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INFORMATION MARKET OBSERVATORY (IMO)


EU ELECTRONIC INFORMATION SUPPLY INDUSTRY: Statistics in Perspective


Luxembourg, November 1994
IMO Working Paper 94/5


The views expressed in this report are those of the IMO secretariat and do not engage the European Commission
Bat. J. Monnet,
Plateau du Kirchberg,
L-2920 Luxembourg
- Office: JMO B4-020.
Telephone: exchange (+352)43011, 
direct line +352 4301 32889.
Fax: +352 4301 33190.
Telex: COMEUR LU 3423. 
Telegraphic address: EURDOC LU 2752.

CONTENTS

HIGHLIGHTS
1. OBJECTIVES
2. METHODOLOGIES AND ISSUES RELATING TO INDUSTRY/MARKET STATISTICS
3. GENERAL ECONOMIC CLIMATE
4. ELECTRONIC INFORMATION SERVICES IN THE EU

5. UK AS A CASE STUDY
6. CHARACTERISTICS OF THE INDUSTRY
6.1 The place of SMEs
6.2 Sales per employee
6.3 Wider applicability of UK figures
7. NORTH AMERICA
8. JAPAN
9. PRINT PUBLISHING
10. CONCLUSION

Graphics

Graphic 1: GDP Index at constant prices (1985=100)
Graphic 2: GDP Index at constant prices (1985=100), by Quarter

Tables

Table 1: Electronic Information Supply Industry
Table 2: National Organisations Participating in the Fourth Co-ordinated Survey
Table 3: EU GDP and Electronic Information at Market Prices
Table 4: Overview of national on-line results contributing to the EIIA co-ordinated survey relating to 1992



Highlights


This paper was drafted by the European Information Industry Association (EIIA) on behalf of the IMO. Principal sources include the EIIA Fourth Co-ordinated Survey of EU-based organisations engaged in the provision of electronic information services and products for professional users, the CICI Survey which fed into the EIIA survey, the TFPL Publishing CD-ROM directory with multimedia CDs, the US Department of Commerce US industrial outlook 1994, the Simba Online services 1994 review, the Database Promotion Center, Japan's Databases in Japan 1994, Consulting Trust GmbH, Frost & Sullivan, and OECD and Eurostat for economic and exchange rate data. The writers gratefully acknowledge the constructive input of the IMO secretariat.



1. OBJECTIVES

The objectives of this IMO Working Paper are twofold, namely

(I) to provide an overview of EU electronic information supply industry statistics on the basis of the latest findings from the series of Co-ordinated Surveys sponsored by the Commission of the European Communities and carried out by a group of information industry associations and similar organisations based in each of the EU Member States, except Greece, under the aegis of the European Information Industry Association (EIIA); and

(ii) to place the EU supply-side statistics into perspective by looking at the general economic climate, available demand-side figures, comparable figures for other major areas of the world, and figures for the print publishing industry.



2. METHODOLOGIES AND ISSUES RELATING TO INDUSTRY / MARKET STATISTICS

Numerous sources offer statistics which purport to relate to particular types of electronic products / services and / or to particular territories of the world. Whilst the figures from most such sources have been compiled professionally, the authority of such figures varies considerably. Several factors can affect the usefulness and potential comparability of figures from different sources. It is worth discussing a number of those factors here, before looking at any particular sets of figures:

(I) Market / industry figures: it is always important to understand whether figures purport to represent the supply side (industry) or the demand / consumption side (market) of any particular geographic area. At the global level, of course, supply and consumption of a commodity such as information are one and the same, but at individual territory level, the picture can be very different indeed, depending upon whether a given territory is a net importer or net exporter of information services. Accordingly, it is worth looking a little more closely at what is included in supply / industry figures and in consumption / market figures.

On the one hand, consumption/market figures have two main elements: a) revenues generated by services / products which are both produced and consumed in the area in question and b) imports of services / products from outside the area in question.

On the other hand, supply/industry figures also have two main elements: a) revenues generated by services / products which are both produced and consumed in the area in question; and c) revenues generated by exports, including sales generated by overseas branches and subsidiaries.

Both types of figure clearly have in common the "e;core"e; (a), namely products / services which are both produced and consumed in the territory in question. The difference between the two types of statistic lies in the fact that one adds to the "e;core"e; imports but not exports and the other adds to the "e;core"e; exports but not imports. As has been intimated, in some geographic areas, taking one statistical approach rather than the other can result in different sets of figures.

(ii) Data collection: organisations aiming to evaluate supply rather than consumption have a significant advantage, in that the 'universe' of all suppliers, even including specialist niche players, is relatively small, whereas the 'universe' of all users is very large indeed. As a result, whilst it is possible to arrive at reliable supply-side figures by identifying and quantifying all suppliers, it is virtually impossible to do so for consumption. Indeed, consumption figures involve much more sampling and extrapolation, with consequent wider potential margins for error.

