Digital Content Industry：
Analysis & Investment
Opportunities
Department of Investment Services,
Ministry of Economic Affairs
Table of Contents
I. Global Trends in Digital Content Industry Development ........... 1
(I)
Internet Advertisement Service & Online Game are Growing Fast.
....................................................................................................... 1
(II) The Outgrowing Asia Pacific Market ............................................ 3
II.
The Status of the Digital Content Industry in Taiwan ............... 6
(I) Supply & Demand .......................................................................... 6
(II) Analysis of a Gap in the Industry Supply Chain, Investment
Niches, and Prospective Foreign Investors ................................... 8
(III) Major Suppliers in Taiwan ........................................................... 11
III. Optimum Investment Items for Foreign Investors .................... 13
(I)
(II)
(III)
(IV)
(V)
(VI)
Animation ..................................................................................... 13
Digital Video Game ...................................................................... 13
Digital Convergence..................................................................... 14
Mobile Data Service ..................................................................... 14
Web 2.0 ......................................................................................... 15
Chinese Market ............................................................................ 15
IV. Successful Examples of Cross-Border Strategic Alliances and
Foreign Investment in Taiwan ..................................................... 17
(I) Korea NCsoft................................................................................ 17
(II) Yahoo ............................................................................................ 18
V.
Industry Investment Incentives ................................................... 19
VI. Industry-Academia Collaborationon in Taiwan ......................... 22
I. Global Trends
Development
in
Digital
Content
Industry
According to the annual Global Entertainment and Media Market
analysis report from PricewaterhouseCoopers, total market value reached
US$1.43 trillion in 2006. The total market value is estimated to reach
US$1.96 trillion in 2011, giving a 6.4% Compound Annual Growth Rate
(CAGR) from 2007~2011.
The analysis report of Global Entertainment and Media Market covered
categories such as movies, television, VOD services, music records, radio,
internet advertising and Access Spending, video games, business information,
magazines, newspapers, publishing books, theme parks, gamble or restricted
games and sports. Products and services include traditional media, digital
services, traditional trading, net transmission and sales.
(I) Internet Advertisement Service & Online Game are growing fast.
According to the analysis, Internet Advertising and Access Spending
outgrew any other digital content industries. This was because the way to
connect to internet had been progressively upgraded from dial-up to
broadband services. Cable and telephone companies took advantage of this
trend and promoted broadband services combining telephone and television.
This promotion was accepted by most consumers and made the market
expand significantly. In 2002, the global market value of the Internet
Advertising and Access Spending was only US$76.4 billion and ranked only
6th in the Global Entertainment and Media Market ranking. In 2006, the
global market value had increased to US$177 billion and has been estimated
to reach US$331.58 billion in 2011. At that time, the CAGR of this area from
2007~2011 would reach 13.4%, giving the highest growing rate among all
businesses.
1
The second outgrowing industry is Video Games. In 2002, video games
market value was worth US$21.8 billion, the penultimate market value,
followed by Theme park market, among the Global Entertainment and Media
Market. Experts estimated that the market value in 2006 would be around
$31.6 billion US dollars, which still consider as a small business. However,
experts optimistically project its market value will approximate $48.88
billion US dollars in 2011, giving a 9.1% CAGR from 2007~2011. The main
reason of the high growth rate was the popular game system like Xbox 360,
PS3 and Wii entered the market from 2005~2006. These game system would
boost up the sales of video games.
2
Global Digital Content Industries Individual Market Prediction
Unit: US$ million
Source: Pricewaterhouse Coopers, organized for the present study, 2007/12
(II)
The Outgrowing Asia Pacific Market
According to analysis and prediction, US was still the largest market in
the world, although the growth rate is slowing down. In 2006, US market
value was US$582.4 billion and estimated to reach US$754.2 billion in 2011.
The CAGR from 2007~2011 would be around 5.6%. In the next few years,
experts believe that internet services will be an area growing the fastest
within the US market. The most important factor is the increasing growth rate
of internet users.
3
EMEA (Europe, Middle East, Africa) was the second largest market.
