The replacement of media policies with (Media) entrepreneurship policies: A view from Europe’s periphery

Abstract

Estonia is recognised for its optimism with regard to ICTs – the country has benchmarking online services and the number of start-ups per inhabitant is the highest in Europe. The ways this enthusiasm is translated into its audiovisual policy is the topic of this paper. Estonia's internal market for audiovisual services is very small and this limits the degrees of freedom for its institutional actors – commercial broadcasters do not drive market innovation. Yet, the responsibility of PSBs for innovation coordination is not recognised in Estonia's policy frameworks. In contrast, many new initiatives are funded that are aimed at supporting the cooperation of the AV industry's SMEs with ICT sector. Such initiatives rely on the hope for scalable returns to national GDP rather than generating diversity in media. Yet, these measures suffer from structural constraints that limit the growth of media SMEs in small peripheral countries. The paper raises related issues for both national and European policies.

Full text

This is the author’s manuscript of the article that was published in International Journal of
Digital Television (Volume 6, Issue 3 – 2015). Please find the published version here:
http://www.ingentaconnect.com/content/intellect/jdtv/2015/00000006/00000003/art00005
The replacement of media policies with (media) entrepreneurship policies:
A view from Europe’s periphery
Indrek Ibrus
Abstract
Estonia is recognised for its optimism with regard to ICTs – the country has benchmarking
online services and the number of start-ups per inhabitant is the highest in Europe. The ways
this enthusiasm is translated into its audiovisual policy is the topic of this paper. Estonia’s
internal market for audiovisual services is very small and this limits the degrees of freedom
for its institutional actors – commercial broadcasters do not drive market innovation. Yet, the
responsibility of PSBs for innovation coordination is not recognised in Estonia’s policy
frameworks. In contrast, many new initiatives are funded that are aimed at supporting the
cooperation of the AV industry’s SMEs with ICT sector. Such initiatives rely on the hope for
scalable returns to national GDP rather than generating diversity in media. Yet, these
measures suffer from structural constraints that limit the growth of media SMEs in small
peripheral countries. The paper raises related issues for both national and European policies.
Introduction: The market situation
Estonia is often praised for its e-governance and optimism with regard to ICTs – it is
recognised for its public online services and the number of start-ups per inhabitant is the
highest in Europe. One could assume that the same, then, applies to its audiovisual sector.
Partly this is true – for instance, ERR’s (Eesti Rahvusringhääling, Estonia’s Public
Broadcaster) activities online are comparatively advanced. As Estonia’s media market is very
small (with a small number of core players) and the general expectation in the country is that
public institutions need to provide extensive services online it has resulted in ERR’s private
competitors being rather relaxed about its rich online offering and do not fight against it
(which is often not the case in bigger European countries). ERR has a portfolio of thematic
portals and award-winning mobile apps, all the radio and TV channels are available for live
viewing online, with unprecedentedly rich options for catch-up viewing, and almost all of its
digitised archive content is available for viewing too. It can be suggested therefore that
similarly to some other European countries (Bechmann 2012: 903) in Estonia also it is the
public broadcaster that drives innovation and experimentation with cross-media strategies in
Europe. Without ERR there would no commissioning of such “convergent content” from
independent content providers. As demonstrated by Bennett et al. (2012: 6), there is evidence
that such a function could be carried out with positive results. They found that the two large
British PSBs, which are committed to multiplatform commissioning, have effectively
“incubated” a number of new companies dedicated to digital content and have more broadly
generated economic value and growth in the independent sector.

Yet, in this context we should still investigate the practices of commercial
broadcasters and online publishers that might drive market innovation. The broader context
for this question is the size of the Estonian advertising market – 88,05 million euros in 2014
(TNS Emor 2015). This is very small compared the core European markets (for discussions
of size and smallness in television markets see Lowe and Nissen 2011, Puppis 2009). What is
more, in general the advertising market and therefore commercial broadcasters also suffered
greatly from the recession and have still not recovered – the market has been growing only a
couple of percentage points per year recently (after a nearly 50% drop in 2009–2010) (TNS
Emor 2014). Furthermore, while the number of TV channels has been on the rise (that is, in
the cable TV sector) the share of TV advertising has been on a slow decline – constituting
32% in 2013 (TNS Emor 2014). That is, the two major commercial TV broadcasters (Kanal2
and TV3) have not been in the position to drive the market with innovative and experimental
content in recent years. Their strategy has been instead to rely on the internationally tested
major international formats to deliver them mass audiences (see Rohn 2014). Next to
traditional broadcasters the various providers of online news and other media content have
been stepping up and starting to provide audiovisual content. Their share of the advertising
market has demonstrated gradual growth over the years. What they also recognise is that
video content has been attractive among their audiences. Therefore they have been motivated
to increase their video offering. Yet, most of the video content they provide has been rather
trivial news content or live streaming of events. No advanced fiction or non-fiction content
from independent producers has been commissioned. Yet, similarly to Netflix and Amazon,
Estonian online providers and telecommunications operators (with VOD services) have
suggested they may look into investing in original programming in the near future. For the
time being, however, it can be concluded that despite the general ICT-optimism the small
size of Estonia’s internal market for audiovisual services has limited the risk acceptance and
capacity to drive innovation in Estonia’s existing private media companies.
New policy rationale? From market failure to innovation coordination failure
Although the budget of ERR has been the smallest among Europe’s PSBs, local market
limitations suggest that it may need to take a more central role in facilitating the emergence
of an innovation-oriented media production ecosystem. But that would also mean that the
market failure logic, the classic rationale that PSBs will need to intervene when the market
fails to deliver, will need to be replaced by a different rationale. I propose for consideration
an alternative rationale that builds on the evolutionary economics view on national
innovation systems. According to the authors of the concept, Christopher Freeman (1995)
and Bengt-Åke Lundvall (1992), the national innovation system is constituted by
interconnected private and public institutions such as commercial enterprises, start-up
companies, universities, investment banks, libraries, business incubators, etc. When such a
system is well coordinated it starts facilitating the emergence and diffusion of new
technologies, which then, effectively, will start contributing to the national GDP. This theory
has been more recently extended by Jason Potts (2007) who has been suggesting that in the
national innovation systems conceptualisation should be included arts and creative industries,
since it is the dynamic cultural scene that facilitates the accumulation of new perspectives
and therefore the emergence of new ideas in a society. Furthermore, arts and creative
industries also facilitate the adoption and retention of new technologies in society. That is,
according to the ‘cultural science’ (an approach that combines evolutionary economics with

