GAUTENGS CREATIVE INDUSTRIES: THE MULTIMEDIA SECTOR

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GAUTENGS CREATIVE INDUSTRIES: THE MULTIMEDIA SECTOR

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M U LT I M E D I A S E C TO R p RO F I L E
TOTAL TURNOVER TOTAL EMpLOyMENT GROSS VALUE-ADDED BLACk EMpLOyEES FEMALE EMpLOyEES NUMBER OF ORGANISATIONS R267,000,000 1,100 R185,119,991 26% 36% 500

BAC k G R O U N D D E S C R I p T I O N O F T H E M U LT I M E D I A S E C T O R 2.1 DEfINITION 2 . 2 T H E vA L U E C H A I N 3 . T H E M U LT I M E D I A S E C T O R S A M p L E 4 . M U LT I M E D I A S E C T O R C O N T R I B U T I O N T O T H E G A U T E N G E C O N O M y 4.1 TURNOvER 4 . 2 E M P LOy M E N T 4 . 3 G vA 4 . 4 CO S T S 5 . T H E S T R U C T U R E O F T H E M U LT I M E D I A S E C T O R 6 . T y p E S O F O R G A N I S AT I O N S w I T H I N T H E M U LT I M E D I A S E C T O R 7 . D E M O G R A p H I C S w I T H I N T H E M U LT I M E D I A S E C T O R 7 . 1 R AC I A L A N D G E N D E R b R E A k D O w N 7 . 2 A G E AT T R I b U T E S 7 . 3 E D U C AT I O N A L AT T R I b U T E S 8. MARkETS 9 . F U N D I N G A N D F I N A N C I N G O F T H E M U LT I M E D I A S E C T O R 1 0 . O U T LO O k REFERENCES LIST OF FIGURES fIGURE 1: fIGURE 2: fIGURE 3: fIGURE 4: fIGURE 5: fIGURE 6: f I G U R E 7: fIGURE 8: fIGURE 9: L I S T O F TA B L E S TA b L E 1 : TA b L E 2 : TA b L E 3 : TA b L E 4 : TA b L E 5 : TA b L E 6 :

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Multimedia value chain S a m p l e b y f i r m s i ze D i s t r i b u t i o n b y o rg a n i s at i o n s i ze Le g a l s t at u s o f m u l t i m e d i a c o m p a n i e s Age distribution of multimedia entities R a c i a l a n d g e n d e r b re a k d o w n R a c i a l a n d g e n d e r b re a k d o w n o f m a n a g e m e n t O rg a n i s at i o n s i ze a n d f u n d i n g a p p l i c at i o n Sources of income for organisations in the multimedia sector

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Sample for Multimedia industry Tu r n o ve r i n t h e m u l t i m e d i a s e c t o r M u l t i m e d i a e m p l oye e s p e r c ate g o r y Co s t s E d u c at i o n l e ve l s o f m u l t i m e d i a e m p l oye e s fu n d i n g i n t h e m u l t i m e d i a s e c t o r

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1 . BACkGROUND
Multimedia is a relatively new sector in South Africa although it is globally established as a leading new knowledge-based industry contributing to employment growth and increased trade. Globally the multimedia sector is experiencing strong growth with innovations visible in web-based programmes, the games industry, the telecommunications industry generally (the cell-phone industry particularly), as well as in the audio-visual industry.

3 . THE MULTIMEDIA SECTOR SAMpLE

The multimedia sector includes the activities of computer technology companies, animation companies, and multimedia experts. The sector is mainly dominated by animation companies.

2 . DESCRIpTION OF THE MULTIMEDIA SECTOR

2.1 DEfINITION
Table 1: Sample for the Multimedia industry
CATEGORy OF INTERVIEwS face-to-face interviews Telephonic interviews TOTAL RESpONDENTS 11 44 55

Multimedia is media that uses multiple forms of information content and information processing like text, audio, graphics, animation, video and interactivity to inform or entertain the audience. Multimedia also refers to the use of electronic media as a medium to convey the multimedia content but is not limited thereto (1021 Media and Design). The Department of Education (2003) defines multimedia as mixed media; computer programmes that involves users in the design and organisation of text, graphics, video and sound in one presentation; computer-based activity which integrates text, visuals and sound. There is debate over whether multimedia should be classified as a separate sector. One argument suggests that multimedia cannot be seen as a sector as it can not be identifiable in the nations economic operation (Gamede, 2006). Many of the participants in the survey, especially those involved with animation, held this view and see themselves as part of the audio-visual sector. However, given the young age of the sector, its central use of technology and its potential to evolve, it has been classified as a separate sector in this report. This also serves to provide a baseline for future studies on the sector.

