PROMOTING MULTIMEDIA ENTERPRISE GROWTH
by Frederick Williams*
The University of Texas at Austin
[Copyright 1997 by the author]
The Emergence of Multimedia as a New Business Sector
Multimedia is a term on everybody’s lips these days, if not on the pages of computer and business magazines, and even in our daily newspaper or TV news. Multimedia (usually found without a hyphen) covers a broad range of referents. What it is depends largely upon who is talking or writing about this topic. Among the interests in multimedia is its growth as a sector of the economy, whether in a city, a state, region or entire country. Commercial scenarios for multimedia–large or small business—reflect a focus upon multimedia as a new frontier of business development, although we have yet to give it an agreed-upon place in the hierarchy of Standard Industrial Classification codes ("SIC"). Are multimedia businesses a commercial sector for stimulation of economic development? Just as a little over a decade ago, there was attention given to the economic dynamics of "Silicon Valley," or "Route 128", we may now raise the overall question as to whether multimedia businesses–in particular, startup companies–ought to fit into economic development plans. The present research, an examination of small multimedia businesses, was focused on that question.
The Research Project
The present research was directed toward identifying key characteristics of small firms that claim to be in the multimedia business. What is the nature of such businesses? How do they get started? What are factors affecting growth? Should they be in economic development plans?
In addition to reviewing considerable published material related to the topic of multimedia businesses, phone and e-mail inquiries mere made to some 30 firms that were included on a national list of over 75 multimedia businesses compiled in a 1995 project. Visits were made to selected firms in lower Manhattan. Information was also gathered from firms located in Austin, Texas. Also of substantial value was a report done by Coopers and Lybrand Consulting, "New York New Media Industry Survey" (April 1996).
What is Multimedia?
– To researchers or analysts concerned with media forms, multimedia typicallyrefers to materials that contain mixes of text, graphics, images and movingimages.
– To those concerned with the character of human-and-media interface,multimedia is distinctively interactive, meaning that the user can not onlychoose the program, but control the character and rate of exposure. Interactivity may range from selecting from a variety of menus that controlimages, moving images, text blocks, of even the blanks and directions of filling in a form requesting user information.
– To individuals focusing on the technical nature of the medium,multimedia makes major use of digital coding, meaning that all variations in text, the informational content of images or moving images, or the algorithms that support interactivity, are coded in the binary codes typical of computers. Multimedia materials are captured, coded, formatted, stored, retrieved and displayed by use of computer technology.
– As a product, multimedia may be distributed on computer disk, CD-ROM, cartridge, interactive television broadcast or cable, or, in particular, the Internet.
– On the other hand, multimedia may be experienced as a service, as when interacting with information formatted for communication via the Internet or other channels for digital media transmission, including versions of interactive television that are on the planning boards.
A Business Perspective on Multimedia
As a business or industry, multimedia involves generating value from the production and distribution of media in the aforementioned forms. Design of digital media, production or distribution of formats like CDs is a major dimension of the business. Design or application of authoring programs for multimedia is another dimension of the multimedia software business. Multimedia firms may be consultative groups offering design services. They may also be publishers in every sense of that business–acquisition of raw materials, design, production, and marketing of products like floppy disk-based software, game cartridges, CDs, CD-ROMs, or other storage media.
We can also ponder multimedia businesses as the newest in the history media industries, one that can take up where newspapers, magazines, books, audio or video tape and films may leave off. Indeed, multimedia may be the future scenario of the traditional media so that if we were to extrapolate from experience our vision of the future of newspapers, magazines, or traditional television to the home, all may somehow be within the future of interactive, digital multimedia. As of this writing the Federal Communications Commission has put broadcasters on a rapid schedule for introducing digital-based television. Also, it was just announced that giant Microsoft will purchase Web-TV, a first commercial venture into Internet access via a set-top box and friendly menus and guidance offered by the same company. In an era with all the concern about children and television violence, kids may well be browsing the Inernet while stretched out on the living room rug. This means a major demand for quality Internet sites of value to individuals who are not necessarily using a desktop computer. Although the basic format and uses of books may or may not be in for great change, how we obtain, store, or share the text is surely a vast part of this digital future. In passing it should be noted that the history of media innovations has shown that one medium does not necessarily always replace another. It is more the case that media innovations build upon existing media and in turn on each other.