the ideas of cultural semiotics and cultural studies) view there are constant feedback loops
between arts, sciences and engineering that then facilitates the general evolution of societies
and economic systems. Potts emphasises that to the logic of innovation systems what is the
central policy concern is not market failure, but coordination failure – whether or not the
feedback loops among the different constitutive institutions and societal domains work well
to facilitate information exchange and therefore growth of knowledge.
Potts et al. (2008) have also maintained that especially in the digital era it is also the
various kinds of network facilitators that take responsibility for such coordination failures to
not happen. Returning to the case of Estonia and its audiovisual industries, I suggest that
especially in such small peripheral markets it is the public service media that could take the
role of such network and market coordinator. There is evidence in Estonia already that the
coordinated actions of ERR’s various TV, radio and web channels (mostly promoting new
artists and a variety of genres) has facilitated the emergence of a new wave of Estonian pop
music. It would therefore be timely to start reimagining the broader ERR remit as the central
coordinator of the audiovisual production system with the aim to facilitate the emergence of a
more innovation-oriented production system in which cultural diversity and dynamics would
be an important side-effect. This could be achieved by making it commission more from
independent providers and thereby to commission more experimental and innovative content
and services. Its production facilities could be used more effectively by the independents and
it could simply promote and raise awareness about the audiovisual culture more
systematically.
I suggest that such redesigning of ERR’s remit would be timely since, as our (Ibrus
and Merivee 2014) recent study indicated, the momentum is there – there is some readiness
within ERR to go that way, to innovate more both in-house as well as also create incentives
for independents to offer innovative content. Yet, as we also demonstrated, despite the
momentum there is also a lot of confusion within ERR with regard to its general functions
and strategic goals, especially regarding innovation and activities on networked platforms.
Estonia’s independent producers and their innovation practices
There were 363 audiovisual content production companies (the statistic does not separate
between film and television production) officially registered in Estonia in 2011 (Eesti
Konjunktuuriinstituut 2013). This number has seen a steady growth, indicating the gradual
fragmentation of the industry towards smaller companies – i.e. the majority of professionals
striving to have their own company (Ibrus et al. 2013). The gross income of the subsector
was €50.7 m. Public funding for film production constituted an additional 12.3% (€6.2 m).
The gross profit of the audiovisual sector companies was €3.5 m, constituting 0.08% of
Estonia’s private sector gross profit. At the same time, the AV sector turnover constituted
0.12% of private sector turnover in 2011 (Eesti Konjunktuuriinstituut 2013). This difference
points to comparatively lower productivity in audiovisual content production in relation to
the rest of the economy. The main source of business revenues is the production of TV
commercials and other TV content. Incomes from ticket sales, video on demand (VOD)
services and DVD or broadcast licence sales may vary, but is not always insignificant. Yet,
the home market support for the industry has its natural limits and therefore the need for
more effective export activities is a widely recognised objective.