The population number is based on discussions with various stakeholders combined with the Animation SA database. The figures are based on an estimated population size of 500: 350 micro businesses (1 person) and 150 businesses larger than 1 person are operating in the Gauteng province.

2.2

T HE vA LUE CH A IN

Figure 2: Sample by firm size

The value-chain of the multimedia sector is presented in figure 1. The concept originates from the authors; Tv/film producers; publisher; advertising companies; broadcasting commissioners or the developers; programmers and animators themselves. The latter further realize the concept. The products/services are then distributed/circulated through computer retailers, mass merchandisers, video clubs, broadcasters, and other distributors. The products/services are consumed by the general public, Tv/film journalists and private networks.1 There are other related activities that take place across the value-chain, like education and training provided by several organisations and higher education institutions. The Gauteng province has several multimedia training institutions like e.g. Cityvarsity campus, NEMISA and boston Campus.
5 to 9 29%

20 to 49 4%

50+ 2%

Figure 1: Multimedia value chain

Creative origination Authors Tv/film producers Publisher broadcasting commissioners production Developers (content writers) Animators Programmers (coders, testers) Multimedia publishers Distribution Computer retailers Mass merchandisers video clubs broadcasters Distributors Consumptions Public Tv/film journalists Private networks

1 to 4 65%

1 to 4 5 to 9 20-49 50+

Funding and support Education and training

Private networks are networks accessed through the Internet but with access restricted to suppliers, buyers and other selected parties

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4 . MULTIMEDIA SECTOR CONTRIBUTION TO THE GAUTENG ECONOMy

4.1 TURNOvER

In Gauteng, the estimated turnover for the multimedia sector in 2006 was R267 million. Table 2 shows how the figure was calculated:

Table 2: Turnover in the Multimedia sector

CATEGORy OF COMpANIES Micro-businesses Medium-businesses TOTAL TURNOVER MEDIAN ANNUAL TURNOVER (R) 120,000 1,500,000 NUMBER OF COMpANIES 350 150 TOTAL TURNOVER FOR CATEGORy OF COMpANy (R) 42,000,000 225,000,000 267,000,000

5 . THE STRUCTURE OF THE MULTIMEDIA SECTOR

The multimedia sector includes the activities of computer technology companies, animation companies, and multimedia experts. The sector is mainly dominated by animation companies - there are over 65 animation companies operating in South Africa (Gamede, 2006). The largest animation companies in the Gauteng province are: Ministry of Illusion, Masters and Savants, Annimate, black Ginger, Depth vfX and Luma. Multimedia products take five main forms: 1. CD ROMs Multimedia software for Personal Computers, mainframe systems and Internet applications web sites and online publications Motion graphics for television, film and other mediums Presentations and events (Creative Strategy Consulting, 1999).

4.2

E M P LOy M E N T

2. 3. 4. 5.
NUMBER OF COMpANIES TOTAL NUMBER OF EMpLOyEES FOR CATEGORy OF COMpANIES 350 150 350 750 1,100

The multimedia sector employs 1,100 people in Gauteng and twenty-six percent of those employed in the sector are black and 36% are female. The multimedia sector is mainly comprised of small firms. we arrive at the above figure in the following manner:

Table 3: Multimedia employees per category

CATEGORy OF COMpANIES Micro-businesses Medium-businesses TOTAL NUMBER OF EMpLOyEES MEDIAN EMpLOyEE NUMBER 1 5

The multimedia sector is a fast growing sector some respondents2 stated that the sector has doubled in size and number of players over the past 10 years. The large number of young companies within the sector confirms this (see below). This accelerated growth is mainly due to the rapidly expanding reach of the internet, and cheaper and easier access to software and hardware. Some respondents stated that the increased competition and cheaper technology have caused the broadcasters and advertising agencies budgets to shrink and thus more marketing efforts are required to secure work.

4.3

G vA

The multimedia sector adds about R185 million to the provincial GDP.

4.4

CO S T S

As shown in Table 4, the most important cost stated by 64% of the surveyed firms was operational costs (e.g. rentals and transport). These costs include telecommunications costs and access to broadband. Thirty-six percent reported wages and salaries as the main cost.

Table 4: Costs
COST TypE Operational costs (rentals, transport, telephone ...) wages and salaries TOTAL pERCENTAGE (%) 64 36 100

This information was obtained during the confidential in-depth interviews.

