C. Future Developments 1997 2003



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C.

Future Developments

1997 - 2003

I. Introduction

Restricted Variety of the Results in an Already Advanced Homogenized European Market

External Factors Mostly Benefiting Future Development of EIS

An informed outlook into the probable near future. How will Electronic Information Services develop in coming years? Taking the probably future developments as fully as possible into account what can be done to eliminate market barriers, to support a strong world-wide competitive European information industry and to exploit fully the potentials of EIS for the information society?

These are the decisive questions of this study. Even if we collect data about the past we know that retrospective figures and the description of the past are not an end in itself. Rather they should be a relatively solid platform from which we can reach out into the future. Then, our best guess about the future probably is: The trends we have computed and analysed from the past to the present will continue.

This may be sufficient for markets which are saturated and develop slowly. But this is a heroic assumption in the area of Electronic Information Services with its rapid emergence of new technologies, new products and services, and new media as well as new delivery platforms and new submarkets. From year to year there are also disappointments in expectations and discontinuities in trends as well as purely new trends, and especially these new trends and discontinuities we must particularly interested in.

If retrospective data say not very much about that, why not asking the leading experts in Europe directly to have a look into the crystal glass and share their - hopefully - superior knowledge about the future with us respective contrast them directly with hypotheses concerning the future?

This was exactly what the institutes of the Member States’ Study II did European-wide additionally to the collection of retrospective data on the supply side, the demand side and the business environment.

However, the capacities even of the best European experts are limited taking into account the rapid development, discontinuities and new trends in the EIS markets. From a realistic standpoint, therefore, long-term prognoses on EIS-markets are presently principally out of question. The support and aggregation team, therefore, recommended that the European experts should restrict themselves to an informed outlook into the near future, that means: from the present until the year 2003.



An additional outlook into the near future: External factors mostly benefiting future developments of EIS. But economic sectors do not develop autonomously. Especially EIS development is heavily influenced by economic, political and even cultural factors (e.g., acceptance towards the new technologies). Fortunately for EIS providers and professionals, particularly the factors of the "business environment" mostly influence the development of Electronic Information Services towards acceleration.

Should we therefore discuss and analyse the situation in these "neighbouring markets" and assess - perhaps even quantitatively - their impact on EIS growth? This was indeed done in the national reports. But here another decision was taken: Though the importance of, e.g., new technologies and deregulation of the telecommunications industry for EIS development can hardly be underestimated priorities for this report had to be set und telecommunication as well as the other "neighbouring markets" are a relatively well-known territory which have been explored also in other reports.

In the following, therefore, we concentrate on the EIS experts panel concerning directly future developments inside the EIS sector. However, in chapter VII, a broad consensus about the benefitting impact of the "business environment" on EIS development will be shortly summarised.

Data collection – Description and analyses of the results on European level.



How can the surprisingly homogenization of the European EIS-markets be explained?

For the interviews with the experts, a questionnaire was developed and recommended by the co-ordination team. However, the national institutes could choose their own questions in order to cover sufficiently the peculiarities of their own national market.

The co-ordination team recommended further that information suppliers and information users as well as information scientists and information policy makers should be interviewed. As far as this can be seen in the national reports this advice was followed by the national institutes principally at least for information suppliers and information users.

As the following list shows alone in 7 countries 100 European experts were interviewed:

Table 1

Number of Experts Interviewed

in 7 European Countries



Spain

28

Germany

25

Luxembourg

6

Belgium came to results about future trends in two discussion groups with 10 participants, divided by language groups (Flamish, French). The UK held two sessions with experts, divided by suppliers and users, and held additional interviews face-to-face and by telephone. Austria participated also in the expert panel about future developments.

As can be seen in the national reports, a majority of the national institutes followed more or less the structure of the proposed questionnaire. In the description and analyses of the results given below the structure of the proposed questionnaire will also be followed.

A summarising of the results in the different European countries was made easier by one central result: The variety of the results was not so extreme as might have been expected after our discussions with the national institutes in preparation for the expert interviews. Though high barriers between the national European markets still exist – most remarkably probably in the institutional area, in the area of information policy and in the differentiation of the European markets in leaders and laggards by belonging to different development phases - the homogenization of the European EIS market seems to be already advanced and is rapidly progressing.

As the biggest ”homogeniser” the Internet may be seen. But there are other important factors:



  • the globalisation and Europeanisation of the markets with the same information needs for world-wide competing importers and exporters;

  • the merger & acquisition fever inside and outside the information markets making world-wide strategies of true global players more and more important;

  • the technological progress with its possibilities for new products, services and applications which are world-wide the same.

See also below the results of the merger & acquisition fever as one of the most important homogenising trends even in an (absolutely, not relatively) small market (Denmark).

