UK small caps: content creation & intellectual property

Key takeaways:

• The rise of influencers and content creators has led to a seismic shift in brand and advertiser behaviour
• Owning the intellectual property (IP) of strong book franchises can ensure repeat business through TV and film series adaptations 
• Advertisers are increasingly partnering with digital media firms to better engage with more diverse demographics

Digital infrastructure is shifting content consumption

Speed of access to information through digital infrastructure has resulted in content being increasingly important in our economic and social activities.  Indeed, it feels difficult to walk down the street these days without being bumped into by someone staring at their mobile phone, transfixed by a screen.

The way that we access news and content has evolved significantly over the last two decades. Once considered the principal medium for accessing facts, opinions and analysis, newspapers have been subjected to a shift in consumer habits, culminating in a dramatic reduction in readers. With their declining numbers of customers, advertising spend has shifted to other mediums.

The growth of influencers and content creators

In 2007, news media advertising – magazines and newspapers combined – was worth £7.1 billion in the UK, or 39 per cent of the £17 billion total UK advertising spend. In 2022, all national, regional and magazine titles combined made around £2 billion in advertising revenues (print and online) out of the total £35 billion  UK advertising spend.

This was less than a fifth of what they received in 2007. They’ve gone from taking 39 per cent to a 6 per cent share of the total¹. 

Brands are needing to adapt to changing media consumption habits like the rise of content creators and influencers. According to Influencer Marketing Hub, the influencer marketing industry is expected to grow to over £17 billion in 2023, with TikTok being the most popular influencer channel².

With the rise in influencers and vloggers it is estimated there are now over 40 million people globally that regularly create content for social media platforms and look to monetise that content³. To compete in this environment, content producers are increasing their spend on advanced recording equipment to create and monetise unique content.

Media companies around the world are also spending more on content as they look to compete for subscribers. Ten years ago, Netflix spent US$3 billion on content, this year it will spend US$17 billion⁴. With competition from Disney+, Amazon Prime, Apple TV, Hulu, Peacock, HBO Max etc., the total amount being spent on content is increasing each year and media companies are looking to bring popular intellectual property to the screen.

For instance, despite Harry Potter being first published over 20 years ago, HBO Max and Discovery+ have announced that a decade-long series is being produced diving deep into the stories from the original books.

Below we highlight some portfolio companies, which are benefitting from this shift in media consumption.

Enduring IP

Bloomsbury Publishing is home to very strong IP. These include the publishing rights to Harry Potter, which still features in the top ten sellers of children books, and bestselling ‘romantasy’ author, Sarah J. Maas.

Bloomsbury has published 16 of Maas’s novels since 2012 and has six more under contract. Sales grew by 51% in the last financial year and hashtag views on TikTok relating to her name stand at over 11.5 billion⁵.

The subculture of “BookTok” on TikTok has allowed followers to find numerous book recommendations, reviews, reactions, and other fan content. Maas has proved to be a particularly popular author here.

When her latest book was released in January 2024, some bookstores opened at midnight to facilitate the demand for the new book. In its first week on sale, the book went to number one globally on Amazon (inc. US, UK, Australia, France, Sweden and Spain). Other books by the author occupied  five of the top 10 best sellers slots and she had nine books in the top 20 – the books continue to sell, but the latest release has triggered readers to buy the back catalogue.

TV series and films driving repeat business

Bloomsbury’s authors demonstrate the enduring quality of their IP, driving repeat customers year after year with new audiences discovering the back catalogue of titles and engaging in new formats such as e-book or audiobooks.

TV series and films based on their author’s work inevitably drive higher book sales as seen through the life of the Harry Potter franchise. The company has announced that another author, Cixin Liu, is soon to have a Netflix release based on his “Three Body Problem” series and there have been reports that streaming service Hulu has signed a deal to make a series based on Maas’s work.

The company has also expanded to distribute content through new mediums in recent years. For example, the Bloomsbury Digital Resources division, which sells access to digital content from academic institutions and schools globally in areas such as Fashion and Drama. This provides annual subscription revenues and is higher margin than traditional publishing.

Emerging trends impacting the success of business models

Structural societal forces are incredibly powerful and often irreversible. Whilst we continue to construct our portfolio on a bottom-up and fundamental basis, we must acknowledge that emerging trends will benefit certain business models. By identifying influential themes such as the growth of content creation and value of strong IP, we can identify businesses that could benefit from these structural tailwinds over the long term.

Find out about our UK equity capabilities

Footnotes

¹ Source: Press Gazette as at 15 February 2024. Colossal decline of UK regional media since 2007 revealed.

² Source: BBC as at 19 October 2023. Are influencer partnerships the inevitable future of business? 

³ Source: Videndum company presentation as at December 2022. Enabling the capture and sharing of exceptional content. 

⁴ Source: Redshark as at 10 February 2024. Streaming wars: Content is king, but kings cost money. 

⁵ Source: The Guardian as at 4 June 2023. The Guardian view on Bloomsbury’s success: publishing wizardry. 

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