Expert estimated that the market value would approximate $473 billion US
dollars in 2006 and reach $616.9 billion US dollars in 2011, giving a 5.05%
CAGR. In EMEA, internet, digital television and digital video game grew
faster than any other areas.
Asia Pacific market was the third largest market in the world, and also
one of the markets with highest constant growth rate, especially China and
India. In 2006, the market value of Asia Pacific was $297 billion US dollars
and was estimated to reach $470.4 billion US dollars in 2011. At that time,
the CAGR would be 9.6%, which is the highest growth rate worldwide.
Meanwhile, expert predicted that China will outperform Japan in 2009 and
become the largest market in Asia Pacific. However, the market with highest
growth rate would be India instead of China, since the CAGR of India would
be 18.5% from 2007 to 2011.
The market value of Latin America was estimated to approximate $44.2
billion US dollars in 2006 and $67.7 billion US dollars in 2011, giving a
8.9% CAGR. The market value of Canada was estimated to be $35.7 billion
US dollars in 2006 and $46.8 billion US dollars in 2011, giving a 5.6%
CAGR.
According to the 2006 Global Entertainment and Media Market shares,
the USA had the highest market shares of 40.7%, followed by the EMEA
(Europe, Middle East and Africa) of 33% and the third was Asia Pacific of
20.7% . Expert predicted that the market shares of the USA will decrease to
38.6%, EMEA would be 31.5%, and Asia Pacific would increase to 24%.
Any other areas will keep the same market shares or have decreased market
shares.
4
2006~2011 Area Market Shares Prediction
2006
Latin America
3.1%
Canada
2.5%
U.S.
40.7%
Asia/Pacific
20.7%
EMEA
33.0%
2011
Canada
2.4%
Latin America
3.5%
Asia/Pacific
24.0%
U.S.
38.6%
EMEA
31.5%
Source: PricewaterhouseCoopers；organized for the present study, 2007/12
5
II. The Status of the Digital Content Industry in Taiwan
Recently,the digital content industries improve significantly because the
government invests a lot of time and fund in it. Since the first stage of the
“Strengthening Promotion of the Digital Content Industry” project, the digital
content market value grows from $133.4 billion NT dollars in 2001 to $360.9
billion NT dollars in 2007, giving a 21% CAGR. It builds a great foundation
for the development of digital content industries in Taiwan.
(I) Supply & Demand
According to the definition of digital content industries in Taiwan, a
digital content converts the traditional media data to digital data in order to
develop different usages. These usages share characteristics such as easiness
to connect, transfer, duplicate, search, edit and reuse. Then, these usages
collocate with service, bandwidth, charges and copyrights for management.
Digital content format sent out from internet, mobile communication network,
terrestrial/cable TV, satellite communication, movies and digital radio. Users
receive digital content by using hardware like TV, cell phone, PDA, personal
computer and MP3. These are the main frames of digital content industries.
Expert estimated that the digital content market value of Taiwan will
approximate $360.9 billion NT dollar in 2007 with a growth rate of 5.7%
from 2006. In view of output value structure, the digital content market is led
by software of approximately 48% of the market value. The second largest
area is internet service of 22% of the market value, followed by the digital
media of 11%. Mobile net service and digital video games has output value
of 7.9% and 6.6% of the market value. Digital learning, computer animation
and digital publishing have output value of 0.6~2.7% of the whole market
value. It is smaller than the output values of other areas.
6
Taiwan Digital Content Output Value 2001~2007
Unit: NT$100 million
Source: DCIPO, 2007/12
In the recent developmnet of each area of digital content industries in
Taiwan, the output value of computer animation dropped in the past few
years, because the process of trasforming from OEM to copyright did not go
well. The output value is growing back smoothly after 2007 along with the
development of wire and wireless broadband network services like digital
video games, mobile application service, digital learning and digital
publication. All are expanding. The average CAGR in each area is over 30%,
especially in the areas of digital learning and digital publication. Because of
the government’s funding project, the CAGRs of digital learning and digital
publication raise to 88% and 42%, respectively.