(iii) Definitions: one of the key problems which besets any person who embarks upon a study of market research reports relating to the electronic publishing industry is the lack of consistency in relation to definitions. Most studies exclude private information services and closed user groups, but apart from that there is a very wide range of coverage. At one extreme, for example, some studies take a particularly wide view of the industry, including in "e;electronic information services"e; not only on-line services accessed by the public telephone network or by leased line, but also interactive and non-interactive broadcast services (i.e. teletext), audiotex, CD-ROM, magnetic tape, floppy disc, fax and "e;other"e;. Other studies are less clear, however, so that where figures are put forward for the totality of the electronic information supply industry, it is not entirely clear which of these categories have been included and which excluded.

(iv) Exchange rates: inevitably, since the electronic publishing industry is international, revenues are actually realised in a variety of currencies. Exchange rates used can sometimes be critical, especially during a time of instability on the international currency markets. A particular instance is provided by the UK pound sterling, which was effectively devalued against the ECU between 1991 and 1992. Thus, the value of the UK on-line industry in 1991 appears to decrease by 5 per cent when converted to the ECU firstly at 1991 rates and then at 1992 rates, as shown below:

                              Value in           Value             %                                    UK £ in ECU

variance 1991 at 1991 rates 

1,750.7m        2,497.4m    1991 at 1992 rates          1,750.7m        2,373.3m       (4.97%)

------------    Apparent difference                           124.1m
------------    

(v) Dates: some reports are not especially clear as to whether figures for particular years are actuals, estimates or forecasts. It is also useful to know when any primary research forming the basis of a report was actually carried out.

(vi) Independence: whilst there is no evidence to suggest that any particular market / industry report has actually plagiarised another, there is undoubtedly much cross-fertilisation and, indeed, mobility of staff. There is also no doubt that the findings of one major report tend to influence other subsequent reports -- even those emanating from different sources.



3. GENERAL ECONOMIC CLIMATE

The years between 1990 and 1993 (inclusive) were difficult in most major world economies.

For the EU as a whole, real growth continued up to 1992, when it petered out and took a slight down-turn. This picture is reflected in the figures for larger Member States, like Germany (where growth in fact took a serious down-turn in 1993), France and Italy. Only the UK exhibited a radically different pattern, with a steady decline from 1990 to 1992, but a distinct up-turn in 1993. These economic trends are illustrated in Graphic 1.

Graphic 1: GDP Index at constant prices (1985=100)

Source: OECD, Main economic indicators, September 1994

Meanwhile, the USA appears to have bottomed out the year before the UK, whilst Japan had reasonable growth in 1990 and 1991, but more or less stagnated in 1992 and 1993.

A closer look at 1992, via quarterly GDP statistics -- see Graphic 2 -- shows that it was very much the year in which economic change took place in the EU, with fairly static GDP figures in the first and second quarters giving way to significant negative growth by the fourth quarter in all of the major economies except the UK. The UK itself made very little progress in 1992, although such movement as there was in the economy was upwards.

Graphic 2: GDP Index at constant prices (1985=100), by Quarter

Source: OECD, Main economic indicators, September 1994

It is against these static or declining overall economic conditions that the real achievement of growth in the electronic information sector has to be judged.



4. ELECTRONIC INFORMATION SERVICES IN THE EU

The European Information Industry Association (EIIA), which has its headquarters in Luxembourg and brings together in its membership both national industry associations and individual players in the electronic information services marketplace, completed its fourth annual survey of the electronic information supply industry in the European Union (EU) during the summer of 1994. Approximately 500 organisations, from all Member States of the EU, responded to the survey, making it the most comprehensive survey of the EU information supply industry.

As a supply-side study, the survey seeks to quantify the contribution to the EU economy of publicly available electronic information services and products for professional users offered by companies and other institutions based in the 12 Member States. In accordance with the pattern established in previous years, the results of the survey at EU level were built up from the results of individual surveys carried out more or less simultaneously in Member States by national industry associations or other qualified organisations. This 'bottom upwards' approach is fully documented in the EIIA's 'Methodological Guidelines', which also define clearly what types of services and products are included within the scope of the series of Surveys.

Table 1: Electronic Information Supply Industry
Key Results of the Fourth EIIA Survey (1992)1)

                                                   1992         1991 


2) Growth    * Employment in the industry        36,913       33,331        

                                                              +10.7%    * Total value of electronic information       

ECU                                            4,212.8m 

ECU                                                         3,469.9m    +21.4%    * Total value of on-line revenues 

3) 

ECU                                         3,643.7m 

ECU                                                         3,121.7m     +16.7%  
                                                    
US$                                            4,729.9m 
US$                                                         4,052.3m    * Geographic distribution of on-line revenues 

3)  
        
National consumption                              39.5%              37.2% 
         
Intra-EC trade                                    31.4%              34.6%          

Total EC domestic                                 70.9%              71.8%          

Export from EC                                    29.1%              28.2%    * Real-time information services

                                                  53.6%              57.2%    * Retrospective/archival information 
                                                                              services           
                                                  46.4%              42.8%    * Subject analysis of electronic 
                                                                              information revenues          

Finance                                           53.8%              60.2%          

Business                                          33.2%              28.8% 

Other                                             13.0%              11.0%    * Total value of CD-ROM revenues:

ECU 152.7m 
         
ECU 79.3m     +92.6%  
                                                      
US$198.2m  
        
US$102.9m    * Total value of professional audiotex services 

4): ECU 97.4m               --         n/a        Notes:
1) To facilitate comparisons, conversions to dollars of figures for both 1991 and 1992 have been made at an average rate for 1992, obtained from Eurostat, of ECU 1.00=US$1.29810. 2) 1991 figures have been restated at 1992 exchange rates or otherwise adjusted to be directly comparable with 1992 figures. 3) Inclusive of 'professional' videotex revenues. 4) 1992 was the first year in which audiotex was brought into the scope of the Survey.

