The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 4: The Needs of the Australian Creative Industries Sector)

In this next section, we examine the needs of the Australian creative industries, with a particular emphasis on the arts and cultural sector.  We do this with a view to seeing how the business models explored in Part 3 might fit with the needs of our sector in Part 5 of this series.

This is the fourth section in a series of blogposts that examines ramifications of the small size of most Australia creative businesses and explores strategies for resolving issues raised here.

In the previous blogs, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

Part 3: Business Models for the New Paradigm

In future blogs, we will look at:

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 4: The Needs of the Australian Creative Industries Sector

Needs of the Australian creative industries with a particular focus upon the arts and cultural sector.

At BYP Group, we research and consult extensively with the Australian creative industries including the arts and cultural sector. We hear perspectives from the funders as well as from the artists and arts organisations that create the art.

Below we outline some of the major issues most frequently raised to us by members of this community over recent years.

  1. Sustainable careers for artists at all stages of practice including related issues e.g.:
    1. Business skills especially
    2. Marketing and communications skills to grow and access audience
    3. Awareness of technology and its impacts on their practice
    4. IP monetization
  2. Affordability of space especially
    1. Space for developmental and experimental work
  3. Professional and creative networks that endure beyond a funding grant or period
    1. Difficulty in career progression from early to mid, mid to established.
    2. Cross-over into the private sector for
      1. ‘Embedded’ work
      2. Service contract work e.g. design, innovation, branding, production skills
  4. Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability
  5. Funding for multi-disciplinary arts that may fall between traditional funding criteria
  6. Increased Strategic impact of funding through e.g.
    1. Increased co-ordination and collaboration between government entities
  7. Lack of economies of scale and the problems associated with this e.g.
    1. Lack of creative clusters and hubs to help increase scale
    2. Activation of the night-time economy
    3. Too much time spent on non-creative activities e.g.
    4. Office management and space maintenance
    5. Marketing and promotion
  8. An environment that generates collaboration, peer learning and cross-pollination
  9. Creative spaces which creates a sense of community and has its own identity
  10. International engagement frequently due to
    1. Lack of scale to overcome e.g.
    2. Tyranny of distance
    3. Insurance and coverage costs (lack of scale)
    4. Lack of familiarity with foreign cultures
    5. Lack of Australian arts industry ‘brand awareness’ in the international marketplace
  11. Public visibility of the arts, especially at the independent and small organisation level especially
  12. Showcasing opportunities, preferably before an international audience

The above is by no means a conclusive list of the sector’s needs.  There is also some double-up in needs, which illustrates the pervasiveness of the issue of scale described in earlier sections of this blog.

Comparison of independent screen media content creator to independent artist

In the independent screen sector we see many overlapping issues.  Some interesting exceptions include:

  • Awareness of technology and its impacts on their practice
  • Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability
  • An environment that generates collaboration, peer learning and cross-pollination
  • International engagement frequently due to
    1. Lack of scale to overcome e.g.
      1. Tyranny of distance
      2. Insurance and coverage costs
  • Awareness of technology and its impacts on their practice

As discussed earlier, media was like the ‘canary in the coalmine’ of Disruption.  Consequently, it tends to lead those arts and cultural sectors that are not easily digitized in nature.

This is a generalization and it is common for incumbents and independents alike not to understand the new paradigm.  Bob Iger, the CEO of Disney mentioned in Part 2, appears to have made a sudden and drastic strategic turn-around in recent times. He has decided to pivot his multi-billion dollar organisation into become an online aggregator and distributor to rival Netflix.

The bottom end of the screen sector has benefitted the independent screen practitioner to get their work produced and seen, frequently before an international audience e.g. on Facebook, YouTube

  • Diversity of access to the arts especially target groups such as
    1. Gender
    2. ATSI
    3. CALD
    4. Disability

We have observed in our research the success of YouTubers from CALD backgrounds such as Rackaracka, Superwog, Natalie Tran, John Luc (MyChonny), et al.  We have also seen the success of Aboriginal Australian dance group, Djuki Mala (formerly the Chooky Dancers) which rode off the back of their viral dance clip.  The Katering Show is an example of an all-female cast YouTube hit that has ‘crossed-over’ onto broadcast television.

The above suggests to us that the new media paradigm has been beneficial to diversity and access for these target groups.  This is probably due to the way the Internet has allowed smaller, independent creatives to bypass traditional chokepoints of production and distribution.

  • An environment that generates collaboration, peer learning and cross-pollination

The Internet allows rapid transfer of ideas and collaboration especially in digital-only content.  We note the example in games of Australian sound designers, KPow! Audio who collaborated with content creators around the world to help make the award winning Banner Saga game series.

Still, there may be even more benefits to be had from physical spaces for collaboration, especially across disciplines.

  • International engagement frequently due to
    1. Lack of scale to overcome e.g.
      1. Tyranny of distance

There are clearly still issues of scale that we have identified for independent screen practitioners above. However, the international nature of the Internet has enabled independent Australian screen practitioners (such as those mentioned above) to reach international audiences.  Whereas in the past they may have served only a small, unsustainable audience within Australia, now a small percentage of a global audience can prove sustainable.

 

Comparison Thought Experiment

At this point, we invite readers to consider the online profile of an Australian artist you know to that of the example OOCC’s above.

Even the unscaled OOCC example we show above has over 60,000 YouTube subscribers.  Are there many Australian non-screen artists you know of with that kind of online reach?

Regardless of obvious reasons for this disparity – it is a full-time creative pursuit and enterprise in itself to produce any type of art at the highest levels, (this is also true of the amount and quality of video content to become a successful YouTuber) – wouldn’t it be good if Australian artists couldhave this kind of online reach?

In the next part of our series, we seek to apply the new paradigm screen business model in a manner that might assist Australian independent artists.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 5: How a ‘new paradigm’ business model might help Australian artists)

This is the fifth and final part of our blog series in which we explored the David vs Goliath battle faced by the Australian creative industries, and what they might do to achieve success in the face of international competition.

In this section we attempt to apply the ‘new paradigm’ screen business models explored in Part 3 above, within the context of the Australian arts sector.  We do this with a view to seeing how the business models explored above might fit with the needs of our sector, explored above in Part 4 of this series.

As a reminder, in above sections, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

Part 3: Business Models for the New Paradigm

Part 4: Needs of the Australian creative industries with a focus upon the independent arts and cultural sector.

 

Part 5: How a ‘new paradigm’ business model might help Australian artists

Taking the business model of the Online Original Content Channel (OOCC) from Part 3, we look now to see how this might look in the context of the Australian arts and cultural sector.

 

A proposed Arts OOCC similar to other OOCC's

A proposed Arts OOCC similar to other OOCC’s

Diagram: Where an Online Original Content Channel for the arts would fit into the new paradigm ecosystem.

Above, we see the OOCC occupying the layer above the independent artists who now occupy the bottom layer in place of the YouTubers, or technically, alongside them.

The Australian Arts OOCC (purple lettering on the left) operates in a similar fashion to the OOCC entities we examined earlier – DanceOn and Geek & Sundry.  On the one hand, in the diagram below, it operates as a ‘digital layer’ above the artists that aggregates content from independent artists who occupy ‘sub-channels/programs’ as we saw on DanceOn and Geek & Sundry in Part 3 of this series.

Diagram-15-oocc-differentiated

On the other hand, in the diagram below, it may additionally have a digital production capability including studio space, permanent crew/staffing etc.  This would make it similar to the two OOCC’s we saw earlier.

Diagram-15-oocc-differentiated

 

Diagram: 1. Differentiated content model, like an OOCC. Artists and partners benefit from scale of digital production, output and distribution, so long as they collaborate to produce content within the NAOOCC’s niche. Examples of niches that might be addressed include e.g. Indigenous Australian content, experimental and developmental content, multi-disciplinary, 

Digital output does not equate to artistic output

Note, the digital output onto the NAAOOCC does not have to be the artistic outcome for any underlying creative hub facility, per se.  Rather, the digital output is used in a way that suits the new paradigm – distribution and marketing of digital content (e.g. interviews with artists, retrospectives, podcasts, short ‘sizzle’ reels of music and/or dance). This raises awareness and interest, driving prospective audience/consumers to non-digitally replicable artwork e.g. live performances, digital media installations, exhibitions etc, that the artist can monetize on their own terms. It is envisioned that the artists collaborate with an on-site digital producer to determine the best type of digital content that will support the artist achieve sustainable practice in a manner suited to that artist.

