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Information Market Observatory (IMO)

The Markets for Electronic Information Services
in the European Economic Area

Supply, Demand and
Information Infrastructure

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European Information Trends 1996

Executive Summary

The markets for electronic information services (EIS) can be characterised by explosive growth, dramatic structural change and an intensive impact upon the competitiveness of companies and national economies as well as upon lifestyles and culture. Electronic information services are an important instrument for exploring new opportunities for research, new products and services, new co-operation partners.

In 1989 the European Commission initiated the so-called "EC-Host-Surveys" to raise market transparency for electronic information services for professional purposes. After four EC-Host-Surveys were completed the methodology was revised and further developed in 1994. The MSSTUDY (= Member States’ Study) was carried out on the basis of this common methodology in 1995 in 17 countries of the European Economic Area (15 countries of the European Union plus Norway and Iceland). Not only the supply side was surveyed in all countries but also the demand side for different important user groups (in 15 countries) and the most important factors of the national information infrastructure (e.g. R&D, technical infrastructure, libraries and other relevant institutions) including national information policy. The reference period was the business year 1994.

Thanks to the results of the MSSTUDY the European markets for electronic information services can be assessed on the basis of reliable, comparable and aggregated market data on the supply side. There is even a Europe-wide breakthrough in the long-neglected area of user research. Though there are many national experiences which have pan-European relevance (examples - from the Swedish: how to raise computer literacy in schools; from the Finnish: how to maintain an intensively used library system; from the Danish: how to conceptualise a national information policy) national peculiarities prevail. This means that problems of the national information infrastructure have to be discussed adequately primarily at national level (see the list of 17 national reports in Annex C), while the Executive Summary concentrates primarily on the main results of the supply and demand side studies.

I. The Supply of Electronic Information Services in the European Economic Area

(1) Revenues

In 1994 the market volume for EIS in the EEA-countries (= total expenditure of users in the European Economic Area) amounted to 4,134.8 million ECU. The biggest market was the United Kingdom with an expenditure of 1,174.0 million ECU and a market share of 28.4% while the smallest market was found in Iceland with an expenditure of 9.0 million ECU and a market share of 0.2%. It is estimated that the total expenditure for Europe (plus Switzerland and the East European countries) is about a further 10% of the total expenditure in the EEA-countries.

In 1994 the world-wide revenues of the European information industry amounted to 6,423.6 million ECU (which includes the exports and excludes the imports). World-wide revenues of the European information industries are 55.3% higher than the market volume in the countries of the European Economic Area. With world-wide revenues of 4,080.9 million ECU the British information industry has a share of 63.5% followed by France with a share of 10.2% and Germany with a share of 5.7%. The British had an export surplus of 2,906.9 million ECU, that is 127.0% of the European surplus. With the exceptions of the United Kingdom and the Netherlands all EEA-countries had negative trade balances.

The outstanding position of the British information industry is largely attributable to the export successes of one supplier, the world market leader for real-time financial information, Reuters. With 76.2% the United Kingdom has by far the highest export ratio, but Belgium (38.5%) and the Netherlands (32.5%) are also relative export-intensive countries. With the notable British exception nearly all EEA-countries are almost 100% dependent on foreign suppliers in the area of real-time financial information. In the other EIS-sub-markets (e.g. retrospective on-line databases, CD-ROM) the large European countries tend to have export surpluses (as has, for example, Germany) while the smaller European countries may have trade deficits here too. This is reflected in high import ratios of smaller European countries such as Iceland (93.3%), Luxembourg (88.0%) and Austria (86.2%) and can be explained by the low market potential in some areas of the smaller European countries which does not allow electronic publishers to break even with electronic titles on the domestic market.

A ratio of international transborder flow is calculated by the addition of export and import ratio. Here the EEA is polarised between countries who are deeply integrated in the "global electronic market" (e.g. UK and Germany), and other countries who are relatively self-sufficient (e.g. France, Italy and the Scandinavian countries). It is suggested that a high integration in international transborder flows is desirable because of its effects on strengthening the domestic industry and increasing the competitiveness of the domestic economy. Taking all exports of the European information industries together, 51% went to other EEA-countries, 20% to North America and 29% to other world regions. Relatively big national information industries have better opportunities to export to regions outside the EEA. Exceptions here are Spain and Austria with their special affinities to Latin America and some Eastern European countries.