Key results of the EIIA survey are presented in Table 1 on page 7. A list of the national partners responsible for collecting data in each of the Member States is given in Table 2 on page 8.



4.1 On-line services

The value of on-line information services provided by EU-based hosts and their overseas branches and subsidiaries amounted to ECU 3.6 billion in 1992, at current prices, up by 16.7 per cent compared with ECU 3.1 billion in 1991.



4.2 CD-ROM

Whilst there continues to be strong interest in CD-ROM in the information industry, that interest had still not been translated into substantial revenues by 1992. According to the EIIA survey, CD-ROM revenues generated by EU-based publishers and their overseas branches and subsidiaries from publicly available CD-ROM titles amounted to approximately ECU 153 million (approximately US$198 million), at current prices, up by almost 100 per cent from the previous year.

Table 2: National Organisations Participating in the Fourth Co-ordinated Survey

  European Information Industry Association (EIIA)*        

*   In addition to overall project co-ordination and data aggregation at the European level, the EIIA was responsible 
for data collection in relation to Greece and Luxembourg.

Belgium:       GRID Strategic Decisions Consultancy            
Denmark:       Infoscan (formerly Dansk DIANE Center)            
France:        Association Française de Télématique (AFTEL)            
Germany:       Gesellschaft für Mathematik und Datenverarbeitung (GMD)            
Ireland:       Information & Computing Services Association (ICSA)            
Italy:         Associazione Nazionale Fornitori di Videoaudioinformazione (ANFoV)            
Netherlands:   Nederlands Bureau voor Bibliotheekwezen en Informatieverzorging (NBBI)            
Portugal:      Lusodoc, Documentação Técnico-Científica, Lda            
Spain:         Fundacíon para el Fomento de la Información Automatizada (FUINCA)            
UK:            Confederation of Information Communication Industries (CICI)            
UK:            Centre for Communication and Information Studies (CCIS),                       

University of Westminster    

It should be stressed that 'CD-ROM' is here used as a generic term for all CD-based digital optical media. Figures relate solely to titles sold and exclude hardware, search/manipulation software (when available separately from 'content') and CD-ROMs which are produced for in-house purposes and which are not publicly available.

To place the above revenue figure in perspective, it should be noted that, according to the authoritative CD-ROM directory with multimedia CDs, published twice yearly by London-based TFPL Ltd, only 1,024 CD-ROM titles had been published by European publishers by the end of 1992 (compared with 698 in 1991).



4.3 Other statistical indicators

Other key figures which emerged from the survey are highlighted in the following paragraphs.


4.3.1 Employment

In 1992, close to 37,000 people were employed by EU-based electronic information suppliers and their overseas branches and subsidiaries, approximately 10.7 per cent up on the corresponding figure for 1991.


4.3.2 Domestic consumption

Roughly 70 per cent of the revenues attributable to on-line information services supplied by EU-based organisations and their overseas branches and subsidiaries were generated by usage within the EU. This proportion had changed little compared with 1991.

By contrast, over 90 per cent of CD-ROM revenues came from the domestic EU marketplace, with most sales of CD-ROM titles actually being made to customers in the same national territory as the publishers. Evidently the EU CD-ROM publishing industry was still very immature in 1992.


4.3.3 Intra-EU trade

Approximately one-third of on-line revenues were generated by trade between the Member States of the EU. Between 1991 and 1992, this intra-EU trade decreased, as a proportion of all on-line revenues, by more than three percentage points, although over the four-year period 1989-92, apart from evident fluctuation, there was scarcely any change in this proportion.


4.3.4 Export

Approaching 30 per cent of on-line revenues were generated outside the EU. As a proportion of all on-line revenues, exports remained stable between 1991 and 1992.


4.3.5 Subject interest

Financial and business services accounted for the vast majority of on-line revenues (61 and 29 per cent respectively in 1992). These figures reflect the fact that real-time services are principally oriented towards the financial community. By contrast, whilst 58 per cent of CD-ROM revenues came from business products, the rest was much more evenly spread across other subject areas, including, notably, products with a legal/governmental orientation, which accounted for approximately 16 per cent of revenues.


4.3.6 Type of on-line service

The split between real-time services and other on-line services was roughly 54:46, having moved significantly away from real-time services compared with 1991 (57:43). It is believed that this movement reflects the fact that real-time services, which are for the most part targeted at the financial community, suffered more from recession than other on-line services.


4.3.7 Other

Revenues from document delivery and from professional audiotex services were each of the order of ECU 100 million (approximately US$130 million).