Partnership Models

Partner organisations to the NAAOOCC could collaborate in one of three optimised ways:

 

  1. Differentiated Content – This is the model in the earlier diagram (“Diagram: Differentiated content model, like an OOCC“). Where the content fits into the NAAOOCC’s niche, the content can be placed on the NAAOOCC’s own digital content aggregator channel e.g. ‘The Multi-disciplinary Art Channel’, ‘The Indigenous Australian Art Channel’, etc. If the niche content falls outside the NAAOOCC’s niche, this is an opportunity for a new, separate niche OOCC e.g. A disability arts channel.
  2. Undifferentiated Content – Where the content produced is undifferentiated the optimization strategy tends towards the Multi-Channel Network (MCN) model described in Part 3 (e.g. similar to the Channel Frederator Network MCN). See diagram below.
  3. Hybrid model – There is also potential for a third model, where the NAAOOCC has a service arm for partners and clients to create digital content more suited to the client e.g. a festival, a corporation, a funding body’s broader remit, etc. The revenues generated from this service facility help sustain an entity like the Niche Australian Arts OOCC, as well as providing alternative income streams for artists and creatives in the space.

 

Undifferentiated 'Multi-Channel Network' model

Undifferentiated ‘Multi-Channel Network’ model

 

 

 

 

 

 

 

 

 

 

Diagram above: 2. Undifferentiated Content model, similar to a the ‘Multi-Channel Network’ (MCN) example described in Part 3 of this series.

 

This model uses aspects of both the differentiated model and the undifferentiated model

This model uses aspects of both the differentiated model and the undifferentiated model

Diagram above: 3. Hybrid Content Model. The OOCC remains niche, but provides services to partners who may wish to create undifferentiated content e.g. advertising for their own organisation, policy need, etc.

 

 

Discussion for deciding between new paradigm business models – Niche OOCC vs Undifferentiated MCN

Strengths and weaknesses of the different models

  1. Differentiated Content Model

Pro: Achieves ‘cut through’ in the crowded content ecosystem (See ‘Example: Importance of the niche strategy’ below)

Pro: Offers more aggregation benefits for content that falls within its niche

Pro: Suits funders addressing a niche area such as a policy gap area, e.g. diversity, experimental work

VERSUS

Con: Requires content made and aggregated to be in the same content niche, reducing the potential for partner collaboration

Con: Reduced size of aggregation benefits across some aggregation categories

 

2. Undifferentiated Content Model

Pro: Increased size of aggregation benefits across some aggregation categories

Pro: Allows more diverse collaboration partners

Pro: Suits funders with broad (undifferentiated) funding priorities

VERSUS

Con: Offers less ‘cut through’ in the crowded content ecosystem

Con: Offers fewer aggregation benefits for (undifferentiated) content on it

 

The above strengths and weaknesses are roughly indicative.  For example, one may find that the overall benefits of ‘cut-through’ of an MCN exceed those of an OOCC even for differentiated content if the size of the MCN is large enough and efficient enough in passing on scale benefits.

 

 

Example: Importance of the niche strategy

As a quick (and by no means conclusive) demonstration of the importance of a niche strategy let’s look at the two OOCC’s we saw earlier in Part 3: DanceOn and Geek & Sundry.   Both of these OOCC’s started around the same time and received the same funding from YouTube’s Original Content Initiative.  To recap, ‘DanceOn’ is a channel that provides popular dance music and purports to find new ‘up-and-coming’ talent. Supported by the likes of Madonna and other high-profile music stars, it came with clear mass market appeal.

Left: DanceOn has content of broad appeal. Right: Geek & Sundry has content of niche appeal

Left: DanceOn has content of broad appeal.
Right: Geek & Sundry has content of niche appeal

Diagram: OOCC’s with different levels of differentiation

 

The other OOCC is ‘Geek and Sundry’, which is very much about what it says it’s about – a collection of nerdy/geeky content. Suffice to say, Geek & Sundry is definitely occupying a narrower niche. How many people like popular dance music compared to … errr … Dungeons & Dragons?  Obviously, a lot more people like popular dance music – otherwise it wouldn’t be ‘popular’.  Here’s where it gets interesting ….

 

DanceOn subscribers vs Geek & Sundry subscribers

DanceOn subscribers vs Geek & Sundry subscribers

Diagram: DanceOn subscriber numbers (1.3M) vs Geek & Sundry subscribers (1.7M)

One might expect the OOCC with the more popular content to be way ahead:  Both organisations  were created as part of the now defunct YouTube Original Channel Initiative. This means both organisations are of similar age and had received the same resources – advanced payment of US$1 million by YouTube “against future advertising revenue to jumpstart production”.

Instead, the opposite is true (although again, not definitively so):  DanceOn has 1.3M subscribers at the time of writing, compared to 1.7M subscribers for Geek & Sundry.

Why?

I speculate that what is happening is that, in the new media paradigm, it is not simply about size of demand, but also about the size of supply. Unlike broadcast media, the Internet is good at finding content to match more niche tastes.  On the flipside, the Internet has an abundance of popular dance music content. Go to any online media splash page and you will find similar images to that of DanceOn. This may be what keeps subscriber levels below that of a true niche offering, like Geek & Sundry. Fans of things geeky have less choice for finding content providers of their niche tastes, consequently, the niche geek channel gets more subscribers than the pop dance video channel.

 

We speculate that areas of market failure in the cultural economy may represent opportunities for a niche OOCC should government choose to fund that gap.  Market failure, for example in providing affordable experimental and developmental space for artists, represents a barrier to entry. Already in screen, we have seen two products with strong female lead casts get picked up overseas, namely Wentworth, and Mrs Fisher’s Murder Mysteries.  With Screen Australia and other state agencies funding the gender gap, content can be made that fills an under-served market for strong female leads.

 

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 3: New Media Business Models)

In this section, we will look at some examples of ‘New Media’ business models that are being employed to harness the Internet to allow scale for small creative businesses.

This is the third of a series of blogposts that examines ramifications of the small size of most Australia creative businesses and explores strategies for resolving issues raised here.

In the previous blogs, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

Part 2: New vs Old Paradigms

In future blogs, we will look at:

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 3: New Media Business Models

Business Models for the Small Creative Business in the New Media Paradigm

But what business models are the small content creators – similar to our independent artists and small arts organisations – employing to survive?

The sector saw a 'hollowing' out of the middle tier

The sector saw a ‘hollowing’ out of the middle tier

Diagram above: Old vs New Paradigm. What is happening down in the bottom right, between the independent creators and ‘middle-tier’?

Before we answer this question, we need to take a closer look at what’s happening in that gap between the middle tier and the bottom.

Independent (micro) screen content creators now

Independent (micro) screen content creators now

Diagram above: Virtually anyone can post content to the Web now. A few may make a living from it. A small percentage of YouTubers generate an income from their YouTube channels.

At the bottom of the above diagram, we see very few people make a viable living from their content.  This is not new.   Very few people as a percentage of the population ever made a living from the traditional TV/Film industries.  What is more, these YouTube content creators experience much greater creative freedom in what they do and create than most of the traditional TV/Film industry workers who tended to be crew, or producers making content for a broader mainstream audience e.g. broadcast content, international film productions.  In fact, we argue that finding one’s ‘authentic voice’ (an artist’s unique selling point, or USP, if you like) is imperative to the small, online, content creator.

 

Still, it’s undoubtedly difficult for individual content makers to make a living from an aggregator like YouTube. Successful YouTubers generally require investing 50 to 60 hours a week on content production, and even then, it usually takes years to build a subscriber base (‘audience’) sufficient to make a living.

 

Their problem, as it is in the independent arts scene, is one of scale.  It takes them so long to make content that they have little time to spend on other monetization activities such as merchandizing, spin-off services (e.g. consulting) and experiential content (live, ticketed performances), or other audience development work e.g. marketing, conference attendance etc.  They frequently also need to focus upon just one aggregator or platform (in this case, YouTube) to create enough scale to draw an audience.  This makes financial sustainability ever harder for the independent as others flood in due to low barriers to entry, and also very vulnerable to the platform on which they choose to concentrate their activity (to achieve ‘cut-through’ amongst the noise).  We saw this recently with the ‘Ad-pocalypse’ decimating YouTube ad revenues and that of YouTubers who had chosen to monetize their content through YouTube.

 

What has the market done to find solutions to this problem of scale in the new paradigm?

The answer lies in two overlapping business models:

1) The Multi-Channel Network (or MCN) and

2) The Online Original Content Channel (OOCC).