Differentiating the revenues of the European information industry by the most important user groups and the most heavily used content types the main findings are as follows:

  • About 40% of usage is by banks and other financial service providers, about 40% by other private businesses and 14% by the public sector. Until now there have been only a few user groups who use electronic information services very intensively. In other words: there is still a large number of sectors, subsectors and user groups (e.g. small and medium-sized enterprises, the public sector) which are as yet untapped markets for electronic information services.
  • The information suppliers received 66% of their total revenue from business information and only 7% from scientific-technical-medical information including patent information. Taking the revenues for business information as 100%, the distribution is as follows: financial data 50%; company profiles and credit ratings 37.9% and other business information 11.4%. Especially high growth rates are foreseen in the news area and in consumer-related sub-markets like videotex and audiotex.

(2) Ratios and Rankings

To assess the different stages of development of national information markets in Europe there are two important ratios: EIS-expenditure in relation to the Gross Domestic Product ("EIS-intensity" of the economy) and EIS-expenditure in relation to the inhabitants ("EIS-penetration" of the country). Taking both ratios there appears to be a ranking of five clusters of national European markets: (1) Luxembourg and all Scandinavian countries are leading. (2) Only the United Kingdom was able to penetrate the phalanx of the Scandinavian countries. (3) The Netherlands and France have also intensity- and penetration-values above the EEA-average. (4) Below EEA-average are the German-speaking area (Germany, Austria), Belgium and Italy. (5) At the very end are the "less favoured regions" of Southern Europe (Spain, Portugal, Greece) and Ireland.

The most important factor for market development in all EEA countries seems to be Gross Domestic Product or Gross Domestic Product per inhabitant: The efficient usage of electronic information services is closely associated with the economic power of a country but sufficient wealth is needed to invest in electronic information services. In contrast to GDP the size of a country as a proxy for market potential seems not to be an important determining factor. The results of national information policy are also mixed: There are countries with a strong information policy and with strong information markets (the Scandinavian countries), but there are also countries with a very strong or strong information policy which have only average-developed or relatively weak developed information markets (France, Germany and Japan). The reverse also holds true: There are countries with a weak information policy and strong information markets (the US., United Kingdom), and there are also countries with a weak information policy and relatively less developed markets (the Southern European countries). Therefore not the financial volume but the quality of national information policy may prove decisive.

In addition to the determining factors of general importance there are the particular strengths and weaknesses of individual countries: Luxembourg occupies first place in the European ranking of market development because it has become an international banking metropolis with an extensive use of real-time financial information. The Scandinavian countries are leading in Europe because of the particular importance of telecommunication in countries with a large surface area and a low population density and who are as a consequence developing a considerable openness towards new telecommunication services and an advanced telecommunication infrastructure; early and extensive strengthening of skills development (e.g. raising PC literacy in schools and universities; many initiatives of a highly differentiated library system); an information policy which begins with the citizen with indirect acceptance and skills effects on employees. The leading position of the United Kingdom can also be explained: the particular significance of London as a global financial centre; the dominance of the English language in the electronic information services business; the general practice of American information suppliers of approaching the European continent via Great Britain, and to transfer new know-how first there; and strong database producers and suppliers who developed their domestic market first.

The above average position of the Netherlands can be attributed to internationally active publishers with a considerable involvement in electronic publishing and "global players" with a presence in the Netherlands, for whom the intensive use of EIS is a sine qua non. In 1994, the Netherlands seemed to be the leading country in the production of "progressive" multimedia titles. The just above average position of France points at strengths (high awareness of the opportunities for the "information industry" and "information society" in government and business; successes in basic research and development; high penetration of the French market by videotex accompanied by many user-friendly software developments) but also to weaknesses, especially to the concentration of the French players on the national market while the international markets are partly neglected.