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THE SAMPLE fOR THE CRAfT SECTOR; CONTRIbUTION TO THE GAUTENG ECONOMy

6 . TypES OF ORGANISATIONS wITHIN THE MULTIMEDIA SECTOR

The multimedia sector is dominated by micro businesses (58%). A further 36% employ 5 to 19 people and 6% employ more than 20 people. figure 3 shows the distribution of firms by size. The size is defined by the number of people employed within the surveyed firm. for those with access to capital and the skills to be part of this sector, entry is relatively easy. Many of these small businesses are part of the value-chain in other sectors including the audio-visual sector and the information technology sector.

figure 5 shows that 42% of the surveyed firms are fairly new to the industry and 38% have been operating in the industry for over 10 years. The remainder 20% have been in operation for 5 to 9 years. The entry of new firms has corresponded with a decline in the cost of the technology, such as computer hardware and software, used in the sector and the rise in demand for the products and services produced by the multimedia firms. Animation is now widely used in films, advertising and television. furthermore, multimedia products, such as CD-Roms, have become commonplace with educational textbooks.

Figure 3: Distribution by organisation size

Distribution by organisation size
70% 60% 50% 40% 30% 20% 10% 0% 1 to 4 5 to 19 20 to 49 50+

Figure 5: Age distribution of multimedia entities

Age distribution of organisations

10+ years 0 to 4 years Number of employees

5 to 9 years

figure 4 shows that the majority (64%) of surveyed firms are registered as close corporations, the remainder (36%) are registered as Limited Companies.

7 . DEMOGRApHICS wITHIN THE MULTIMEDIA SECTOR

7.1 R ACI A L A ND GENDER b RE A kDOw N

Figure 4: Legal status of multimedia companies

Legal status

Sole trader

The workforce in the multimedia sector is predominately white (74%) and male (64%). The figures for the management staff are even more one sided, with 88% being white, of whom 68% are male. There are a number of explanations for this. Technology plays a central role in the multimedia industry. Those that choose to enter the sector have often been exposed to computers and computer programming at a young age. They also often have studied mathematics at the secondary school level. both of these factors disadvantage black students and limit the number of black students that are able to enter tertiary training. In addition to this, entry into the sector usually requires access to technology, such as a computer (fortt, 2004). These prices have however fallen in recent years, making them affordable to middle-class families. However, computers remain unaffordable for black working-class families.
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STRUCTURE Of THE INDUSTRy; TyPES Of ORGANISATIONS wITHIN THE CRAfT SECTOR

7 . DEMOGRApHICS wITHIN THE MULTIMEDIA SECTOR

Figure 6: Racial and gender breakdown

7 . DEMOGRApHICS wITHIN THE MULTIMEDIA SECTOR

7.2 AG E AT T R I b U T E S

percentage of employees by race and gender

Not surprisingly, a substantial number, (fifty percent) of the respondents reported that the principal or majority owners of the organisation were less than 35 years old.

black male white female black female

7.3

E D U C AT I O N A L AT T R I b U T E S

The specialist qualifications required in the sector mean that 63% percent of the employees at managerial level have at least completed a university degree, compared to only 24% of the general workforce. However, a diploma is the most common educational qualification among the general workforce and 63% of the workforces have at least completed matric. The education levels confirm that advanced skills are required in the multimedia sector.

Table 5: Education levels of multimedia employees

EDUCATION LEVELS OF EMpLOyEES Completed post-graduate degree white male Completed university degree Diploma with Grade 12 Up to Grade 12 vocational training with Grade 12 TOTAL percentage of management by race and gender wORkFORCE % 0 24 50 13 13 100 MANAGEMENT % 36 27 27 9 0 100

Figure 7: Racial and gender breakdown of management

black male white female black female

8 . MARkETS
The majority (88%) of the surveyed firms sell their products/services directly to other firms and 18% sell their products/services directly to the public. The firms they sell their products/services to are mainly advertising agencies, post-production houses, the national broadcaster and other corporate organisations. The multimedia sector thus forms an important link with the value-chains of other sectors. fifty-five percent of the surveyed firms stated that they sell their products/services in the international market. Respondents reported EU as their main export market (42%). Other export markets include Asia (25%), Rest of Africa (25%) and the Middle East (8%). Given the technology based products and services in the sector, distance and thus physical transport costs are less important than for other types of products. However, high broadband and telecommunication costs make companies less competitive in the global market (South African foundation, 2005). An important component of operating in the international market is making connections to other companies. Thus many of those in the multimedia sector need to travel to trade-shows or other conferences to create and maintain international networks. This can be costly.