 

Multi-Channel Networks and Original Content Channels

New business models have emerged to solve the problem of scale for independent screen content creators, especially YouTubers.

New business models have emerged to solve the problem of scale for independent screen content creators, especially YouTubers.

 

 

 

 

 

 

 

 

 

 

Diagram above: Where new screen business models fit in the new ecosystem. Notice how they occupy a new ‘lower-middle’ tier between the old paradigm ‘middle’ (e.g. broadcast networks, national newspapers) and the bottom.

 

Two business models have emerged to offer scale to YouTubers: Multi-Channel Networks (MCN) and Online Original Content Channels (OOCC)

Two business models have emerged to offer scale to YouTubers: Multi-Channel Networks (MCN) and Online Original Content Channels (OOCC)

Image above: On the left, the Multi-Channel Network. On the right, the Online Original Content Channel

Note these definitions are not precise as the sector is undergoing disruption and transformation.  In fact, the Online Original Content Channel is my own name and definition for one of the new business models. For the time being, let’s outline the two different approaches:

1) Multi-Channel Networks (or MCN’s)

The first – MCN’s – aim to provide marketing and advocacy scale, whilst generally not becoming involved in content production. i.e. They have no ‘skin in the game’.

A good example of an MCN operating in this mould is The Channel Frederator Network: http://www.channelfrederatornetwork.com/

Note the splash page of the Channel Frederator Network’s (in the above diagram on the left).  It emphasises the big numbers it attracts – without even a reference to the type of content on its site.

Its business model is one of undifferentiated content aggregation.

 

2) Online Original Content Channels (OOCC’s)

OOCC’s on the other hand, do create their own content, or at the very least, seek to contribute to the production of the content and curateit, by offering economies of scale in things such as, production crew, social media campaign managers, booking agents, studio facilities etc.  Whilst an MCN as large as the Channel Frederator Network (above) might also offer these things, the OOCC seeks to aggregate and offer scale in a niche.

Note this latter model differs from the YouTube Spaces model in that the OOCC is not simply a ‘neutral’ or ‘objective’ provider of resources on plainly economically rational grounds.  Whilst an OOCC may, of course, measure its ‘sub-channel’ content according to rational measures, it bears substantially more risk than YouTube or an MCN does by investing in the content production.  YouTube Spaces is like a ‘macro’ model of an OOCC, with YouTube benefitting overall from the improvement in production values and capabilities of videos posted on its site. Because YouTube owns the aggregation site, it does not need to differentiate in content.  MCN’s are like ‘mini’ YouTube Spaces.

OOCC’s, on the other hand, almost always pursue a niche strategy. As we described in Part 1 of this blog series, niche strategies are important to survive if you are a small plant or animal in the big jungle.  It is the orthodox business strategy for small players within and outside the creative sector:  Where competition is fierce, and you are small, you must make sure what you do provides unique value in that ecosystem, or you will quickly find your margins eroded by another competitor e.g. a competitor from a country where costs are lower e.g. India, Nigeria, China etc.  We describe more on the niche strategy below as it applies to two different OOCC’s in Part 5, ‘Example: The importance of niche’.

 

What does an OOCC look like?

Starting from the outside looking in, generally, an OOCC will occupy multiple platforms and aggregators (e.g. website, iOS, Twitch, Facebook Live, YouTube, podcasts, etc) to maximise distribution of its content – one of its advantages over a small YouTube operation.  Within an aggregator, such as YouTube, the OOCC will have many ‘sub-channels’, visible on its ‘Playlist’ tab (right hand side of the screen shot below).

 

OOCC's tend to occupy multiple aggregators and platforms. They can have sub-channels or 'programs' under their banner.

OOCC’s tend to occupy multiple aggregators and platforms. They can have sub-channels or ‘programs’ under their banner.

Images above: What an OOCC looks like from the outside. Top: Home page on the web of an OOCC. Bottom left: Splash page for the OOCC on YouTube. Bottom right: The OOCC’s sub-channel menu with each of the images representing a sub-channel of content, like a television program on television.

 

What do they look like from the inside? Here we’re going to focus on the OOCC called Geek & Sundry. Some features to note:

 

The content is produced in the studio of the OOCC using (initially) the OOCC’s generic set, production crew (producer, camera, audio and social media manager). One might wonder how they can afford the staff and crew.  The answer is that these same crew and resources are scaled across the large number of sub-channels (see the above diagram in the bottom right image), likely using the same crews and resources across different sub-channel productions. ‘Sub-channels’ are defined here as channels of content that have been curated by the OOCC and exist under the banner of the main online channel – here, a YouTube channel. Similarly, the sub-channel might exist on the OOCC’s website under a separate tab or link.

 

So what are the consequences of this scaled approach at the micro-level? In the next few diagrams we’ll look at one of the sub-channels – Critical Role (which exists on the OOCC, Geek and Sundry) – and watch how it benefits from scale, starting from its humble start as a very bare-bones production.  Later, we’ll compare it to an unscaled YouTube sub-channel, and also compare it to an unscaled artist or arts organisation approach.

 

Each sub-channel or program can share resources from the OOCC

Each sub-channel or program can share resources from the OOCC

Example: Critical Role Sub-Channel. Critical Role is a sub-channel on the Geek & Sundry OOCC. Note, the Geek & Sundry logo appears on the bottom right of the screen, visible in the images at the top left, top right and bottom right.

 

The Benefits of Scale for an OOCC

The first thing to note below is the title sequence of the same sub-channel at different times in its journey: For Episode 1, there is no visual title sequence – just voice over. After approximately 40 episodes we can see elaborate make-up, wardrobe, CGI, location shoot etc.

Production values can increase as the program earns it

Production values can increase as the program earns it

 

 

 

 

 

 

 

 

 

 

Diagram above: The first episode title sequence is nothing but a blurred screen with voice-over. By episode 40, the program/sub-channel has earned enough subscribers, monetisation or engagement (the OOCC sets the Key Performance Indicator) to afford a video production with CGI (provided by a sponsor), make-up/wardrobe and a location shoot.

As the sub-channel grows, it has attracted more sponsors. Note below the hand-drawn diagram/map in the left picture compared to the ornate models and figurines being used on the right. These products have been provided by sponsors, demonstrating one of the advantages of scale (and success).

Sponsors find ways of supporting the program

Sponsors find ways of supporting the program

Diagram above: Product placement advantage for an OOCC sub-channel. On the left props and set are generic or cheaply drawn. On the right, as the sub-channel grows, it attracts sponsors, in this case, figurines and elaborate models.

Also note above, the use of the OOCC’s generic set in the early episodes has been replaced by a customised set build as the sub-channel has earned the resource allocation through subscriber growth and views. Note too, some of the talent are wearing t-shirts and other paraphernalia branded for the sub-channel.  They are able to produce, promote and sell merchandise and promote sponsors much more easily due to their scale, probably through a dedicated sponsorship manager and/or online community manager. In the first instance though, before the sub-channel has proven itself, the online community and campaign manager was probably the producer and their (the talent’s) own efforts, as with a normal unscaled Youtuber’s channel.

 

Comparison of a scaled OOCC sub-channel versus an unscaled OOCC sub-channel

Now we compare an unscaled OOCC sub-channel (below image, on the left) to the scaled sub-channel (below image, on the right, which is still the Critical Role example from before). Although the lone YouTuber on the left has strong graphic and video production skills (he came from the video production industry) – possibly even better than for the ‘Critical Role’ sub-channel – he cannot beat the better production values over time or the access to a wider talent pool.

Left: Typical unscaled (successful) YouTuber. Right: Scaled YouTube operation

Left: Typical unscaled (successful) YouTuber. Right: Scaled YouTube operation

Diagram: Comparison of unscaled sub-channel versus a scaled sub-channel

In fact, we are also seeing another benefit of the scaled operation.  In the above example, the OOCC was using the popularity of one sub-channel to cross-promote and publicize the launch of what would become a new sub-channel on the OOCC: D&Diesel.

Audience engagement and development

 

In the image below, on the left, the lone (‘unscaled’) YouTuber is able to gather his friends together for a livestream with his audience. In the image below, on the right, a professional ‘gig booker’ has taken the Critical Role talent around the United States before live audiences of hundreds, sometimes thousands.  These are opportunities to either further monetize e.g. paid tickets, or develop new audience and engage more deeply with existing audience.

