta) is one of the world’s largest contents festivals. Various events related to the contents industry, such as games, anime, manga (comics)/characters, broadcasting, music and films, are all held in Japan in autumn. CoFesta brings all these events together. CoFesta is for all kinds of contents emerging from Japan to influence each other and to be linked, to create new possibilities while also maintaining connections with the media technology industry for the distribution of contents, and to make a broad appeal to overseas.

The Game Developers Association of Australia (GDAA) have had their request for tax rebates for the film industry to be extended to investment in games developing rejected by Federal Government Communications IT and Arts Minister Senator Coonan.

In a previous entry, >>Howard Government to ‘bring Hollywood home’ through tax breaks<< I mentioned the new package the federal government was providing the film industry to ‘bring Hollywood home’ which included a 40 percent refundable tax rebates for film production.

The entry was also critical of the package and its ambitious goal:

…on first glance the tax incentives appear somewhat short-sighted or parochial on the policymakers front by exacerbating an artificial division between supporting “Australian stories” and allowing international films to use local locations and talent.

Quoted on Builder AU news, the Minister said in a written response to the GDAA:

“The Screen Media Support Package announced in the Budget has the potential to benefit screen content producers of all kinds. While games will not be eligible for the tax offsets announced as part of the Package, the introduction of a Location Offset is expected to have positive indirect flow-on effects for screen businesses, as digital and visual companies develop larger and more skilled workforces.”

Builder AU quotes GDAA CEO Greg Bondar saying the introduction of a rebate would have led to an additional AU$25 million in new investment into Australian-developed titles.

Raising the game developers’ interest in receiving government support to encourage investment, the aforementioned DISCONTENTS entry asked the question “why film and not games?”

On the game / film divide, one could argue that the film industry still has the justification of “culture” on its side, having enjoyed a long history of support from a cultural policy approach. Film and television policy has long supported the production of “Australian” programs to ‘protect our culture and national identity.’ Like nobody would watch Australian programs if there was not a 50 percent local content quota on free-to-air broadcasts? Games in contrast are rarely distinguishable as ‘Australian’ (and probably export better than films for that very reason!)

But if the goal of the film industry package is to increase economic growth, then games developers have a very cogent argument for the package being extended to them.

Undoubtedly, the Minister, and Treasury, would be anxious about extending tax incentives beyond the industry that the policy was originally designed for. Fears that such a move would open the flood gates to lobbying from any number of industry bodies claiming that they are no different to the industry sector receiving benefits. With this in mind, it is not all together likely that the tax incentives will be extended to the games sector if Labor wins office this election, despite their being “very sympathetic”.

It is an indictment on industry [industrial] policy that an industry should need to show it is in danger of dying – that capital will dry up and jobs will be lost, before a government offers any kind of support. One has to wonder whether if the Minister’s response would be any different if the GDAA showed that they were being undercut by programmers and developers in China and were set to lose x number of jobs without government intervention. That is not meant to be a statement advocating the propping up ailing industries, nor one that supports the indiscriminate provision of tax dollars to high-growth industries.

One does wonder though, whether the recent ‘lull’ in industry policy in Australia is not so much a sleeper as it is the conservative continuation of prevailing protection for inefficient industries.

It seems that more and more governments at the provincial/state level are increasingly interested in supporting game development.

Games are a high-growth industry and fit well into the rhetoric of ‘knowledge economy’ and ‘information economy’. The industry requires ‘creative’ inputs, relies heavily on advanced software and information technology, and employs a workforce that are well trained, (relatively) young, and with high discretionary income relative to some manufacturing sectors.

For jurisdictions with waning manufacturing industries, games represent a tool to create jobs, or at least absorb losses (on a net basis rather than directly) from declining industries. Reducing unemployment can not only be a key economic concern, but is often a key target of political campaigns and a tangible measure of a government’s ‘success’. As well as creating new jobs, it has the potential to reduce ‘brain drain’ as locally educated graduates move elsewhere.

A healthy or at least visible games industry in a jurisdiction can also be used by local and provincial governments in their location marketing activities to signal an attractive climate for potential investors. Having games in an industrial portfolio can give a regional economy ‘currency’ and suggest the existence of high growth industries, skilled and flexible workforce, and an advanced ICT infrastructure.

