Making Money Uk

S4C is sitting on a £26.1 million investment fund that could be used to plug expected cuts to its public budget.

The publicly-funded Welsh-language broadcaster’s commercial arm S4C Digital Media Ltd (S4CDM) made £33 million in 2005 from selling its stake in the SDN Freeview multiplex to ITV (LSE: ITV). It used the cash to create a digital investment vehicle.

But S4CDM has made only one deal since - a £9.5 million equity investment it led in 2008 in to Inuk Networks, an Abercynon startup operating a service for viewing TV on computers.

S4CDM still has £26.3 million in assets, according to 2009 annual accounts. But there’s little prospect of a return on the sole investment. Now, with the Department for Culture, Media & Sport (DCMS) reportedly ready to cut 24 percent (£24.2 million) from S4C’s £101 million annual public grant over the next four years, S4C may come under pressure to use the funds for its core public service instead of digital investing.

“The purpose of the S4CDM fund is currently being reviewed,” S4C tells paidContent:UK.

The story…

Flush with cash from having sold the digital terrestrial spectrum that it had originally been granted by Ofcom, S4C invested in promising young Inuk together with Sir Terry Matthews’ VC house Wesley Clover in 2008.

S4C’s contribution had been £6 million, giving it a stake of 20 to 26 percent, and was approved by the then culture secretary Andy Burnham by parliamentary order upon the S4C Authority‘s request, according to correspondence between the authority and the DCMS which was released to a Freedom Of Information (FOI) request this month.

The S4C Authority had thought the investment would “secure a continuing outlet for S4C Digital on a broadband network in the future”, watched particularly by young diaspora away at university, since Inuk’s main business was delivering IPTV to halls of residence.

But, despite the new money, within months, we heard Inuk was struggling under the weight of its costs. In December 2008, S4C’s then CEO Iona Jones flew home from a holiday to attend an emergency meeting on the matter and, on Boxing Day, S4C loaned Inuk a further £1 million, in return for an option on all Inuk’s property, equipment and intellectual property as security.

Early in 2009, Inuk appointed a strategist to review the business and, in April, sold the company to Move Networks, a Utah-based IPTV company.

Move paid Inuk in shares rather than cash, so S4C made no financial return on its investment.

Upon hearing about the imminent acquisition, the DCMS asked the S4C Authority to show it details of S4C’s new stake in Move Networks. What the authority supplied, on the same day Inuk’s acquisition was confirmed in public - according to the FOI request - was the press release announcement, which contained no mention of S4C or of Move’s shareholders.

Subsequent S4CDM annual accounts show that S4CDM’s £6 million Inuk stake had been swapped for 914,714 Move shares without making a profit or a loss.

But now Move itself is in trouble. In June, the company laid off much of its staff and said it, too, was seeking a sale - likely because its costs, too, had gotten ahead of it whilst building out its HD web video platform.

But S4C should not make much of a return on any sale. Move had already taken at least $70 million in investments from Steamboat Ventures (Disney), Hummer Winblad Venture Partners, Microsoft (NSDQ: MSFT), Benchmark Capital, Cisco (NSDQ: CSCO), ComcastInteractive Media and Televisa, before S4C had taken any Move stock. S4CDM’s stake is, therefore, likely more dilute than its Inuk stake was. S4C is not even listed amongst the investors on Move’s website.

At least three potential suitors have talked with Move since June, according to recent industry reports, but no deal has been forthcoming - buyers are likely put off by the valuation which would be required for Move’s big-name investors to make a return on their $70 million. “No one is going to be willing to pay that much for the company,” StreamingMedia.com reported. “So, unless the investors can get stock in the company that eventually purchases Move, they will lose money on the deal.”

That means S4C would, again, not cash out of its £6 million Inuk investment; it would instead need to gain only stock in whomever might buy Move and hope for a later liquidity event.

However, S4C tells paidContent:UK: “The current book value of S4CDM’s stake in Move Networks is still £6 million.”

The options

All bets are now off when it comes to S4C’s future. The channel’s faithful and staff alike are alarmed by recent reports but acknowledge radical reform may take place.

