Competitors Survey 1996
An exclusive survey of multimedia developers in Canada and the UnitedStates
by Robert Haiat, February 1996
I recently conducted a competitor survey to
determine the level of competitiveness in the
interactive multimedia and digital communication
industries in Canada and the United States.
Additionally, the aggregated responses from each
survey were used to determine the following:
This report will not only analyze industry trends
and demographics, but will also focus on, compare,
and differentiate the trends and demographics for
Toronto- and US-based multimedia firms.
Most of the questions asked on the survey were not
open-ended and were consequently analyzed
quantitatively. For those questions which were
open-ended, selected responses were reported in the
body of this report. Competitor surveys were randomly
sent to 125 companies located in Toronto and various
US cities via E-mail. Of the 125 surveys sent out,
nine were completed and returned. (Editor's note:
While the small sample body makes the findings of
this report inconclusive, the survey results are
still fascinating.)
Of the multimedia firms which completed the
surveys, 44% are based in Toronto, Ontario, while the
remaining 56% are based in the United States,
including New York, Connecticut, and California.
78% of the surveys were filled out by the company
president, strengthening the validity of the
individual responses. The remaining 22% of the
surveys were filled out by employees at the
vice-president and director level.
Age of Company and Barriers to
Entry
The average age of the companies was 4.125 years,
yielding a standard deviation of 2.696. The date of
incorporation for the companies surveyed ranged from
1985 to 1996. However, the majority of companies
incorporated sometime between 1990 and 1993.
Therefore, the results indicate that the window of
opportunity for starting up a multimedia firm was
around 1992. Today, multimedia firms have stated that
the barriers to entry are becoming more stringent,
identifying industry knowledge, reputation, track
record, and capital as the major barriers.
Industry Knowledge: Acquiring industry and
market knowledge is imperative before starting any
company, regardless of whether it is a multimedia
firm or not. Knowledge of consumer demand,
demographic trends, the size of the market, the
barriers to entry, the types of substitutes and
compliments, the number of direct and indirect
competitors, and the level of competitiveness are all
extremely important factors before starting a
company. Some companies mentioned that, at present,
there are too many new multimedia firms setting up
shop without conducting any market research and
clearly understanding the industry. As a result,
these companies have been labeled as fly-by-nights,
meaning that these firms have the inability to
acquire clients and make their first sale,
consequently leading to insolvency.
Reputation and Track Record: Reputation and
track record are somewhat of a "Catch-22."
According to the results on the surveys, it is
extremely difficult to establish a track record
unless the company has a positive reputation in the
market; likewise, it is difficult to acquire a
positive reputation without having a track record.
Further, companies have indicated that between 1992
and 1993, clients (e.g. the private sector) did not
understand interactive multimedia as well as its
benefits. However, in the following years, the trend
for a company in the private sector to establish and
maintain a World Wide Web site grew exponentially,
yet they still did not understand its benefits.
During this time, multimedia firms would solicit the
private sector and successfully convince them to
invest in this new technology. Now that both existing
and potential clients have become more aware of
interactive multimedia's benefits, the private sector
is becoming more knowledgeable about the industry. In
fact, before deciding upon a particular firm to
produce an interactive multimedia product (e.g. Web
site, information kiosk, CD-ROM, etc.), private
sector companies usually conduct research and use
both the track record and reputation criteria when
evaluating and looking for the ideal firm. Therefore,
as clients become more aware of multimedia, the more
stringent the barriers to entry become and the more
difficult it is for start-up companies to penetrate
the market.
Capital: Capital is extremely difficult to
acquire, especially for start-up companies. As
previously mentioned, there are too many
fly-by-nights in today's market. Therefore, investors
have become disenchanted with the industry, since
companies rarely generate a profit.
Types of Products and Services
Companies were asked which type of products and
services they offer. According to the results, 100%
of the respondents mentioned that they offer
consulting services. Similarly, 89% of the companies
indicated that they produce interactive multimedia
for CD-ROM and engage in interface design. 100% of
the multimedia companies based in Toronto mentioned
that they offer interface design, compared to 80% of
the multimedia companies based in the US. According
to the future trends section, CD-ROM will become less
popular as a medium for interactive multimedia
products as new and improved platforms come into
play. It is also expected that interface design will
be just as popular in the near future as it is today.
