The Future in Focus with Canada's Digital Media Talent

Summary

The Canadian Film Centre (CFC), through its new media division CFC Media Lab, is proud to be part of a world–leading digital economy hub that "creates, uses, and supplies advanced digital technologies and content." Specifically, since 1997, the CFC Media Lab has led in the creation of content products for emerging technology, and accelerated incubation of new media companies. Our experience–based recommendations for Canadian government investment in the digital media industry address four areas:

Canada must cultivate "well–rounded" digital talent

Canada produces more than enough graduates with the necessary basic skills. These skills are too narrow. The biggest hurdle to overcome in developing products fast enough is the shortage of professionals who can see a potential product in its totality — not just the technical challenges it presents, but the business model that will attract funding, and the wide range of non–technical activities required to bring it to market. In this industry a combination of creative and business skills is essential to success.

Recommendation 1: Target and match federal funds with private sector commitments for regional centres of excellence to incent the combination of business and creative skills development

Canada must not be afraid of failure

In an inherently risky industry companies need to "fail fast," that is, bring products to market, and learn about the market as much from their failures as their successes. The best way to inculcate a culture of greater risk–taking is to build a close association, in the context of new product incubation, among funding entities such as angels and incubator investors, digital media companies, and consumers.

Recommendation 2: Support consumer–focused incubation centres in key regions, providing opportunities for initial product design and prototyping.

Canada must embrace collaboration as a competitive advantage

The lead–time of new media products is measured in months, not years. But they are inherently complex, and their production requires participation from firms with different skills. Any product is only viable within a certain window of opportunity — miss the window and either competitive products secure the market, or a shift in technology makes the product obsolete. Speed of execution is key, and when the supply chain is a collaborative network, this means that relatively informal contractual arrangements, based significantly on trust, are required.

Recommendation 3: Support the evolution of new formal and informal collaborative networks, to build trust, and to raise the level of technical, creative and business knowledge among their members

Canada must sound (or tweet) her own horn

Canada clearly has the raw talent to succeed in the new media marketplace, but Canada, and important innovation clusters such as Toronto and Montreal, are not recognized enough in the global market as significant sources of innovation. Careful branding can break down barriers to entry in foreign markets. The credibility of our new media enterprises would be enhanced if there were general acceptance of the sophistication of our industry.

Recommendation 4: Launch a branding strategy to raise the global profile of significant Canadian centres of excellence.

Submission

CFC and CFC MEDIA LAB

The CFC is Canada's leading institution for advanced training in film, television and new media. A pioneer in the rapidly changing entertainment landscape, CFC promises stakeholders an innovative education, creative industry partnerships, and cutting–edge production experience. Beyond development, CFC is committed to promoting and investing in Canada's diverse talent by providing exhibition, financial, and distribution opportunities for top creative content leaders from coast–to–coast. Established by acclaimed film director Norman Jewison 20 years ago, the CFC has become one of North America's centres for excellence in all forms of content creation with a keen emphasis on great storytelling. Amongst the CFC's many programs — in writing, directing, producing, and editing short films, television series, and fiction and documentary feature films — the CFC Media Lab shines as a hub of content production for emerging technology and acceleration and incubation of 21^st century companies.

CFC established CFC Media Lab to address the growth of a nascent industry — digital media — and develop a strategy for seeding talent, projects and companies in this sector. Over the years CFC Media Lab has responded to this challenge in a number of ways:

First, by broadening the talent pool of entrepreneurship and "innovationship" in digital media

• Through its flagship Interactive Art & Entertainment Programme [IAEP], CFC Media Lab provides next generation digital media industry entrepreneurs with an opportunity to build product prototypes, in a training program that instills creative thinking, technological literacy, and business acumen.
• Once "incubated", participants leave the CFC Media Lab with projects/prototypes in hand. IAEP professionals enter the sector as contract workers or salaried employees, but, more likely, they become start–up business owners. During the first six years of CFC Media Lab's history approximately 50% of IAEP's participants started their own businesses, with 25% of these becoming SMEs with up to five employees.
• Most recently, the Lab has introduced a number of other programs that look to increase the capacity of traditional media professionals to innovate and become more entrepreneurial. Our Interactive Narrative Feature Program (INFP) has taken dozens of traditional media players and involved them in the production of LATE FRAGMENT — an interactive feature film that became the first dramatic interactive feature film to be launched at the Toronto International Film Festival, and received distribution by a commercial distributor. Our NBC Universal Multiplatform Matchmaking Program (MMP) runs traditional and digital media players through an intensive workshop that generates up to 50 new original multiplatform projects each session.

