Source: EURLEX
Language: en
Format: md

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### **`COMMISSION OF THE EUROPEAN COMMUNITIES`**

```
                           COM(93) 156 final

                           Brussels, 19 April 1993

               REPORT FROM THE COMMISSION

TO THE COUNCIL. THE EUROPEAN PARLIAMENT AND THE ECONOMIC AND SOCIAL COMMITTEE

                  IMPACT Programme

 Main events and developments in the electronic information services market

                      1991

```

**1.** **This Communication concerns the IMPACT Programme (EC plan of action for**
**setting** **up** **an information services market) adopted by Council Decision 91/691/EEC**
**of** **12** **December 1991.**

**2.** **In conformity with Article 6 of Council Decision 91/691/EEC, a report has been**
**prepared on the main events and developments which occurred in the electronic**
**information services market in 1990-1991 and is attached to this Communication.**
**Two similar reports, covering the state of the market in the periods 1988-89 and 1989-**
**90 have been forwarded to the European Parliament and to the Council as docs.**
**SEC(90) 1788 final, dated 24 September 1990, and SEC(92) 1536 final, dated 2**
**September 1992.**

**3.** **This third report reviews the most important trends identified over the period 1990-**
**1991** **within the following sectors:**

**online ASCII database services,**
**videotex services,**
**CD-ROM publishing,**
**fax-based and audiotex services.**

**4.** **The report highlights the following major findings, some of which to some extent**
**confirm those** **findings** **found in these previous reports:**

**In 1990, turnover by EC-based producers and distributors of electronic**
**information services was around BECU 3.1, providing employment for an**
**estimated 32,000 people in** **7,000** **firms, of which those in the finance and**
**business sectors represent around 95% of all revenues.** **The electronic**
**information services sector on this basis is in between two other strategically**
**important sectors: market research (BECU 1.9) and management consultancy**
**(BECU 3.5).**

**The United States continues to dominate international markets for professional**
**electronic information services. US industry value in 1990 was around BECU**
**6.9, more than twice the size of total EC-based activity (BECU 3.1). Typically,**
**the average European company is smaller, less vertically integrated and more**
**nationally-oriented than its US counterparts. Disparities continue to exist**
**between the US and the Community in terms of database production and the**
**number of market operators.**

**Japan remains a relatively minor player in world markets for electronic**
**information, but there is a strong public sector commitment to encourage**
**innovation in the provision of electronic services.**

**Significant differences exist between the Member States in relation to**
**information market development.** **Particular problems are faced in the**
**Community's "less-favoured" regions in relation to demand, local supply and the**
**telecommunications infrastructure.**

**Most information providers operate on a predominantly national basis**
**delivering professional information services to their own national communities.**

**Technical, linguistic, administrative and legal obstacles continue to hamper the**
**development of a common market in information services.** **Despite the**
**opportunities presented by the Single European Market, few truly pan-**
**European information services have been brought to the marketplace. This**
**reinforces the need for market broadening and awareness raising activities, as**
**supported by the INFO EURO ACCESS central strategic concept of the**
**IMPACT programme.**

**a.**

**5.** **Since the publication of the previous IMO Annual Report, three important new**
**developments have become apparent:**

**Evidence from both supply and demand side indicators collected by the IMO**
**points to a slow-down in the rate of growth of international markets for online**
**information.** **In 1990, the European electronics information services supply**
**grew by only** **12.5%** **as against previous estimates of** **20%-30%** **per annum. This**
**slow-down appeared in the beginning** **of** **the second half of 1990 and continued**
**throughout 1991. Recessionary pressures in the global economy appear to have**
**depressed demand in EC, North American and Japanese markets.**

**Intra-EC** **"trade" in online ASCII databases was the fastest growing market**
**segment between 1989 and 1990 with a growth rate of 26.1% (in absolute**
**terms), while exports to destinations outside the Community grew by only 6.0%.**

**Merger and acquisition activity is a significant force in the European**
**information market as industry actors seek to integrate information production**
**and distribution activities. The number of vendors active in the European**
**market is gradually declining and is predicted to fall from** **7,000** **firms in 1991 to**
**no more than** **5,500** **by 1995.**

**1 t**

#### **`Contents`**

```
INTRODUCTION

EXECUTIVE SUMMARY

1. ELECTRONIC INFORMATION IN AN INTERNATIONAL CONTEXT

1.1 World markets and global competition
1.2 European markets for electronic Information
1.3 USA

1.4 Japan
1.5 Emerging markets in Eastern Europe

2. EUROPE'S COMPETITIVE STRENGTHS AND WEAKNESSES

2.1 European supply-side strengths and weaknesses
2.2 Strengths and weaknesses 1n European telecommunications
2.3 Reducing the gaps and imbalances within Europe

```

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**3.**

**3.1**

**3.2**

**4.**

**4.1**

**4.2**
**4.3**
**4.4**
**4.5**

**5.**
**5.1**
**5.2**
**5.3**

**5.4**

**TRENDS IN THE DEMAND FOR ELECTRONIC INFORMATION**
**Indicators** **of European demand**
**Trends 1n the demand for professional electronic Information**
_**3.2.1 Competition between Information delivery media**_
_**3.2.2 Slowdown In demand for online ASCII databases**_
_**3.2.3 Awareness of electronic information services by executives**_

**TRENDS IN THE PRODUCTION AND SUPPLY OF ELECTRONIC INFORMATION**
**Indicators of European supply**
_**4.1.1**_ _**Structure of the European supply-side**_
_**4.1.2 Trends in supply-side**_ _**growth**_
**Online** **ASCII database services**
**Videotex**
**Audiotex**

```
 Optical information media
```

_**4.5.1 CD-ROM**_
_**4.5.2 Multimedia information products**_
_**4.5.3 Geographic Information systems**_

```
DYNAMICS OF THE EUROPEAN INFORMATION INDUSTRIES

 Structural change 1n the Information industries
 Concentration of ownership: mergers and acquisitions
 Corporate strategies in the Information business
```

_**5.3.1 Diversification and cross-media ownership**_
_**5.3.2 Broadening the professional user base**_
```
 Completing the Internal market: challenges and opportunities

```

```
CONCLUSIONS

ANNEXES

I: Definitions

II: Acronyms and abbreviations
III: List of publications