Left: Unscaled operation uses home webcam and lounge room Right: A professional gig-booker provided by the OOCC has booked gigs before large audiences

Left: Unscaled operation uses home webcam and lounge room
Right: A professional gig-booker provided by the OOCC has booked gigs before large audiences

 

 

 

 

 

 

 

 

 

 

Diagram above: The scaled program on the right is before an audience of hundreds. This audience can be monetised (selling tickets to the event – a live-before-an-audience performance of what the program streams) or used to build audience and deepen engagement.

 

Comparison of Spin-off IP monetization

Below, both the sub-channels being compared have ‘spin-off’ intellectual property (IP) they wish to monetize. The ‘Z-Land’ content from the unscaled OOCC is based on their original IP for a new game system.  But with viewer numbers only in the dozens, it is probably not selling anywhere near as well as the IP generated by the other ‘scaled’ sub-channel, Critical Role.

Below, one of the talents on the ‘Critical Role’ show, the Chronicles of Exandria, due to its audience of millions: https://geekandsundry.com/the-chronicles-of-exandria-the-tale-of-vox-machina-available-now/ (and also likely due to the fact that the critical role IP to serve an already well-known IP asset, Dungeons & Dragons).

 

Left: The unscaled channel's crowd-funding program raises c.$8K Right: The scaled program has a subscription base of 1.7 million from the OOCC from which to help monetise.

Left: The unscaled channel’s crowd-funding program raises c.$8K
Right: The scaled program has a subscription base of 1.7 million from the OOCC from which to help monetise.

Diagram above: Comparison of spin-off IP monetization capabilities between unscaled sub-channel and scaled sub-channel

 

Monetization ratios

A key performance indicator (KPI) to examine is the comparison between monetization ratios of scaled OOCC operations and unscaled OOCC’s.

 

Much higher monetisation ratios are likely for a scaled OOCC than an unscaled YouTube channel

Much higher monetisation ratios are likely for a scaled OOCC than an unscaled YouTube channel

Image: Comparison of monetization ratios between unscaled sub-channel and scaled sub-channel. Very rough estimates for monetization per YouTube subscriber.

Unfortunately, this is a difficult exercise from where we stand.  It is difficult to specify precise monetization ratios for YouTube channels because:-

1) It is a confidential stipulation of YouTube that content creators using its services not disclose monetization rates

2) The KPI monetized by YouTube is the amount/duration of ads viewed by viewers (‘Clicks per 1000 views’ or CPM). This will vary even within a YouTuber’s own channel as content length and type may vary

3) Many OOCC’s are privately held and keep data to themselves

 

BYP Group estimates – very roughly – that the average successful YouTuber (say, >10,000 subscribers – it’s what YouTube itself uses as a gauge for access to resources at its YouTube Spaces) monetizes at a ratio of around $0.33c per subscriber from YouTube ad revenue alone (the YouTuber gets 45%, and YouTube keeps 55%).  If they actively undertake activities such as merchandising and spin-off services, they may reach $1 per subscriber and possibly higher.  For reasons of scale mentioned above, we suspect few lone YouTubers ever achieve this higher threshold.

A scaled OOCC is likely to generate a much better monetization ratio.  To put that in context, recall Geek & Sundry had 1.7 million (now nearly 1.8M) subscribers.  We roughly estimate G&S’s revenue is around $8-17 million p.a.

 

In the next section, we examine the needs of the Australian creative industries, with a particular emphasis on the arts and cultural sector. We do this with a view to seeing how the business models explored above might fit with the needs of our sector.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 2: Old vs New Paradigm)

In this section, we look at the impact of the digital disruption and implications it has for the creative sectors.

This is the second of a series of blogposts examining ramifications of the small size of most Australia creative businesses and exploring strategies for resolving issues raised here.

In the previous blog, we explored:

Part 1: We’re Tiny. The tiny size of Australian creative industries

In future blogs, we will look at:

Part 3: New media models for harnessing the Internet to create scale for creatives

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Part 2: Old vs New Paradigm

The advent of the Internet saw a paradigm shift in media that the World economy is still working through.  Broadly known as ‘Disruption’, we went from a world of content scarcity (Anyone remember having only one TV channel in Wollongong?), and difficulty in distribution (e.g. newsagents and video rental stores), to almost the opposite.

Media: The Canary in the Coalmine of Disruption

To begin with, we will look to the world of media, because these are the industries that were first to feel the effects of disruption caused by the Internet.  Consequently, many of these industries have had more time to develop responses to the new paradigm – or even more interestingly – have started their business model with the Internet in mind – so-called ‘digital natives’.

We argue these ‘new media’ businesses are better designed to leverage the strengths and minimize the weaknesses of the digital disruption.  These developments in the media industry have ramifications for our later discussion considering many artists and creatives receive most of their income either employed by the media industries, or ‘embedded’ in other industries employing new media techniques.

The sector saw a 'hollowing' out of the middle tier

The sector saw a ‘hollowing’ out of the middle tier

Diagram 1(above): Old vs New Paradigm. The sector saw a ‘hollowing’ out of the middle tier.

Many media forms saw a ‘hollowing out’ of the ecosystem, e.g. print publishing saw national newspapers (e.g. Fairfax Media) eroded by a handful of larger international papers (e.g. NYT, Guardian) and new paradigm media outlets (e.g. Buzzfeed) towards the top. Broadcast television saw plummeting profits in the commercial networks leading to the acquisition of Network Ten by a large, foreign media company, CBS. Computer games saw ‘mid-sized’ firms like local companies Blue Tongue and Team Bondi displaced by only the very large content aggregators such as Zynga, Steam or ‘AAA’ developers such as Rockstar Games (e.g. Grand Theft Auto), and replaced by smaller games companies who had success in the new paradigm such as local firms Hipster Whale (Crossy Road) and Half Brick (Fruit Ninja) with much lower production-value games.

Differences in the impact of disruption upon different creative sectors

It is important to acknowledge that each of the media industries has experienced disruption in slightly different ways.  The recording industry experienced years of eroding revenues before recently having renewed success with the subscription model e.g. Spotify and Apple iTunes.  Likewise, the book publishing industry were successful in litigating, with the result being that the aggregator, Amazon, maintains high prices for digital books.  Interestingly, Amazon still wins from this, as it is the main aggregator for books.  Where it loses is that it is more restricted in accelerating the popularity of books in digital form.

In both cases, the respective ‘old paradigm’ media powers were able to successfully leverage intellectual property (IP) laws.  This is not surprising as IP laws came about to protect powerful interests that were wealthy enough to own the production (or the means of putting things into ‘producible form’) e.g. Emperors of China – China had invented the printing press prior to the 8thcentury CE and quickly saw imperial decrees similar to modern copyright laws; and later in the West, industrialists who had sufficient capital to invest in printing machinery.

Changes to the Screen Sector

For the purposes of this series, we will focus upon the screen sector due to its interesting parallels to the arts and cultural sector in Australia.

In screen, we’ve seen the top filled by aggregators such as Netflix, YouTube and ‘orthogonal’ businesses such as Facebook and Amazon. At the bottom end of the content production spectrum we see individual YouTubers posting millions of hours of content a month – frequently people sitting in front of their ‘face-cam’ on their desktop computer at home or shooting from their mobile phone.

At the ‘bottom end’ of content, where production values are cheap and barriers to entry are low, the viewer is now inundated with so much content, the power has shifted. No longer is it with the distributor – e.g. the broadcast networks, newspaper publishers and their newsagents – the power now actually goes to the organisation that can sift through all the content and find relevant content to the viewer’s tastes – e.g. Google/YouTube search, the App Store (arguably a ‘platform’), Facebook. The new ‘large’ players are the aggregators – by aggregating content, they become desirable to the audience/consumer, in turn becoming more desirable to the content creator who then places more content on the aggregator, the audience turns to the aggregator ‘where all the content is’, and so on and so on, in a ‘flywheel’ effect dubbed ‘Aggregation’ (sometimes known as ‘the network effect’).

Content scarcity now only exists in the screen sector at the top end of production values and quality, like Game of Thrones, House of Cards, etc where the makers of the content can be ensured there are restrictions to distribution. In this context, large content providers like Disney and HBO are similar to large book publishers in the old paradigm and new paradigm ‘aggregators’ like Netflix analogous to Amazon’s book store.

One should note too that the screen content has to be so compelling the audience is willing to pay a price for access to it, for example, by subscribing to a Subscription Video on-demand service (SVOD).