4.4 Commentary

The EIIA's figures demonstrate clearly that the EU-based electronic information supply industry was not seriously affected overall by recession in 1992, although there are indications to suggest that some products aimed at the financial services sector, especially real-time services, may have suffered. The strong growth rates reported in this industry are all the more remarkable in view of the fact that, as illustrated in Section 2, above, in all of the major economies of the EU except the UK, the real growth rate of gross domestic product (GDP) was progressively slowing down throughout 1992 and in some countries had turned negative by the end of the year. On the other hand, in the UK, where recession had arrived earlier, real GDP growth was still fairly flat throughout the year. Growth in the electronic information industry is shown relative to GDP growth at current prices in Table 3.

Inevitably, patterns of growth in the 12 Member States still varied considerably in 1992, with the more mature industries progressing less dramatically — but still well compared with other sectors of the economy. In particular, the UK industry, which was further into recession and, in any case, is the most mature electronic information industry in the EU, grew by only 9.3 per cent in 1992.

Table 3: EU GDP and Electronic Information at Market Prices

1989     1990     1991     1992  GDP (BECU)         

4,428    4,767    5,176    5,421  at market prices            
+7.7%    +8.6%    +4.7%    Electronic Info    2,659    2,993    3,470    4,213  (MECU)
+12.5%   +16.0%   +21.4%   On-line Info       2,203    2,492    3,122    3,644  (MECU)
+13.1%   +25.3%   16.7%    

Source:  Eurostat, Basic statistics of the Community, 1994; and EIIA Co-ordinated Survey, Summer 1994    

Naturally, the Less Favoured Regions (LFRs), where electronic information supply still has a lot of ground to catch up, made further substantial advances.



4.5 Exploitation of results

As with all projects which enjoy European Commission support, it is important to ensure that the results of research are put to good use. It should, therefore, be recorded that during 1994, along with figures from the UK national partner in the Co-ordinated Survey, CICI (Confederation of Information Communication Industries), EIIA statistics were used by the UK Monopolies and Mergers Commission during its investigation, completed earlier in the year, into FT Profile and so-called "e;historical on-line database services"e;. EIIA figures were also used in the preparation of a report for the UK government by the Science Policy Research Unit (SPRU) of the University of Sussex, concerning the competitiveness of electronic information services in the UK.



4.6 EU market figures

Numerous studies offer figures for the European consumption of electronic information services, although, more often than not, such market figures relate to the whole of western Europe (rather than just to the 12 countries which constituted the EU up to the end of 1994), thereby including the relatively small but nevertheless significant markets of Norway, Sweden, Finland, Austria and Switzerland. In consequence, it is extremely difficult to correlate those market figures with the supply-side figures of the EIIA surveys.

In general, market figures, whether referring to all electronic information or just to on-line, are of a similar order of magnitude to the supply-side figures of the EIIA, but are rather lower. This indicates that the revenues earned by EU-based organisations through sales made to non-EU countries both directly and via their overseas subsidiaries and branches, exceed the value of electronic information imports. In considering this finding, it has to be remembered, however, that the basis of the EIIA supply-side figures for the EU is such that the figures include revenues generated both by the North American subsidiaries of indigenous EU companies (e.g. Reuters) and by subsidiaries of US companies incorporated in the EU (e.g. various EU-based companies ultimately owned by Dun & Bradstreet).

Amongst the variety of sources, one which offers a figure specifically for the EU is the US Department of Commerce annual entitled US industrial outlook. In the 1994 edition, it states 'EC [sic] member countries spent a total of about $3.8 billion in 1992 on electronic information.' Regrettably, no source is cited and it is not known what exchange rates were used in calculating this figure. Translating, as it does at the Eurostat average exchange rate for 1992 used throughout this paper, to approximately ECU 2.9 billion the figure is appreciably lower than others in circulation.

The import/export picture is rather different if figures for CD-ROM, representing a relatively newer segment of the electronic information industry, are examined. In fact, it is difficult to obtain reliable figures for the CD-ROM market in Europe, with estimates varying quite significantly. Figures from Frost & Sullivan have put the market at around ECU 196 million -- approximately US$255 million -- in 1992 and ECU 347 million -- approximately US$450 million -- in 1993. Comparison with the EIIA's industry figure for 1992 of ECU 153 million -- approximately US$198 million -- (see Section 4.2, above) indicates that the EU is a significant net importer in this relatively newer segment of the industry.



5. UK AS A CASE HISTORY

Within the field of electronic information services in the EU as a whole, whether viewed from a supply perspective or a demand perspective, the UK represents the largest single component, as is clear from the overview of national on-line results from the EIIA supply-side survey presented in Table 4, on page 10. It is, therefore, worth looking separately at the results of the Co-ordinated Survey for the UK, although it should once again be reiterated that, as a supply-side study, CICI's survey measures the industry value, including exports and earnings from subsidiaries outside the UK. Thus, the figures for the UK include the sales of the subsidiaries and branches of UK organisations located in the EU, as well as in other parts of the world.

Table 4: Overview of national on-line results contributing to the EIIA co-ordinated survey relating to 1992

 National             Currency          ECUm        B/LUX      348.9m           8.4    D          

837.0m         414.3    

DK          49.6m           6.3    
E          885.5m           6.7    
F        3,405.1m         497.2    
I          648.0bn        406.1    
IRL          1.6m           2.2    
NL          77.5m          34.1    
P           84.4m           0.5    

UK       1,914.2m       2,595.1                            

-------  Less adjustments* (327.2)                            

-------    

Total    3,643.7    

*Adjustments, similar to those made in respect of inter-company trading in the consolidated accounts of multinational corporations, are necessary to eliminate double counting (i.e. to correct for the inclusion of the figures of a subsidiary company both in the country of incorporation and in the country of incorporation of its parent).