```

_**Ac**_

L i s t **o - r** **t a b l e s** a . **r i** c i c h a r t s

T a t » ! © s

page

```
 1. Online ASCII database production / distribution;
   worldwide, 1991. 2
 2. Electronic professional Information service revenues;
   USA; performance and estimates, 1988-1992. 3
 3. Online ASCII databases; Japan, market shares of key
   players, 1991. 5
 4. ISDN basic Unes; projected EC Infrastructure, 1994. 10
 5. Electronic information services; estimates of demand
   1n selected EC markets, end-1990 and projections to 1994. 15
 6. Electronic Information services; estimates of demand in
   selected EC markets by delivery technology, end-1990. 15
 7. Dedicated videotex terminals; installed base,
   EC, end-1990. 17
 8. Videotex; total and professional users, EC, end-1990. 18
 9. Key characteristics of electronic Information
   delivery media. 21
10. Online ASCII database production/distribution; EC, 1991. 23
11. Professional hosts and information providers in the EC;
   turnover by service or product type, 1989-90. 25
12. Professional hosts and information providers 1n the EC;
   turnover by subject interest, 1989-90. 25
13. Online ASCII databases; geographic distribution of
   turnover, 1989-90. 27
14. International videotex standards; EC Member States, 1991. 30
15. Premium Rate Services; prefixes and tariffs, EC, 1 May
   1992. 33

16. CD-ROM titles published by EC-based players, 1989-1992. 35
17. CD-ROM disk drives; installed base and projections:
   selected EC Member States, 1990-1994. 36

###### **`Charts`**

Videotex terminals; EC, end-1990. 16
Videotex users; EC, end-1990. 18
Database distribution; EC, 1990, staffing by function. 26
ASCII databases; EC-based supply, 1990 revenues by type 28

```

### **`U`**

#### **`INTRODUCTION`**

```
  When on 26 July 1988, the Council adopted a plan of action for
setting up an information services market (the IMPACT programme),
1t asked the Commission to establish an Information Market

Observatory (IMO) 1n Luxembourg and to present an Annual Report on
the most significant developments and trends 1n the European
electronic information services market. This third Annual Report,
based on data collected during 1991, reviews the state of the
European market for professional Information services and Identifies
the most important trends which became apparent that year.
  As before, this Report reviews developments 1n four key segments
of the European marketplace for professional electronic information:

   o online ASCII database services

   o videotex services

   o CD-ROM publishing

   o audiotex and fax-based services

  As well as presenting detailed findings of work undertaken or
commissioned by the Information Market Observatory, this Report
attempts to widen the usefulness of the work by stressing the
competitive strengths and weaknesses of European service providers.

```

```
fe

```

#### **`EXECUTIVE SUMMARY`**

```
  If Europe is to remain competitive 1n world markets for goods
and services, and to continue to make advances in science and
technology, organisations of all kinds must have access to the best
possible information. The commercial value of timely and relevant
information, especially in strategic areas of decision making such
as Investment or market analysis, 1s Increasingly being realised
and, as a result, a significant market for tradeable information 1s
developing within the Community. Recorded Information comes 1n two
forms: paper-based or electronic. The traditional publishing sector
1s dominated by printed newspapers, periodicals and books, while the
electronic Information sector Includes online ASCII databases,
videotex, CD-ROM and other optical Information media, together with
new and emerging forms of service delivery such as audlotex. Since
the early 1980s, the market for electronic Information has evolved
away from Its origins in science and technology towards specialised
professional information services covering financial and company
data, market research, bus1ness-to-bus1ness Information and news
services. Innovation and diversity on the supply-side are essential
to the continuing growth and stimulation of demand for Information
services. It 1s for this reason that the Commission has placed
considerable emphasis on co-funding a number of leading edge
demonstration projects.

  A decade ago, the European market for professional electronic
Information was Insignificant 1n economic terms. With an annual
turnover in 1990 of around BECU 3.1, the electronic information
services market is still relatively modest 1n comparison with the
massive telecommunications (BECU 70) or the computer services (BECU
33.5) industries. Nonetheless, the sector 1s becoming increasingly
important in terms both of turnover and numbers of people employed strategically Important sectors of similar size to the electronic
information services sector 1n Europe Include market research (BECU
1.9) and management consultancy (BECU 3.5).
  A major impetus to the electronic information services
marketplace will, of course, come from the general expansion of
cross-border business activity after the Single Market is
consolidated over the next few years. As businesses 1n all sectors
of the economy adjust to the new realities of pan-European market
competition and regulation, they will require more external
Information to function effectively. This 1s likely to result 1n
the stimulation of new demand for Community-wide Information,
particularly 1n the areas of mailing lists, credit ratings, and
company Information.
  Despite the evident importance of this emerging sector as a
'trigger' to downstream productivity gains and Its contribution to
growth 1n the European economy as a whole there has, until recently,
been relatively little reliable Information on the size and
structure of the information Industry, especially in the area of
electronically-delivered services. There are many gaps 1n our
detailed knowledge of the nature of the demand for electronic

                  11

```

```
t*

```

```
information and of the factors that encourage and shape that demand.
This means that newcomers to the electronic information Industry
find it very difficult to gauge the market potential for their
services, especially on a pan-European basis. The work of the
Information Market Observatory is intended to give a better insight
into the Information services market and provide the Commission with
a basis for formulating policy in this field and for representing
the Interests of European actors 1n international fora.
  Between 1989 and 1990, turnover in the European electronic
information services sector grew by 12.5 per cent (unadjusted for
Inflation) from BECU 2.8 to BECU 3.1, with finance and business
information generating more than 95 per cent of all revenues.
Finance alone, including information relating to stocks and shares,
banking, foreign exchange and Insurance, accounted for more than 70
per cent of sales. While performance 1n the sector outstripped the
rate of growth in the economy as a whole, the 12.5 per cent measured
growth between 1989 and 1990 contrasts with typical estimates for
the preceding three years in the region of 20-30 per cent. A number
of factors may account for this apparent slackening in demand, not
least the generally difficult trading conditions 1n the second half
of 1990 (especially 1n the UK financial services sector). Trading
conditions in 1991 were far from Ideal and there 1s convincing
demand-side evidence to show that the rate of growth in
International online markets fell sharply, affected by the twin
effects of a slowdown in financial services markets and the

worldwide economic recession. At the same time, it can be argued
that these same factors have actually underlined the importance of
external information as a source of competitive advantage and this
is likely to ensure the continuing growth of the electronic
Information sector in the future. When drawing conclusions, 1t 1s
Important to differentiate between cyclical and structural factors.
The North American experience suggests that there 1s still much
potential for market development in the longer-run, although the
effects of cyclical down-turns might obscure this.

  Europe has a number of competitive strengths 1n world markets
for professional Information services, not least because of the
presence of world ranking information and media conglomerates within
the Community and the existence of large and powerful markets for
information in key industrial sectors such as chemicals and
financial services. Yet, despite these strategic advantages, the
European market for electronic Information lags behind that of North
America, both 1n terms of supply and demand. The differences are
striking. On the supply-side, North America accounted for almost
59 per cent of world online ASCII database production 1n 1991, and
its database producers and host services outnumbered its European
counterparts by almost two to one. Compared with the United States,
Europe also lags behind in terms of total industry value. According
to evidence produced by the US Department of Commerce, the turnover
by US suppliers 1n 1990 was BECU 6.9, more than twice that reported
within the Community. Europe's other main competitor, Japan, 1s
currently a relatively minor player in world markets for electronic
information, but 1t has undoubted strengths 1n hardware and there

                  iii

