A Review of the Creative Media Sector in Herefordshire

and its Environs

Final Report

Produced by:

Marc Bayliss

Office 234

79 Friar Street

Worcester

WR1 2NT

Contents

Executive Summary

Aims and Objectives

Methodology

Key Findings

Business Characteristics

Main Industry

Years trading

Turnover

Main markets e.g. local, national etc

Number of employees

Use of freelancers and associates

Vacancies

HTF vacancy causes

Future growth

How will grow business

Consequences of growth

Expected Changes in employment levels

Future business challenges

Business support

Sources of help used

Satisfaction

Reasons for none use of business support services

Knowledge of support available

Participation in local networks

Networks used

Satisfaction with local networking

Additional information needed

Location and premises

Current premises

Fitness for purpose of premises and equipment

Issues with current premises

Need to move in next few years

Satisfaction with available local premises

Key characteristics in new premises

Need for specialist equipment

Conclusions

Executive Summary

Worcester Research were commissioned in December 2008 by Herefordshire & Worcestershire Chamber of Commerce, on behalf of a range of local partners, to undertake research designed to provide further insight into size, characteristics and needs of digital media businesses operating in Herefordshire and the surrounding area.

The research was conducted using aweb-based survey tool and achieved a response rate of 21.6%.

Key Findings

  • The digital media sector operating in Herefordshire is very diverse in nature with firms operating in a wide range of industries. However, film production, photography, interactive media and graphic design appear to be among the most common individual areas of activity.
  • Almost half of those businesses surveyed had an annual turnover of less than £50,000 last year demonstrating the high number of micro businesses operating locally.
  • Digital media companies in Herefordshire obtain their orders from wide geographic markets, with over four-fifths working nationally and a third working internationally.
  • While only 23% of businesses in the sector employ more than five people directly, there is a well established practice of employing freelancers and associates to augment organisations’ own workforces.
  • Over three quarters of those interviewed believed that their business would expand over the next 2-3 years, with 21% predicting significant growth over that time period.
  • Digital media businesses’ most common business challenge at the present time was dealing with the consequences of the current recession. The threats posed by competition and cashflow were also identified as significant business challenges.
  • Three-quarters of those which had used business support services rated themselvesas satisfied with the services provided.
  • Less than one-third of businesses surveyed currently participate in any formal business networking, and there is clearly a significant latent demand amongst local firms for greater networking opportunities.
  • Overall, around 40% of businesses believed it was likely they would need to relocate to alternative premises over the next 2-3 years.

Aims and Objectives

Worcester Research were commissioned in December 2008 by Herefordshire & Worcestershire Chamber of Commerce, on behalf of a range of local partners,to undertake research designed to provide further insight into size, characteristics and needs of digital media businesses operating in Herefordshire and the surrounding area.

This research was commissioned in response to anidentified knowledge gap amongst those organisations seeking to support the development of a vibrant and resilient local economy in the county.

The specific aims of the research were to gather data and intelligence on the:

  • Size of the local digital media sector;
  • Future growth prospects;
  • Business challenges;
  • Support needs;
  • Premises and equipment requirements; and
  • Networking needs.

Methodology

In order to conduct this research it was necessary to develop a database of contact details for creative media businesses operating in Herefordshire and its environs. Where possible, contact details were provided by partner organisations, including: Rural Media Company; Herefordshire Council; Herefordshire College of Art & Design, and Herefordshire & Worcestershire Chamber of Commerce. Further contact details were identified by Worcester Research following extensive Internet searches.

Digital media companies were initially invited to take part in this research via an email providing a link to an electronic questionnaire hosted on the Chamber of Commerce website. A number of partners bodies involved in the research also provided information about the research to their members through newsletters and other communication channels. Most respondents to the survey completed it electronically, but those experiencing difficulty doing so were contacted by telephone and their responses were inputted manually.

In total 407 companies were informed about the research and invited to contribute to the survey. A total of 88digital media organisations completed the questionnaire, which was a response rate of 21.6%. This response rate was above what would typically be expected from a survey of this sort, and indicates a high level of engagement amongst survey respondents.

Key Findings

Business Characteristics

Main Industry

Chart 1 below provides a breakdown of the individual industries that local digital media companies operate in within Herefordshire. The survey found that approximately one in five respondents operate in film production with a further 16% in photography and 13% in both interactive media and graphic design. Less than five percent of those surveyed came from the animation, radio or games development industries.