Options for downsizing which S4C might consider could, theoretically, include abandoning today’s kind of 24/7 linear TV channel and instead becoming a multi-platform, on-demand-centric brand, commissioning less but higher-quality content for the coming era of mass time-shifting…

In three years, when UK TVs start shipping with integrated YouView, round-the-clock linearity will matter less than quality; VOD will be commonplace. As a brand pushing disaggregated video out through such devices, S4C could even offer multiple programming strands, cutting unloved output but maintaining the content it’s well regarded for, like its children’s segment.

The problem is, today, S4C’s VOD strategy is trailing. While other broadcasters are unbundling their shows for syndication through a burgeoning array of distributors like SeeSaw, YouTube, Sony (NYSE: SNE) Internet TV and iTunes Store, S4C’s VOD is available only on its own-brand S4/Clic catch-up site…

Right now; YouView is a distant prospect - S4C is the only one of the UK’s five public service broadcasters which is not a partner in the JV, although YouView’s first non-equity content partners are due to be announced in coming weeks.

If S4C favours a conservative continuation in its current form over this kind of reformation, then one option is clear - stop playing venture capitalist...

Creating a digital investment arm, with the aim of securing carriage for S4C through online disruption, may have been admirable. Facing austerity, however, S4C could write off any Inuk losses, consider how lucky it was to have been granted won a spectrum license that eventually netted it £33 million, close S4C Digital Media and transfer the £26.1 million reserve to S4C proper, where it would plug the anticipated reduction in grants precisely.

Yet Another Study Shows Musicians Making More Money

from the well,-look-at-that dept

We've made the argument repeatedly that saying unauthorized file sharing is hurting the music business lacks evidence. Instead, what we've seen, over and over again, is that more money is pouring into the music business, more music is being produced and (most importantly) that more musicians who embrace this new world are doing better than they would have otherwise. Now, we've pointed to research in the UK, Sweden and the US that have all shown aggregate growth for the music business, with some of the numbers suggesting more money going directly to musicians, rather than gatekeepers.



The latest study, highlighted by TorrentFreak takes a similar look at the Norwegian music market to show very similar findings and (of course) that musicians are, indeed, benefiting:



Like the UK and Swedish studies, this study, covering Norway, found that the aggregate amount going to the industry is up slightly (4% in real terms), mostly thanks to live shows more than making up for the decline in music sales (it's important to note that these researchers appear to have modeled their research on both the UK and Swedish studies, and made only slight changes, which they explain (and justify) in the report. The key finding is that musicians appear to be making significantly more these days than in the past:

Total artist revenues have gone from NOK 208 million in 1999 to NOK 545 million in 2009, which is an increase of about 162%. Excluding state subsidization, the income from 1999 to 2009 has increased with NOK 229 million, or 147%....



According to this, Norwegian artists have seen an increase in all four of their income sources during the past eleven years. This goes contrary to the common belief that artists have seen a decline in income because of the digitalization of the industry.



The loss of record sales because of consequences of the digitalization of the industry has not affected the Norwegian artists in the same brutal way as it has the record companies. Artists earn in general 20% or less from record sales, and a decrease in record sales would most likely be compensated by an increase in one or more of the other three income sources.

Now, it's worth pointing out -- as I learned when I attended Nordic Music Week last year -- that the Norwegian music industry is heavily subsidized by the government, which is one of the four revenue streams discussed above. However, that only represents about 30% of artist revenue in 2009. The largest single component -- again similar to what we've seen elsewhere -- is live revenue, which continues to grow. Even if you exclude state subsidies, the report found that Norwegian artists doubled their income in the past 11 years:

Adjusted for inflation, total artist revenue has gone from NOK 255 million in 1999 to NOK 545 million in 2009, an increase of about NOK 290 million or 114%. Excluding state subsidizations, the increase has changed from NOK 192 million to NOK 386 million, which is an increase of NOK 194 million or 101% This goes to show that the artists themselves, as a group, have seen tremendous more growth than the industry as a whole.

And, yes, there are more musicians out there to split the pie, but the growth rate in the industry has increased more quickly than the growth in musicians.