As multimedia firms prepare themselves for
CD-ROM/on-line hybrids and Interactive Television,
interface design may become even more popular.
78% of the companies indicated that they offer
either information kiosk production, Web site design,
or both. More specifically, 50% of the Toronto-based
multimedia firms stated that they engage in
information kiosk production, compared to 100% of all
US-based firms. Additionally, 75% of the
Toronto-based firms engage in Web site design,
compared to 80% of the US firms. It is expected that
information kiosks will remain popular in the short
term and become more popular in the near future when
they will have both on-line and automatic teller
machine (ATM) capabilities. Although companies have
indicated that Web sites are over-hyped in the
private sector, it is expected that they will become
more popular when two-way point-casting
communications will be commonplace, whereby the
customer will be able to engage in two-way
communication with the company (e.g. Toyota).
44% of the companies surveyed indicated that they
offer either multimedia catalogue design, internal
communications, or both. More specifically, 50% of
the Toronto-based companies mentioned that they
produce either multimedia catalogues, internal
communications, or both, compared to 40% of the US
firms. Additionally, 33% of companies stated that
they design multimedia annual reports. Interestingly,
75% of the Toronto-based companies indicated that
they design multimedia annual reports, whereas no
US-based firms engage in this activity. The demand
for each of the aforementioned products and services
are more company-specific than Web sites and
information kiosk design. Not all companies produce
and/or need catalogues, let alone multimedia
catalogues, and internal communications and
multimedia annual reports are extremely expensive.
That is, the benefits of the company-specific
products are less diverse than that of Web sites and
CD-ROM products.
The least popular type of products and services
that multimedia companies offer are CD-ROM/On-line
hybrids and Interactive Television. 22% of companies
indicated that they provide one or both of these
services. However, this figure is extremely
misleading. Most multimedia companies mentioned that
they are progressively moving in the CD-ROM/On-line
hybrid and Interactive Television direction. The only
problem is that there currently is no proper
infrastructure to support these products and services
in the marketplace. When technology progresses
however, this notion will change and the demand for
these products and services will proliferate
exponentially. Other services that multimedia firms
indicated that they offer include digital video post
production for multimedia.
Figure 1 is a pie chart illustrating an aggregated
percentage breakdown of the types of products and
services that are offered by multimedia firms in
Canada and the United States.
(Figure 1)
As illustrated in Figure 1, 16% of Canadian and US
multimedia firms' services and products is attributed
to consulting, whereas 15% is attributed equally to
CD-ROM production and interface design. 13% is
attributed equally to information kiosks and Web site
production, and 7% is attributed equally to
multimedia catalogues, internal communications, and
future products; the latter includes Interactive
Television and CD-ROM/On-line hybrids. Finally, 5% of
multimedia firms' efforts are focused on multimedia
annual reports and 2% on digital video
post-production.
The following two figures breaks down Figure 1
even further. Figures 2 and 3 illustrates the type of
products and services offered by Toronto-based
multimedia firms and US-based multimedia firms,
respectively.
(Figure 2)
As illustrated in Figure 2, consulting, CD-ROM
development and interface design make up 48% of the
products and services offered by Toronto-based
multimedia firms, each accounting for 18%, 12%, and
18% of products and services, respectively. When
compared with the statistics from Figure 1,
consulting, CD-ROM development and interface design
are almost on par with the industry average. Other
products and services which are similar to that of
the industry average include, future products (e.g.
Interactive Television and CD-ROM/On-line hybrids),
internal communications, multimedia catalogues, and
Web sites. The two types of products and services
which are radically different from the industry
average include multimedia annual reports and
information kiosks. As per Figures 1 and 2,
information kiosk production is more common in the US
than in Toronto, whereas multimedia annual report
production is more common in Toronto than in the US.
(Figure 3)
Most of the statistics in Figure 3 are similar to
the industry average. The only differences however,
lie in future products, digital video
post-production, information kiosks, and annual
reports. When comparing Figures 1-3, it is evident
that digital video post-production is only offered in
the US, whereas multimedia annual reports are only
offered in Toronto. Additionally, statistics show
that information kiosk production is more common in
the US than in Toronto, and future products (e.g.
Interactive Television and CD-ROM/On-line hybrids)
are more prevalent in the US.