```

```
1s a deep public sector commitment to encouraging Innovation in the
provision of Information services.
  Europe faces greater internal barriers to sector development
than either the USA or Japan. This, together with the relatively
poor financial performance of many European players 1n the
electronic Information services marketplace provides much of the
driving force and the rationale behind the European Commission's
IMPACT programme.

                  1v

```

_**ik**_

##### **`1. ELECTRONIC INFORMATION`** **`SERVICES IN AN`** **`INTERNATIONAL CONTEXT`**

```
  Information 1s a key factor 1n the Industrial production,
distribution and marketing chain. For some service sectors, such
as finance, Insurance and tourism, it has been described as a basic
raw material, such as energy is in the manufacturing industries.
The commercial value of timely and relevant information, especially
in strategic areas of decision making such as investment or market
analysis, 1s being realised by growing numbers of decision makers.
As a result, sizeable markets for tradeable Information often 1n
electronic form, are emerging in many of the world's developed
economies. The European Commission's IMPACT programme alms to
promote the exploitation of this valuable resource to the full, both
as an aid to competitiveness and to stimulate the emergence of an
EC-w1de electronic Information services market.

  Since the early 1980s, the market for electronic Information has
evolved away from its origins 1n science and technology towards
specialised Information services, delivering financial and company
data, market research, bus1ness-to-bus1ness Information and news
services to groups of professional users. Information services are
currently being brought to the European marketplace In a range of
electronic formats, from online ASCII databases, videotex, to CDROM and other multimedia publications, and audiotex. It 1s likely
that this trend towards diversity, both 1n the services themselves
and the ways 1n which they are 'packaged' and delivered to users
will continue, opening up market opportunities in the areas of
leisure, education and training, and for Information services with
a social or cultural emphasis.

1.1 World markets and global competition

```

**`In 1979/80, the`** **`first`** **`Issue`** **`of`** _**Cuadra's Directory**_ _**of**_ _**Online**_
_**Databases**_ **`catalogued some`** **`400`** **`databases`** **`and 59`** **`International host`**
```
services across the world. By 1991, there had been a more than
tenfold Increase 1n supply-side activity, with more than 5,026
databases available through 731 host services. As 1s clearly
demonstrated in Table 1, world production and distribution of
electronic databases 1s very much concentrated 1n the highly
developed economies of North America and the European Community.
The differences between North America and the European Community are
particularly striking. North America produced almost 59 per cent
of the world's publicly-available professional ASCII database
services 1n 1991, and North American database producers and host
services outnumbered their counterparts in the EC by almost two to
one. In the high revenue-generating area of business databases,
North America produced more than three times as many databases as
Europe. North American host services enjoyed a further advantage
over Europe 1n terms of a more highly concentrated database
distribution sector, as Indicated by higher database to host ratios
(7.3 1n North America; 5.7 1n Europe).

```

**1**
**J**

_World_ _Numbers_

```
Table 1

Online ASCII database production / distribution; worldwide, 1991.

                    Database Gateway
             Databases producers Hosts services

North America 2,956 1,223 404 57
European Community 1,280 651 226 26
Rest of the world 790 284 101 23

Total 5,026 2,158 731 106

```

_Source: Directory of Online_ _**Databases,**_ _Cuadra/Elsevier,_ _July_ _**1991.**_

```
1.2 European markets for electronic information

  In addition to the supply-side Imbalances mentioned above,
compared with the United States, Europe faces a considerable gap 1n
market turnover for electronic Information services, of the order
of 2:1. While North America 1s still clearly ahead of the rest of
the world (including Japan, Incidentally) both 1n terms of database
production and distribution, the European Information services
market remains fragmented by linguistic, regulatory and technical
barriers, with service developments often taking place on a
national, rather than a truly pan-European, basis.
  Over the past decade the European electronic Information
services sector has been characterised by markedly uneven patterns
of development. In 1991, the example, combined Industry value for
the United Kingdom and France was much higher than 1n the other
Member States, accounting for well over half of all EC turnover.
The reasons are largely historical. France, for example, has a
booming videotex market which achieved the remarkable figure of
nearly 105 million hours of traffic 1n 1991. The position of the
City of London as a key International financial centre goes some way
to explaining the development of a significant market for real-time
financial services in the United Kingdom and other parts of Europe.
Germany and the United Kingdom lead the field 1n terms of database
production, particularly 1n the strategically Important areas of
science and technology, if videotex services are excluded.
  A major impetus to the European electronic Information
marketplace will, of course, come from the general expansion of
cross-border business activity as the Single European Market 1s
consolidated over the next few years. As firms 1n all sectors
adjust to the new realities of pan-European market competition and
regulation, they will require a great deal of external Information
to function effectively and efficiently. This will stimulate
further demand for Community-wide Information, particularly 1n the
areas of market data, mailing lists, credit ratings and company

```

```
Information.

1.3 USA

  The majority of the world's database producers and distributors
are located 1n the United States. In 1991, the US had almost twice
as many database producers as the EC (1,111 as against 651) and
nearly fifty per cent more host or gateway services: 461 as against
252. Assuming that overall counts of database producers are in some
way Indicative of market demand, then the US clearly had a major
strategic advantage over the EC, both 1n terms of the scale of
database production and 1n the diversity of services on offer.
  The US dominance of the electronic information service sector
```

**`extends beyond sheer numbers`** **`of`** **`services. According`** **`to the`** _**1992 US**_
_**Industrial**_ _**Outlook**_ **`published`** **`by the US`** **`Department`** **`of`** **`Commerce,`** **`the`**
```
1990 turnover for the electronic publishing sector (online ASCII
databases and services; CD-ROM publishing; videotex; and audiotex)
was around BECU 6.9, which was more than twice the size of the total
Industry value for the European Community in 1990 (BECU 3.1). Table
2 records the growth 1n US electronic Information service revenues
(estimated) over a five year period from 1988 to 1992. One general
trend, evident from the Table, 1s that year-on-year growth 1n US
markets appears to be showing signs of declining growth, albeit
gradually. Two possible explanations may account for this slowdown.
The first 1s the widely accepted notion that some sectors of the US
market for electronic Information services are now saturated and

that the Industry 1s showing signs of early maturity. Another
proposition might simply be that sales of electronic Information
have been adversely affected by cyclical factors in the wider

economy.