Large as Compared with Small Multimedia Businesses
Although the present research was focused mainly on small firms in the multimedia business, as in the study of traditional media, these firms can be affected by goings-on in the large firm side of the business. The small firms reflect are many of the examples we have just been talking about–such as you or me getting out the next edition of our papers or book in a CD-ROM form, or one of us creating a commercial web site on the Internet. On the large-business side are the traditionally large media industries, as for example, the motion picture industry. Big multimedia were the topic of the March 1996 issue of FORBES which put the spotlight on George Lucas as a captain of the digital media industry. THE RED HERRING, which is usually more concerned with giving you tantalizing information on small company IPOs, highlights its Feb. 1996 cover with "Digital Hollywood," including "Pixar Lights of Hollywood: Steve Jobs Tells How." We are definitely seeing digital media, if not multimedia as a major American industry.
Mass Multimedia is the product of "digital big media" and we would expect to see that as an industry, and as such, driving developments in digital technology and redefining the media marketplace. We see big multimedia as even touching the lives of the little media. The entry of giants AT&T, MCI and Sprint into the Internet-access provider business brings a sanction to the Internet business not unlike how the entry of IBM into the PC business elevated the microcomputer to the level of a serious product. The feelings at the time were that if Big Blue was now going to build and market personal computers, then this must be an important and large market business. Similarly, if AT&T brings all of its long distance customers an easy access to the Internet, coupled with advice, software, and a solution to problems of credit card security, this surely is a sanction for the Internet as the newest of our public media, or multimedia as we are discussing here.
Geographic Distribution of Multimedia Businesses
Multimedia business growth has been identified with certain sites in the United States. As California has been the long-time center of film and video production , it is not surprising that the talent required for such businesses could easily support multimedia business development. Lower Manhattan houses a concentration of artists, authors, as well as the Interactive Television academic program of New York University. Oregon has visibly opted for software businesses as a major focus for its economic development efforts; multimedia is a natural counterpart. Washington State houses the giant Microsoft Corporation which has already targeted multimedia as a new area for expansion. Our own Austin, Texas houses the "odd couple" of digital engineering and the community of artists, musicians, programmers, and several highly successful software companies.
The City of Austin, fresh from over a decade of aggressive nurturing of microelectronics industries, would like to have its eye on multimedia as a long-term growth industry, and accordingly is now asking proposals for assistance in developing a multimedia business incubator. Moreover, the city administration wants to explore the prospects of having such an incubator on-line–i.e., a "virtual" one connecting any group that wishes to stake a claim in this growing area.
Generalizations from the Research
Following are our main generalizations, most of which reflect upon the opening questions of this report.
o Multimedia businesses are difficult to "pin down," so to speak. They come and go, or change. A list of some 75 national and international firms that included multimedia in their description found in a search done by in a 1995 project showed only about 40 still in business or in business under the same name or description.
o A firm that labels its business as "multimedia" may be engaged in any one of a considerable variety of services or products, including computer software, film production, and the like. Accordingly, if a program is developed to promote multimedia businesses, there is likely to be a substantial amount of time and effort required to decide "who’s in?" vs. "who’s out."
o We found little evidence that "transplanting" or attracting multimedia businesses is a usual undertaking (as with electronics or software firms).
o Many small multimedia business owners we met in our search were not recruited to a city or region; they mostly started their business locally and from "scratch."
o A frequent scenario for small business development in multimedia was an individual who, or small group that, had technical skills in digital media production. They may have come from software enterprises, film or TV production, graphic design, or in some cases from education. Often they had experience or a business-connection with some type of client, for example, educational media companies, and in several examples, advertising companies.
o The challenge most often reported for starting a multimedia business was acquiring capital; they need equipment, supplies, and start-up expenses. a more general challenge was seen in having a sustainable business plan–"How do you make money with this?"