Not everyone looks at games as a desirable industry. Several stakeholders and interest groups such as those formed by parents view computer games, the products the industry produces, as having a negative impact on their children’s lives and on society in general. This prevailing view, while fading, is still present, and as these groups form a potentially large voting pool, governments are no doubt sensitive to their concerns and may not want to appear to be supporting the games industry directly by allocating funds.

The argument for games is seen in the U.S. state of Georgia, where tax credits have been approved for the industry, and local developers see that state as a potential facilitator for attracting both venture capital and major games publishers. The following quotes are from a Georgia Tech News Release.

Georgia General Assembly recently passed tax credits aimed at game developers and film companies that base production activities, such as editing, animation and coding, in the state.

Now, the stats on industry size:

• Sales of video-game software in the United States totaled $8.2 billion in 2004 – not far behind the music industry, which generated $11.4 billion the same year.
• By 2010, U.S. sales of video games are expected to grow to $15 billion.
• Video gaming is expected to generate more than 250,000 jobs by 2009, a 75 percent increase over the industry’s 144,000 full-time positions in 2004.

The industry helping the economy:

For one thing, the industry provides high-paying jobs that could help ease the economic sting of Georgia’s eroding manufacturing base.

with a skilled and flexible workforce:

According to ESA statistics, entry-level game developers earn $67,000 per year. Video-game development is high science, providing white-collar, intellectual jobs, Lowe notes. Today’s game development teams must have expertise in a wide range of skill sets, including 3-D graphics, architectural engineering, artificial intelligence, computer networking, databases, mathematics, physics, digital sound and more.


but graduates are leaving for other areas:

Strengthening Georgia’s video-gaming industry would not only improve the state’s economy, but also prevent brain drain. “If graduates are getting into video games, they’re more than likely relocating to the West Coast,” says GGDA’s Lowe. “That’s a tremendous loss of human capital for the state of Georgia. We’re spending tax dollars to educate students and then letting them go.”

So there is the argument for stemming the flow – or the leak – of talent that has been trained locally and moves interstate or overseas, either due to a lack of local jobs or being recruited by major firms. Not to advocate the view, but if education were fully self-funded, there would of course be no argument for reducing the ‘waste’ of tax revenue on walking human capital, and hence no argument to spend more tax dollars in order to retain it. The institute does see itself as a mecca for game training though:

“When game companies hire employees, Georgia Tech is one of three schools that they turn to,” says LCC’s Murray, noting the other two schools are Carnegie Mellon and the University of Southern California. “We’re supplying the next generation of game designers and we’re training them in a way that employers can’t get elsewhere.”

The need for (venture) capital and ‘anchor’ publishers:

To bolster gaming, Lowe would like to see more venture capital flowing toward video-game startups. That’s because the average cost of developing a video game today has soared from about $40,000 to $10 million during the last decade. “One of the things GGDA is doing is to help companies learn to speak the language of capital sources and learn how to approach venture capitalists,” says Lowe.

Attracting a major video publishing company would also be a plus, Lowe adds. Publishers have muscle in managing intellectual property – an area where small design studios typically are weak.

How much in money, tax concessions, subsidies, and other incentives would the State need to proffer to attract a major publisher though? Wouldn’t it be better for an industry-university collaborative effort to provide the first forays for publishers to set-up locally? If the training institute is the ‘selling point’ for Atlanta from a publisher’s perspective, then such an arrangement with Georgia Tech may provide them with better access to graduates.

But regarding industry structure, are local developers all independent? Or are any owned by major publishers? Are they currently doing sub-contracting work for major developers or publishers or are they producing their own IP? How many graduates find employment locally? How many start up their own firms locally? Answers to these questions are key considerations for policy formulation.

Korean content producers, supported by government, are looking to extend their reach further into international markets, beyond Asia.

An article in Variety

  • Korea’s content industries are likely to produce ‘more nuanced’ properties rather than relying heavily on the local star system, . Big names appear not to be getting the pre-sales that they were overseas.
  • Film commissions in Seoul and Busan are becoming more aggressive at establishing Korea as a viable shooting location.
  • The film industry is looking to the US and Hollywood both for distribution and co-production opportunities
  • The technological savvy of local firms is helping to give Korea a leg up in certain sectors like special effects and new media.
  • Korean animators, who have gained technical expertise through years of outsourced U.S. work, are becoming strong contributors. KOCCA and other government organisations provide significant funding for training in the industry.