```

_**USA**_ _**BECU and percentages**_

```
Table 2

Electronic professional Information service revenues; USA,
performance and estimates, 1988-1992.

       1988 1989 1990 1991 1992

BECU 5.0 6.0 6.9 8.2 9.6

Annual

growth (%) - 20.0 15.0 18.8 17.1

```

_**Source: US Department of**_ _**Commerce,**_ _**1991.**_

```
  The reasons behind the leadership of the US electronic
Information services industry can be found in Its early development
coupled with a number of other factors. The current US specialised
Information sector was partially created by public Intervention.

```

```
The stimulus was both oriented towards the creation of databases

within the federal agencies, through the action of the Committee for
Scientific and Technical Information (CSTI), and the financing of
the automation of learned societies' publishing systems through the
action of the National Science Foundation (NSF). In addition to the
positive stimulus given to the sector in terms of public
intervention, the sheer size of the US domestic market sustained
significant economies of scale and the development of profitable
telecommunications networks and information services.

  European players entered the electronic information services
arena some years later than their counterparts in the US, although,
naturally, this lag in market entry will become less important as
time goes on. More importantly, their primary national markets
offer fewer opportunities for the economies of scale which are to
be found in the large, homogenous, English-speaking US domestic
market. The continuing strategic advantages of the US are reflected
in terms of exports. The US Department of Commerce estimates (1991
figures) that around 30 per cent of revenues for electronic
information services are attributable to export earnings. In fact,
the figure for Europe is roughly the same proportion, so the
advantage here is relative rather than absolute. There are several
reasons, apart from language, why the US is successful 1n export
markets. One is that US suppliers tend to be very well represented
overseas and the presence of a large number of US foreign
subsidiaries has certainly been a facilitating entry factor in
European markets for both US hosts and information providers.
Another factor is that US suppliers are more and more keenly aware
of the need to find overseas customers in order to increase their

chances of surviving in an increasingly competitive environment.
US suppliers have clearly identified International prospects as the
key to future growth, with the EC and Japan as the prime targets.

1.4 Japan

  According to the Japan Information Services Association (JISA),
the total revenues of the Japanese database industry were around
MECU 1,037 in 1989, compared with total revenues flowing to EC-based
producers and distributors that same year of MECU 2,799. The
Japanese supply-side was dominated by seven major players in 1991,
who between them achieved a remarkable 87 per cent share of the
total Japanese market (Table 3). The largest electronic information
markets in Japan are 1n the financial services; patents; and
scientific, technical and medical (STM) sectors.

  While Japan is currently a relatively minor player in world
markets for electronic information, there is a very deep public
sector commitment to developing the electronic information services
sector. The main action lines of the Ministry of International
Trade and Industry (MITI) in this area may be summarised as follows:
supporting database production, often at a small-scale local level;
research and development activities aimed at making electronic
databases easier to use; support for the development of more
efficient database services; the production of public sector
database services; and the expansion of government-owned data
supply. A public sector Database Reserve Fund was established in

```

```
1987 to support the massive Initial investment necessary for
database production. Further private support for database
production 1s provided through the Japan Development Bank which
provides low-interest financing for capital and other loans to those
producing databases in the private sector.

```

_**Japan**_ _**Percentages**_

```
Table 3

Online ASCII databases; Japan, market shares of key players, 1991.

```

```
             Market

              share

Quick 54.0

Ninon Kelzai Shlmbun 9.0

Kyodo Press 6.5
JAPIO 6.5

JICST 5.0

Maruzen 3.0

Kinokuniya 3.0

```

```
Market

sector

Financial services

Financial services

Stock market

Patents

STM

Foreign database agent
Foreign database agent

```

_**Source: Electronic Publishing Services Ltd, 1991.**_

```
  It is possible that Japan will emerge as a major force in
electronic information, but possibly by adopting a strategy which
capitalises on their undoubted strengths 1n hardware. By
Integrating data and hardware 1n convenient new packages, such as
```

`electronic books and games` _(Nintendo,_ `for` `instance),` `the Japanese`
```
may be able to reap significant market opportunities for the
delivery of electronic information. The recent wave of Japanese
acquisitions of foreign 'software' concerns, like the takeover of
```

_CBS_ `by` _Sony_ `may be early` `indicators` `of their` `Intentions.`
```
  The close relationships between government and industry 1n Japan
1s another factor to consider. Two recent examples of this
closeness both emphasise the medium- to long-term threat which Japan
may pose 1n International markets for electronic Information. The
first is the designation by the Ministry of International Trade and
Industry (MITI) and the Ministry of Post and Telecommunications of
more than 60 towns and areas outside Tokyo as testing grounds for
the use of advanced Information technologies; 1n effect creating a
series of experimental 'Information societies' with considerable
investment in human skills. In June 1991, MITI announced that 1t
Intended to make a large investment (MECU 24) by a 'Hyper Network'
laboratory. This 1s an exercise to develop videotex and advanced
telecommunications for Japanese industry which will Involve the
```

**`cooperation`** **`of`** _**France Télécom.**_
```
  While there 1s clearly a trend towards the production of
localised database products and greater self-sufficiency Japan still
has to overcome many problems before competing 1n the global

```

```
information marketplace on an equal basis. The most obvious of
these 1s Japanese Itself and the considerable costs of translation
in other languages. In the meantime, Japanese demand 1s
characterised by a high degree of dependence on domesticallyproduced sources of data. It 1s estimated, for example, that
spending on foreign databases 1n 1989 accounted for only one-third
of total expenditure, but two-thirds of available services.

1.5 Emerging markets 1n Eastern Europe

  The dramatic changes which have taken place 1n the former
Eastern Bloc or former Council for mutual Economic Assistance (CMEA)
countries have provoked considerable Interest 1n the medium- and
long-term opportunities for growth 1n information services trade
with these countries, particularly for EC-based suppliers. However,
there are a number of Infrastructural problems which mean that the
emergence of information services markets 1s likely to take some
considerable time. Whereas Western Europe has benefitted from
diverse and efficient sources of Information supply, the former CMEA
countries have had to rely on state-controlled agencies to gather
and disseminate data.. In the post-war years Eastern Europe has
lagged behind the West 1n nearly all aspects of telecommunications
and information technology and massive Infrastructure problems
persist within the former CMEA countries. The development costs to
remedy these structural problems have been estimated, by one
industry commentator to be of the order of BECU 350. Apart from the
lack of a we 11-developed information Infrastructure, there are other
factors which militate against short-term entry Into International
markets such as political uncertainty and a lack of hard currency.