This highlights a significant difficulty with supply-side figures, namely that meaningful comparisons with other countries, rather than other major regions, can be difficult because of the overlap of networks of subsidiaries and branches of international companies and other organisations. In its methodology for aggregating figures at EU level, the EIIA has successfully applied procedures to prevent double counting arising from this phenomenon (the so-called 'head-quarters principle', fully documented in the EIIA's 'Methodological Guidelines', whereby the revenues of all subsidiaries/branches are attributed uniquely to the territory of the ultimate EU-based parent company). It remains, however, difficult to make comparisons between individual Member States. This point is stressed here, because, on the face of it, when all overseas branches and subsidiaries are taken into account, the UK can appear to represent over 80 per cent of the total value of the EU industry (see Table 4), whilst in fact, quite significant revenues may legitimately be attributed simultaneously to other Member States and to the UK, when viewed from a supply rather than demand perspective.

The principal findings of the CICI Survey are highlighted below.



5.1 On-line services

The value of on-line information services supplied by UK-based hosts and their overseas branches and subsidiaries amounted to £1.9 billion in 1992, at current prices, up by 9.3 per cent compared with £1.75 billion in 1991. Growth in the year was appreciably stronger than the 6.4 per cent recorded for 1991, when the full effect of recession was being felt by the industry, but not as high as the figure for 1990 over 1989, when growth was 12.6 per cent.



5.2 CD-ROM

As in the EU as a whole, by 1992 CD-ROM had not become a major source of income for UK-based publishers and their overseas branches and subsidiaries. According to the CICI survey, revenues generated from publicly available CD-ROM titles amounted to approximately £43.4 million, at current prices, in 1992, up by almost 150 per cent from the previous year. To place this figure in perspective, it should be noted that, according to TFPL Ltd, only 504 CD-ROM titles had been published by UK publishers by the end of 1992. Growth in 1991 compared with 1990 had been around 180 per cent. It should again be noted that these CD-ROM figures relate solely to titles sold and exclude hardware, search/manipulation software and CD-ROMs which are produced for in-house purposes and which are not publicly available.



5.3 Audiotex

Revenues from professional audiotex services in 1992, the first year for which CICI had collected such figures, amounted to just over £59 million, at current prices — approximately one quarter of the ICSTIS figure for all premium-rate services in that year (which include 'chat' lines and other services aimed at the general public). ICSTIS is the Independent Committee for the Supervision of Standards of Telephone Information Services, the UK audiotex watchdog.



5.4 Other statistical indicators

Other key figures which emerged from the survey are set out in the following paragraphs.


5.4.1 Employment

In 1992, over 18,000 people were employed by UK-based electronic information suppliers and their overseas branches and subsidiaries, approximately 5.2 per cent down on the corresponding figure for 1991, evidently an after-effect of recession.


5.4.2 Domestic consumption

As in 1991, approximately one quarter of the revenues attributable to on-line information services supplied by UK-based organisations and their overseas branches and subsidiaries was generated by UK domestic usage. By contrast, roughly two-thirds of CD-ROM revenues came from the domestic marketplace.


5.4.3 Export

Again, as in 1991, roughly three-quarters of on-line revenues, amounting to around £1,400 million, were generated overseas. Of this total, rather more than half came from other EU countries. In the case of CD-ROM, nearly one quarter of all revenues came from other EU states.


5.4.4 Subject interest

Financial and business products and services accounted for the vast majority of revenues generated (72 and 27 per cent respectively), reflecting the fact that the major European players in these sectors have their head-quarters in the UK, whilst scientific and other electronic information suppliers mainly have their head-quarters elsewhere. The relative proportions of finance and business were almost identical to 1991.


5.4.5 Type of service

The split between real-time and other on-line services was roughly 58:42, representing no significant change compared with 1991.



5.5 Commentary

CICI's figures suggest that the UK-based electronic information industry emerged from recession during 1992. Although the industry growth rate did not rise back to the level enjoyed in 1990, the electronic information supply industry nevertheless continued to sail well ahead of the economy as a whole. Within the industry, CD-ROM continued to exhibit an exceptionally high growth rate, consistent with a sector still in its early stages.

Now that CICI has completed four surveys, covering a total of five years, following essentially the same methodology, it is possible to establish a clear trend for the on-line industry over the period covered by the surveys, as follows:

1988     £1,187 million    
1989     £1,460 million      +23.0%    
1990     £1,645 million      +12.6%    
1991     £1,751 million       +6.4%    
1992     £1,914 million       +9.3%    

These figures tend to support the view that, in addition to having suffered from recession -- in 1991, especially -- the mainstream industry supplying on-line services for professional users, particularly in the financial sector, is approaching maturity. In other sectors, not measured by CICI, however, notably products and services for the general public, often based on CD-ROM and similar media, the industry is far from mature and, indeed, is very dynamic, growing rapidly on an as yet relatively small base.



