7. Summary of industry opportunities


How might the private sector respond to opportunities?

To become a substantial participant in the IMM industry, based in Australia, there are several choices for private sector players. These options are not mutually exclusive. Indeed the thrust of the argument in this report is that most of these initiatives represent the essential building blocks for successful industry outcomes. To seize the opportunities, industry participants could:

As we see it, these business segments are large, sustainable, and accessible today. They do not require waiting for broadband: today's narrowband networks can get many on-line multimedia services launched. They include short-term opportunistic plays, which will make a number of agile entrepreneurs quite wealthy (such as tying up Asian distribution channels, based on agency rights for North American or European CD-ROM product). They all need a rapid, focussed effort to seize first-mover advantage in emerging on-line multimedia services, to serve local, regional and global markets.

Individual companies and operators can be expected to exploit particular opportunities in each of these areas. The question is whether this will add up to a scale of industry effort that maximises the industry opportunity and is sustainable as global competition strengthens.

It seems clear that a focused industry development effort in Australia will pay dividends. For example, we doubt that Australian independent publishers of CD-ROM titles can survive without strong international distribution ties (any more than the independent book or recorded music publishers have, to date). A strong effort is needed to train a broad base of technical and creative people who can provide the professional services: perhaps 50,000 professionals in full-time employment in five years time would be a reasonable target. This talent base would be greatly enhanced if there is a systematic program to foster facilities and precincts where the technical and creative talent can mingle and form project teams, at low cost.

Sizing the opportunity for Australia.

To summarise the Australian interactive multimedia industry opportunity, as assessed in this report, we would make a few key observations for consideration by both industry participants and government.

  1. The professional services opportunity is modest. It represents perhaps 50,000 full-time equivalent jobs worth $250 million per year. Much of this will occur without targeted government policy action.
  2. Attracting international publishers to domicile and invest in Australia is key to sustainable employment of the talent pool and, with reinvestment of royalties and profits locally, could generate up to a $1 billion industry. This is worth having, and may be thought of as a particular focus for the RHQ attraction program. The full set of government investment attraction initiatives should be targeted (and customised where necessary) towards the twenty or so international firms that matter.
  3. The main prize is to establish Australia as a prime location for the development, publication and distribution of on-line interactive multimedia services to regional and global markets. This requires a three to five year focused strategy to build a new set of industries for global markets, where first mover advantage and established brand names will be critical for market penetration. The twenty or so major international publishers must be encouraged to test and launch new on-line service concepts in Australia. Several of the emerging independent IMM content development groups could have the creativity and management talent to grow into substantial on-line service providers, provided equitable and open access to consumers is available via competitively priced international telecommunications networks.
  4. By the end of the decade a burgeoning market could be achieved. A domestic IMM market of $2 to 3 billion, at end user prices, is possible. Exports of $1 billion, at wholesale prices, for the content industries must be seen as achievable by 1997/98. Very conservatively, at least 20% of this amount should be in IMM formats (CD-ROM and on-line). By 1999/2000 a very much higher on-line "user import" revenue stream could be achievable, but this will require a concerted effort by government and service providers to build a supportive environment.

Summary of the main challenges

The overwhelming bottleneck constraint that has been identified is distribution. This applies to content industries in general and the emerging multimedia on-line services opportunity in particular. The essential challenge is to ensure that Australia imports overseas consumers for its creative infrastructure (like we import tourists) rather than exporting Australian content and electronic services through overseas service providers, who can extract bottleneck rents.

International communication links need to be tariffed on a competitive basis. Australia is currently not competitive in the market for on-line access by a factor of up to ten times or more. To be competitive, international links need to be tariffed on a distance independent basis, and preferably to provide bandwidth on demand.

The Australian Government must move to focus the Australian carriers - Telstra and Optus - on deployment of abundant bandwidth for multimedia traffic between Australia and the major prospective overseas consumer markets in North America, Asia, and Europe. Policy mechanisms to encourage the carriers down this track can be identified, including the use of Ministerial determinations on pricing principles, the selective relaxation of rules applying to international gateways, the negotiation of specific bilateral arrangements for international resale, and clear policy signals as to the weight to be given this issue in the current telecommunications policy review.

Big pipes, at the world's best prices for usage, will be a necessary but not sufficient condition to open up the necessary consumer markets for content services and to reduce the constraints imposed by existing publishers and distributors over access channels. Care will be needed to ensure that new profit-taking bottlenecks are not created or condoned by any regulations or laws, such as the emergence of dominant gateway providers or vendors of human : system interfaces that may make consumer access to content more expensive than would otherwise be possible.

The role of government

The potential capability and performance of emerging Australian interactive multimedia industries can be tested against multiple national policy objectives, addressing both economic output and cultural identity (Figure 31).


Figure 31: Possible policy objectives and industry measures

Maximise economic output                  Jobs created in Australia       
                                          Total wages
                                          Royalties and fees to owners   
                                          of intellectual property    
				          Return on working capital employed              
Maximise support for Australian           Quality and quantity of output of     
cultural identity                         cultural industries, eg .        
                                           - ABC news caf, fine music,    
                                                  enterprises, drama
                                           - FFC/S10ba projects           
                                           - Education curricula Local          
                                           - Local content on FTA television    
                                          Emphasis on local consumption/      
                                                  penetration

Seek positive balance of trade            Increased exports of goods and        
                                          services           
                                          Import substitution effects                               

We believe that there is clear role for government to assist the "creative infrastructure" to grow by implementing a set of active policy measures that:

  1. Seek to maximise both economic output from content industries and support for Australian cultural policies;
  2. Help build a much larger number of content development teams, with a talent pool matching the present world-class pioneering group;
  3. Attract and retain both local and global IMM publishers to locate activities in Australia, and to partner with the content developers;
  4. Bring forward the timing of experimentation in, and the market launch of on-line services, to gain first-mover advantage for Australian multimedia publishers in overseas markets, and to protect against the downside of a decline in competitiveness of the existing $9 billion content industries in Australia as they become progressively more trade-exposed to on-line services emanating from overseas centres;
  5. Instigate a range of direct initiatives leveraging off governments' position as significant users and producers of content, to facilitate the development of a strong and sustainable Australian IMM industry.

Specific government measures to address the issues canvassed in this report are set out in the next section. It is important to note that, in implementing these initiatives, a "whole of government" approach will be required.