Interactive media sector reports major growth despite global slowdown

When nearly everyone in the communications industry is shrinking under heavy debt loads and a weak economy, Canada’s digital media industry is bucking the global trend with 2008 revenue results that exceed even the most optimistic predictions. Overall, the industry generated $4.7 billion in 2008 – a 50.9% increase over 2006, according to 2008 Canadian Interactive Industry Profile (CIIP), released by the Canadian Interactive Alliance (CIAIC) at the Interactive Exchange conference last week in Toronto. More than 80% of this revenue, or about $3.8 billion, came from interactive digital media projects. Small, medium and large firms generated an annual average of nearly $900,000 from interactive digital media activities. “I actually didn’t expect a 50% growth in new media revenue over two years. To me, that’s incredible,” CIAIC executive director James Lewis tells Tech Media Reports. “The caveat here is that we left out companies that derived less than 50% of their revenue from interactive media. Our figures are then, quite conservative.” Broadcasters, ISPs and firms where even 49% of revenue is derived from interactive digital media were not included in these figures. The CIAIC is the only group to track growth and evolution in Canada’s new media sector, although Lewis is hoping Statistics Canada will take up the charge. His association is lobbying the department to add interactive media to its North American Industry Classification System, which is next due for an update in 2012. When that happens, he contends the industry would be large enough to warrant “distinct sector” status, which would up new funding and other opportunities for companies. “Once we convince Statistics Canada and Canadian Heritage that we have a working formula, they will then go and submit it to their US and Mexico counterparts,” says Lewis, “the industry could then maybe be tracked like the automotive sector or agricultural sector.” Digital media companies may also be benefiting from government policies – both federally and provincially – that are designed to stimulate growth and innovation in the sector. For example, last week the Ontario government announced it would invest $250 million over five years in emerging technology companies, including digital media. “The Ontario government has identified the entertainment and creative cluster as the fastest-growing sector of our economy over the next ten years, led by the interactive digital media industries – and the latest findings from the CIIP certainly bear that out,” Karen Thorne-Stone, president and CEO of the Ontario Media Development Corporation, said in a press release. Diversity contributes to stability The industry is showing considerable resilience against tough economic times. Firms, on average, have been in business for nine years; demonstrating an ability to withstand multiple business, technological and consumer cycles. The study estimates there are nearly 3,000 interactive media companies in Canada employing between 51,000 to 52,000 full time people. The majority of these companies find themselves working across a diverse spectrum of interactive digital media activities. Nearly 74% report being engaged in three-to-five different core activities, while only 12% specialize in one specific area. “You’re going to want to be in as many areas as possible when this recession ends,” says Lewis. “You’re going to want to be ready to pounce when the economy rebounds.” There are, however, clear areas of concentration in the industry. Approximately 75% of the Canadian interactive digital media industry’s revenues are derived from six key areas: software design and development; content management systems; advertising and promotional content; simulations; and training. Nearly half of industry revenue stems from game and website design and development. Unlike Canada’s regulated communications industries, digital media is not subject to foreign ownership restrictions. It’s somewhat surprising then that 85% of interactive media companies continue to be 100% Canadian-owned. Canadian firms also tend to generate significant intellectual property (IP) in their operations, with approximately two-thirds of projects based on internally developed IP. And, the future of the sector looks promising: 53% say their business performance is better or much better than last year. New capital and talents continue to enter the sector – 15% of firms were founded in the past two years. “Will we see another 50% growth by 2010? I hope so,” says Lewis. The full study, including regional breakdowns, will be available on the CIAIC website in April.

Interactive media sector reports major growth despite global slowdown

News | 03/23/2009 6:43 pm EDT

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