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T y P E S O f O R G A N I S AT I O N S w I T H I N T H E C R A f T S E C T O R ; D E M O G R A P H I C S

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9 . FUNDING AND FINANCING OF THE MULTIMEDIA SECTOR

The multimedia sector is predominantly a commercial sector. Only 19% of the surveyed firms had applied for funding over the past two years, and two-thirds of these secured funding. Most firms (68%) did not apply for funding because they did not need it. Only 10% stated they were not aware of the availability of funding and 7% found the procedure of applying too complex. Others (5%) stated that it is pointless to apply as they would fail to get funding and the remainder reported compliance issues, lack of time and experience and cross subsidy from other business as reasons for not applying. These results suggest that government attempts to promote the sector through making more funding available are likely to fail given the lack of need.

9 . FUNDING AND FINANCING OF THE MULTIMEDIA SECTOR

Figure 9: Sources of income for organisations in the multimedia sector
Sources of income for organisations in the multimedia sector
90 80 70 60

Table 6: Funding in the multimedia sector

REASONS FOR NOT AppLyING Process is too complex It is pointless,I would still fail to get it Did not know there was funding It is pointless, I would still fail to get it No need TOTAL 6 3 3 88 100 pERCENTAGE (%)

50 40 30 20 10 0 National government grant No secondary source Royalties Direct sales/ services funding agency grant N/A

Primary source (%)

Secondary source (%)

Out of the 19% that did apply for funding over the last 2 years, 11% employ between 5 and 19 people and 4% employ between 1 and 4 people. Thus in this sector mainly the medium-sized firms apply for funding. firms were also asked about whether they had any debt. forty percent of those interviewed claimed to have some level of debt. The median amount of debt was R750,000, although this is based on a very small sample size. This access to debt and the low reliance on government funding indicates the commercial sustainability and relative sophistication of the sector. firms are integrated into the formal financial sector, have assets that can be borrowed against and thus do not need other sources of funding.
Organisation size and funding application
60% 50% 40% 30% 20% 10% 0% 1 to 4 5 to 19 20 to 49 50+

Figure 8: Organisation size and funding application

1 0 . OUTLOOk
There is reason to believe that, especially in the Gauteng province, the multimedia industry is poised for sustained future growth. Critical to this potential will be enhancing the competitiveness of our telecommunications sector, specifically bandwidth, improving the appropriateness and quality of skills available in the market and developing support mechanisms (from financing, loans and grants to export plans) suitable to this sector.

Number of employees Applied Did not apply

The firms surveyed for this project were asked about primary and secondary sources of income. Every firm reported that they generated 100% their primary income through direct sales/services. Seventy-five percent reported they do not have a secondary source of income. The remainder stated royalties, government and funding agency grants as a secondary source of income. These results suggest that the growth in the sector will be driven by growth in demand and an increase in market size.
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1 1 . REFERENCES
1021 Media and Design (2007) http://www.1021.co.za/multimedia_1.html [Accessed on 18/12/07] Creative Strategy Consulting, (1999) The Creative City: Johannesburg and the Creative Industries - Johannesburg: the creative capital, Gauteng Spatial Development Initiative, Prepared by Avril Joffe, Creative Strategy Consulting, SQw (SA) for the DbSA. Department of Education, (2003) National Curriculum Statement Grades 10 12, visual arts, Seriti Printing (Pty) Ltd, 2003. Available from http:// curriculum.pgwc.gov.za/php/circular_docs/29_ncs_visual_arts.pdf accessed on 10.12.07 fortt, J.(2004), 2004s Top Technology Trends, [Available from http://www.forbes.com/2004/01/02/102techtrendspinnacor_ii.html; Accessed on 14/03/2008]. Gamede, f. (2006) Multimedia: A sector or New Technology? An analysis research report about the multimedia in South Africa Research completed as part of the requirements for the MAPPP-Seta Skills Programme on Research Skills (April) South Africa foundation, (2005) Telecommunications prices in South Africa: An international peer group comparison, occasional paper No. 1 prepared by Genesis Analytics, 2005. Industry experts consulted in conducting the research Adam Harris (Technical Director Depth vfX, telephonic interview on 20/12/07) Jamie Haigh (Temple House Design, telephonic interview on 20/12/07) Jason Cullen (Sphere Animation Studio, telephonic interview on 18/12/07) Stephen Hobbs (The Premises, telephonic interview on 19/12/07) Zander Grobler (Director 1021 Media & Design co-ordinator, telephonic interview on 19/12/07)

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