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Can Harry Potter and Jeremy Clarkson save Britain?
From television to music, content is king again, says Matthew Lynn. That's great news for Britain, and for investors buying into the companies that own those assets.
Apple is reported to be exploring deals for original programmes to put on a TV streaming service. Jeremy Clarkson is decamping to Amazon in a reported £160m deal the tech giant is spending big bucks to compete with Netflix. Netflix itself, perhaps the most significant technology company of the last three years, is pouring hundreds of millions of dollars into some of the best-made programmes on television. The TV-streaming service now has 65 million paying subscribers and a market value of $42bn.
Meanwhile, BT is spending the equivalent of the GDP of a medium-sized nation buying up sports rights, while traditional broadcasters, such as NBC, are rumoured to be investing in fast-growing websites, such as BuzzFeed.
Content is king
A new phone was a lot more exciting than any particular film or band, and even the Kindle was a lot more interesting than any particular book. Rather oddly, what you consumed media on attracted more attention than the media itself.
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There are signs that is starting to change. Around this time of year the Apple PR machine cranks into life, trying to get everyone exciting about the latest update to its products. But the endless iPhone tweaks are becoming about as exciting as Arsenal on transfer deadline day. Nothing much happens and people are paying less and less attention.
Wearable devices, such as smart-watches, have proved about as successful as Liz Kendall's campaign for the Labour leadership. We may be close to the point where we stop upgrading our phones or tablets, much as a few years earlier we stopped upgrading our desktops because there is nothing much more to add to what they already have on them.
What will the tech giants do then? Inevitably, they will turn to content, because it is unique. Any feature you add to a smartphone is inevitably going to be copied by a dozen other companies within a few months, and increasingly all the device manufacturers can do is compete on price that is seldom a good place to find yourself. For now, Apple can still rely on the phenomenal power of its brand to protect itself from the competition but lots of businesses have found over the years that is not enough once cheaper alternatives are available.
Content is different. If you want to watch Clarkson on cars, you'll have to subscribe to Amazon Prime. The next series of hit drama House of Cards? You'll have to renew your Netflix subscription. Champions League football? You will need to get BT broadband to get it at a decent price. That is an incredibly powerful offer. If anyone tries to copy that, an army of lawyers will descend on them waiving writs.
Great news for Britain
A government report earlier this year found that Britain'screative industries were worth £76bn a year to the UK economy. They are growing by almost 10% a year, three times as fast as the rest of the economy. They account for £17bn of exports, close on 10% of the total, and employ 1.7 million people. That is a big industry by any measure.
How much would a six-month exclusive on the next Adele album be worth to Apple's new music streaming service that is trying to take on Spotify, or a new Harry Potter book exclusive to Google if it wanted to take on Amazon's Kindle?A heck of a lot, that much is certain.
This country has a lot of those kinds of assets, and their price could well be about to go through the roof.Indeed, it is already happening.The Clarkson deal is one sign of that.So was the hefty price Pearson got for the FT, another unique piece of content (and one it certainly sold too soon). As content becomes king again, the UK will benefit mightily and so will investors who buy into the companies that own those assets, whether they are in television, musicor publishing.
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Matthew Lynn is a columnist for Bloomberg and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