Belgium ranks below EEA-average though the Belgian banks are very active in the EIS-sector and a CD-ROM-publisher is internationally successful. Germany's surprising low ranking can be attributed to the breakdown of the information infrastructure in the "Neue Bundesländer" (formerly the socialist GDR), the continuing existence of efficient alternatives to electronic information services in the print sector, acceptance problems of EIS in small and medium-sized enterprises, techno-sceptical currents in politics and public opinion, a deficient "PC-literacy" in the population and the late start of the German private sector into electronic publishing. Because of close interdependencies Austria and Germany either boom or do not boom together. Similarly to Germany, Italy has its own "less favoured regions" (the southern territories), and additionally there were deficits in the telecommunication infrastructure. Among the further less-favoured regions Portugal has a relatively well developed information market because of heavy investment in its information infrastructure (partly with money from the Regional Funds of the European Union).

Further European rankings by type of product, subject area and user groups lead also to interesting results: relatively weakly-developed information industries have participated fully or even better than the EEA-average in the CD-ROM-boom (e.g. Germany, Italy). But these countries may have to catch up again when the "on-line renaissance" comes. While there are information industries producing almost entirely for the business sector (e.g. United Kingdom, Ireland, Germany and Denmark), there are also information industries that sell their offerings primarily to the public sector (Iceland, Italy, Greece and Austria). In the latter cases especially this points to an opportunity as well as to a deficiency: the almost untapped potential markets in the business worlds of these countries.

(3) Development, Structural Changes, Europe's Position in the World

The present growth rate of the European information industries is estimated at nearly 20% per annum, and the boom may even accelerate in the near future. Overall growth will hardly be impeded by recession and structural crises as was almost the case in the past.

The present European market structure of electronic information services can be described by "rules of thumb": 80% on-line and 10 - 20% off-line; inside the on-line sector: 40% real-time financial information, 30% retrospective on-line services, 7% videotex, 4% audiotex; inside the off-line-sector: CD-ROM 6%, other off-line services 3% other products: 9%).

Structural changes which are presently taking place can be described as follows: Real-time information and even more the ticker-services of the news agencies are losing market share (though they have still remarkable growth rates). CD-ROM is booming and there are also gains by other off-line-services, e.g. diskettes. Retrospective on-line services are also winning market shares and the growth seems to be accelerating, driven by decreasing telecommunication costs, by consumer oriented services like videotex and audiotex and by the consumer on-line services. Currently audiotex has the highest growth rate although it starts from a low base of absolute revenues. Currently the European countries are at different stages of development with for example CD-ROM coming on strong in Denmark and bringing attractive multimedia offerings on-line in the Netherlands.

Measured against revenues of the information industries headquartered in different world regions Europe's world position is strong and seems to be getting stronger. In 1994 the world market share of the information industries in the European Economic Area was estimated at 39.6%, while in 1992 the world market share was only 38.1%. Nevertheless Europe lagged behind North America whose world market share was 54.4% (1994) although a particular dependence of the European markets on the US. - as it is widely presumed - did not exist. From a qualitative point of view it has to be added that the "American threat" is most evident in evolving new markets such as the electronic services for the consumer and in "paradigm shifts" like the Internet explosion and the multimedia revolution. All these developments have far-reaching effects on new technologies, products and services, corporate strategies and implications for information policy in the near future. There is no "Japanese threat" at all in the EIS-sector, but in parallel markets (e.g. video games) and neighbouring sectors (e.g. hardware).

(4) Employment and Other Factors

The European information industry provided 60,000 jobs in 1994 (measured in full-time equivalents). The British suppliers alone provided 24,000 jobs (most of them outside the United Kingdom), that is an employment share of 39.6%. Labour productivity increases with product standardisation (see the relatively high labour productivity in real-time financial information). It increases also with the internal organisational efficiency of the information provider, with market development and market size (because the EIS-markets are still in the realm of increasing returns).

Employment growth on the supply side is estimated at about 10% per year, but overall employment growth in the overall information professional sector is much lower because there are stagnating tendencies and even job losses on the user side in the information and documentation centres.