o Start-up capital came mostly from initial partners, small investors, a small venture capital firm, or from up front payment on a production contract. Many times, individuals in small start-ups or persons looking back on their earlier experiences, said that they lacked know-how in raising capital, some admitting to lack of skills needed for developing a business plan.
o Most people we met in multimedia business did not see themselves as particularly " high tech." or part of that business sector. As the technical part of a business (i.e, coding or coding-related activities) can be "farmed out," many in the core business see themselves as authors, designers, artists, or media producers. Some may mix professionally in software circles.
o Although we found no main examples of firms whose development or relocation was encouraged by economic development programs, interviewees did generally agree on three factors that would be important for a move or location selection: (1) availability of facilities at a reasonable cost, (2) a talent pool of designers, coders, and authors,. and (3) market contacts. A further, more subtle factor, was life-style A major urban area may offer city attractions and services, and even market contacts. Although a smaller city may offer an easier and less expensive lifestyle, it may be too far removed from "the action." Moreover, the point was made that having a firm in a small city or away from urban areas, may signal that they "couldn’t make it in the big time."
o Workforce qualities are simply people who "can do the job," are dependable, and do not expect exorbitant wages. Sometimes having a local university or college is an advantage for talent acquisition. But experienced and high-quality talent is hard to come by. "World class multimedia is done only by world class talent," said one CEO. Also it does not seem that academic institutions are paying much attention to educating students for multimedia work or careers.
o Numbers of new jobs generated by a small multimedia firms are not impressive at all if examined from an economic development standpoint. Whereas a small manufacturing or service firm might be dependent upon several dozen employees in order to conduct its business, the small multimedia firm many need only a half dozen on it payroll and many may be part-time. And if production is outsourced, the numbers may be negligible.
o Members in a multimedia firm need to "rub elbows a lot," said one executive who said his talents were in design. There needs to be a place where it’s "OK to look over a shoulder and give suggestions or praise." This suggests a studio environment conducive to plenty of personal interaction. It also raises a caution if a firm wants to divide its work over different locations, or thinks that telecom links will support group supervision or manager-worker interaction.
o Will advanced telecom services, like availability of high speed Internet connections help a firm? Actually, some of the above points about "looking over a shoulder" or rubbing elbows" came up in discussions about having a decentralized firm–for example, where telecom services could link people working from their home or
individual studios. One executive, experienced in publishing, said that telecom links may well move business out of a city when local firms decide to "outsource" their production work. . This, of course, can work both ways. A local firm may do much of its business as a contractor of production services. In any of these scenarios, telecom services are an important requirement.
But Will Multimedia Business Promotion Pay off in Jobs and Contributions to the Local
Despite all the attractive features of a multimedia businesses–e.g., an obviously growing industry, clean, synergy with local schools and certain other businesses, there is the overall question of whether the investment in promoting these businesses is worth it when funds could be allocated in other enterprises. Multimedia start-ups do not create large numbers of jobs. They do not purchase their raw materials from typical local businesses, nor are their sales to local customers. Moreover, advances in telecommunications can make it possible for a multimedia business to serve many of its needs and make its financial impact outside of the local community.
Surely, multimedia business development needs serious consideration in economic development plans, but it comes with an important set of cautions. But on the optimistic side is that innovation often starts in small businesses, and multimedia may be an excellent example. Small business can become large ones.
*Fred Williams is Professor and occupies the Mary Gibbs Jones Centennial Chair in the University of Texas College of Communication; he is also an endowed Fellow in the University’s IC2 Institute, an organization devoted to study of technology transfer and enterprise development. Dr. Williams is author of books on communication and new media, among them THE COMMUNICATIONS REVOLUTION, an early look at the communications world to come, and more recently, THE NEW TELECOMMUNICATIONS, a view of telecommunications as the infrastructure for the Age of Information. This research was conducted as a policy research project co-directed with Professor Robert Wilson of the LBJ School of Public Affairs at the University of Texas at Austin. Williams and Wilson are preparing a more detailed version of this report for publication in an economic development journal.
Prof. Williams’s telephone and Fax number is 512/261-6101; E-mail