Since the total number of artists in 1999 and 2009 are available to the authors, it is possible to calculate an average income from music for artists in Norway. With 3200 artists in 1999 the average income from music would be about NOK 65 000. With 4100 artists in 2009 the average income from music is about NOK 133 000, creating an increase of NOK 68 000 or 105%. Adjusted for inflation the income has increased with from about NOK 80 000 to NOK 133 000, an increase of NOK 53 000, an increase of 66%.

Overall, the results, like those in Sweden and the UK, seem to clearly debunk the repeated claims from recording industry folks (and some musicians) that artists are somehow suffering under this new setup. Now, there may absolutely be cases where artists who fail to adapt are struggling, and there's no doubt that some labels that failed to adapt are struggling -- but there's increasingly little evidence that the overall music industry or artists as a whole are suffering. All of the evidence seems to suggest that it's not file sharing that's a problem at all. More money is going into the music business. The only problems are from those in the industry too stubborn or too clueless to adapt to capture the money that's flowing in.

27 Comments | Leave a Comment..

Scripting <b>News</b>: What kind of <b>news</b> system...?

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In news related to Michelle raising more money, the GOP seems to be short of it. Gosh, other than 8 years of a failed presidency, and then attacking the popular candidates and their supporters just as the Dems are doing, I can't imagine ...

robert shumake

Scripting <b>News</b>: What kind of <b>news</b> system...?

And it's not okay that they're making a bid for exclusivity on the role of News System of the Future, and they can't even keep their servers running properly. Either you deliver the benefit of being the sole provider, or sorry (to ...

Google <b>News</b> Now Eight Years Old

google-news-screenshot-old Google today announced on the official Google blog the eighth birthday of Google News. It's a huge milestone for the California-based search company, which launched the Google News service on the 22nd of ...

Wednesday <b>News</b> « The Confluence

In news related to Michelle raising more money, the GOP seems to be short of it. Gosh, other than 8 years of a failed presidency, and then attacking the popular candidates and their supporters just as the Dems are doing, I can't imagine ...

S4C is sitting on a £26.1 million investment fund that could be used to plug expected cuts to its public budget.

The publicly-funded Welsh-language broadcaster’s commercial arm S4C Digital Media Ltd (S4CDM) made £33 million in 2005 from selling its stake in the SDN Freeview multiplex to ITV (LSE: ITV). It used the cash to create a digital investment vehicle.

But S4CDM has made only one deal since - a £9.5 million equity investment it led in 2008 in to Inuk Networks, an Abercynon startup operating a service for viewing TV on computers.

S4CDM still has £26.3 million in assets, according to 2009 annual accounts. But there’s little prospect of a return on the sole investment. Now, with the Department for Culture, Media & Sport (DCMS) reportedly ready to cut 24 percent (£24.2 million) from S4C’s £101 million annual public grant over the next four years, S4C may come under pressure to use the funds for its core public service instead of digital investing.

“The purpose of the S4CDM fund is currently being reviewed,” S4C tells paidContent:UK.

The story…

Flush with cash from having sold the digital terrestrial spectrum that it had originally been granted by Ofcom, S4C invested in promising young Inuk together with Sir Terry Matthews’ VC house Wesley Clover in 2008.

S4C’s contribution had been £6 million, giving it a stake of 20 to 26 percent, and was approved by the then culture secretary Andy Burnham by parliamentary order upon the S4C Authority‘s request, according to correspondence between the authority and the DCMS which was released to a Freedom Of Information (FOI) request this month.

The S4C Authority had thought the investment would “secure a continuing outlet for S4C Digital on a broadband network in the future”, watched particularly by young diaspora away at university, since Inuk’s main business was delivering IPTV to halls of residence.

But, despite the new money, within months, we heard Inuk was struggling under the weight of its costs. In December 2008, S4C’s then CEO Iona Jones flew home from a holiday to attend an emergency meeting on the matter and, on Boxing Day, S4C loaned Inuk a further £1 million, in return for an option on all Inuk’s property, equipment and intellectual property as security.

Early in 2009, Inuk appointed a strategist to review the business and, in April, sold the company to Move Networks, a Utah-based IPTV company.

Move paid Inuk in shares rather than cash, so S4C made no financial return on its investment.