Criteria for directly quoting the results of the national expert panels on European levels were:



  • quantity of results (e.g, numer of expert interviews);

  • focussing on the core question of MSSTUDY II, that is content, even if some national institutes discussed broadly the prospects of, e.g., online advertising and E-commerce in general;

  • relevance from an European point of view;

  • pragmatism, that means also: coming to recommendations for the information policy makers and the players on the market;



Internationalisation and concentration as factors of homogenizing the EIS-markets even in a small country:

Danish companies swallowed up by foreigners.

As a Danish national report stated: Some trends are immediately to be seen from MSSTUDY I and II: The list of companies and organisations, which are suppliers of electronic services and/or products, shows confirmation of a continued trend towards concentration, similar to what has for many years been seen in the publishing area. Fewer and larger companies, compared to the survey MSSTUDY I, are now the actors on the information producing scene.



Another trend is seen: More and more foreign companies are swallowing up the Danish information suppliers. It is not, that the information produced and sold is no longer in Danish or concerned with the Danish market. On this point there is no significant change, it is just the ownership of the firms, that has changed visibly. Foreign companies do not necessarily sell imported information – some of them do – but in most cases, when a Danish company in the information producing area is bought by a foreign company, it is still the Danish information, produced as before the takeover, which is offered.

Particularly concerning the smaller companies it is seen, that many of them either have merged to form larger companies, or are swallowed up into some other company, Danish or foreign. Some others of the small companies, which were reporting as suppliers in MSSTUDY I have now succumbed to the competition and are not found any more. The group of very small enterprises may eventually disappear from the market.

II. Total Market Development 1999 - 2003

II.1 Professional EIS Versus Consumer Services

Consumer services will grow relatively but professional Electronic Information Services will stay strong. In the proposed questionnaire the experts were asked how the market share of professional EIS would develop in coming years in comparison with the consumer services. As a help for the experts the current market share of professional and consumer EIS were given.

For four countries following this approach fully ”average” quantitative estimates of future market shares could be computed.



Table 2

Market Shares of Professional and Consumer EIS in 4 European Countries

1997 - 2003

In %






1997

2003




Professional
EIS


Consumer
EIS


Professional
EIS


Consumer
EIS


Austria

56

44

47

53

Finland

74

26

55

45

Spain


60

40

50.6

49.4

According to these results, consumer services will grow relatively in coming years but professional Electronic Information Services will stay strong. In 3 of 4 countries for which the "average" estimation of the experts could be quantified the professional EIS market will be bigger than the consumer EIS market in 2003 if only by a margin. Only in Austria the professional EIS market will be overtaken by the consumer market until 2003 – with a decreasing market share for the professional EIS from 56% to 47%.

Though not in the same way quantifiable the results for the other European markets did not contradict the hypothesis of professional EIS losing share but still staying strong until 2003. Further quantification in the next chapters can also be – more or less – generalized for other European countries but this will not be stated explicitly in every case.

To put the central result in other words: Nearly all European experts seemed to be united in their assessment that the development of the professional EIS as well as the development of consumer EIS will be characterized by high growth rates unparalleled in other sectors of the economy with the exception of (other) telecommunication services. But the growth rate of consumer services will be even higher than the growth rate of professional EIS.

The case of the Consumer Services: Though they offer huge amounts of free information they rise faster. Nevertheless, the assessment described above may be partly surprising taking the experience of the last years into account. For example, Compuserve and American Online started their activities in Europe on a grand scale only in 1995. With gigantic market bugets they increased their market share very rapidly in two years from a little bit above zero to, e.g., in the key account market Germany of about 27.1% (together with offline products even to 42%). If equivalent shifts in market share will take place until 2003 consumer services will be stronger by far than professional EIS.

Most national experts were also united in their assessment that a real boom for consumer services is under way, though the reason they gave apply also at least partly to professional EIS. In some cases, even factors, especially "free information" for the consumers, were stated, which should actually hinder consumer services growth.

See, for example, the Finnish national report: "Consumer services were considered the greatest potential source for EIS providers. The market for business information services may be a mature market but consumer information is on its way. On one hand: ordinary citizens at households learn to use network services, connection costs will decline, there will be more services to consumers from public authorities, including local municipal administration – thus added benefits of use for the consumers. On the other hand: consumers have become used to "free" services on the Web, and the development of electronic payment systems will have its impact on the situation."

Or the Spanish national report: "Practically all the experts believe in a boom of the consumer market, bringing forward for their forecast the conjunction of various factors:



  • online systems more and more versatile, powerful and cheap;

  • translation of more and more information into digital formats;

  • inter-operativeness: decision-taking based on the creation, participation and processing of information flows."

In the Luxembourg report, the "contradiction" between the tendency to offer free information for the consumers and high growth rate in terms of revenues was most explicitly stated:

  • "For private users, the present tendency is towards free retrieval of daily information, whereas past information is achieved and available against payment;

  • the rates of increase (in terms of income) were estimated more optimistically by the information or multi-media professionals (±100% business use, ±75% private use) than by the users (30%-50% in both cases)."