It is interesting to note that Disney – formerly a content maker and ‘old world’ distributor (to cinemas, TV etc) – has recently decided to ‘pivot’ from being a content creator to moving up the supply chain to becoming a content aggregator.  Disney’s CEO Bob Iger recently flagged they are to start a subscription video service in 2019.

 

In the next part (Part 3) of our series, we examine what is happening in the screen sector at the bottom end of content production with a view to drawing insights that may inform Australian creative industries who have similar economic properties of being small in scale.

The David versus Goliath battle faced by Australian creative industries and what they might do to win (Part 1: We’re tiny!)

Recently, BYP Group came across a statistic:  Ninety-nine percent (99%) of NSW creative businesses are freelancers and small businesses.[i]  An overwhelming majority of these small businesses had fewer than 5 or 6 employees.

This is the first part in a series that will examine some of the ramifications of this and explore strategies for resolving issues caused by this widespread lack of scale.

In future blogs, we will look at:

Part 2: The impact and implications Disruption has for the creative sector

Part 3: New media models for harnessing the Internet to create scale for creatives

Part 4: Australian creative economy needs, especially those in the arts and cultural sector

Part 5: How a new media model solution might look in the arts and cultural sector

 

Key Points

  • Australian creative industries (CI’s), artists and arts organisations are predominantly very small
  • Being small, most should concentrate on niche strategies and/or strategies that offer them the benefits of scale
  • Disruption has changed the media landscape with implications for the small CI or artist
  • This ‘new paradigm’ has created new business models to achieve scale for independent screen creators or ‘YouTubers’
  • These new business models also address many of the needs of independent Australian artists
  • We explore two business models, the Multi-Channel Network (MCN) and the Online Original Content Channel (OOCC) and imagine how they might apply to the Australian arts and cultural community

 

 

Part 1: We’re tiny!

 

There are several inferences we draw from the preponderance of micro-businesses in the NSW creative industries:

  1. The rest of the Australian CI’s are similarly small
  2. Australian creative industries (CI’s) predominantly exist in a ‘gig economy’
  3. Australian CI’s are likely to face problems of ‘scale’
  4. Conventional business strategy for dealing with being small is to ‘go niche’
  5. Australian CI’s will need to think hard about their unique selling points (USP’s) to compete

 

  1. The rest of the Australian CI’s are similarly small

We will infer that the rest of the Australian CI’s are similarly small, and where they are not, they are likely to soon follow.  This is a common trend for the larger centres of a sector to lead trends across the sector.

  1. Australian CI’s predominantly exist in a ‘gig economy’

With the overwhelming proportion of Australian CI’s being freelancers or micro-businesses (below 6 people), it is safe to assume that Australia has an agile creative workforce, responsive to the needs of the economy.  One suspects too, that many are ‘tele-commuting’ from outside of the expensive Australian capital cities.  The Illawarra (roughly 1.5hrs south of Sydney), Blue Mountains and Central Coast regions all experienced a rapid jump in creative roles between the 2011 and 2016 censuses.

One potential negative of this ‘gig economy’ (and there are several) is the volatility in workflow this can cause, and lost efficiency in needing to spend much of one’s time winning business.  At BYP Group we are very familiar with this issue…

  1. Australian CI’s are likely to face problems of scale

The above issue is essentially a problem of scale.  ‘Scale’ is short for ‘economies of scale’.  For those not familiar with the term, it means the efficiencies and cost-savings gained by being larger.  For example, if you are a lone freelancer designer and you need a large format printer, a lot of its time is spent idle.  More can be gained from that asset if it were used more, e.g. by others in your business, or businesses nearby like in a shared workspace, perhaps reducing the price of access to the printer.

The problem of scale is not unique to Australian CI’s.  Australian businesses in general, except perhaps in mining, banking and superannuation, frequently have difficulty competing internationally because they are so small and have reduced efficiency and competitiveness across several fronts.

  1. Conventional business strategy for dealing with being small is to ‘go niche’

The conventional business strategy to deal with this issue is to focus upon a niche.  If you are not in a niche, there will be many competitors who will outbid each other on cost in a ‘race to the bottom’.  The people that win these types of races are those with the lowest costs.  In the creative industries, the main costs are generally labour and office space.  Being in a niche means you can avoid this issue by competing on a narrower front.

  1. Australian CI’s will need to think hard about their unique selling points (USP’s) to compete

However, being in a niche means you have to truly understand what it is that makes you different in a way that is meaningful to the marketplace (your audience, viewers, patrons or consumers) – i.e. something the market is willing to pay for (thus the ‘S’ for ‘selling’).  Marketers have long worked out that the thing to try to identify is what makes your business truly unique, such that your market cannot go anywhere else to get what you offer.

One traditional problem with the niche has been that, frequently, the niche is too small to provide a living to the creator.  You make the best silver and orange toed socks for ferrets in the world?  It’s just a shame that it has a market of only 30 people in the country.

Of course, the Internet has revolutionised things in two important ways:

  1. The Internet is international, expanding the potential market for the niche creative content, making many more niches viable for creators.
  2. Through improving communications between buyer and seller, reducing costs of distribution and replication (especially of digital goods), the world has gone from one of relative scarcity, to one of relative abundance (at least in First World Nations), especially for goods that are not differentiated. (There’s that idea again – ‘different’).

 

With the above points in mind, in subsequent sections, we will look at:

 

 

[i]BYP Group estimates based on ABS Counts of Australian Businesses, including Entries and Exits, Jun 2012 to Jun 2016.

 

Do arts interventions actually change the way people behave?

evaluate-imageCan a community arts event actually get people to do more exercise? Does a digital app which encourages you to dance at random hours of the day improve your sense of social connection? If you run around with a story and a list of clues, do you develop a greater sense of belonging in your town?

This article summarises some research we did in the context of arts for health promotion to develop a framework for evaluating the impact of VicHealth’s active arts strategy. I am sharing it because it might help a little with your thinking if you are trying to work out how to find out if your arts activity actually changes the way people behave, without the benefit of a randomised controlled trial (research nerd joke ;-). If anyone has further insights to share, please do!

The social model of health

Health promotion activities take place within the context of the social model of health attempts to address broader influences on health, such as social, cultural, environmental and economic factors, rather than respond directly to disease and injury. It focuses on policies, education and health promotion to effect social change to provide the prerequisites for health.

Social models of health attempt to:

  • Change the broader determinants of health e.g. gender, socioeconomics, built environment, social inequities
  • Empower individuals and communities with skills, knowledge and self-efficacy to make positive health decisions
  • Access to health care, addressing physical and cultural barriers e.g education, location, language, culture
  • Collaborate across departments and stakeholders

Health promotion models and theories of change

Health promotion models and theories of change vary in terms of their emphasis. Earlier theories tended to focus on personal decision-making behaviours, whilst later theories take into account personality factors, self-efficacy, intrinsic and extrinsic motivations to change. Broadly speaking, health promotion models and theories of change can be grouped as follows:

  • Behavioural change theories
  • Ecological theories and models
  • Planning models
  • Communication theories
  • Nursing theories of health promotion and change (Raingruber, 2014).

How health promotion theories can inform arts intervention theories of change

When we were developing the VicHealth Active Arts Strategy theory of change, we identified the following as particularly helpful and apposite health promotion theories:

  • Social cognitive theory
  • Self-determination theory
  • Salutogenic theory
  • Diffusion of innovations theory

Social cognitive theory (SCT) is based on vicarious learning. Behaviour is learned via observation, imitation, positive reinforcement and noticing the benefits to others. SCT emphasises self-efficacy, which refers to a person’s sense of confidence to act (Raingruber, 2014: 58-9).

Self-determination theory focuses on intrinsic motivations for action. People who are intrinsically motivated are interested and satisfied by doing the activity, rather than focusing on an extrinsic reward such as recognition or income.

Intrinsic motivation can flourish when a person has a sense of connection with others, a sense of agency in their own lives and a feeling of competence to deal with one’s environment and produce positive outcomes (Raingruber, 2014: 59).

Salutogenic theory focuses on building people’s ‘strong sense of coherence,’ which results in seeing the world as meaningful and manageable. Coherence can be developed through positive relationships and meaningful pursuits (Raingruber, 2014: 67).

Diffusion of innovations theory describes the stages of change as: knowledge, persuasion, decision, implementation and confirmation. A health promotion program would be adopted if it could demonstrate that it is: better than other options; compatible with existing values and needs; trialable; producing observable results; easy to use, understand and communicate; adoptable with a minimal investment of time and risk; and usable with a moderate level of commitment. Roles in the adoption of innovations (including innovative health approaches) include opinion leaders, change agents and change aides.