Upon hearing about the imminent acquisition, the DCMS asked the S4C Authority to show it details of S4C’s new stake in Move Networks. What the authority supplied, on the same day Inuk’s acquisition was confirmed in public - according to the FOI request - was the press release announcement, which contained no mention of S4C or of Move’s shareholders.

Subsequent S4CDM annual accounts show that S4CDM’s £6 million Inuk stake had been swapped for 914,714 Move shares without making a profit or a loss.

But now Move itself is in trouble. In June, the company laid off much of its staff and said it, too, was seeking a sale - likely because its costs, too, had gotten ahead of it whilst building out its HD web video platform.

But S4C should not make much of a return on any sale. Move had already taken at least $70 million in investments from Steamboat Ventures (Disney), Hummer Winblad Venture Partners, Microsoft (NSDQ: MSFT), Benchmark Capital, Cisco (NSDQ: CSCO), ComcastInteractive Media and Televisa, before S4C had taken any Move stock. S4CDM’s stake is, therefore, likely more dilute than its Inuk stake was. S4C is not even listed amongst the investors on Move’s website.

At least three potential suitors have talked with Move since June, according to recent industry reports, but no deal has been forthcoming - buyers are likely put off by the valuation which would be required for Move’s big-name investors to make a return on their $70 million. “No one is going to be willing to pay that much for the company,” StreamingMedia.com reported. “So, unless the investors can get stock in the company that eventually purchases Move, they will lose money on the deal.”

That means S4C would, again, not cash out of its £6 million Inuk investment; it would instead need to gain only stock in whomever might buy Move and hope for a later liquidity event.

However, S4C tells paidContent:UK: “The current book value of S4CDM’s stake in Move Networks is still £6 million.”

The options

All bets are now off when it comes to S4C’s future. The channel’s faithful and staff alike are alarmed by recent reports but acknowledge radical reform may take place.

Options for downsizing which S4C might consider could, theoretically, include abandoning today’s kind of 24/7 linear TV channel and instead becoming a multi-platform, on-demand-centric brand, commissioning less but higher-quality content for the coming era of mass time-shifting…

In three years, when UK TVs start shipping with integrated YouView, round-the-clock linearity will matter less than quality; VOD will be commonplace. As a brand pushing disaggregated video out through such devices, S4C could even offer multiple programming strands, cutting unloved output but maintaining the content it’s well regarded for, like its children’s segment.

The problem is, today, S4C’s VOD strategy is trailing. While other broadcasters are unbundling their shows for syndication through a burgeoning array of distributors like SeeSaw, YouTube, Sony (NYSE: SNE) Internet TV and iTunes Store, S4C’s VOD is available only on its own-brand S4/Clic catch-up site…

Right now; YouView is a distant prospect - S4C is the only one of the UK’s five public service broadcasters which is not a partner in the JV, although YouView’s first non-equity content partners are due to be announced in coming weeks.

If S4C favours a conservative continuation in its current form over this kind of reformation, then one option is clear - stop playing venture capitalist...

Creating a digital investment arm, with the aim of securing carriage for S4C through online disruption, may have been admirable. Facing austerity, however, S4C could write off any Inuk losses, consider how lucky it was to have been granted won a spectrum license that eventually netted it £33 million, close S4C Digital Media and transfer the £26.1 million reserve to S4C proper, where it would plug the anticipated reduction in grants precisely.

Yet Another Study Shows Musicians Making More Money

from the well,-look-at-that dept

We've made the argument repeatedly that saying unauthorized file sharing is hurting the music business lacks evidence. Instead, what we've seen, over and over again, is that more money is pouring into the music business, more music is being produced and (most importantly) that more musicians who embrace this new world are doing better than they would have otherwise. Now, we've pointed to research in the UK, Sweden and the US that have all shown aggregate growth for the music business, with some of the numbers suggesting more money going directly to musicians, rather than gatekeepers.



The latest study, highlighted by TorrentFreak takes a similar look at the Norwegian music market to show very similar findings and (of course) that musicians are, indeed, benefiting:



Like the UK and Swedish studies, this study, covering Norway, found that the aggregate amount going to the industry is up slightly (4% in real terms), mostly thanks to live shows more than making up for the decline in music sales (it's important to note that these researchers appear to have modeled their research on both the UK and Swedish studies, and made only slight changes, which they explain (and justify) in the report. The key finding is that musicians appear to be making significantly more these days than in the past:

Total artist revenues have gone from NOK 208 million in 1999 to NOK 545 million in 2009, which is an increase of about 162%. Excluding state subsidization, the income from 1999 to 2009 has increased with NOK 229 million, or 147%....