5.6 Exploitation of results

In addition to the uses already mentioned in Section 4.5, above, the UK industry figures compiled by CICI within the context of the series of EIIA Co-ordinated Surveys were also used during the course of 1994 in two documents issued by industry players in connection with important launches. Thus CICI figures were cited both in the MAID plc flotation prospectus of March 1994 and in the background documentation circulated with Reuters' press releases announcing its Business Briefing and Business Alert Services, also in March 1994.



5.7 UK market figures

As for Europe as a whole, for the UK, too, there is a variety of sources for market as opposed to industry figures. In general terms, there is a degree of agreement that for on-line services the UK market (i.e. domestic consumption including imports) was of the order of ECU 1.5 billion -- approximately US$2 billion -- in 1992. This compares with CICI's industry figure of £1.9 billion -- approximately ECU 2.6 billion -- (see Section 5.1, above), indicating that the UK had a very healthy surplus of electronic information exports over imports.

On the other hand, it is extremely difficult to obtain reliable figures for the UK CD-ROM market. Figures from Frost & Sullivan have put the market at around ECU 46 million -- approximately US$59 million -- in 1992 and ECU 83 million -- approximately US$108 million -- in 1993. Comparison with CICI's industry figure for 1992 of £43 million -- approximately ECU 58.8 million -- indicates that, unlike the EU as a whole (see Section 4.6, above) the UK is a net exporter in this relatively newer segment of the industry.



6. CHARACTERISTICS OF THE INDUSTRY

Two supplementary analyses relating to the UK which emerged from the 1992 Co-ordinated Survey are of particular interest in relation to the way in which the industry is structured.



6.1 The place of SMEs

On the basis of questionnaire responses and other data available for analysis, the UK data collection agency, CICI (Confederation of Information Communication Industries) was able to classify UK-based electronic information services suppliers according to two criteria relating to size, namely sales turnover and number of employees.


6.1.1 Sales

So far as sales turnover is concerned, out of more than 100 organisations examined, no more than 25 had sales in excess of £5 million in 1992, whilst over 45 per cent had sales of less than £500,000 (approximately ECU 680,000). In so far as it is easier to identify and assess the revenues of larger players, it is likely that organisations not taken into account in this analysis could certainly have been in the lower, if not the lowest, of the revenue bands.

Thus, the bulk of UK-based electronic information suppliers fall into the SME category, with the "e;balance"e; between large players and SMEs being probably worse than 80:20. Indeed, well over half of all players fall into the "e;small"e; category.


6.1.2 Employees

As would be expected, the above picture is borne out by analysis of the number of staff employed by UK-based players. In fact, no more than 15 organisations had more than 200 employees in 1992, whilst close to 75 per cent had fewer than 50. Again, players not taken into account in this analysis would certainly have been in the lower bands.

So, again, here is further confirmation that the UK-based electronic information industry is populated overwhelmingly by SMEs, which represent at least 80 per cent of all players, with almost 75 per cent falling into the category of "e;small"e; organisation.



6.2 Sales per employee

The analysis of the preceding two sub-sections indicates that the preponderance of SMEs is greater when numbers of employees is examined than when sales turnover are considered. This disparity invites an analysis of sales per employee.

When the aggregate figures for all UK respondents to the 1992 Co-ordinated Survey were analysed by CICI, they yielded a figure for sales revenue per employee of £98,200 (approximately ECU 126,000). This is not at all surprising, since it is to be expected that the electronic information industry will be more technology-oriented and therefore less employee-intensive than many other industry sectors.

Two other points also emerged from the UK analysis. Firstly, when large players were examined more closely, they exhibited sales per employee which were well in excess of £100,000, so scale was evidently offering a degree of advantage. Secondly, when audiotex companies alone were examined, their figures were substantially higher again, suggesting that their activities are even less employee-intensive than the generality of the electronic information supply industry.

As always with mean figures, some care has to be exercised, since there is substantial variation in reality. For example, some publicly-funded organisations were found to have very depressed figures for sales per employee.



6.3 Wider applicability of UK figures

As was stated at the beginning of Section 5, the UK represents the largest single component of the EU electronic information industry/market. To some extent, therefore, the findings discussed in Sections 6.1 and 6.2 will also apply to the EU in general.

Unfortunately, data are not available to support or qualify that hypothesis, but in so far as there are differences across the EU as a whole, in general terms, they are most likely to be:

(i) Whilst the more developed countries are likely to have a profile very similar to the UK, with perhaps up to 10 or a dozen internationally recognised players and a mass of small operators, the less favoured regions (LFRs) are unlikely to fit the same mould. Indeed, LFRs are unlikely to have any internationally recognised player.

(ii) The structure of the industry in some countries -- mostly, but not solely the LFRs -- may be distorted by the degree to which the government is currently or traditionally interventionist in this sector.

The one figure available for the EU as a whole is the sales revenues per employee, which was a little over ECU 114,000 (approximately £89,000). Evidently, the rest of the EU has brought down the figure for the UK only, by around 9 per cent.