Yet, exports have been rather limited. Although Estonian films have been received
well in festivals (including Golden Globe and Oscars nominations) there have be no
significant financial returns from international markets. Also the export of TV content or
formats is very rare – mainly due to a lack of co-operation with international distributors
(effectively still conditioned by the lack of skills and contacts needed to participate in
international markets effectively) as well as the small market affording relatively limited
production budgets that produce limited quality and low export value. What has been
growing (with policy support) is the provision of production services to foreign films and TV
series. The rationale behind this is that, since it would be difficult to increase public funding
for film and TV production, therefore the only way for the local industry to grow
institutionally stronger is to provide services to others, acquire new skills, contacts and make
ends meet.
Related to this generally accepted goal to export more is another tendency. Since the
broader policy to increase public funding for audiovisual production has been unpopular
among the political class, the new rationale developed by the sector’s governing
organisations has been to find new financing and growth opportunities from cooperation with
the ICT sector. Therefore, one can observe the emergence of a mindset and activities that are
aimed at supporting innovation by directly targeting the small independent providers and
media sector start-ups. The specific emphasis tends to be on supporting cooperation between
the AV industry’s SMEs and the ICT sector aimed at facilitating various forms of cross-
innovation, cross-media production, etc. Using EU structural funds, several new schemes
such as those in support of clustering and incubation, have been set up that fund such
enterprises. In addition to direct funding for companies, new study curricula with a focus on
entrepreneurship and digital skills are funded, among other related initiatives. Such initiatives
typically rely on ‘digital creative industries’ policy discourses that have an explicit neoliberal
ethos and build on the hope for scalable returns to national GDP rather than generating
plurality or public value in media.
Yet, as we have demonstrated (Ibrus forthcoming, Ibrus and Ojamaa 2014, Ibrus et al
2013) these initiatives suffer from structural constraints that limit the growth of media SMEs
in small peripheral countries. For instance, we have observed how the existence of such
funding schemes often becomes an important stimulus for the generally underfunded film
sector and is therefore eagerly used. Yet these can also become a source of new frustrations
and tensions, since most industry professionals do not have the skills needed or even an
understanding of the new opportunities of digital distribution, cross-innovation, cross-media
production, etc. Acquiring new skills and knowledge is not only time-consuming but also
costly and therefore constitutes significant thresholds for micro-sized production companies
that operate in limited markets.
Furthermore, it is paradoxical that, although the creative industries’ policies
presuppose growth in the sector, especially occasional scalable growth among start-up
companies and assume that this growth can be achieved by external support for these start-
ups, it may be difficult to attain. Even if AV industry SMEs undertake experimentation and
try to innovate with digital forms and online distribution eventually it is difficult for them to
gain traction in the saturated internet marketplace of the “attention economy” (Goldhaber
1997) era. Larger brands or companies that control assets across media boundaries (for
instance, own TV channels, newspapers, online portals, etc.) are simply better placed to use
their marketing muscle and keep the audiences engaged with their own provision of content.
Which is to say that cross-platform business modeling may indeed be enforcing the path

dependencies of the oligopolistic market structures. There is evidence (Ibrus 2012) that even
if the small independents have been considering trying to make it alone, they soon retreat
under the helms of large brands and broadcasters. However, at the same time, the bigger
players, including the PSBs, have learned their lessons about the cost-effectiveness of digital
multi-platform productions, for instance that high costs are not necessarily reflected in
audience numbers, and they therefore take care to produce only small numbers of blockbuster
products – heavily marketed content brands. And, they do it mostly in house. The Estonian
ERR also tends to be very hesitant to commission content for online audiences from
independent content providers.
In addition, there is the current practice of PSBs to keep the intellectual property
rights for content that they themselves do not fully exploit. This in turn limits the
opportunities for independent content providers to have autonomous operations. What is at
stake here is the potential for the kind of ‘serialisation’ that is generally associated with cross-
media/transmedia-like productions – certain narrative/intellectual property derivatives across
multiple platforms of which the TV component commissioned by a TV channel may be only
one. Such serialisation as it builds on the fan engagement with the familiar brands or
storylines across platforms has the potential to secure longer-term stability for independent
producers. As such, transmedia could empower independent studios – the companies that
traditionally used to apply for resources from external public funding schemes could now
build on their intellectual properties and generate new revenue streams and autonomous
income. Yet, as our research demonstrated (Ibrus and Ojamaa 2014:2295), similarly to the
situation in the UK (Bennett et al. 2012), the limited remit of ERR also means this potential
remains to be fulfilled. This could be understood as another example of coordination failure.
Conclusions
What this analysis suggests is that, despite the promises associated with digital distribution
and start-up culture, the dynamics – at least in Europe’s small peripheral media markets – are
still shaped by the classic drift of media markets toward oligopolistic structures. Encouraging
innovation and diversity will require more comprehensive policy changes than just loose
measures aimed at pouring small pots of funding into the sector to encourage entreprenuarial
spirit of independent studios and designing the media production institutional landscape by
taking the start-up scenes in other sectors and bigger countries as an example. It is therefore
of importance that future regulatory activities on the European and national levels take these
vulnerabilities into account. What is needed is not only to continue the work on new kinds of
educational programmes for media professionals, but also facilitating better access to markets
for AV industry SMEs. The latter objective should be of especial importance in negotiating
the terms of EU’s Digital Single Market reform.
Furthermore, the roles of PSBs as coordinators of media innovation systems,
especially in smaller markets, need to be recognised. To an extent, these roles are carried out
to positive effect already, but this function could be strenghtened by reconceptulising PSBs
as interventions aimed at neutralising ‘innovation coordination failures’ in contemporary
national media systems. The remits of PSBs need to be redesigned to require them to take
direct responsibility for wider media production ecosystems, for instance enabling them to
share intellectual property rights with independent providers.
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