According to this, Norwegian artists have seen an increase in all four of their income sources during the past eleven years. This goes contrary to the common belief that artists have seen a decline in income because of the digitalization of the industry.



The loss of record sales because of consequences of the digitalization of the industry has not affected the Norwegian artists in the same brutal way as it has the record companies. Artists earn in general 20% or less from record sales, and a decrease in record sales would most likely be compensated by an increase in one or more of the other three income sources.

Now, it's worth pointing out -- as I learned when I attended Nordic Music Week last year -- that the Norwegian music industry is heavily subsidized by the government, which is one of the four revenue streams discussed above. However, that only represents about 30% of artist revenue in 2009. The largest single component -- again similar to what we've seen elsewhere -- is live revenue, which continues to grow. Even if you exclude state subsidies, the report found that Norwegian artists doubled their income in the past 11 years:

Adjusted for inflation, total artist revenue has gone from NOK 255 million in 1999 to NOK 545 million in 2009, an increase of about NOK 290 million or 114%. Excluding state subsidizations, the increase has changed from NOK 192 million to NOK 386 million, which is an increase of NOK 194 million or 101% This goes to show that the artists themselves, as a group, have seen tremendous more growth than the industry as a whole.

And, yes, there are more musicians out there to split the pie, but the growth rate in the industry has increased more quickly than the growth in musicians.

Since the total number of artists in 1999 and 2009 are available to the authors, it is possible to calculate an average income from music for artists in Norway. With 3200 artists in 1999 the average income from music would be about NOK 65 000. With 4100 artists in 2009 the average income from music is about NOK 133 000, creating an increase of NOK 68 000 or 105%. Adjusted for inflation the income has increased with from about NOK 80 000 to NOK 133 000, an increase of NOK 53 000, an increase of 66%.

Overall, the results, like those in Sweden and the UK, seem to clearly debunk the repeated claims from recording industry folks (and some musicians) that artists are somehow suffering under this new setup. Now, there may absolutely be cases where artists who fail to adapt are struggling, and there's no doubt that some labels that failed to adapt are struggling -- but there's increasingly little evidence that the overall music industry or artists as a whole are suffering. All of the evidence seems to suggest that it's not file sharing that's a problem at all. More money is going into the music business. The only problems are from those in the industry too stubborn or too clueless to adapt to capture the money that's flowing in.

27 Comments | Leave a Comment..

robert shumake

Scripting <b>News</b>: What kind of <b>news</b> system...?

And it's not okay that they're making a bid for exclusivity on the role of News System of the Future, and they can't even keep their servers running properly. Either you deliver the benefit of being the sole provider, or sorry (to ...

Google <b>News</b> Now Eight Years Old

google-news-screenshot-old Google today announced on the official Google blog the eighth birthday of Google News. It's a huge milestone for the California-based search company, which launched the Google News service on the 22nd of ...

Wednesday <b>News</b> « The Confluence

In news related to Michelle raising more money, the GOP seems to be short of it. Gosh, other than 8 years of a failed presidency, and then attacking the popular candidates and their supporters just as the Dems are doing, I can't imagine ...

robert shumake

Scripting <b>News</b>: What kind of <b>news</b> system...?

And it's not okay that they're making a bid for exclusivity on the role of News System of the Future, and they can't even keep their servers running properly. Either you deliver the benefit of being the sole provider, or sorry (to ...

Google <b>News</b> Now Eight Years Old

google-news-screenshot-old Google today announced on the official Google blog the eighth birthday of Google News. It's a huge milestone for the California-based search company, which launched the Google News service on the 22nd of ...

Wednesday <b>News</b> « The Confluence

In news related to Michelle raising more money, the GOP seems to be short of it. Gosh, other than 8 years of a failed presidency, and then attacking the popular candidates and their supporters just as the Dems are doing, I can't imagine ...