7
Taiwan Digital Content Industries Output Value
Unit: NT$100 million
Source: DCIPO, 2007/12
(II)
Analysis of a Gap in the Industry Supply Chain, Investment
Niches, and Prospective Foreign Investors
Digital content includes many different industries, such as internet,
content software, wireless broadband network and mobile application
services. All these industries play an important role in the M-Taiwan project.
Animation industry in Taiwan has transformed completely from OEM to
cooperating development and building new brand. Digital video games
industry also breaks into the international market. Currently Taiwan works
with nations from Europe, US and Asia Pacific to improve its abilities in
product research, development and operation management.
8
Structure of Digital Content Industry
Source: DCIPO, 2007/07
Digital TV becomes the future trend of the world, which will affect
digital media industries significantly. Taiwan has great potential in the area of
digital media within Asia Pacific Zone in the future. In addition, digital
publication is one of the core industry in the knowledge-driven economics.
When the digital publication is combined with internet media technology, it
would develop to a new industry, a digital knowledge-driven service. This
new industry is important to the formation of the new information society in
Taiwan.
The gap in Taiwan digital content industry supply chain could be filled
by some potential foreign companies. The potential foreign companies in
computer animation are Dreamworks, Pixar, Disney, Nickelodeon, and BBS.
9
The potential foreign companies in digital video games are Nexon, Microsoft,
NCSoft, and UBIsoft. The potential foreign companies in rising digital
leisure and entertainment industry are Apple, Microsoft, TBS, and KBS. The
potential foreign companies in innovative mobile data service are Orange,
3mobile, Tencent, and Sina. The potential foreign companies in innovative
internet service and appliance are My Space, Google, Yahoo, Baidu, and
Alibaba. The potential foreign companies of digital Chinese learning are
Amazon, and Youtube.
Recently, most Taiwan hardware production companies moved overseas
because of globalization. It really affects output value and employment
opportunities in Taiwan. As a result, knowledge-driven, service-driven and
creativity-driven economics are needed to raise Taiwan’s competitiveness.
Taiwan should take the advantage of rich resource from information
electronic industry to increase and expand the digital content industry; also,
set an example for the other industries and improve relationship with
cooperated nations. More importantly, takes the advantage from the industrial
vigorous development and values to transform Taiwan into a higher quality
information society.
10
(III)
Major Suppliers in Taiwan
In May 2002, Executive Yuan passed a project called “Strengthening
Promotion of the Digital Content Industry”. The purpose of this project is
to take the advantage of the existing industries and culture characteristics
in Taiwan to strengthen the development of Taiwan’s digital content
industries. The final goal is to become the center of digital content
development and exploiation in Asia Pacific Zone; also, it develops related
knowledge-driven industries. Digital content industries have the potential
to expand knowledge-driven and digital economics. In order to increase
the competitiveness of the industries in Taiwan, the need for the traditional
industries to gain knowledge is very important. Furthermore, it will
transform from the traditional industries to the knowledge-driven
industries.
In order to effectively guide the expansion of digital content
industries, Taiwan Ministry of Economic Affairs combined all possible
resources and strength to form a team for this project: “Digital Content
Industry Progressive Office” (DCIPO). For the past two years, the team of
DCIPO has worked with the academics and industries to build an suitable
environment for investment and legislation. In this way, Taiwan’s
industries could attract more international investment and cooperations.
Taiwan’s domestic industries has already built up a great foundation to
complete the system for economic assistance on industries development,
strengthen core technologies and product development, train industries
innovation and creation talents, and assist industries in leveling up their
international marketing strength.
The digital content industry in Taiwan can be divided into two parts:
digital contents products and services. There are eight areas in digital
11
content products parts: digital video game, digital learning, mobility
service, internet service, computer animation, appliance of digital
Audio/Video, content software and digital publication. The major
manufacturers in these eight areas are Softstar, Soft-World, Gamania, IGS,
InterServ, XPEC, Giga media, SOFA Studio, TVbean, SMEC, YAOX,
Green Paddy, Spring House, and so on. As for services like internet, cable
television, terrestrial television, movies and satellite communications, the
main manufacturers are Rockmobile, WalkGame, PChome, DAWN TV
TECHNOLOGY, CMC, CNS, Ettoday, PTS, KKBOX and CHT.