```

#### **`2. EUROPE'S COMPETITIVE`** **`STRENGTHS AND WEAKNESSES`**

```
2.1 European supply-side strengths and weaknesses

  Europe has a number of competitive strengths in world markets
for professional information services, not least because of the
presence of world ranking Information and media conglomerates within
the EC. Many of these have been active in the field of electronic
```

**`Information services`** **`for`** **`more than`** **`a`** **`decade:`** _**Reuters;**_ _**Pearson-**_
_**Financial Times; Reed International;**_ _**Elsevier;**_ **`and`** _**VNU,**_ **`to name`** **`a`**
```
few. In addition, the Information services sector 1n Europe is
characterised by large and well-established markets for professional
electronic information in such key Industrial sectors as chemicals,
pharmaceuticals, and financial services. Yet, despite these
advantages, the market for professional electronic services 1n
Europe remains relatively underdeveloped 1n comparison with North
America, which, as has already been seen, enjoys considerable
advantages over Europe. 1n terms both of database supply and demand
for Information 1n electronic format. The 1989/90 co-ordinated
```

**`survey`** **`of`** **`hosts`** **`and`** **`Information providers`** _**(CEC/EIIA)**_ **`revealed that`**
```
almost 49 per cent of European respondents were not operating at a
profit. The mismatch between the relatively poor performance of
European players in the electronic Information services arena and
the considerable market potential which exists, especially after
1992, has provided much of the driving force and rationale behind
the Commission's two IMPACT programmes.

  European players face strong competition from non-EC operators
1n a number of specialised (or 'vertical') markets, of which
chemistry 1s perhaps the most notable example. In vertical, as 1n
more general interest (or 'horizontal') market sectors - for
products such as dictionaries or news services - the realisation of
scale economies will Increasingly determine competitive advantage.
North American suppliers are 1n a strong position to develop scale
economies since their home markets are large and effectively
monolingual.
  Certain segments of the market for electronic Information are
global by their very nature. This is particularly true 1n the area
of scientific and technical information, since research 1n these
areas knows few national boundaries. While many of the largest
scientific and technical databases are North American, European
providers still command large shares 1n a number of global vertical
```

**`markets (such`** **`as`** _**Derwent**_ **`in the`** **`case`** **`of`** **`patent Information`** **`and`**
_**INSPEC**_ **`in`** **`the`** **`areas`** **`of`** **`electronics, computing`** **`and`** **`physics).`**
```
Similarly, the trend towards the Increasing economic Interdependence
between the countries of Europe and other trade blocs means that
markets for macro-economic data and financial information services
are becoming Increasingly International 1n scope.
  Creating and maintaining databases Involves considerable time
and Investment: in the EC much of this effort often tends to be
concentrated in the production of reference databases, often in STM

```

```
subjects. While Europe has a lead over the USA 1n the number of
```

**`bibliographic`** _**databases**_ **`produced, US`** **`databases`** **`tend to be much`**
```
bigger (on average about three times bigger). This means, in
```

**`absolute terms, that the USA produces many more database`** _**records**_
```
than the EC. In addition, the US has a considerable lead over
Europe in the production of full text and other 'source' databases.
So, while the EC produces almost as many scientific and technical
databases as the United States, it produces many fewer news and
current affairs services (despite the presence of well-established
newspaper and other traditional publishers on European soil). The
production of bibliographic database services, aimed at
intermediaries in libraries and documentation services 1n research

organisations and in the larger public and private sector
institutions, is still a dominant feature of supply-side activities
in the EC. If Europe is to redress the Imbalances in the demand for
professional electronic information, then the solution must H e with
marketing services directly to end-users: to financial directors,
jurists, engineers, and marketing executives.

  A further issue regarding the competitiveness of the European
supply-side relates to the optimal number of distribution outlets
for electronic services. Critics have long argued that Europe 1s
oversupplied with national host services and that this factor tends
to exacerbate market fragmentation and work against the realisation
of critical mass demand. In many sectors, such as legal and
statutory information,information on company solvency, or market
intelligence, supply is heavily dominated by national operators.
In other words, the main database services have developed along
national lines, to serve national rather than international markets.
On the other hand, these same factors tend to work against the entry
of American operators into a European marketplace which continues
to be dominated by dozens of medium-sized European suppliers
operating essentially within their own national markets. To reach
international markets in a number of key subject areas, providers
must be willing to invest heavily in data collection, form strategic
alliances, or gain access to the information base of foreign
companies through acquisition or merger. These are barriers which
must be crossed if pan-European information services are to be
established.

  Paradoxically, many of Europe's strengths are, at the same time,
also weaknesses. For example, the existence of a highly developed
and efficient supply structure for traditional printed business and
professional Information in many EC countries 1s a factor which may
contribute to a relatively underdeveloped market for electronic
information. Further evidence of Europe's simultaneous strengths
and weaknesses in the global information services marketplace can
be marshalled by observing the commercial strategies of some of the
larger European media conglomerates. In the early 1980s, several
Dutch and British media corporations invested aggressively 1n the
US in preference to the EC, taking the view that the likely returns
on Investment were very uncertain 1n Europe. British publishers
have tended to develop strategies which are 'transatlantic' in
nature, a natural outcome of their shared language and good trading

                   8

