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Wednesday, January 07, 2009

A vision for an International Content Services Centre - Part II

In his book, “How the Irish Saved Civilization: The Untold Story of Ireland's Heroic Role from the Fall of Rome to the Rise of Medieval Europe”, 
Thomas Cahill outlines how the great monastic settlements of Ireland helped to preserve the classical culture of Europe from being lost during the so-called Dark ages. The Irish monks became passionate scribes, not only of the scriptures but also of ancient classical texts, ensuring that all the great learning of the Roman age did not irretrievably vanish. In a sense, Ireland between the 6th and 9th centuries became a “knowledge economy” through the painstaking and disciplined work of the disciples of St. Patrick.

Now over 1500 years later, as we move swiftly from the analogue to the digital age, Ireland has the opportunity to re-define itself as a “knowledge economy”. Whether we save civilization again is up for grabs. In my last article, I outlined broadly the concept of an International Content Services Centre, the digital content equivalent of the IFSC. The purpose of this article is to look more closely at what could be achieved by such an initiative based on the feedback from readers and other interested stakeholders.

I outline each opportunity, the actions required and the potential return on investment. Due to the convergent nature of the industry, these areas are not exclusive and will necessarily overlap. These are broad brushstroke descriptions of what such a centre might look like and what activities might be realised.

1) THE OPPORTUNITY: LAW / LEGAL SERVICES
This encompasses many aspects and is, in itself, a massive undertaking. The Institute of International and European Affairs outlined some of the potential as follows in their recently published “The Next Leap – Competitive Ireland in the Digital Era” (IIEA 2008) report.

“As a part of the legal hub, a taskforce could be drawn together to consider the feasibility of a global rights clearance hub. ….The Taxation Commission could investigate whether innovative tax deductions could be introduced to make Ireland an attractive location in which to vest intellectual property, and whether new tax treaties are necessary to minimise double taxation on foreign withholding tax. In addition, new measures to enhance Ireland’s conformity with US intellectual property and trade compliance law could be considered. One stakeholder proposed that Ireland lobby to join the US Patent Prosecution Highway (PPH), thereby allowing parties filing patents of first instance to do so in Ireland, with the added assurance that they could pursue infringers in the US for damages.”

Areas that a legal hub could focus on are myriad: global digital rights management, rights clearance, intellectual property management, privacy, taxation, arbitration etc.

Actions:
A legal taskforce encompassing both legal experts and interested parties should be convened to flesh out the potential for such a Hub.

Return on Investment
Like Financial Services, legal services are a high-end activity which will bring economic reward, encourage economic activity as well as additional services. The recent changes to the Finance Act which provide for a three-year exemption from corporation tax for start-ups makes Ireland an ideal location for new innovative global businesses who would benefit from the services of such a legal hub.

2) THE OPPORTUNITY: ONLINE ADVERTISING
As content is being rapidly freed from the constraints of analogue broadcasting and enforced territorialistaion, funding mechanisms are also under assault. The fragmentation brought on by digital television has meant greater competition and less funding for quality programming. The rise of the Personal Video recorder (TiVo, Sky+) has further undermined the effectiveness of television advertising and further impacted the availability of funding. New business models and funding mechanisms are required for content and advertising will be at the heart of that change.

Actions:
Create a tax-incentivised location for global media buyers. Ireland becomes a hub for online advertising. Also, ensure data-warehousing infrastructure (potentially with a green, energy-efficient agenda) is available to further incentivise a move here. With banner advertising being replaced rapidly by video and interactive rich-media advertising displays, hosting and maintenance will be an added-draw.

There is also an opportunity for Ireland to become a ”broker” for branded entertainment, managing the relationships between brands and content-creators. Indigenous online success stories such as Sophia’s Diary highlight the potential of these new business models whereby brands deal directly with content creators to inculcate their brands into the content. Ireland is already a leader in the field although this is not recognised sufficiently within the mainstream media circles.

Return On Investment:
Apart from the obvious revenue brought into the country, bringing global media buyers will give content-creators in Ireland a “doorstep” opportunity for taking advantage of the new emerging business models. Also, it will further copper-fasten the relevant multi-nationals such as Google and Microsoft who are stakeholders in the infrastructure of online advertising. The creative services “add-on” potential is also attractive giving local indigenous creative talent new opportunities to work on global media campaigns (all be it online) – campaigns which traditionally would have emanated from New York or London.

Advertising is potentially the kick-start for the “creative industries” sector in Ireland for two reasons. One, it is in itself a “creative service” offering employment and service opportunities in creating and developing campaigns. Secondly, the end product – “the advert” – provides revenue for content creators who adopt the new advertising business models for ad-supported content (Video-On-Demand, ad-placements in casual gaming, branded entertainment etc.)

The opportunity for becoming a “broker” for online branded entertainment would further re-inforce Ireland as a location for global advertising services .