Second, by accelerating the commercialization of projects and companies

• In 2003, CFC Media Lab created the Bell Globemedia Content Innovation Network with, as partners, the Banff New Media Institute and Institut National de L'Image et du Son. Through this network we introduced a program called the Interactive Project Lab (IPL), which gives participants access to capital and company acceleration. During the five years we ran this program, we accelerated the development of up to 70 companies and projects.
• In 2006 the Telus Innovation Fund was launched to complement the work being done through the IPL. An investment program, the Telus Innovation Fund, provided up to $100,000 to accepted applicants for the commercialization of projects that range across a variety of platforms and genres. To date, we have invested in 8 projects.

Third, by producing North America's best practice productions in digital media

• Examples include the Great Canadian Story Engine, Canada's first user–generated content site, produced in 2000, and LATE FRAGMENT, North America's first dramatic interactive feature film, produced in 2007.

More recently, in keeping with its focus on collaborative innovation, CFC Media Lab formed a core program partnership with MaRS and moved part of its operations to the MaRS Discovery District. As an integral part of the Ontario Network of Excellence ecosystem, MaRS has a reputation as one of North America's leading innovation centres. Combining the CFC Media Lab track record of producing digital media talent and products with MaRS's track record of delivering the best innovation services positions this partnership to create, incubate and accelerate a new generation of media companies founded by a new generation of entrepreneurs — key to Canada's future digital content advantage.

OUR VIEW OF INDUSTRY EVOLUTION

Globally the entertainment industry has revenues of USD2 trillion, and in aggregate has been growing at about 16 percent per annum over the last 10 years. Selected sectors of the industry have seen hypergrowth (examples: digital music distribution and mobile games) fueled by new technologies, new products and services, and new consumers — particularly those in south and east Asia. Of the greatest importance is that the old structures of content creation, distribution, and consumption have been crumbling under the weight of the digital revolution: first, the digitization of everything, second, the rapid but still incomplete shift to the Internet as the distribution channel of choice, and third, the prevalence of truly personal ICT devices of staggering functionality — the mobile phone / GPS locator / MP3 player / camera / iPhone 4 / iPad / Kindle — now in the hands of over half the world's population. As the volume of ICT devices sold goes up by orders of magnitude, the pace of product and process innovation inevitably accelerates, because of learning curve effects¹ — it takes a much shorter time to double the number of devices in circulation when the device is an iPhone 4 compared to when the device is a mainframe computer. Unfortunately, incumbents have not been uniformly adept at keeping pace, and outsiders like Google and Apple now command a significant amount of space in the industry.

This is the present stage of the digital revolution, but the next stage may produce even more dramatic change. While the critical device in today's ICT world is associated with the individual we can anticipate that tomorrow the critical device (that is, the device around which innovation will concentrate) will be the ICT device associated with things — a primitive example being today's RFID transponder. In this highly–instrumented environment entirely new forms of entertainment focused on the intersection of the real and virtual worlds become possible. The success of the Nintendo Wii, detecting the motion of a player through simple accelerometers, is a first–generation example that only hints at the promise of such forms of entertainment in an Internet of Things. The example of Nike+ (see sidebar) shows how a company can leverage a personal portable device, sensors, wireless technology, the internet, and social networks to create a compelling new product / service.

Fragmentation has become a defining characteristic of the media landscape. From the radio / TV / newspaper age of the 1960's, we now live in a world where information and entertainment is created, distributed and shared across literally dozens of different channels. As the variety of distribution channels and destination devices increases, it becomes important to think of entertainment products in a multi–platform context, where a movie, for example, is launched in combination with a related massive multi–player mobile game, music, and viral promotional product. And increasingly the line between the entertainment industry and others will become blurred, as companies seek to augment their products with new media, as the Nike example shows.