```

```
relations with the US. Dutch publishers, confined to a small
national market, have tended to grow by acquisitions both In the US
and, more recently, in Europe.

2.2 Strengths and weaknesses in European telecommunications

  The European Community's vision of a market without obstacles
to the free movement of goods, services, capital and people, to be
achieved by the end of 1992, needs to be supported by a flourishing
Community-wide market 1n professional information services and by
an advanced telecommunications infrastructure which can deliver
those services competitively. As well as stimulating Information
market development through a variety of mechanisms under the IMPACT
programme, the CEC has a significant role to play in shaping the
legal and regulatory environment within which pan-European
electronic Information services can flourish. In the wake of
telecom's liberalisation, an EC-w1de regulatory framework 1s needed
to ensure free competition. The framework which 1s currently being
laid down will ensure that former monopoly operators do not abuse
their dominant position 1n the market, through mechanisms such as
cross-subsidy or the Imposition of proprietary standards. Similar
processes of liberalisation have been taking place in the United
```

**`States`** **`with`** **`the deregulation`** **`of`** _**AT&T.**_ **`This`** **`has been the subject of`**
```
much public debate, not least because the American press and media
are understandably reluctant to share the Income from electronic
advertising with the telephone operators. Currently, with the
```

**`recent lifting of restrictions,`** **`five`** **`of the seven`** _**Regional**_ _**Bell**_
_**Operating**_ _**Companies (RBOCs)**_ **`are engaged in the`** **`delivery`** **`of a range`**
```
of transport and Information services, Including electronic yellow
pages and audiotex services. The full significance of these
developments has yet to be seen, but analysts think 1t 1s likely
that the RBOCs will seek entry to a number of foreign
markets,Including European ones. In Europe, many of the large
national operators have already entered the information services
marketplace and are Involved 1n the provision of host services,
videotex and kiosk services, gateways, electronic messaging
```

**`services, and electronic telephone directories and`** _**Yellow Pages.**_

```
  While a more liberal regulatory environment within Europe is
beginning to show signs of assisting Information market development,
progress in the technical area of developing a European broadband
network has been much slower. The current revolution in
telecommunications technology has considerable implications for the
way that Information services will be delivered 1n the future.
Broadband communications, which enable huge quantities of data to
be transmitted at high speed, make 1t feasible to Integrate text,
voice, sound, and Images and so open up new markets for Innovative
service providers, 1n areas such as video conferencing and training.
  Major progress has been made on Installing an Integrated
Services Digital Network (ISDN) Infrastructure within the Community,
but a great deal remains to be done. By 1990, four Member States
were already offering commercial services, but partly as a result
of a lack of agreement over standards, the ultimate goal of

```

```
replacing the analogue public switched telephone network with a
fully-fledged pan-European ISDN has been delayed. It is now four
years since the twelve PTOs operating in the EC agreed to implement
a European ISDN infrastructure by 1992. While basic ISDN lines are
already installed in most European countries, the rate of progress
is highly uneven, as can be seen in Table 4. Naturally, this has
implications for the development of an advanced information market
across the Community.

```

_**EC Member States**_ _**Numbers**_

```
Table 4

ISDN basic Unes; projected EC Infrastructure, 1994.

          Current ISDN Basic lines per
          population(a) Unes 000 population
          (million) by 1994 by 1994

Belgium 10.0 140,000 14.0
Denmark 5.1 125,000 24.5
Germany 79.6(b) 1,250,000 15.7
Spain 39.0 420,000 10.8
France 56.4 1,100,000 19.5
Greece 10.1 170,000 16.8
Ireland 3.5 30,000 8.6
Italy 57.6 825,000 4.3
Netherlands 15.0 280,000 18.7
Luxembourg 0.4 7,000 17.5
Portugal 19.9 60,000 6.1
UK 57.4 1,000,000 17.4

EC 344.0 5,407,000 15.7

```

**(a)** _**OECD Employment Outlook, 1990.**_
**(b)** **For unified Germany.**

_**Source: Yankee Group,**_ _**1992.**_

```
  ISDN 1s not the only technology around which new forms of
Information service delivery will develop. There is an intention
that an even more advanced Integrated Broadband Communications (IBC)
network will be set up within the Community. The IBC network could
take over from ISDN which does not have a broad bandwidth and 1s

therefore unsuitable for advanced multimedia services. The

prospects are that Integrated Broadband communications (IBC),
currently still at the developmental stage within the context of the
Commission's RACE (Research & Development 1n Advanced Communications
1n Europe) programme should be available commercially from about

               10

```

```
1995 onwards. If these assumptions hold good, then another major
enabling element 1n the European information environment will be in
place before the end of the decade.
  In its Green Paper on the development of a common market for
equipment and services, issued 1n 1987, the CEC outlined a programme
of regulatory change meeting the challenges of the Single Market of
1992 and of technological development. The Green Paper argues that
there must be an opening up of the public telecommunications
infrastructure to allow equality of access of both private service
providers and the public network operators, and that equality of
access should be based on clear common rules and practices. The
common principles regarding the general conditions for the provision
of networking Infrastructure to users and competitive service
providers, in particular for transborder services, have become known
as Open Network Provision (ONP). The Council directive on the
establishment of the internal market for telecommunications services

through the implementation of ONP identifies the following priority
areas where ONP conditions are to be developed: leased Unes; voice
telephony; packet data services; and ISDN. Users and analysts agree
that ONP 1s an Important catalyst to change but that progress has
so far been slower than expected. In this respect, ONP has still
some way to go in order to achieve Its main objective; to give
competitive service providers and users uniform access to Europe's
public networks.

    As a result of action by the Commission of the European
Communities as well as through market forces, further convergence
and harmonisation of standards in telecommunications will continue

to be beneficial forces in the European marketplace for electronic
Information, although inevitably, new equipment and technologies
will create new disparities and divergences. While considerable
progress has been made, transparency in the videotex marketplace
remains elusive. Even here, however, technical developments on two
broad fronts are helping to break down some of the barriers to the
pan-European market acceptance of videotex. One is the increasing
network transparency which gateway solutions can offer. The other
relates to the availability of multistandard terminal hardware and
the continuing diffusion of the personal computer and multistandard
software Into the home and office environment, developments which
have a significant role to play.

2.3 Reducing the gaps and Imbalances within Europe

  Although in recent years there has been a steady and well
documented growth 1n the European electronic information
industry,this growth has tended to be concentrated within the more
developed countries such as France, Germany and the United
Kingdom. Over the past decade, the European information market has
been characterised by a markedly uneven development of products and
services, with some countries showing a high commitment to
electronic services, whilst others are largely Ignoring them.
Between Individual Member States there are significant variations
given to the various technical options. This shows itself, for

                   11