Approaches to the Evaluation of Health Promotion Impacts

There are a number of different approaches to evaluating the impacts of arts-based (and other) health promotion activities. The key factors in choosing an approach are:

  • What is the purpose of the evaluation?
  • What are our resources the evaluation?
  • Are the causal links between proximal indicators to distal outcomes already established?

Three of the main evaluative approaches which we tend to adapt and draw from when measuring the social and behavioural impact of an arts program include the following:

  • Incremental evidence evaluation (commonly known as a program logic or impact evaluation)
  • PRECEDE/PROCEED model
  • RE-AIM framework

Incremental evidence evaluation (program logic / impact evaluation)

In this approach, researchers gather evidence about the effectiveness of an health promotion program or intervention in its real world setting, effecting impact on a behavioural determinant of health outcomes (Nutbeam, 1998). It can be understood as a program logic evaluation, or impact evaluation, where the desired impacts of the program are also determinants of positive health outcomes (Thorogood and Coombes, 2010: 12).

This approach allows researchers to evaluate the effectiveness of programs happening in the real world, rather than focusing on expensive, experimental situations such as random-controlled trials. Change occurs on a continuum. If links are already well-established, then you do not have to prove causal relationships again. Instead, you can focus on proximal indicators which are known to be related to distal outcomes (Green and Tones: 1999).

In deciding what level of outcome to measure, researchers consider how the evaluation will be used. The evaluation can occur at various levels of complexity, as follows:

  • Process evaluation – how was the program carried out?
  • Adequacy – did the expected changes occur?
  • Plausibility – were the outcomes actually due to the intervention vs external factors?
  • Probability – did the intervention have a (health) effect?

PRECEDE-PROCEED Model (PPM)[1]

The PPM model aims to describe proximal, intermediate and distal outcomes of health promotion programs. The approach is based on the assumption that interventions will be effective if they:

  • Come from the community
  • Are well planned
  • Are based on data
  • Are seen by the community as feasible
  • Include multiple strategies woven together
  • Rely on feedback and progress evaluation (Green and Kreuter, 1992)

The PRECEDE part of the model focuses of educational factors that influence change, whilst the PROCEED part looks at the importance of ecological factors.

The model involves the following steps:

  1. Social assessment: community members identify their own health promotion needs
  2. Epidemiological assessment: Identify the health problems of the community using national statistics
  3. Behavioural and environmental assessment: Identify factors contributing to the problem. Factors are ranked according to importance and feasibility of changing them. Most changeable and most important factors are priority targets.
  4. Educational and ecological assessment: Identify predisposing, reinforcing and enabling factors for the desired health behaviours, and develop measurable objectives.
  5. Administrative and policy assessment: Design interventions and the resources, organisational changes and circumstances required for success.
  6. Process evaluation: Evaluating the implementation of the intervention.
  7. Impact evaluation: Evaluating the impact of the intervention on the reinforcing, predisposing and enabling factors, behaviours, lifestyle and environment.
  8. Outcome evaluation: Evaluation of health outcomes.

The RE-AIM Framework[2]

This framework is designed as a planning tool to select between health promotion projects for investment. Projects are assessed according to five dimensions:

  1. Reach: how many people will be influenced by the program
  2. Efficacy/effectiveness: produces positive outcomes with few unintended consequences
  3. Adoption: participation rate and representativeness
  4. Implementation: process evaluation as to whether the program was implemented as intended
  5. Maintenance: long-term utilisation of the given health behaviour, and whether a program is sustainable even if resources change.

[1]PRECEDE stands for ‘predisposing, reinforcing and enabling constructs in educational/environmental diagnosis and evaluation.’ PROCEED stands for ‘policy, regulatory, and organisational constructs in education and environmental development.’

[2] RE-AIM stands for reach, efficacy/effectiveness, adoption, implementation and maintenance (Glasgow, Vogt and Boles, 1999).

In conclusion

Most evaluations of arts interventions happen on limited budgets and timeframes. You may not have a large sample population and a large budget, but don’t despair! Evaluation is still possible and worthwhile, because you may be able to evaluate whether your project is contributing to the determinants of behavioural change. And that is the start of the answer.

References

Bailey, Jackie and Yang, Hung-Yen. (2014). Play Me I’m Yours: Evaluation Report and Appendices. Arts Centre Melbourne: Melbourne.

Foreman-Wernet, L and Dervin. B. (1011). ‘Cultural Experience in Context: Sense-Making in the Arts.’ The Journal of Arts Management, Law and Society 41: 1-37.

Gilmour, J, MacDowall, L and Oliver, J. (2013). The Arts, Physicality and Connection: An Evaluation of VicHealth’s MOTION Program. VicHealth: Melbourne.

Glasgow, R, Vogt, T and Boles, S. (2011). ‘Evaluating the public health impact of health promotion interventions: the RE-AIM framework.’ Social Science and Medicine 73: 383-390.

Green, J and Tone, K. (1999). ‘Towards a secure evidence base for health promotion.’ Journal of Public Health Medicine 21(2): 133-9.

Green, L and Kreuter, M. (1992). ‘CDC’s planned approach to community health as an application of PRECEDE and an inspiration for PROCEED.’ Journal of Health Education 23(3): 124-147.

Kelaher, M, et al. (2014). ‘Evaluating community outcomes of participation in community arts: a case for civic dialogue.’ Journal of Sociology 50(2): 132-149.

Loy, C, et al. (2013) ‘Crowd Counting and Profiling: Methodology and Evaluation.’ In Modeling, Simulation, and Visual Analysis of Large Crowds. Ali, S et al. (Eds). Springer: New York. 347-382.

McCarthy, Kevin, et al (2004). Gifts of the Muse: Reframing the Debate about the Benefits of the Arts. RAND Corporation: New York.

Nutbeam, D. (1998). ‘Evaluating health promotion – progress, problems and solutions.’ Health Promotion International 13: 27-43.

Radbourne, J, et al. (2009). ‘The Audience Experience: Measuring Quality in the Performing Arts.’ International Journal of Arts Management 11(3): 16-29.

Raingruber, Bonnie. (2014). Contemporary Health Promotion in Nursing Practice. Jones & Bartlett Publishers: Burlington MA.

Sherwood, N and Jeffery, R. (2000). ‘The Behavioural Determinants of Exercise: Implications for Physical Activity Interventions.’ Annual Review of Nutrition 20: 21-44.

Synergistiq. (2014). Evaluation of MOTION: Final Report. VicHealth: Melbourne.

Thorogood, Margaret and Coombes, Yolande. (2010). Evaluating Health Promotion: Practice and Methods. Oxford University Press: Oxford.

Victorian Government Department of Human Services. (2003). Measuring Health Promotion Impacts: A Guide to Impact Evaluation in Integrated Health Promotion. Department of Human Services: Melbourne.

Watson, R and Yip, P. (2011). ‘How many were there when it mattered? Estimating the sizes of crowds,’ Significance, September, 104-107.

Hearts and minds – an explanatory model of impact

BYP-Explanatory-Model
Here is something I have been toying with for a while – how to get into one diagram the way Sarah, Yen and I think about impact.

When I talk about evaluation (to anyone who will listen to me ramble about it – mostly social and health workers, mental health programmers and arts professionals), I describe the impact of an experience or program in terms of how it affects an individual’s:

  • heart (their emotional response)
  • mind (the person’s intellectual and attitudinal change)
  • body (behaviours – what the person does)
  • spirit (aesthetic change, unitary change – i.e how all the changes coalesce to change a person)
  • world (social, community and cultural change which results from the program or experience)

Sometimes evaluation can scare people with its academic language. Of course it is important to have theoretical rigour. We can have this, and still use a language and framework that makes sense to people intuitively.

I am not much of an illustrator, so here it is in smart art! It’s a work in progress…but hopefully the model can help if you are trying to conceptualise and articulate the impact of  what you or your organisation does, and then evaluate that impact.

Click here for a PDF of the model

Hearts and minds, people. Hearts and minds.

 

A ‘tail’ of two news services (as seen through news of China’s fossil fuel car ban)

In Part 1, I compare the reporting of the recent news of China’s move to ban fossil fuel in automotive vehicles by the pay-to-view Australian Financial Review and the free Bloomberg News service.

In Part 2, I consider the merits of Australian Financial Review’s ‘Lex Column’ argument on the future of China’s electric vehicle (EV) industry.