Major Supplier of Digital Content Industry in Taiwan
Item
Major Supplier
Digital Content
SoftStar, Soft-World, gamania, IGS, Interserv, XPEC, funtown,
Porducts
SOFA Studio, TVBean, SMEC, Yaox, GreenPaddy, Spring
House, Tomorrow Studio, Pilar Digital, Reallusion, ImageTech,
brightideas, aEnrich, LearningDigital, Craftsman Software,
UDN, Storynest, Chinatimes…
Digital Content
YoYoRock, Walkgames, PChome, dawn-tv, CMC, CNS,
Services
ETToday, PTS,KKBOX, CHT, 104, CatchPlay, Enterprise TV,
Seednet, Webs-TV…
Source: Organized for the present study, 2007/12
12
III. Optimum Investment Items for Foreign Investors
According to the current situation of digital content industries and global
industries development, there are some opportunities for industries
development such as development from original content, management style
innovation, value-added multimedia entertainment and cross-area industries
cooperation. The details are listed as follwing:
(I) Animation
In 2006, TV channels in Taiwan had broadcasted total 215 million
minutes of animations, where 4,000 minutes were from Taiwan, giving a 0.33
percentage out of 215 million minutes. Clearly, there are a lof of rooms for
animations broadcasting in Taiwan. In addition, the broadcasting time of
Taiwan’s children programs and animations broadcasting from YoYo TV,
Public Television Service and other channels is increasing gradually.
Statistics from Taiwan audience rating shows that Taiwan’s own creation is as
popular as foreign productions or even more. It implies that Taiwan has great
strength in creating and developing its own animations. With extensive topics
and production abilities Taiwan’s output of self-made animations can be
increased, and a great potential market.
(II) Digital Video Game
In the past, Taiwan’s video games market were in software and products
in certain type of video games. Currently, Taiwan is facing competitions from
Korea and other countries. If Taiwan continues to invest in research and
develop technologies and production, it would increase the level of output
and quality of video game products. Meanwhile, Taiwan could make profits
and extend product life cycle if it could formulate the derivative business
opportunities of copyrights.
13
(III) Digital Convergence
There is a phenomenon in digital convergence called” Triple play
effect.”
This
effect
not
only
drives
the
integration
of
global
telecommunications, wire and wireless broadband network, but also realizes
the Ubiquitous Network, leading to the high growth in the need of digital
content.
Currently, Taiwan is vigorously driving policies such as TV channels
digitization, wireless broadband network, mobile internet and M-Taiwan
project. In addition, the strong and powerful foundation of Taiwan’s
information technologies, machine mold and plastic industries contributes to
develop digital leisure entertainment industry. Besides, video games are
cyberization and diversification in recent years. Additionally, the operating
models of entertainment businesses are transformed towards theme leisure
entertainment development. Therefore, the newly rising digital leisure
entertainment industries combining digital games, computer animation,
mobile application service and network service could be the potintial new
market and cooperation opportunity for domestic digital content business,
information communication business and leisure entertainment business.
(IV) Mobile Data Service
In 2007, the mobile statistics revenue ratio of Taiwan is only 8.7%.
Compared to the 25% revenue ratio from Japan and Korea, the revenue ratio
of Taiwan still has a lot of space to be improved. Therefore, the government
encourages related businesses to offer new services to attract more mobile
data consumers. This new serivces could increase the revenue ratio
significantly. Experts estimate that an extra $490 billion NT dollars market
demand could be created when Taiwan’s mobile revenue ratio reaches 20%.
This created market demand could actively develop a prosperous market to
the mobile data service industy.
14
(V) Web 2.0
A combination of the user’s participation, personalization and exchange
and the concept of Web 2.0 becomes the motivation for businesses to create
and develop new content management model. Taiwan has many advantages,
such as creative talents and cultural music, for Taiwan industries to develope
Web 2.0. Besides, the complete understanding of users’ needs is also a factor
to build a good fundation of Web 2.0 application for the industy in Taiwan.
Appropriate rewards for User Generated Content would increase the
development of ICT industries. This would help Taiwan’s industries to create
an internet services with no border and also innovate the operating models.