Chart 1: Primary industry of respondents

Years trading

Respondents were asked to identify how many years their businesses had been trading, and as can be seen in Chart 2 responses varied widely. Overall, approximately a quarter of digital media businesses had begun trading within the last three years, with 30% having been trading for between four and ten years. The survey also found a surprisingly high level of long-standing businesses operating in the sector, with 47% of businesses having been trading for more than ten years.

When analysed by number of employees, small businesses with five or less employees had been trading for a median average of 7 years where as larger businesses with more than five employees had been trading a median average of 15 years.

Chart 2: Number of years trading

Turnover

In addition to providing information on length of trading, respondent firms were asked to identify their level of turnover in the last financial year. Chart 3 below shows the wide disparity in income levels between firms which responded to the survey. Just under half (47.7%) of digital media businesses reported turning over less than £50,000 in the last year, and 25% of all respondents reported annual turnover of less than £20,000. These findings indicate the micro business nature of many of the firms operating in the sector at this time.

At the other end of the spectrum, just under 6% of respondents stated that their annual turnover last year had been more than £1million.

Chart 3: Annual turnover in last financial year

Main markets e.g. local, national etc

Respondents to the survey were asked to identify the geographic markets in which they currently operate. As shown in Chart 4, 82% of those responding to the survey undertake work for other local organisations, with 70% working regionally and 82% working for clients across the UK. The survey also found that approximately one third (35%) of businesses work internationally. Overall the survey found that similar proportions of smaller and larger digital media businesses operate internationally.

Chart 4: Percentage operating in different markets (multiple responses)

Number of employees

Data on the number of people employed by digital media sector businesses is provided in Chart 5. As can be seen, 28% of all businesses in the sector reported employing no one other than the business owner. This finding supports the earlier evidence of a significant number of local micro businesses in the area which turnover relatively small amounts and would, at current income levels, be unlikely to support further employment.

The survey did find 72% businesses in the sector do employ people, with 25% employing one person and a further 24% employing between two and five people. The remaining 23% of those surveyed reported employing more than five people, with just 3% of respondents employing over 100 staff. The mean average number of employees across all respondents was 7.1 with a median average of just 1.

Chart 5: Total number of employees

Use of freelancers and associates

In addition to answering about whether they employed staff directly, respondents were asked about their use of freelancers and associates to augment their staff. As can be seen in Chart 6, 63% of all digital media businesses in Herefordshire reported frequently using freelancers and associates. Amongst small businesses, i.e. those with five or fewer staff, 57% reported using freelancers and associates, whereas the figure was 79% amongst larger digital media employers.

Chart 6: Use of freelancers or associates

Vacancies

Table 1 below shows that just 9% of all respondents reported having vacancies for new employees at the time of completing the survey. This figure did vary depending on size of organisation with only 5% of small businesses reporting vacancies as compared with 21% of digital media businesses employing more than five employees.

While the overall number of companies with vacancies was low, the survey found that nearly 90% of companies with vacancies were finding some or all of those vacancies hard to fill. Once again this issue appeared to be most acute amongst larger firms.

Table 1: Vacancies and HTF Vacancies

Percentage
Company has current vacancies / 9%
Of those with vacancies percentage proving hard to fill / 89%

HTF vacancy causes

As shown in Chart 7 digital media employers stated that hard to fill vacancies were mainly a result of applicants lacking skills necessary to undertake the role (67%); a general low number of applicants (56%) and a lack of appropriate work experience (44%). For around a fifth of employers poor transport was also a perceived a cause of hard to fill vacancies. None of those surveyed felt that the terms and conditions on offer were causing them difficulty in recruiting.

Chart 7: Causes of Hard to Fill (HTF) Vacancies

Future growth

The data presented in Chart 8 below shows how respondents expected their businesses to change over the next 2-3 years. Overall 76% of businesses predicted that they would grow either a little or a lot, with one in five businesses predicting significant growth. Just 7% stated they foresaw a contraction in their business over the same period, with the remaining 16% believing that their level of business would remain broadly stable.

Both small and large digital media businesses were equally confident about their prospects for growth over the next 2-3 years.

Chart 8: Forecast change over next 2-3 years

How will grow business

Companies predicting that they would either grow a little or a lot over the next 2-3 years were asked to identify how they thought this growth would be achieved. Table 2 shows that across all respondents the most commonly identified method of growth was increased penetration of their existing market. Almost as many employers did, however, state that the development of new products would be important to achieving the predicted level of growth. For around two-fifths of respondents the diversification into new markets was identified as a key mechanism for successfully growing their businesses.