In terms of future products and services, 44% of
all respondents indicated that they are preparing
themselves for Interactive Television. 33% of all
respondents stated that they plan to develop
multimedia/on-line hybrids. Other future prospects
include interactive chat rooms on the World Wide Web,
Digital Video Disc (DVD), Intranet applications,
Point-of-Sale (POS), banking, and other networked
applications.
Revenue and Sales Growth
Revenue for the last fiscal year ranged from less
than $67,250 to over $1,000,000 in Canadian funds. It
was calculated that the industry average for 1995
revenue was $698,000 for both Toronto-based and
US-based multimedia firms. The standard deviation for
this average equals $502,958. The revenue range for
Toronto-based firms was $100,000 to over $1,000,000.
The average revenue for 1995 was $867,000 with a
standard deviation of $664,000 for Toronto-based
firms. The revenue range for US-based firms was less
than $63,500 to $1,008,750. The average revenue and
standard deviation were calculated to be $615,250 and
$404,283, respectively, for US-based multimedia
firms.
The range for sales growth for all companies was
between 10% and 1250%. Because the company who
generated the 1250% sales growth is a very small
company to begin with and since including this figure
would only skew results, the company was eliminated
from the following set of statistics. Therefore, the
percentages for sales growth in the multimedia
industry ranged from 10% to 120%. The average sales
growth equals 57.5% with a standard deviation of 43%.
The average sales growth for Toronto-based companies
amounts to 53.3% with a standard deviation of 41.63%.
The average sales growth for US-based companies
equals 60% with a standard deviation of 48.5%.
Employees
The number of employees at each of the multimedia
firms surveyed range from 1 to 25. The average number
of employees equals 8.67 with a standard deviation of
7.79. The average number of employees for
Toronto-based multimedia firms is 10.25 with a
standard deviation of 10.69. This high standard
deviation indicates the number of employees per firm
is radically different. The average number of
employees for US-based multimedia firms is 7.4 with a
standard deviation of 5.59.
The average pay (when converted to Canadian funds)
for a Multimedia Developer is $42,245 with a standard
deviation of $8,880. Pay, in this category, ranges
from $30,000 to $53,800. The average pay for a
Multimedia Developer working at a US-based multimedia
firm is $47,075, whereas the average pay for the same
position in a Toronto-based multimedia firm is
$35,000.
As per the results, the range in pay for a Manager
in a multimedia firm is $35,000 to $60,525, slightly
higher than that of the Multimedia Developer. The
average pay for a Manager is $47,397 with a standard
deviation of $9,953. The average pay for a Manager in
a Toronto-based firm is $42,500, whereas the average
pay for a Manager working at a US-based multimedia
firm is $50,622.
This discrepancy in pay between the US- and
Toronto-based firms is strange. Although the average
US employee gets paid more than the average Toronto
employee, the average US multimedia firm generates
significantly less revenue than the Toronto-based
multimedia firm.
In terms of motivational incentives, multimedia
firms were asked whether they employ profit sharing
for their employees, and/or provide benefits and/or
bonuses or not. Every multimedia company offered at
least one form of motivational incentive and 78% of
firms admitted that their chosen incentives are
successful. First, 44% of firms engage in profit
sharing for their employees. More specifically, 60%
of US-based firms and 25% of Toronto-based firms
employ profit sharing. It is evident from looking at
these figures that profit sharing is not that common
of a practice in Toronto-based multimedia firms.
Second, 67% of the multimedia firms provide
benefits to its employees. Further, 60% of US-based
firms and 75% of Toronto-based firms offer benefits.
The third and most common practice are bonuses.
78% of multimedia firms indicated that they
administer bonuses to their employees. More
specifically, 80% of US-based firms and 75% of
Toronto-based firms use bonuses to motivate their
employees.
Other motivational incentives, as specified by the
respondents, include stock options and opportunities
to pursue personal interests during company time.
Clients and Geographic
Sources of Business
Multimedia firms were asked how many clients they
currently have. According to their responses, the
average number of clients for a multimedia firm is
28.5 with a standard deviation of 32.11. The average
number of clients for Toronto- and US-based firms are
45 and 12, respectively. The standard deviation for
the number of clients for Toronto- and US-based firms
are 40.4 and 6.78, respectively.