(VI) Chinese Market
Nowadays, a guaranteed quality manpower is offered in Taiwan because
of the generality of high education level and open learning environment.
Beside, the cost of production in Taiwan is still lower than that in advanced
countries. Furthermore, the industries are still developing their production
skill level. Therefore, some industries already have the abilities to
manufacture products meeting the international standard. Also, Taiwan is
located at the center of Asia Pacific Zone with strong Chinese culture and an
open democratic society. Therefore, Taiwan can fit the need of Asia Pacific
market when manufacturing and operating the content products, while having
the cultural characteristics and creation.
Currently, it is a global trend to learn Chinese. Many countries have
added Chinese in their foreign language curriculum. International enterprises
also pay more attention on Chinese for business use. The Chinese learning
market in the world would grow significantly in future. Taiwan already
possesses high quality Chinese teaching abilities and teaching materials.
15
If Taiwan could combine the experiences of digital learning industries in
learning platform, technologies and content productions, Chinese learning
industries will be one of the major areas in the digital content industries.
However, it should be supported by the customized design of Serious Games.
16
IV. Successful Examples of Cross-Border
Alliances and Foreign Investment in Taiwan
Strategic
(I) Korea NCsoft
NCTaiwan established on August in 1984 and formally transformed to
NCsoft, a subsidiary in Taiwan, on January, 2007. It is a joint venture of
NCsoft , the top online game in Korea, and Gamania , the top online game in
Taiwan. NCsoft’s headquater located at Seoul, Korea is the top-notch online
game developer. After the stocks listed in Korea in 2000, the market value is
over $16.5 billion US dollars. It has many subsidiaries in American, Europe
and Asia. NCsoft developed a lot of innovative and popular games such as
“Lineage”, “LineageII”. NCsoft also acquired successfully the famous online
game developing studio, ArenaNet, and became the pronoun of high quality
global online game manufacturer.
NCTaiwan introduces the games from parent company in Korea and
launchs two big online games. The first one is a very popular online game:
“Lineagell”. This game gives the players a whole new feeling and drives the
trend to upgrade their computer hardware. And then, NCTaiwan brings in the
brand-new online game: “Guild War”. It connects Taiwan with the world.
In the meantime, NCTaiwan devotes to improve the abuses which are easily
found in the online game in Taiwan and promotes the service quality for
players. Taiwan players and foreign players can synchronize and experience
the newest game content by shortening the correcting schedule between
Taiwan and original dealer.
NCTaiwan will launch several big online games and middle size
platform entertaining games to provide the players more options. Looking
forward, NCTaiwan not only can act for the products from parent company
continually, but also expect to provide fully support on transferable skills.
17
Subsequently, it will strengthen the capacity of research and development in
order to supply more high quality products to players.
(II) Yahoo
Yahoo! Kimo established in Feb 2001 from merging Yahoo! and Kimo.
Yahoo! Kimo has become the largest portal site in Taiwan. Yahoo! Kimo
dedicates to offer diversified services and communication platform to
numerous people and enterprises.
In Dec 2006, Yahoo! Kimo absorbed the largest community web site
“Wretch”. Yahoo! Kimo obtained 100% shareholding of Wretch. Rumor has
that the absorbed cost was as high as $22 million US dollars, which was
about $711 million NT dollars.
Wretch was established in 1999 by a student, Jian ZhiYu, from NCTU. It
started off as a BBS user interface and transformed to business management
after March 2005. Currently, Wretch has members more than 2.8 millions.
Wretch is very popular in Taiwan. After merging Wretch, Yahoo! Kimo not
only increases their market share from blog and community services, also
reaches the goal of “People’s Media”.
After merging, Wretch still kept the same brand name and web address.
The original Wretch team stays and manages the business. Wretch’s biggest
problem in the past was their bandwidth, but it was solved by the assistance
from Yahoo! in hardware upgrading.
18
V. Industry Investment Incentives
In order to expand Taiwan digital content industries, the government
offers rent & tax preferential, research and development assistance, low
intesest loan, and training preferential policies. In this way, the government
assists all digital content industries and attracts foreign investment into
Taiwan market.