3) THE OPPORTUNITY: ONLINE GAMING AND VIRTUAL WORLDS
With over 217 million people playing online games globally (Comscore 2007), there is an enormous opportunity for creating the right environment for locating a hub for this global activity here. We already have a number of success stories located in The Digital Hub such as Goa and GALA Networks, so there is real merit in targeting this area strategically.

Actions:
The IDA should make a concerted effort to locate online gaming in Ireland and provide a tax-incentivised location to that end.

Return On Investment:
Ireland has done well from middleware applications for the gaming industry. Now as the area moves towards a Software as Service model, there is ample opportunity to create employment in this area. This may also have the knock-on benefit of furthering a games developer industry where original IP can be created.

4) THE OPPORTUNITY: CLOUD COMPUTING
Already Ireland is host to a number of multi-nationals who have avowedly stated that Cloud Computing is an inherent part of the business strategy. These include Amazon, Facebook, Microsoft , Google and IBM. In a sense, this opportunity needs to be seen in tandem with the next opportunity, data warehousing as they are much the same thing. However, it is the content creation and services side of Cloud-Computing that is of huge potential to Ireland.

Actions:
A concerted educational push at primary, secondary and tertiary level to encourage the understanding of Software Developer Kits. This need only be endorsed and supported by the Department of Education and may be funded by the relevant enterprise providers. The educational activities may take place in the form of after-school activities, competitions, club house environments utilising the facilities of the education establishments.

Return On Investment:
Innovation and entrepreneurship. Cloud Computing and the services infrastructure offers a low barrier to entry for monetising creative and technical services and products. By instilling this sense of creativity and technical expertise, there is the manifold effect of creating both an audience for the products as well as developers.

5) THE OPPORTUNITY: DATA-WAREHOUSING/GLOBAL CONTENT EXCHANGE
This opportunity should be carefully considered relative to the other opportunities – legal, advertising and cloud-computing. Initially, it would be aimed at the traditional content sectors such as film, video and audio. Archiving and the monetisation of existing content will be the initial priority. But as the industry develops and the demand for content becomes more sophisticated, Ireland will be well positioned for the tranisiton.

Actions:
By pro-actively creating the correct entrepreneurial, legal, administrative, political and commercial environment to support this idea then we can create a world-class solution for the provision of global content.

Return On Investment:
According to the International Federation of the Phonographic Industry (IFPI), in 2007 20 billion music files were illegally downloaded. In 2008, that went up to 40 billion music files illegally downloaded. At the same time, digital music grew by an estimated 25% and is now worth 3.7 billion dollars in 2008. Digital music now accounts for 20% of recorded music sales, up from 15% in 2007. The ratio between illegal to legal downloads is 10:1.

The film industry is looking down the barrel of the same gun. In 2006, piracy cost the movie industry $6.1 billion, 75% higher than expected, according to the Motion Picture Association of America.

There is a huge opportunity for Ireland to provide a solution to the mess. Digital Content as a commodity provides for a low-cost, high volume business opportunity.


Managing Innovation
The Digital Economy is fundamentally different than the old Industrial Economy. The focus now is on collaborative processes, shared resources, teamwork, knowledge sharing, open innovation, communities of practice and value networks. Value in a digital enterprise is largely determined by intangibles such as technical competence, imagination, creativity, ideas and flexibility. However, alongside these, having an ability to invest in, value, finance and apply the appropriate business model to develop digital projects, is equally crucial.

Because a digital age way of thinking and acting is so different than the old, a radical approach to learning will be used in the ICSC. In order to provide ongoing intellectual support for those engaged on projects, a dynamic learning infrastructure will be put in place. Developed in partnership with existing educational providers, it will nurture a spirit of innovation, stimulate ventures, help individuals understand risk and manage change in a supportive mutual learning network. Quality, initiative, a risk taking attitude and eagerness for self-development will become a core feature in the participants’ professional lives.

A rich and dynamic environment will emerge through the interaction of those from diverse backgrounds such as media studies, financial services, IT, business, the arts, engineering and science drawing on and learning from each other. Innovation programmes will also draw on the creative cultural resources of this country along with the values and identities of recent immigrants, leading to a world renowned cultural dynamic. This education will leverage expertise already available in the IFSC gained by developing programmes there. Such an approach to creating value from projects founded on interactions between digital and financial networks will lead the ICSC to generate an inimitable international competitive advantage for Ireland.

Thanks to the following contributors to these articles for their ideas and input:

Finbarr Bradley, Michael Walsh (Globaldmx.com), Liam Ward & Graeme Kelly (DV4), Andrew Fitzpatrick (Monster Distributes), Andrew McAvinchey, Cathal Gaffney (Brown Bag Films), Alex Klive (WorldTV.com), Johnny Ryan (IIEA), Frederic Herrera (IADT/Create), Ed Melvin (ICANN)

posted by Neil Leyden @ 4:41 p.m. 3 comments