A simple explanation of the consumer services boom: The time is ripe. Therefore a simple explanation of the "real boom" may be sufficient: The time is ripe. In more details, this means:

  • The private households have the necessary equipment or will it have soon.

  • The members of private households, especially the younger ones, are qualified now to use the potential of their equipment for online and offline surfing, searching and buying.

  • With the decrease in telecommunication costs online prices are becoming attractive even for the private user.

  • The big information, entertainment and other electronic providers have seen their new opportunities and moved into the new markets perhaps lately, but then with speed and much money.

  • An engagement in the Internet and also in the CD-ROM submarket has become cheap, so besides the high visible big providers there are numerous rapidly expanding small entrepreneurs offering their niche products to the consumers and generating revenues or at least traffic.

  • So big is the potential of the consumer market, to be computed from the population and to be estimated from the total media consumption of the individual in comparison with his TV, movie, print consumption, etc. that this market as measured by its potential is bigger by far than the professional market, even if we take into account that a private household typically spends much less on EIS then the average firm.

  • After coming lately, there is the need and the opportunity of the consumer services to catch up.



The rise of the consumer services create a challenge to the professional sector. Does the absolute and relative rise of the consumer services bear any importance for the professional sector? Yes, a lot:

  • The big consumer services have already shown that they can be successful also in the professional area. American Online, for example, has profiled itself as the supplier for the whole family but with a marketing budget higher as the marketing budget of some professional submarkets in Europe combined, AOL made additionally huge inroads into the professional market as a pure side effect. The providers in the professional sector, therefore, live under the constant threat to lose market share or to be acquired if only the consumer services change their strategy and move into their professional market.

  • The EIS-providers in the professional sector may profit from the boom in the consumer area, if they expand into it. Should they? See the discussion in the next chapter.

  • The frontier of the capabilities and prossibilities of multi-media production is pushed forward in coming years especially in the consumer sector. The developments have to be watched by the professional EIS-providers closely in order not to fall behind too far in their possibilities of product development in comparison to the current state of the art of the total EIS market.

II.2 Shall the Information Providers for Business and Professional Services Expand into the Consumer Area?

Only limited acceptance for plans to expand into the consumer area. In the proposed questionnaire the leading European experts were asked whether information providers for the business and professional community should expand into the area of online and offline consumer services. According to the answers in Germany and Spain such plans would meet only limited acceptance.

Table 3

Shall the Providers of Professional EIS

Move into the Consumer Area?

In %






Germany

Spain

Yes, absolutely

21,7

30,8

No


39,1

42,3

A comprehensive sceptical assessment: The case of Austria. A comprehensive if short sceptical assessment was given in the Austria national report:

"Business services are very specialized, an enlargement demands important additional investment. For the moment, consumer services often attribute more to costs than to profit. Further one, micro-payment systems for consumers still have to be developed. Once the charging of small units of information is widely available, and sufficient standards for property right assurance are established, the enlargement into the consumer segment will be more profitable for providers of business information."

The most important reason for scepticism: Different needs of target groups lead to higher barriers between the submarkets. In other national reports, the most important reason given for a sceptical attitude against expansion plans were the different needs of professional people and the consumers. This leads to different products and services and to high barriers between the professional and consumer EIS-markets. Information providers have specialized themselves on the need of their target groups, and it would constitute a grave risk to move in the other area with other contents, other presentation forms of information and other needed qualifications for employees.

However, there is a current example that contradicts the scepticism described above: The online consumer services are ostensibly able to be successful in the consumer as well as in the professional area.

The lessons of this success story overcoming barriers between the submarkets may run as follows: You can overcome the market barriers between professional and consumer services but this requires strong efforts and much money for market research, personnel, product development, and, above all, marketing. Therefore, if you are not AOL, Time Warner or Bertelsmann you should think again before acting in this direction.

Some experts believed that spillover effects from the consumer area with their fast-food philosophy concerning information would lead to quality decreases in the area of professional EIS.

The most important reason for optimism: Because your content is already important for the consumer you only need another form of presentation. Probably the most important reason for a more optimistic attitude was the possibility of "customization" of already existing content for a new target group: The information provided for the professional world includes already information that is at least in principle very valuable for the consumer. Examples are financial information and medicinal information. In the past, the contents have been mainly used by professionals. But nowadays when on the average the members of the European private households become richer and older they are increasingly interested in using these information too (e.g., for investing their accumulated money and for self-medication against their decreasing health). All what would be needed from the point of view of the optimistic publisher would be another form of presentation of, say, a medicinal electronic database.

Therefore an alternative strategy to the relatively gigantic efforts of online consumer services may be possible: to expand slowly and step by step – first with one product, then with another – in the area of consumer services. However, model examples or success stories on this type of expansion seem to be rare.

Other reasons for optimism mentioned by the European experts were:


  • The return on investment in the consumer area is relatively high.

  • If you use the same content base for developing products in the professional and consumer area costs will be relatively reduced.

III. Development of the Markets for Electronic Information Services for Professional Use

III.1 The Coming Growth Rates

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