Taiwan investment preferential policies
Preferential
Policies
Rent & Tax
Preferential
Preferential details
Contact Window
※New important tactic industries preferential
Industrial Development
(Shareholders investment deduction or 5 years
Bureau, Ministry of
income tax, choose 1 out 2)
Economic Affairs
※Training preferential (Same year 35%
http://www.moeaidb.gov.tw
deduction from income tax)
E-mail：
※Research and development preferential
service@moeaidb.gov.tw
(Same year 35% deduction from income tax)
Tel：886-2-2754-1255
※Equipment depreciation preferential
（Depreciation Limit fro 2 years）
※Purchase of equipments and technologies
preferential
※Import equipments tax free
※Technologies migration or cooperation tax
free
※Preferential for new branches
19
※Industrial Technology Development Plans
Department of Industrial
（ITDP）
Technology, Ministry of
※Small Business Innovation Research（SBIR） Economic Affairs
※Industrial Technology Development
http://doit.moea.gov.tw/
Alliance Program（ITDAP）
Tel：886-2-2321-2200
※Program for Innovative Technology
Applications and Services (ITAS)
※Industrial Technology Innovation Center
Research and
Development
Assistance
Program（MNCD）
※Multinational Innovative R&D Centers In
Taiwan（MNCF）
※Leading product development plan
Industrial Development
※Enterprise development alliance plan
Bureau, Ministry of
※Enterprise management service
Economic Affairs
solution@moeasmea.gov.tw window
http://www.moeaidb.gov.tw
E-mail：
service@moeaidb.gov.tw
Tel：886-2-2754-1255
Taiwan investment preferential policies
Preferential
Policies
Preferential details
Contact Window
※Industrial Research and
Industrial Development Bureau, Ministry
Development Promotion Loans
of Economic Affairs
http://www.moeaidb.gov.tw
E-mail：service@moeaidb.gov.tw
Tel：886-2-2754-1255
Low Interest
Loan
※Executive Yuan mid-long
Council For Economic Planning and
terms low interest loan
Development
http://www.cepd.gov.tw/
Tel：886-2-2316-5300
※Assist small and medium
Small and Medium Enterprise
enterprise project loan
Administration, Ministry of Economic
Affairs http://www.moeasmea.gov.tw
E-mail：solution@moeasmea.gov.tw
Tel：886-2-2368-6858
20
※Executive Yuan development
National Development Fund, Executive
fund loan preferential
Yuan
http://www.df.gov.tw/
E-mail：df@df.gov.tw
Tel：886-2-2389-0633
※Science Park low rate loan
Science Park Administration
http://www.sipa.gov.tw/
Tel：886-3-577-3311
※Recruit international talents
Department of Investment Services,
Ministry of Economic Affairs
http://hirecruit.nat.gov.tw/
E-mail：hirecruit@taitra.org.tw
Tel：886-2-2370-9687
※National defense service
National defense service office
http://rondi.mnd.gov.tw
Training
E-mail：mndsys@iii.org.tw
Tel：886-2-2736-8088#3414
※Research and development
Research and development substitution
substitution service
service office, Ministry of the Interior
http://rdss.nca.gov.tw
E-mail：rdss@mail.nca.gov.tw
Tel：886-2-2736-6066#206
Source: Organized for the present study, 2008/01
21
VI. Industry-Academia Collaborationon in Taiwan
Taiwan’s government invests a lot in improving digital content
industries from combining strength and knowledge from government, society
and industries.
Taiwan Digital Content Industry Impetus Organizations
Institution
Website
Industrial Development Bureau, Ministry of
www.moeaidb.gov.tw
Economic Affairs
Department of Investment Services, Ministry of
www.dois.moea.gov.tw
Economic Affairs
DCIPO, Ministry of Economic Affairs
www.dcipo.csd.org.tw
Taiwan External Trade Development Council,
www.taiwantrade.com.tw
Ministry of Economic Affairs
Institute for Information Industry
www.iii.org.tw
Corporate Synergy Development Center
w1.csd.org.tw
Taipei Computer Association
www.tca.org.tw
Taipei Hsien Computer Association
www.thca.org.tw
Source: Organized for the present study, 2008/01
22