A forecast of the market growth areas in the short term also emphasizes the increased importance of two trends: user participation in content creation and interaction (as opposed to passive observation), and the impending dominance of the mobile platform — chiefly cell phones, compared to the PC.

Regardless of the exact path the evolution of entertainment takes we can only be sure of one thing, that the variety and scale of entertainment products and services will grow enormously, existing types becoming a small subset.

This is not, on the face of it, good news for incumbents, or for economies like that of Canada, where strong entertainment clusters are located.² Creative destruction exposes their vulnerability while simultaneously forcing them to re–build around new players, new products, and new business models. On the other hand, a global market, growing very fast, with no established dominant participants, is highly attractive, especially since systematic barriers to entry appear to exist, precisely at the level of the regional economic cluster. The rich amalgam of capabilities that will create success in this market cannot readily be assembled de novo — for example, strengths in wireless communications, mobile device design, animation, dramatic content creation, robotics, and venture capital markets, and this gives regional clusters like Toronto a strong competitive advantage.

Scale itself might be a disadvantage — regional entertainment clusters dominated by a single medium or market–dominant firms (such as Hollywood with its movies, or Vancouver with Electronic Arts) are likely to be slow to respond to opportunities that threaten to cannibalize or destabilize their existing base of revenues and profits. Success is more likely for areas where smaller, more highly variegated firms predominate, especially where the regional scale and commercial, technical, and academic infrastructure favour high levels of cross–fertilization. The most transformative and cutting–edge companies in this industry are often the smallest — and their ability to challenge market leaders and industry stalwarts has never been greater. Convergence is breaking down the silos between industry sectors and technology disciplines, and giving an advantage to those institutions and jurisdictions best able to re–integrate and aggregate the components that remain.

In summary, our analysis reveals a world where the most innovative, flexible and dynamic new media clusters can reap the considerable benefits that come from attracting a disproportionate share of ideas, companies, capital, money and people.

SIDEBAR: Nike+iPOD

An excellent example of how a company can leverage consumer–oriented devices and applications is Nike's Nike+iPod, a cheap device that links a shoe–based sensor via wireless communications with an iPod Nano (or iPhone). It works like this:

Graphic Description

The point of this example is that Nike tapped into an extraordinarily rich set of capabilities by using the $150 iPod Nano (a signature product of the music industry, which many people already own) as the hub for a "personal area network." Nike also enabled a whole ecosystem of Nike+–based products and services.³

As of March 2009, the seven largest commercial equipment providers were shipping enabled equipment (Life Fitness, Technogym, Precor, Star Trac, Cybex, Matrix and FreeMotion). The models of compatible cardio equipment include treadmills, stationary bikes, stair climbers, ellipticals, and others such as Precor's Adaptive Motion Trainer (AMT).

The social network capabilities of this ecosystem have not been ignored. The Nike+ site is integrated with Twitter and Facebook. Over a million runners are part of the network, uploading their running statistics, and joining in virtual races. The extension of this system to medical home–monitoring is obvious.

WHAT GOVERNMENT CAN DO

A fundamental goal for government must be to assist in creation of a context where rapid innovation can occur. Innovation in the new media industry may originate within a single firm, but the creation of new media products will almost always involve a collaborative network based on the regional new media cluster. It is this ecosystem that must be the focus for government intervention in the event of market failure.

The Discussion Paper paints a picture of Canadian industry as being technology laggards, under–investing in ICT. We cannot comment on the state of other industries, but this picture would be very wrong as a picture of our new media industry. Here the issue isn't lagging adoption of ICT. Rather, the issues facing this industry are, from our experience:

• shortage of talent that combines the creative and business skills needed to bring a product to the market
• creating a risk–taking culture where the lessons of "fast failure" of a product or service are valued as highly as the early–stage investment that created the products
• matching the pace of innovation to the pace of change
• branding Canada as a new media powerhouse, in terms of being an innovator in the tradition of RIM, a supplier of significant tools to the industry, in the tradition of Alias and others, and, in the longer run, a trailblazer in integration of physical and virtual worlds within the same entertainment product.

While the new media industry is significant in its own right, it also "punches above its weight." Successful and sustained innovation in a high–visibility industry touching the lives of millions of consumers globally produces a halo effect that enhances the reputation of other Canadian industries.