Respondents were then asked to indicate the
percentage breakdown of geographic sources of
business. That is, firms were asked to determine the
amount of business conducted in their own city, other
cities within their country, outside the country, and
overseas. In order to weight the averages, the
aforementioned percentages were multiplied by each
firm's corresponding number of clients. Figures 4, 5
and 6 illustrate the aggregated percentage breakdown
for the industry, Toronto-based firms, and US-based
firms, respectively.
(Figure 4)
As illustrated in Figure 4, 69% of sales is
conducted within the company's city. To a lesser
extent, 28% of business is conducted within the North
American continent but outside the firm's city. The
remaining 3% is attributed to international sales,
particularly in Japan, the Middle East, and selected
regions in Europe.
(Figure 5)
As illustrated in Figure 5, over 80% of sales for
the Toronto-based multimedia firm is conducted within
its own city. The remaining sales is conducted in
other Canadian cities and the US at 13% and 5%,
respectively. It is noteworthy that Toronto-based
firms have not penetrated the overseas market.
(Figure 6)
Unlike the Toronto-based firm, the vast majority
of sales for the US-based multimedia firm is
conducted in the US but not within its own city, at
68%. Only one out of five clients are from the
US-based multimedia firm's own city. The remaining
12% of clients are situated overseas, particularly in
Japan, the Middle East, and selected regions in
Europe. It is noteworthy that of all the US-based
respondents, none had sales in Canada.
Advertising Expenditures
Respondents were asked to determine a percentage
breakdown of their advertising expenditures. More
specifically, the purpose of this section of the
survey is to determine the amount of time and
resources that are used to promote awareness and to
attract clients to a particular multimedia firm.
Figures 7, 8, and 9 show these breakdowns for the
industry, Toronto-based multimedia firms, and
US-based multimedia firms, respectively.
(Figure 7)
As illustrated in Figure 7, the most popular means
of promoting awareness as well as attracting clients
to the average multimedia firm is direct
solicitation, accounting for 21.6% of advertising
expenditures, resources, and time. Developing
multimedia products (e.g. designing a company Web
site) and networking account for 19.13% and 17.28%,
respectively, of advertising expenditures and time.
Public relations and participating in trade shows
tied at 14.2% of advertising expenditures each.
Direct mail is also a somewhat popular means of
advertising, accounting for 8.02% of advertising
expenditures. The two least popular advertising
initiatives include print and radio, accounting for
4.32% and 1.23%, respectively, of advertising
expenditures.
(Figure 8)
As illustrated in Figure 8, the two
most common methods of advertising for Toronto-based
multimedia firms are direct solicitation and
developing multimedia products (e.g. company web
sites) at 22.1% each. When comparing these figures to
the industry standard, Toronto-based firms expend
more resources and time on designing company
multimedia products. The amount expended on direct
solicitation however, is on par with the industry
standard. Participating in trade shows, public
relations, and networking are also quite popular for
the Toronto-based multimedia firm, accounting for
13.95%, 12.8%, and 11.63%, respectively. As seen in
Figures 7 and 8, less time, resources, and reliance
is spent on networking by the Toronto-based
multimedia firm. Direct mail and print advertising
accounts for 9.3% and 8.14%, respectively. It is
noteworthy that Toronto-based multimedia firms spend
more advertising dollars (in proportion to their
revenue) on print media than the industry norm.
(Figure 9)
In contrast to Toronto-based firms, US-based firms
expend a great deal of effort, time, and resources on
networking, accounting for 23.68% of advertising
expenditures. Direct solicitation is the second most
popular at 21.05%. Both public relations and the
development of multimedia products (e.g. company web
sites) account for 15.8% each of advertising dollars.
Participating in trade shows is almost as popular as
the other modes of advertising at 14.47%.
Interestingly, direct mail is not as high as it is
with Toronto firms, accounting for only 6.58%. Radio
advertising is the least popular method at 2.63%. It
is noteworthy that from the US-based multimedia
companies surveyed, not a single respondent indicated
that they engage in print advertising.
Robert Haiat has an MBA with an area of
concentration in Arts and Media Management and
Entrepreneurial Studies. He has conducted extensive
research on the film and television, digital
communications, and interactive multimedia
industries. He has also worked for several motion
picture production/distribution companies in both the
Marketing and Business Affairs departments, including
MGM/UA Canada, Norstar Entertainment, and Nelvana.
His ultimate goal is to become a producer of film,
television, and interactive multimedia.