There are considerable activities of the European information suppliers in the area of outsourcing, but more so in the sphere of production than in the sphere of sales-oriented services. For example, between 30% and 71% of the information suppliers (by country) undertook outsourcing activities in the area of "software development and maintenance", but only between 0% and 35% in the area of "public relations".

According to the results on cost recovery and profitability the European information industries are primarily market oriented thereby contradicting a public image of a heavily subsidised information industry. Of the 9 countries surveyed, 8 earned 70% of their income and more on the marketplace. In 1994 between 41.3% of the information suppliers (France) and 100% (Iceland) were operating profitably in terms of operating costs. In a few years according to the expectations of the information suppliers nearly all EIS providers will operate profitably with the exception of institutions which belong more or less to the scientific infrastructure.

1994 ("The year before the Web") was too early for an indication of a European Internet boom but the results of later surveys and estimates strongly indicate that the boom has now really begun.

In eight national reports of the MSSTUDY no multimedia activities were reported for 1994 but in other countries such as Luxembourg, Belgium and Spain considerable multimedia activities were detected. In Germany 22.6% of the information suppliers were involved in some multimedia activities mostly restricting themselves to the modest multimedia type 1 (text with graphs, tables and pictures). In Denmark and Norway "progressive" multimedia titles (with the inclusion of audio and video elements) were more common (with 33.0% respective 43.9% share of total multimedia revenue) although all multimedia titles combined had only a very small share of the total market for electronic information services (1.3% respective 0.3%). But a first decisive breakthrough for multimedia took place in the Netherlands - with many multimedia titles not only on the CD-ROM platform, but also on Internet and with a share of 23.1% for multimedia titles of total expenditure for electronic information services.

Although at European level there were no significant revenues for multimedia products in 1994, this situation was excepted to change dramatically in the very short run.

II. The Demand of Electronic Information Services in the European Economic Area

For the first time, the demand side of the electronic information markets in many European countries was studied. The two main user groups suggested at the beginning of the study for case studies were independent information brokers and information intermediaries in banks. In order to assess the possibilities for further market development and to define the main market barriers, the potential users and end-users were also considered. Of 17 countries, 15 (the exceptions being Austria and Ireland) took the possibility to have a closer look at different user groups.

(1) Main User Groups

It can be concluded from the supply side study that about 4 billion ECU was spent by the users of EIS in all the EEA-countries in 1994. This total can be distributed to four main important user groups in the EEA:

41.3% to users from the financial services sector
38.8% to users from all other parts of the commercial sector of the economy
14.9% to users from the public sector
5.1% to other users (freelancers, independent brokers, private households, etc.).

Not intermediaries searching for end-users, but the end-users themselves are the most important user group in Europe. From the supplier's point of view this can be seen as the breakthrough.

(2) End-Users in the Financial Services Sector

The demand side study confirmed this proportion: a main group of users of EIS are in the financial services sector. In this sector, the trend towards end-users and away from intermediaries can be noted. Those intermediaries employed in banks tended to perform an internal role which is not charged as a separate service but which is seen rather as a marketing and customer satisfaction tool and which is therefore not offered externally as a commercial activity.

Electronic information usage today is, contrary to public opinion, not a matter of intermediaries, but a matter of end-users. Where the end-user has already been reached, the market is developed, the services are well known and have a high reputation. This is particularly true for real-time financial information services where the use of information is directly related to the earning of money or where the information is even part of financial transaction services.

(3) Independent information brokers

The independent information broker, as it would appear from the results, is an endangered species in Europe. These brokers as intermediaries for an efficient information transfer operating in the open market as their main profit-seeking activity are virtually insignificant for the EIS-markets in the EEA-countries. As the results show: the number of independent information brokers is very small in all countries covered by the MSSTUDY. In all the countries their market share is estimated at less than 1%.

It became evident from several national reports of the MSSTUDY that the more an independent broker moves from searching information sources to analysing the search results and consulting, the more profitable his business will be and the better his revenues/market share will develop. This is the reason why none of them is living merely from on-line database searches. Value added services promise a small but successful market niche.