Our recommendations for Canadian government investment in this industry address these issues.

Canada must cultivate "well–rounded" digital talent

The concerns of the Discussion Paper for increasing the numbers of skilled ICT professionals are not germane to the new media industry. Community colleges and universities are producing more than enough graduates with the necessary basic skills. The problem is that these skills are often too narrow.

CFC Media Lab's experience with product incubation has shown that one of the biggest hurdles to overcome in moving at the requisite speed of product development described earlier is the shortage of professionals who can see a potential product or service in its totality — not just the technical challenges it presents, but the business model that will attract funding, and the wide range of non–technical activities required, such as negotiating partnerships, arranging distribution, and securing adequate funding. In this industry a combination of creative and business skills is essential for an entrepreneur to be successful.

Recommendation 1: Target and match federal funds with private sector commitments for regional centres of excellence to incent the combination of business and creative skills development

Canada must not be afraid of failure

There is rarely time to do a lengthy marketing study for the typical new media product, and, even if there were, the data it collected might be obsolete by the time of product launch. In these circumstances companies need to "fail fast," that is, bring products to market and learn about what the market is demanding as much from their failures as their successes . This demands a different risk profile than that found in many CEOs, and venture capitalists. Our experience in running a number of acceleration programmes is that the best way to inculcate a culture of greater risk–taking is to build a close association between funding organizations such as venture capitalists, and new media technologists in the context of new product incubation. In such a setting the risk can better be calibrated, and

Recommendation 2: Support consumer–focused incubation centres in key regions, providing opportunities for initial product design and prototyping.

Canada must embrace collaboration as a competitive advantage

The lead–time from concept to deployment of a new media product is measured in months, not years. This time frame is very compressed by comparison with lead–times in other industries. The reason is that new media products are more like products in the fashion industry than products in consumer durables. But they are different from fashion goods in that they are inherently quite complex, and their production requires participation from a collaborative network comprising different skills. As in other high–tech industries, any product is only viable within a certain window of opportunity — miss the window and either competitive products secure the market, or a shift in technology makes the product obsolete. Speed of execution is key, and when the supply chain is a collaborative network, this means that relatively informal contractual arrangements, based significantly on trust, will be required. This is an important attribute of industry clusters, and one which different levels of government can do much to foster. In Silicon Valley the Churchill Club⁴ provides a venue in which industry participants can meet on a regular basis, and hear first–rate industry observers like Ray Ozzie and Vint Cerf speak about the issues of the day. In Toronto Interactive Ontario⁵, and in Vancouver DigiBC attempt a similar role, but they are more like a traditional industry associations in their approach. The digital media ecosystem may also require other forms of informal collaborative networks that are nimble and serve to produce results quickly to its members and would, in the expression popularized by Microsoft, "eat its own dogfood," that is use all the tools and services that go into its products to achieve its goals.

Recommendation 3: Support the evolution of new formal and informal collaborative networks, to build trust, and to raise the level of technical, creative and business knowledge among their members

Canada must sound (or tweet) her own horn

Canada clearly has the raw talent to succeed in the new media marketplace, but Canada, and important innovation centres such as Toronto and Montreal, are not recognized in the market as significant sources of innovation. In contrast, for example, Finland, through its concentration of attention on global industries like mobile phones and paper–making, has effectively projected its technology competence. Careful branding is a useful way to break down barriers to entry in foreign markets. A Canadian new media enterprise would have enhanced credibility if there were general acceptance of the sophistication of Canadian firms.

Recommendation 4: Launch a branding strategy to raise the global profile of significant Canadian Centres of Excellence.

¹ The notion of a learning curve is that as cumulative production increases the per–unit cost will decline, because of product and process innovation. Specifically, in ICT industries one might expect costs to decline by about 20 percent for each doubling of cumulative production.

² When we talk about an entertainment cluster, or more particularly a new media cluster, we are talking about a local agglomeration of firms, employees, and institutions that operate at the leading edge of innovation in both creativity and information technology.

³ McClusky, Mark (2009–06–22). "The Nike Experiment: How the Shoe Giant Unleashed the Power of Personal Metrics". Med–Tech: Health (Wired) 17 (7).

⁴ Churchill Club

⁵ Interactive Ontario