 

Part 1

Yesterday’s headlines read like the tale of two publications: One, the pay-to-read Australian Financial Review, and the other, the news service, Bloomberg. Whilst both were founded pre-World Wide Web (AFR in 1951, Bloomberg in 1990), the quality of journalism was on stark display.

Yesterday’s (12th of September, 2017) pay-wall protected article from The Lex Column (herafter ‘Lex’)  in the Australian Financial Review (AFR) made the bold claim ‘China’s electric vehicle ambitions a tailpipe dream for now’.  In contrast, Bloomberg’s headline read ‘China deadline shifts focus to electric car race.’

Lex’s claim came in response to China’s vice-minister of industry and information technology, Xin Guobin’s, public announcement that the Chinese (PRC) government is working with industry on a timetable to end production and sales of internal combustion engine (ICE) vehicles. Lex’s claim rests on the assertion that a shift to electric vehicles (EV’s) will require massive scale that Chinese automakers cannot achieve: “China’s automakers are not yet big enough to make electric cars profitably.”

Besides being a slightly irrelevant claim – China and the Chinese Diaspora all over the World have demonstrated on several occasions that a) they are prepared to operate on much lower profit margins than many in the West and b) they are frequently prepared to participate in industries even where they aren’t profitable (steel anyone?) – Lex wanly support their claim with one meager data point; that Great Wall, a Chinese auto company, recently failed to raise capital to buy Fiat Chrysler – as if somehow outbound Chinese foreign investment capabilities are germane to foreign investment inbound to China. It’s a point contradicted by the Bloomberg article’s mention of the much-documented fact that Warren Buffet (the world’s most famous and successful investor of the past 50+ years) has invested heavily in BYD, China’s largest electric vehicle manufacturer. And if you think that BYD doesn’t have scale in electric vehicles? Check out this video: https://www.youtube.com/watch?v=sLo3Pn4KC3w

Lex’s sweeping statement is hedged in the time honoured teleological error of conservatives: It is a ‘tailpipe dream for now.’  In other words, ‘It will never happen … until it happens’.

In stark contrast to the (pay-to-view) AFR’s op-ed comes the (free) Bloomberg article based on the same announcement. Bloomberg’s article is entitled ‘China Fossil Fuel Deadline Shifts Focus to Electric Car Race’. Contrary to Lex’s one data point and numerous assumptions, Bloomberg makes a far more contained assertion (but still a bold one) and they support their argument with loads of data and sound reasoning. For example: Recent 7 month sales data for two large Chinese automakers in the tens of thousands, and a comparison to GM’s paltry electric vehicle sales figures in China; two very strong policy reasons for China to support EV’s – reduced oil dependency and reduced pollution (everyone knows how bad China’s pollution problem is, not least of all the Chinese!); public comments from foreign motor car companies on their intentions to bring their latest EV’s to China; as well as news that Nio, a Chinese EV start-up is working with Anhui Jianghuai Automobile Group which is partnered with Volkswagen AG to introduce an electric SUV next year. Additionally, the Bloomberg article reports that “Tesla said in June that it’s working with the Shanghai government to explore local manufacturing, a move that would allow it to achieve economies of scale and bring down manufacturing, labour and shipping costs.” So much for Lex’s claim that “(W)estern producers … have been reluctant to push battery and hybrid cars (in China). They fear losing valuable intellectual property to their (Chinese) joint-venture partners.”

Last but not least, the Bloomberg article doesn’t simply assume economies of scale will be required, it quotes somebody from the sector who might actually know better than they do – a senior executive from one of China’s largest car companies, Chery – to make this assertion for them: “’Chery’s Liu said as newer technologies are developed in the meantime, the strongest among the manufacturers with better resources will adapt to the market and continue to dominate. Those who currently are outrunning the others in EV’s will not necessarily continue to stay ahead,’ he said.”

Point-for-point, by my reckoning, the Bloomberg article is in every way superior to the AFR’s, pointing to another disruption that is occurring besides the two alluded to above. The disruption here though is not that of electric vehicles over I.C.E’s and China’s economic ascension, but that of media.

Bloomberg is a media service, and in the past, depended upon the traditional media’s means of distribution to reach its audience. With the coming of the Internet, Bloomberg is able to go directly to its audience. Looking to the future (and perhaps the present day) why does it need a legacy print media institution like the AFR when its content is superior and free and its reputation is as good as – if not better – than the AFR’s in the global marketplace? If the latter were not true, why does the AFR refer to Bloomberg? (E.g. Just one of many examples http://www.afr.com/news/cheap-wind-solar-will-make-australia-a-magnet–bloomberg-20170615-gwrwat ) The only reasonable answer I can come up with is that the AFR has a strong local reputation, providing local financial news (and I’m open to hearing others). Yet in an increasingly globalized economy (something that was occurring before the Internet, but has been accelerated by it), where global trends affect local trends more than vice versa, it makes me wonder if I should continue subscribing to the AFR.

 

Part 2: More than just a drubbing by Bloomberg – Lex is probably wrong

Even over-and-above the drubbing Lex’s column receives in comparison to Bloomberg’s, the thing that piqued my interest in the first instance is the complete lack of insight into two very important facets of financial news by the Lex column: 1) The future of the automobile industry and 2) The Chinese economy.

The article starts with two assertions, both of which may yet prove to be false: i) “China may learn techniques from the west (sic) …”, ii) “ … but adapt these for the local culture. So it is with electric vehicles.”

Let’s start with assertion i), ‘China may learn techniques from the West’:

Firstly, in the case of EV’s, it may not be the case that China has much to learn. When looking at EV’s, one should understand that EV’s, by their nature, are actually simpler than ICE vehicles. Some reports suggest that the Tesla drive-trains use as few as 20 moving parts, when compared to 200 for an ICE: https://forums.tesla.com/en_AU/forum/forums/model-s-vs-ice-how-many-moving-parts .

The main issue with electric vehicle adoption was not the motor technology, which was developed predominantly by the pioneers of electricity in the 18th and 19th centuries, and has remained essentially unchanged. The main technological hurdle has been with the battery technology. The power-to-weight ratio (or roughly, the ‘energy density’ and more precisely, the ‘specific energy’) of lead-acid batteries prohibited their usage in all but the most niche applications – e.g. to power the starter motor for the ICE. Lithium ion batteries improved that power-to-weight ratio markedly, but for a long time have been too expensive. The Lex article cites Bernstein to point out that a mid-size combustion vehicle costs $US15k to produce compared with $US24k for a comparable EV. The differential is down to the battery, which accounts for half of an EV’s cost. A combustion engine is just 15 per cent of a traditional car.”

So much is not in dispute – even though it ignores the rapidly decreasing price of lithium ion batteries: https://electrek.co/2017/01/30/electric-vehicle-battery-cost-dropped-80-6-years-227kwh-tesla-190kwh/ . Notwithstanding this short-sighted view of EV production costs, Lex goes on to conclude (Western car makers) ‘do at least have the scale to finance the necessary investment (in battery production). The clear implication being that the Chinese do not. This last point is in direct contradiction to the fact that a) numerous Chinese Gigafactories are coming online in the coming years http://fortune.com/2017/06/28/elon-musk-china-battery/ and b) Elon Musk (CEO of Tesla Motors) is looking to invest in a Chinese-situated Gigafactory https://electrek.co/2017/06/22/tesla-gigafactory-china/ . Yet another nail in the coffin for Lex’s claim above that Western companies will be reluctant to invest in China.

So if anything, the heavy investment in ICE technology by Western car manufacturers can serve as a disadvantage, compared to those who have less invested – like the Chinese. This is one of the key lessons from Clayton Christensen’s Innovator’s Dilemma: When new technologies cause great firms to fail, in which he coined the term ‘Disruption’ in its much over-used meaning in technology circles. Namely, it is because these (once) great firms were optimized for a past paradigm tends to mean they are less optimized for the new firm that takes into account the new paradigm.

A second line of reasoning relates to the widely acknowledged fact that Chinese manufacturers tend to disregard Western intellectual property (IP) laws has led to a vibrant and cut-throat technology scene: http://www.nesta.org.uk/blog/made-china-what-maker-movement-means-china-and-world; https://www.theguardian.com/cities/2014/jun/13/inside-shenzen-china-silicon-valley-tech-nirvana-pearl-river . Note, not only are they stealing from the West, but they are stealing from each other. As a result, they are much more dynamic in many areas of technological advancement than their counterparts in the West and in some cases are leaders.   It is likely this will be increasingly the case in many areas in the future. But which areas? This leads me to my next point …

ii) “The Chinese adapt techniques they learn from the West for the local culture”

This claim again may have firm roots in the past, but as every wise investor knows (one would presume, one of the AFR’s core readership segments?), the past is not necessarily an indicator of the future.