7. NORTH AMERICA

Of the various studies available concerning the electronic information marketplace in North America, the annual Simba Online services review focuses specifically on on-line. The Simba report has the advantage not only of appearing with predictable regularity, but also of being very clear in terms of its definitions and its methodology and is supported by good profiles of key market players.

According to Simba's 1994 Review, the North American industry supplying on-line information services for 'business / professional' users generated revenues as follows over the last three years:

            US$m       ECUm*      +/-%    

1991     5,215.5     4,017.8        --    
1992     5,637.9     4,343.2      +8.1    
1993     6,241.4     4,808.1     +10.7    

* In order to facilitate comparisons, the figures for all three years have been converted at an average exchange rate for 1992, obtained from Eurostat, of ECU 1.00=US$1.29810.

It has to be understood, however, that in valuing the North American supply side, Simba applies a very rigorous definition of indigenous providers and, in particular, it excludes Reuters America Inc., on the grounds that it is a subsidiary of a European corporation. Whilst this is factually true, Simba's stance in this respect complicates comparisons with, for example, the EIIA figures for the EU, since the EIIA considers any organisation incorporated in the EU as European for the purpose of its Survey, even though ultimate ownership may lie outside the EU (the justification being that 'local' subsidiaries provide employment and contribute to the economy of the EU in much the same way as wholly-owned EU corporations).

Once the basis of valuation is understood, however, Simba is undoubtedly one of the best and most user-friendly sources of statistical data on the North American industry. Nevertheless, working, as it does, at arms' length, Simba significantly undervalues the size of the EU-based industry. According to Simba, the European industry represents only 32 per cent of a global industry/market value, which includes consumer on-line services, of US$10.1 billion (approximately ECU 7.8 billion) in 1992 and US$11.3 billion (approximately ECU 8.7 billion) in 1993. Thus, the whole of Europe's electronic information industry is valued by Simba at only US$3.2 billion (approximately ECU 2.5 billion) in 1992 and US$3.6 (approximately ECU 2.8 billion) in 1993.

One aspect of the industry which Simba particularly highlights is the spectacular growth of consumer on-line services. According to Simba, this sector achieved revenues of US$558.4 million (approximately ECU 430 million) in North America in 1993, up by 27.8 per cent compared with the previous year. This figure almost certainly heralds what is likely to begin to happen in Europe within the next few years.

Another important source of industry figures is the US industrial outlook, which, of course, refers to the US only, not the whole of North America. According to the 1994 edition, total US revenues for all electronic information services, including those aimed at consumer markets, over the last three years were:

        US$bn     ECUbn*     +/-%    
1991     10.2        7.9       --    
1992     11.7        9.0    +14.7    
1993     13.6       10.5    +16.2    

* In order to facilitate comparisons, the figures for all three years have been converted at an average exchange rate for 1992, obtained from Eurostat, of ECU 1.00=US$1.29810.

According to this source, on-line services constitute nearly two-thirds of all electronic information revenues, the break-down of 1993 figures being as follows:

                          US$bn      % of whole    

On-line services           8.84            65.0    
CD-ROM                     1.63            12.0    
Audiotex                   0.59             4.3    
Other electronic media     2.54            18.7    

It should be noted that figures from the US industrial outlook represent a supply-side perspective, but unlike Simba, the US Department of Commerce does include revenues from the subsidiaries of foreign companies operating in the US.



8. JAPAN

Each year, the Tokyo-based Database Promotion Center, Japan (DPC) issues a publication entitled Databases in Japan, which constitutes the main source of information for foreigners concerning the electronic information industry in Japan. The publication includes both information from the Ministry of International Trade and Industry (MITI) and the findings of the DPC's own research exercises.

According to the 1994 edition of Databases in Japan, 1992 -- a year in which the Japanese economy began to experience decline (see Graphic 2) -- was a poor year for electronic information services, although the effects of recession were unevenly visited upon different types of service/product. Unfortunately, it is not entirely clear whether the figures sourced from MITI and published by DPC relate to supply or to consumption and, in particular, whether they include the revenues generated by the overseas subsidiaries/branches of major corporations such as Quick and Teikoku. Nor is it clear whether electronic information services aimed at the general public are included.

The figures for the years 1991 and 1992 are set out below:

           Yen m       ECUm*      +/-%    

1991     215,981     1,315.2       --
1992     214,064     1,303.5     (0.9)    

* In order to facilitate comparisons, the figures for both years have been converted at an average exchange rate for 1992, obtained from Eurostat, of ECU 1.00=Yen 164.223.

Curiously, when these figures are broken down into on-line and off-line products, it is evident that the decline occurred wholly in the off-line category, details being as follows:

                Yenm
            
1991         
1992            +/-%    
On-line      148,135     164,199    +10.8    
Off-line      67,845      49,865   (26.5)    

Yet the text makes it plain that CD-ROM as a medium continued to enjoy real growth, so it has to be presumed that the negative growth was attributable wholly to other types of products, like magnetic tapes and discs.