(4) Information intermediaries in libraries and documentation centres

Information intermediaries in these organisations are not working in a market- and profit-oriented way. The tendency for governments to subsidise information brokerage in these and other institutions has led to a culture of free information which some would argue offers unfair competition to independent information brokers. But their intermediary function is more a public service than a potential business which is not developed in a commercial direction. This user group is the third largest user group in Europe at present according to the supply side study.

(5) Information intermediaries in several organisations and companies

Some studies found that internal information intermediaries in organisations were making more use of the internal information sources than of external databases. This may be due to the perception that external information can be expensive. Like banks, libraries and documentation centres they tend to provide a service that is for internal consumption only and is not sold externally for a profit. Normally, they do not offer their intermediary services to anybody outside their own companies. Internal intermediaries offering their services to external customers only play a small part in the economy of suppliers offering EIS. If a charge were to be made, it seems more likely that it would be to set up some barriers to the occasional external user rather than to make a profit as such. The intermediaries working in organisations and companies seem to belong to the second largest European user group coming from all other parts of the commercial sector of the economy than from the financial services sector.

(6) Use of Electronic Information Services of the different user groups

As far as the willingness to pay or the financial ability of users in different sectors is concerned the findings show that it depends

  • on the country (leading countries or less favoured regions),
  • on the sector (financial sector, business sector, STM sector, etc.), and
  • on the legal status of the user (public, private, semi-public)

how much is spent for electronic information services .

Information intermediaries or independent brokers spend on average between 13.7% and 14.1% of their total budget for the use of electronic information services. The average budget expenditure of information intermediaries in the banking sector which ranges between 23.7% and 25.9% clearly indicates a more intensive use of electronic information services in this sector. The average budget for EIS of documentation centres and libraries ranges between 6.6% and 7.4% of the total budget and is spent primarily on the use of STM on-line and off-line information services.

The absolute amounts spent depend on the sector, the legal status and the country. The more electronic services are already used in a certain sector (financial area), the more of the budget is also reserved for other electronic information services. It was not surprising to see that the spending of organisations in the financial sector far outweighed that of respondents in other sectors.

(7) The main market barriers to EIS in Europe

The potential user and end-user surveys or studies agreed that the most obvious problem and one which could be readily addressed is simply the lack of awareness of EIS. Both less favoured regions and sophisticated markets in the EEA such as Scandinavia reported lack of knowledge about EIS to be a major barrier. An unsatisfactory relationship between supply and demand is noted together with lack of user friendliness which reflects the move of the market from an intermediary market to one based on end-users. Costs are a frequently mentioned barrier, though they are generally not the most important barrier. In some of the less favoured regions, technical problems and network deficiencies are mentioned as significant barriers to using EIS.

The surveys showed that management attitudes (resistance from management) were not classified as a major barrier. This means that the EIS marketplace in Europe is beginning to develop in a positive way. This finding is underlined by the fact that budgets for EIS are meanwhile already reserved.

(8) Awareness creation

The European market for EIS can best be developed by already introducing the use of EIS in schools and in universities. At this level it should already be possible to teach potential end-users how to benefit from electronic information services. It is to be expected that Internet will give further encouragement to the EIS marketplace.

(9) There is still a long way to go before the balance between print and electronic information changes in favour of on-line and/or off-line information services

The different surveys revealed that the majority of users still rely on printed sources for the majority of their information requests. Most of the users use electronic on-line and/or off-line information services as one source among others. But there are already the first countries in Europe in which the use of electronic information surpasses the use of printed media (the Netherlands, see D, II.6 and the United Kingdom, see D, V.5).

Despite an encouraging level of penetration of electronic information services in the financial, business and professional sectors, there is still a long way to go before EIS will become the primary and predominant source of information for the various user groupings within the total user population.

(10) Creating market transparency for electronic media in the multimedia age

These trends show that the end-user will be more and more important for the development of the future market for electronic information services. For future studies, this means that the ongoing trend from the information intermediary to the end-user and consumer has to be fully taken into account. With multimedia offerings coming on a large scale, new market potentials will develop that have to be discovered and to be analysed as early as possible.