Is this the case for electric vehicles in China? My assertion is that the past habit of Chinese adapting techniques from the West for the local culture may prove to be incorrect in the context of EV’s. The reasons for this are two-fold. Firstly, car ownership is much lower in China than in most First World nations. Just as the Chinese are more ‘mobile first’ than Westerners (something reported over 30 months ago in this free ABC article: http://www.abc.net.au/technology/articles/2015/03/27/4206067.htm ) it is possible that China will lead in electric vehicle adoption and technology.

To understand this claim, one needs to understand how China came to be more ‘mobile first’ than Westerners, despite still lagging behind most G20 nations in per capita income and many other ‘quality of life’ measures. If you’re still grasping with this idea, check out this article here: https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/michelleevans1/2017/04/12/how-china-won-the-race-to-being-considered-a-mobile-first-commerce-nation/ .

My potted version is as follows:  In the recent past, China’s telephony infrastructure and logistics infrastructure were not as robust as what we were used to in First World nations. This is a natural consequence of having an entirely state-controlled economy for a large part of the 20th century, with its inherent lack of capital, lack of responsiveness to consumer demand and susceptibility to corruption (although I admit, the Eastern European public transport systems I witnessed soon after the Berlin Wall came down were well ahead of Sydney’s and many other Western public transport systems). The mobile boom occurred as China was opening up and as it adopted aspects of Capitalism in what was famously referred to as ‘Socialism with Chinese characteristics.’ This meant its mobile telephony infrastructure was simply more convenient to use, and could be used to leapfrog or bypass many of the annoyances that came with the old Communist-era infrastructure as well as the many intermediaries keen to take their slice from the consequent scarcity of distribution.

In addition to this, their mobile economy is much less fragmented than in the West. Where the free market prevailed in the West, leading to different players in different aspects of social media e.g. Facebook for long-engagement social media, Snapchat for transient social media, Google for search, Paypal for payments etc, many of these services are dominated by just one player in China; TenCent’s WeChat. This allows for a much smoother e-commerce experience than we have in the West. How WeChat came to dominate – whether by market forces, or by government intervention – is debatable, but it appears it is at least partly due to both: the superiority of its offering as well as being aided by the so-called Great Firewall of China and other Chinese requirements inhibiting the success of foreign entrants. See these articles for some commentary on these issues: https://stratechery.com/2015/aggregation-theory/ ; https://stratechery.com/2017/apples-china-problem/ ): https://www.ca.com/us/rewrite/articles/application-economy/wechat-a-do-it-all-app-thats-everything-to-millions-of-chinese-u.html ; http://exponent.fm/episode-113-wechat-china-and-apple/ )

But what has this to do with EV’s?

The automobile industry has similarities to the mobile market, in that China has started way behind the West in car ownership although unlike in mobile, it still lags. It is so far behind that its market will have stronger incentives to accommodate the next automotive disruption. No, I’m not talking about electric vehicles – technically a technological evolution and not a disruption (see this article for why: http://www.asymco.com/2015/02/23/the-entrants-guide-to-the-automobile-industry/ ).

The ‘next automotive disruption’ I’m referring to is self-driving vehicles (SDV’s). There is strong evidence that the introduction of truly self-driving vehicles that completely replace the driver, will eventually lead to a different business model, known as ‘transport-as-a-service’ (TAAS). Yes, it’s like Software-as-a-service (e.g. Salesforce, and Adobe’s Creative Suite has moved to that model as have most other desktop applications), Cloud services such as Dropbox, OneDrive and Amazon Web Services etc (a.k.a. ‘memory-as-a-service’). Behind the fancy jargon, it will be just like a taxi service – but for virtually every automobile trip you make – and without the driver.

The following research suggests how price-competitive a self-driving taxi service would be compared to car ownership, in a city as small as Austin (population around 1 million: https://en.wikipedia.org/wiki/Austin,_Texas ): http://www.caee.utexas.edu/prof/kockelman/public_html/TRB15SAVsinAustin.pdf

In short – ‘Very competitive’. Since most research shows that the average car owner only uses their vehicle for 4% of the day (e.g. http://www.cityofsydney.nsw.gov.au/__data/assets/pdf_file/0012/122502/CarShareEconomicAppraisalFINALREPORT.pdf ) a predominantly self-driving fleet of cars can be far less numerous than present-day car ownership quantities.

Not only will this mean less scale is required by TAAS ‘cab’ makers, than traditional auto-manufacturers (since there will be fewer cars), so too, with less car ownership, the average Chinese consumer has stronger incentives to adopt a TAAS model, in place of buying a car outright.

On top of this, the prospect of nearly 1 billion more cars on the road is enough to make even the stony faced apparatchiks of the CCP quail. The Chinese government (and most Chinese citizens and residents I’ve spoken to) probably doesn’t want each citizen to own a car for the aforementioned reason of pollution, as well as over-crowded road infrastructure. The Chinese government, thus has an incentive to legislate change for a TAAS model to occur. You think they won’t? They just announced their intention to ban I.C.E vehicles, remember? One advantage of their ‘Socialism with Chinese characteristics’ economic model is that the State has great power to force through change regardless of what a vocal minority or ‘swinging voter’ would dispute. Suffice to say, there is very little ‘NIMBY’ism’ (“Not In My BackYard!”- ism) in China.

The above paragraph is important in the context for the TAAS future, because it resolves the most difficult question we in the West face in coming to such an outcome. Nobody ‘in the know’ about self-driving vehicles doubts that TAAS will occur. How and when we get there is the big question.

For example, when will the (Western) government be satisfied that self-driving vehicles are safe enough to allow on the road in self-driving mode?

Note that this question is mainly a social question. Technically at least, 80% of daily trips could probably be covered by the autopilot systems available in cars such as those made by Tesla today: https://www.youtube.com/watch?v=VG68SKoG7vE . Highway driving is easy for the most sophisticated autopilot systems of today, and if everyone had autopilot in their car, it would be a lot safer too! This is because the hardest parts of self-driving are a) dealing with the unpredictability and fallibility of human drivers and b) ‘The last mile’ problem of transportation. In getting from A to B, it’s the first and last portion of the journey (e.g. from the winding suburban roads onto the highway, or from the home to the public transport hub; and then the bit from the highway to the car park or office, or the train station to the office) that tends to present the biggest problem for self-driving software. Take away these obstacles and the software doesn’t need to be as ‘bleeding edge’ as that being developed by the likes of Waymo (Alphabet/Google’s self-driving arm) or Tesla Motors.

A powerful government could easily make a legislative change that bans all but self-driving vehicles on highways, and organizes pick-up and drop-off points for passengers at transport hubs to cover the last mile of their journeys. And all of this is possible with today’s technology and a government as powerful (relative to its citizenry) as the Chinese Communist Party (CCP).

So just as China is not ‘learning techniques from the West’ in mobile, I suspect, China is likely to lead the way in terms of TAAS and the self-driving future.

So that’s my 2 Yen’s worth.  What’s yours?

Validated instruments to use when assessing the impact of the arts

evaluate-imageHi guys,

There was a lot of interest in my blogette about resources for measuring cultural value, so I thought I might share some other tools which I find quite helpful in BYP Group’s work around assessing and measuring the impact of the arts.

I have compiled a table of useful and even better, VALIDATED instruments which might be used when assessing the impact of the arts on personal capacity development e.g. self-esteem, self-efficacy, self-concept, emotional regulation, theory of mind, creativity etc.

Validated-Arts-Research-Instruments-Table

Enjoy! And of course email or comment on this blog if you have any more to add to the list or have any questions.

Jackie

BYP Group does not take responsibility for the accuracy of the information contained in external links.

Useful resources about quantifying cultural value

pmiy

Street Pianos (c) Luke Jarman

A quick scratch pad of useful reports to do with quantifying the value of arts and culture (and also a bit about alternative financing for a bit of light reading).

 

Understanding the alternative finance market (NESTA 2016)

Quantifying the social impact of culture and sports (UK 2014)

Quantifying and valuing the wellbeing impacts of culture and sport (UK 2015)

The 2015 report of the Warwick Commission on the Future of Cultural Value (UK)

Validating the links between arts and liveability (US)