9. PRINT PUBLISHING

IMO Working Paper 93/4, issued in September 1993, offered an overview of print publishing markets in the EU. In that Paper, figures from Consulting Trust GmbH were cited, which indicated that total revenues earned by EU publishers from print-based activities (including advertising and corporate publishing) amounted to ECU 75.5 billion in 1991. Whilst stressing -- quite rightly -- the difficulties of breaking out 'professional' publishing, the Paper put forward an estimate for professional print markets (primarily newsletters, trade press and text-books) of around ECU 25 billion in 1991. This may be compared, albeit with great caution, with the EIIA figure of ECU 3.5 billion for all EU 'professional' electronic information media in 1991 (see Table 1, on page 7), suggesting that the value generated by electronic information was no more than 14 per cent of print media in this sector. Given the rate of growth of electronic information revenues, that proportion will be getting progressively greater year by year.

Figures from the US indicate faster progress for electronic media than in Europe. The 1994 edition of the US industrial outlook provides the following figures for the US publishing industry in 1993:

                          US$m       ECUm*    Newspapers              35,892      27,650    

Periodicals             22,772      17,543    Book publishing         18,730      14,429   

Misc. publishing        11,175       8,609        

Total                   88,569      68,230    

* In order to facilitate comparisons, these figures have been converted at the Eurostat average exchange rate for 1992, used throughout this Paper, of ECU 1.00=US$1.29810.

On this basis, revenues for electronic information services, at US$13.6 billion (ECU 10.5 billion), amounted to just over 15 per cent of the revenues generated by all print publishing in the US in 1993. Clearly, if it were possible to separate out 'professional' print publishing and if such activities represented approximately one-third of all industry revenues, as estimated above for the EU, then the value of the 'professional' electronic sector might be around 45 per cent of revenues generated by the corresponding print sector.



10. CONCLUSION

The sources cited in this Paper do not, individually, offer a wholly satisfactory overview of the global electronic information industry, less still of Europe's place within that global industry. It is, however, possible to assemble a very coarse overview from essentially national sources, taking the assumption that each such source achieves a broadly accurate picture of its own territory. The biggest problem in attempting such an exercise is the 'entanglement' of the revenues of the subsidiaries of North American corporations in Europe and of the subsidiaries of European companies in North America. These revenues are allocated differently by virtually every source.

If, for the purpose of obtaining an overview, the EIIA industry figures are used for Europe, then it is necessary to use Simba figures for North America, since its approach meshes reasonably closely with that of the EIIA (see Section 7, above), although it still has to recognised that there is an overlap of unknown proportions in respect of the subsidiaries of North American companies in Europe, which are counted by both sources. This may be offset to some extent that by the facts that the EIIA figures relate solely to the EU and that figures for territories other than Europe, North America and Japan tend to be ignored by the majority of sources. For Japan, which remains fairly self-contained, there appears to be less of a difficulty. The very coarse, approximate picture which emerges from such an exercise, using 1992 supply-side figures for 'professional' on-line services only, is as follows:

                     ECUbn          % of whole    

EU                   3.6                40.4    
North America        4.3                48.3    
Japan                1.0                11.2                       

-----               -----   

Total                8.9               100.0    

Sufficient data are not to hand to attempt to create a similar global profile with market/consumption figures, although what is certain is that the North American figure would be greater and the European one lower. Indeed, a different treatment of just one major player, namely Reuters, would have a significant effect. In its 1992 published annual report, Reuters declared information products revenues of £162.6 million (ECU 220 million) generated in North America. If this amount is moved from Europe and into North America, then the respective percentages change immediately to 38.2 and 50.6.

Within the overall context of electronic information services/products, on-line still occupies a predominant position -- 86 per cent in the EU, 65 per cent of all revenues according to the US Department of Commerce and over 76 per cent according to MITI in Japan. Figures for CD-ROM are less abundant than for on-line and are more difficult to interpret, although it is undoubtedly clear that CD-based media are steadily gaining ground for 'professional' users and constitute a dynamic, albeit still immature segment of the industry.

Another segment of the industry which is beginning to establish itself is consumer-oriented on-line services. Figures from Simba for North America show dramatic growth and a 1993 base worth well in excess of US$500 million. There are signs of vigorous activity now in Europe, too, although there are no reliable figures and it is obvious that this market is at an even earlier stage than it is in the US. In future years, however, it will make little sense to measure only 'professional' services, although it will be instructive to try to maintain the distinction and to observe how quickly the consumer sector will gain ground relative to the more established area of the industry.

A further observation which is important to the industry is that its performance is consistently better than that of the economy as a whole. Moreover, with the continuing strength of CD-based products and the rapid progress in North America and introduction in Europe of consumer services, there is every reason to expect continued sustained growth over a period of several years, albeit initially from a very small base. Europe is, however, well behind the US in all of the newer segments of the industry.

Finally, it is a matter of regret and some concern that even towards the end of 1994, the most recent figures available for most parts of the world relate to 1992. The only firm figures for 1993 cited in this Paper are taken from Simba. Figures for 1993 put forward by the US industrial outlook and other sources quoted are, in fact, qualified as 'estimates' and, in the case of the US industrial outlook, are apparently not based upon primary data collection, but upon a digest of others' research. In a fast moving industry some figures are better than none as general indicators, but the establishment -- via national statistical offices -- of mechanisms for the regular issue of consistently collected, up-to-date and well-segmented figures would assist planning both by the players within the industry and by governments anxious to foster an area of important economic growth.



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