III. Future Market Developments - New Necessities for Political Action?

Serious quantitative forecasts are not possible because until now overall development of the EIS markets has been hallmarked by trend disjunctions. Therefore a restriction to qualitative hypotheses is necessary when taking the results of the MSSTUDY into account.

The EIS boom continues and will probably accelerate again. The boom is accompanied by rapid structural changes. New neighbouring markets are arising with exert a strong influence on electronic information services for the business sector.

The three most important external factors for market development are: (1) the telecommunication revolution (continuing deregulation, intensification of competition, reduction of prices - with ever faster transmission rates on-line - becomes capable of multimedia); (2) the multimedia revolution (mature technology, diminishing production costs - qualitative breakthroughs - convergence of PC- and TV-technologies); (3) growing societal awareness of the possibilities and the inevitability of electronic services promoted by permanent media coverage.

There is also an explosion in the number of users, promoted by the growing technical infrastructure in households and companies and created primarily on the Internet and the on-line consumer services and also by the growing demand of companies for "individual solutions" and an optimal integration of internal and external information sources. However, the current usage of EIS is still very meagre compared with the enormous usage potential.

Market development will also be significantly encouraged by the suppliers, especially by the entry of newcomers, the intensification of electronic publishing by established suppliers and the professionalisation of strategies for market development. Important developments here are: the integration of hitherto separate information worlds with the Internet; the opening up of private households and the semi-professional market by the on-line consumer services; closing information gaps in the business information sector by newspapers, magazines and public data; the change of Internet to a commercial network for transaction purposes; the transition to even more sophisticated multimedia productions and the continuing process of permanent innovations in other fields, e.g. communication and retrieval software.

Taking these developments into account the following tendencies can be forecast:

  • functional sub-markets: very high growth rates for transaction services; high growth rates for entertainment and edutainment services and games; lower but nonetheless high growth rates for information services (especially news)
  • target groups: very high growth rates in the consumer sector; still high growth rates in the business sector; low growth rates for scientific-technical-medical information
  • platform and technologies: very high growth rates for services close to the consumers such as Videotex and Audiotex; somewhat lower, but still very high growth rates in the on-line retrospective sector; still very high, although lower growth rates in the area of off-line, particularly CD-ROM; still considerable, although significantly lower growth rates for real-time financial information and even less growth for the ticker services of the news agencies
  • interactivity: higher growth rates for electronic services with high interactivity, communication services and "progressive" multimedia titles.

In comparison to the United States Europe is increasing its position in the area of information services for businesses, but it may initially have to accept a further American lead in the consumer sector and possibly also in multimedia production. In comparison to other world regions, some of them (Far East outside Japan, Latin America) are increasing their world market share. This is in the European interest, since the various domestic markets are best opened up by indigenous suppliers, and the European information suppliers have to depend on strong partners "on the spot" in order to sell their products world-wide. Within Europe the smaller European countries and even more so the less favoured regions may be confronted by particular problems if the costs of advanced multimedia title production shoot up and the national markets for electronic services are increasingly integrated into international markets.

Is there a necessity for new political action? Firstly, the possibilities of national governments and even more so of the European Commission should not be overestimated. Market development has to be primarily driven by the players in the markets themselves. Secondly, the priorities of European information policy, as they are outlined in the programme INFO2000, are more or less confirmed by the results of the MSSTUDY. This is especially true for the emphasis on sophisticated multimedia productions particularly in the on-line sector, for making available the untapped information resources of the public sector and for developing a pan-European information community by principally multinational projects and the construction of pan-European networks.

Thirdly, the rapid developments of the markets may make discussions about relatively new political approaches inevitable. In this report two relatively new approaches (including some possible lines of actions) are described and deserve further attention:

  • to increase the interdependencies on other - until now nearly forgotten - world regions (e.g. Far East, Eastern Europe, Latin America, India, Near East) in order to increase overall export opportunities for the economies of the European Economic Area;

  • in addition to the subsidies for the less favoured regions a more conceptual approach is needed in order to reverse a possible further polarisation process between the "front-runner countries" and the less favoured regions (by full integration of the less favoured regions into the new forming European supplier and user communities and a Europe-wide co-operative environment).

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