Amongst businesses of all size the most popular method of business growth was increased penetration of existing markets. However, 70% of larger digital media businesses saw the diversification into new markets as a route to business growth as compared with just 34% of smaller businesses which employ five or less employees. This finding might reflect the reduced skills and capacity within smaller businesses to adapt to change in comparison to larger rivals.

Table 2: intended methods of growing business (multiple responses)

Percentage
Enter new markets / 41
Develop new products / 59
Increase Market penetration / 61
Other / 8

Consequences of growth

In order to be able to effectively plan support for expanding businesses, those businesses which predicted growth over the next 2-3 years were asked to identify the likely consequences of that growth. Chart 9 shows that the almost 70% of growing businesses foresee the need to invest more in capital. For 53% of growing businesses there was predicted a need to raise additional funds and increase staffing levels. 27% of those questioned stated that a move to new business premises was also a likely consequence. Among those businesses which foresaw other consequences of growth the key issues were the need to increase their spend on marketing and promotional activities and to up-skill their staff in new products and techniques.

Just 35% of smaller digital media companies predicted a need to recruit additional people as compared to 62% amongst larger firms. There was also a significant difference between smaller and larger firms when it came to the need for new premises, with 53% of larger firms foreseeing a need to obtain bigger premises as compared with just 13% of smaller firms.

Chart 9: Consequences of growing business over next 2-3 years (multiple responses)

Expected Changes in employment levels

All respondents to the survey were asked to forecast how the size of their workforce would change over the next 2-3 years. Chart 10 shows that a majority (52%) believed their workforce would remain broadly the same while 42% believed it would increase and 6% predicted a contraction. Smaller and larger firms have broadly similar predictions in terms of changes in future employment levels.

Chart 10: Predicted change in workforce over next 2-3 years

Future business challenges

Chart 11 presents data on the main businesses challenges predicted by digital media businesses over the next 2-3 years. Perhaps unsurprisingly given the current recession, the general economic conditions were identified as a challenge by almost three quarters of those questioned. Other significant challenges identified were: competition from other organisations; the organisation’s cashflow position; keeping pace with new technologies and developing new products and markets.

Amongst larger firms 54% identified recruitment of suitable employees as a significant challenge as compared with only 8% amongst smaller firms. This finding reinforces the earlier point that smaller firms are much less likely to recruit new staff and to view recruitment as a concern.

Amongst those respondents that identified another, unspecified challenge the key issue was a concern over unfair competition between private sector firms and public sector organisations.

Chart 11: Main challenges over next 2-3 years (multiple responses)

Business support

The following section considers sources of business support used, satisfaction with services provided and the use and satisfaction with current networking opportunities for digital media businesses in Herefordshire.

Sources of help used

Overall the survey found that 81% of digital media businesses had obtained some type of external business help or support over the previous 12 months. Chart 12 shows that the most common sources of business support and advice for digital media firms were: accountants; Business Link; banks; family and friends. Around a quarter of firms had also used services provided by the local chamber of commerce.

Amongst the list of “other” organisations providing support were: Screen West Midlands; The Arts Council; and a range of local universities.

Larger and smaller digital media firms general sought advice from similar sources although, unsurprisingly, family and friends were used more frequently by smaller businesses.

Chart 12: Sources of business support used in previous 12 months (multiple responses)

Satisfaction

Amongst the 81% of digital media firms that had used sources of business advice and support over the previous 12 months Chart 13 shows that 74% were either satisfied or very satisfied with the help they received. At the other end of the spectrum just 6% of those which had received support rated themselves as either dissatisfied or very dissatisfied.

When analysed by size of business, satisfaction levels vary with 100% of larger businesses stating that they were either satisfied or very satisfied with the support they received as compared with only 69% amongst smaller businesses employing five or less employees.

Chart 13: Satisfaction with business support received in last 12 months

Reasons for none use of business support services

Chart 14 below demonstrates that the top reason for not using the business support services available to digital media businesses was that the firm did not consider they had a need for advice. However, three quarters of none-users stated that they did not know what support was available to them. For approximately a quarter of non-users the cost of the support was prohibitive and for 17% of respondents the help required was too specialist and could not be sourced locally.

Chart 14: Reasons for none use of business support services (multiples responses)