In today’s age of transformation, the creative industries are being turned upside down. We’ve marvelled at the pace of change, and at how ambitious management teams have been able to innovate to benefit from this. Here at YFM, we’ve had the opportunity to back some of these teams over the last few years – Eikon, Ncam and Outpost VFX being some recent examples. For me, it has been a privilege to work alongside and support some incredibly innovative and creative individuals who help bring the magic to our screens.
Recent studies suggest that if they don’t reinvent their business, over a third of executives say their company will no longer exist in five years. This shake up is being driven by a combination of factors, including:
Content spend – this continues to climb at pace, with initial figures showing global content spend hit $250bn in 2021, driven largely by the relentless demand for original content by the streaming platforms such as Netflix, Amazon and Disney+ as they continue to fight for new subscribers.
Changes in how we consume content – on-demand versus linear isn’t a new trend, but the number of streaming platforms is increasing daily, and consumers can get the content they crave when they want it, and where they want it.
The data this generates – as most content is consumed by viewers with a logged-in identity, as opposed to the historic model of mass media with anonymous viewers, content providers can understand their customer more than ever before. Capturing and understanding these insights to drive strategy is key.
Cloud technologies and increased connectivity – the creative space has been slow to adopt cloud, mostly due to computing power and security requirements. Progress on these has made cloud an increasingly viable option, making businesses more agile, increasing the use of innovative software, and making for more efficient workflows across global studios and decentralised workforces.
As the industry continues to navigate this period of transformation, there is a huge opportunity for both creative businesses and technology providers serving this market, with more agile smaller businesses set to benefit from this trend. Given this, it’s no surprise that financial investors have become increasingly interested in the sector, a sector in which private equity has often shied away from.
Following successes in our portfolio, we have identified some common traits of successful businesses in and around the creative industries:
Creative industries rely heavily on talent, and the ability to recruit, develop, and retain the best talent is critical to staying ahead. The winners in this transformation will be actively driving positive change here, by putting the continued development and fair treatment of staff at its core.
Successful employers must recognise that employee attitudes about the workplace are changing quickly – accelerated by the pandemic. It’s no longer about “checking into a job”; decentralised workforces and a willing army of freelancers means unhappy staff are much more likely to resign today than ever before. To succeed, you need to invest in your culture and encourage continuous learning – this is key if you want to retain the best talent and keep up with the pace of change in the industry.
Outpost VFX is a great example of a business doing just that, driving several initiatives including their recent announcement of accelerated overtime pay for all staff; something which was unique and a huge step forward in the industry, and has since been replicated by some of the largest global firms.
As with every people-intensive business, managers must know where the business makes money, and where it doesn’t. Being on top of operations, including full control of the budgeting process, talent and studio allocations, production timetables, and ultimately quality of output, is critical.
The creative industry historically relied on the gut feel, but digital transformation makes it easier to understand operations in much more detail, using data to inform key decision making. More businesses are adopting cloud driven workflows and can work much more collaboratively across their global teams. The best management teams are looking to make this shift and have ambitions to invest in and improve on operational execution and delivery.
With Outpost, a key part of the investment strategy was to fund the transition to cloud, enabling the studios and teams in Bournemouth, Montreal, LA, and Mumbai to work together more seamlessly, and to better leverage the propriety workflow and production systems that the team built over recent years.
With the rapid pace of change in the industry, it is critical to implement processes which nurture innovation. One example of recent technological change is with the rise of virtual production, put on the centre stage by Disney’s Mandalorian and now on the lips of everyone in the industry. A business’s ability to react to developments like this, and invest accordingly, will be the key to sustained success. Ncam is a great example of this, with its real-time camera tracking technology now being used in virtual production sets, allowing for CGI elements to be seen in real time.
We want to see leadership teams with a clear strategy, but also with the agility to continually adapt as required, and with a willingness and structure in place to listen to innovation ideas from within the organisation.
Here at YFM, we are constantly on the lookout for opportunities to invest in creative businesses, and in the software and service providers that are taking advantage of this transformation. It has been an exciting few years for us in the space and we’re keen to continue this.