My question though, is how developed their storytelling ability has become, and to what extent government policies are aiming to develop these non-technical creative skills.

An article in the Bangkok Post has quoted industry figures in Thailand saying that the animation and graphics ‘industry’ needs government support.

”Policymakers should realise that animation and the CG industry could generate lucrative income to the country,”
”It is a value-creation industry, which needs only ideas and creativity. It is not harmful to anybody and does not cause global warming,”

….Santi Laohaburanakit, the vice-chairman of the Thailand Animation and Computer Graphics Association told investors and fund managers at the Thailand Focus 2007 investor conference yesterday.

Calls for government assistance come despite the fact that the industry has grown by 40 percent in the last year.

It may seem strange for a high growth industry to be asking for government support, but it not all that uncommon. Industries – particularly newer industries – lobbying for assistance generally first need to show politicians how ‘valuable’ their industry is in terms of how much it contributes to the economy (income and jobs), and what its growth potential is. The second prong is then to identify that growth could be much higher if certain policy provisions were implemented. Here, it is also important to mention the potential for increased exports. A common strategy is to point out a similar industry that is receiving favourable conditions and argue that one’s own industry is facing discrimination. Finally, lobbyists will invariably point to other nations in the region indicating to their own government that foreign states are providing more favourable environments and may well gain a competitive advantage over the home country.

”Unfortunately, many Thai policymakers have not seen this opportunity, unlike [those in] South Korea or Singapore,”

”Without a national policy, Thailand can lag behind Singapore and Malaysia.”

”I would say that the value could multiply by 10 times over the next five years if we receive a strong commitment from the government,” Mr Santi said.

…which is a monstrous target. Digital Content industry players in Australia were aiming to double industry size in 10 years (7% growth per year) but then that all is relative to the respective starting size and maturity of the industries.

Finally the author of the article has added some supporting statistics:

Based on a Kenan Institute report, South Korea’s online game industry is now worth more than $4 billion. The global market is estimated at $101 billion, more than 80% of which is controlled by American and Japanese companies.

According to the association, animation and computer graphics in Thailand can be categorised into three segments: animation for TV and cinemas, valued at $41 million last year; digital gaming worth $41 million; and visual effects and computer graphics worth $33 million.

Taiwan Government has approved a set of plans to promote the development of Taiwan’s digital content industry, according to an article in Digitimes.

Focusing on computer animation and games software, the plans aim to increase the industry’s annual production value from NT$341.2 billion (US$10.34 billion) in 2006 to NT$600 billion in 2011.

The National Development Fund under the Executive Yuan will appropriate NT$20 billion for a five-year budget to encourage R&D in computer animation and games software by investing in private projects, especially joint ventures (JV) with international partners, the Executive Yuan indicated. Once such R&D projects pass examination by the government, the fund will commit investment before the projects kick off, an important measure to facilitate R&D on a long-term basis, the Executive Yuan pointed out.

Growing the industry 1.75 times its original size in five years is an ambitious numerical goal to achieve. Encouraging R&D is a positive step, but notably the government intends to invest in projects rather than offering tax offsets (which has both merits and demerits). What the government panel defines as “R&D” is also unclear; is it the development of a game or animated work, or does it refer to development of tools, middleware, and engines for games developers and artists to use?

In addition, there will be a five-year subsidy budget of NT$4.12 billion, including: NT$1.36 billion to subsidize Taiwan-based production of about 60 animation films as well as games software in an attempt to cultivate Taiwan’s R&D capabilities; NT$330 million to subsidize the broadcast of Taiwan produced animated video by terrestrial and cable TV companies, bringing the proportion of animation broadcast in Taiwan that was produced locally from 0.33% in 2006 to 10% in 2011; and finally, the promotion of more than 10 animated films and games characterized by vivid Taiwan imagery in the international market.

These animation subsidies appears to clearly emphasise the production of local content, taking on almost an import-substitution-like policy goal. Whether subsidised productions that presumably display imagery easily identifiable as Taiwanese can be successfully sold in the international market is also questionable.

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