```

```
example, in the heavy commitment given in France to public videotex
and, 1n the UK, in the emphasis on a market preference for online
ASCII databases and audiotex services.

   Particular problems are faced by the 'less favoured' regions
(LFRs) of the Community, who are not as yet major participants 1n
the electronic information services market,either as producers or
users. For strategic business reasons, such as minimising
telecommunications costs or needing to maintain close contacts with
major customers, hosts tend to be located in the major metropolitan
areas of the Community; equally, telecommunications carriers tend
to concentrate their new network investments and services in the

central markets of national economies. Another difficulty 1s that
divergences between telecommunications tariff structures have
further reduced the demand for electronic information within the

LFRs. There is a danger, therefore, that Information market
development 1n the LFRs will continue to lag behind the Community
as a whole, and that their prospects for improved economic and
social development through the exploitation of electronic
information services will fade. This underlines a continuing need
for the market broadening activities initiated by DG-XIII under the
IMPACT programme's INFO EURO ACCESS theme, which 1s designed to
improve the accessibility of Information at the European level for
all interested parties.

    Differences in the political and regulatory environment,
especially in the field of telecommunications, coupled with economic
imbalances between the various Member States of the EC have

contributed to this uneven development - and the moves to further
deregulate telecommunications and so favour the emergence of value
added networks, actually runs the risk of widening rather than
closing the gap between Member States. These disparities are
particularly acute in the case of the 'less favoured' regions of
the EC, those at the geographical periphery and those which lack an
adequate telecommunications infrastructure, the equipment, and the
know-how to exploit electronic information services to the full.

    Advanced telecommunications are currently at the forefront of
regional economic development. One of the key alms of EC
telecommunications policy is to reduce the disparities in
development between the various regions of the Community. In an
attempt to boost the usage of data communications 1n some of the
Community's poorest regions, the European Commission set up a
```

**`initiative`** **`1n 1991 known as`** _**Télématique^**_ **`jointly managed by the`**
```
regional development (DG-XVI) and telecommunications (DG-XIII)
directorates. This Initiative is designed to reinforce and broaden
the progress made under the Commission's STAR programme. The
emphasis of Télématique 1s put on services, specifically on data
communication applications. As regards the development of data
communication services in small- and medium-enterprises (SMEs), the
Initiative is intended to assist access to the same databases and

information services as those available in more central locations

1n the Community. A further aim is to help firms to work with or
become suppliers of data services 1n the fields, for example, of
design, accounting, financial management, joint ordering, and stock

                   12

```

**`management.`** **`Under`** **`the`** _**Télématique**_ **`scheme, eligible regions are`**
```
those with a per capita domestic product less than 75 per cent of
the European average (areas which qualify Include Greece, Ireland,
Portugal, together with the poorest regions of France, Spain, Italy,
and the UK).

               13

```

##### **`3- TRENDS IN THE DEMAND`** **`FOR ELECTRONIC INFORMATION`**

```
3.1 Indicators of European demand

  The emergence of an identifiable, 1f 1ll-def1ned Information
Industry has not been accompanied by the collection and publication
of regular, standardised Industry statistics. Mapping and measuring
the electronic information services sector presents many problems
of definition and classification and nowhere 1s this more apparent
than in relation to demand-side indicators. It 1s for these reasons

that the Information Market Observatory was established to further
the collection of Industry data and provide a deeper understanding
of the market.

  The total demand for electronic information within the EC 1s

the sum of imported Information products and services plus local
consumption of EC-produced electronic information. Unfortunately,
electronic Information by-passes export and Import regulations,
customs posts and tariffs and therefore goes unrecorded 1n national
trade statistics. At the same time, online databases are accessible
internationally through an increasingly complex world-wide system
of host computers, gateways and data communications networks, making
1t virtually Impossible to produce any meaningful figures for crossborder transactions. Similarly, 'portable' databases carried on
media such as optical disk or magnetic tape are very easily shipped
across national frontiers.

  As a result, there 1s a massive gap in our detailed knowledge
of the nature of demand for electronic information and the factors

that encourage and shape that demand. In the absence of adequate
mechanisms to capture demand-side Indicators, policy makers and
investors have to rely on gross estimates of market size and shape.
Despite these qualifications, the following sections will attempt
to present an overview of the current state of the European market
and key trends in demand for electronic Information, based on
available information.

  Demand for electronic information services (including online
ASCII databases; videotex; audiotex; and broadcast Information
services) 1n Western Europe was estimated at more than BECU 3.5 in
1990. Table 5 gives a broad Indication of relative market size 1n
selected EC countries and confirms that the largest European
national markets for electronic Information services are located 1n

the United Kingdom, France and Germany. Finer detail 1s given in
Table 6 of the level of European demand for the various delivery
technologies which are included in the total market figures
presented in Table 5.

                14

```

_**Western Europe**_ _**MECU**_

```
Table 5

Electronic information servlces(a); estimates of demand in selected
EC markets, end-1990 and projections to 1994.

           end-1990 estimates 1994 projections

Germany 295 1,000
Spain 105 315
France 950 1,685
Italy 195 685
Netherlands 260 435

UK 1,205 1,960

Western

Europe(b) 3,535 7,480

(a) Includes online ASCII databases; videotex; audiotex; and
   broadcast Information services.
```

`(b)` `Total demand across EC` _and_ `EFTA countries.`

_**Western Europe**_ _**MECU**_

```
Table 6

Electronic Information services; estimates of demand in selected EC
markets by delivery technology, end 1990.

          Online Broadcast

          ASCII Videotex Audiotex information

          databases services services services

Germany 270 20 5 *
Spain 90 15 * *
France 285 505 155 5

Italy 170 15 10 *
Netherlands 160 * 100 *

UK 860 15 240 90

```

**Western**

**Europe(a)** **2,325** **580** **530** **100**

**(a)** **Total demand across EC** _**and**_ **EFTA countries.**

_**Source (Tables 5 and 6): Communications & Information Technology**_
_**Research Ltd, 1991.**_

**15**

```
  While demand indicators for online ASCII database services are

very difficult to compile, for the reasons already mentioned, the
situation is very different with respect to videotex network
services. The reasons for this are threefold. First, European
markets for videotex information tend to be almost exclusively
national. Secondly, unlike online ASCII services which may be
accessed through a standard personal computer, a very high
proportion of users access services by means of dedicated videotex
terminals (as may be seen in the pie chart).

#### Videotex terminals; EC, end-1990
```

**(thousand units)**

Dedicated tor minais
6140

Fmulatcd PC:

Sourco Tablo A

```
  Thirdly, videotex services have typically been offered by the
national telecommunications network operator in most European
countries. This feature of videotex usage makes it possible to
establish indicators of the installed terminal base (Table 7). The
total European installed base of videotex terminals is estimated to
have reached more than 6.6 million by the end of 1990. Comparing
this figure with similar indicators for North America and Japan, it
is possible to say that in 1990, on average, there was one videotex
terminal for every 61 inhabitants in Europe, compared with 1 for
every 131 inhabitants in North America and 1 for every 1,134
inhabitants in Japan. However, figures for the European installed
base of videotex terminals are distorted by France's massive
contribution of 87 per cent of the total.
   However, taking into account the shortcomings and disparity of
sources, comparisons between countries should be made with prudence.
The most critical areas for discrepancies relate to how the figures
for the installed base of terminals is presented, where three main
considerations need to be taken Into account:

o national estimates do not clearly distinguish between
    terminals and users;

                   16

```

```
   1n most EC countries, the national operators provide estimates
   of the number of dedicated videotex terminals, but do not
   include estimates of the number of general purpose personal
   computers running videotex emulation software;

   in some EC countries, the videotex operators estimate the
   installed base in terms of the number of subscribers; 1t
   should be noted that the number of users may be greater than
   the number of subscriptions, also that there may be more users
   than terminals.

```

_**EC Member States**_ _**Numbers, percentages and dates**_

```
Table 7

Dedicated videotex terminals; Installed base, EC, end-1990.

```

```
Year service

  commenced

     1986

     1987

     1983

     1986

     1980

     1990

     1988

     1986

     1986

     1980

     1989

     1979

```

```
  Installed base of

videotex terminals(a)

```

```
Share of total EC

Installed base (%)

```

```
 0.12

 0.09

 3.91

 2.25

87.41

 0.02

 0.05

 2.18

 0.02

 1.50

 0.05

 2.40

100.00

```

```
Belgium
Denmark

Germany
Spain

France

Greece

Ireland

Italy
Luxembourg
Netherlands

Portugal

UK

EC

```

```
  7,700
  6,000
 130,000(b)
  60,000(c)
5,607,000(d)
  1,000
  3,000
 145,000
  1,000
  25,000(6)

  3,500
 160,000

6,149,200

```

```
(a)
(b)
(c)
(d)
(e)

```

```
Dedicated terminals only.
Plus an additional estimated 130,000 videotex-emulated PCs.
Plus an additional estimated 90,000 videotex-emulated PCs.
Plus an additional estimated 210,000 videotex-emulated PCs,
Plus an additional estimated 75,000 videotex-emulated PCs.

```

_**Source: Information Market Observatory.**_

```
  Despite the inevitable limitations in these indicators, they
remain useful in conveying a sense of the overall size and shape of
European videotex markets. Videotex was initially designed to
simplify the access of consumers to information and transactional
services, with households having a link installed between their
televisions and telephones.

               17

```

_**EC Member States**_ _**Numbers and percentages**_

```
Table 8

Videotex; total and professional users, EC, end-1990.

```

```
  Share of

professional
  users (%)

     95

     79

     60

     60

     50

     100

     100

     50

     100

     75

     50

     80

```

```
Professional

    users

    7,315
    4,740
   156,000
   90,000
  2,628,150
    1,000
    3,000
   72,500
    1,000
   75,000
    1,750
   80,000

```

```
Belgium
Denmark

Germany
Spain
France(a)

Greece

Ireland

Italy
Luxembourg
Netherlands

Portugal

UK

```

```
Total number

  of users

    7,700
    6,000
   260,000
   150,000
  5,256,300
    1,000
    3,000
   145,000
    1,000
   100,000
    3,500
   100,000

```

```
EC 6,033,500 3,120,455 52

(a) Ten per cent of Minitels are inactive (France Télécom).

```

_**Source: Information Market Observatory,**_ _**1992.**_

#### Videotex users; EC, end-1990

(millions)

**Professional** **users** **Domestic users**

**Source: Table 8.**

```
  The dissemination of low cost terminals in France created a

mass-market of consumer services, which has been useful in the
```

`design of professional services.` `Although` _Té lé_ _tel_ **`traffic`** `is`

```
                18

```

```
currently split more or less evenly between professional and
```

**`consumer or general interest services, according to`** _**France**_ _**Telecom,**_
```
1t 1s professional use which is the fastest growing sector. In
other Member States professional usage dominates, as can be seen
from Table 8 and the accompanying chart.

3.2 Trends 1n the demand for professional electronic information

```

_**3.2.1**_ _**Competition between information delivery media**_

```
  From a single act of keyboarding, a database publisher may
create a series of information products and services in formats
ranging from print-based products to data broadcasting services.
The impact of alternative electronic Information media and their
acceptance in the marketplace is complex, but it 1s of enormous
interest for the industry. Although very difficult to quantify, it
1s becoming evident that alternative information media, notably in
the form of CD-ROM and in-house networked systems, are beginning to
have a significant impact on the marketplace for electronic
Information. Table 9 attempts to Identify some of the key
characteristics and differences between the main forms of electronic

information delivery considered in this Report: online ASCII
databases; videotex; audiotex; and CD-ROM. While there are clear
advantages and disadvantages associated with each delivery
technology, they are not necessarily 1n direct competition with one
another. Indeed, the different forms of delivery may be highly
complementary. A good example 1s the relationship between CD-ROM
and online ASCII database services, where there may be considerable
advantage to an organisation to have both modes of access to what
is essentially the same data. CD-ROM offers the possibility of easy
and frequent access to key sources at no incremental cost, while
online services circumvent the slow updating cycles of optical
media.

  Electronic information services are pervasive throughout the
whole economy and are produced across a very broad range of
Industries. A corollary of this is that there is an increasing
diversity in the number and types of players who operate in
information service markets; from the 'traditional' online sector,
to publishers, télécoms operators, and the service industries
themselves. In particular, the low entry costs associated with
optical publishing have been a significant factor tempting many new
players into the marketplace. At the same time that the
'traditional' online sector is facing increased competition from
these new entrants, their market position with their end-users is
being gradually eroded by the advent of gateway services and local
area networks (LANs). The connect-hour approach to pricing,
customer support, and the protection of copyright all take new
dimensions when users gateway out of a LAN and onto an online host.
If LANs represent a challenge to online services, then they offer
both a threat and an opportunity to the CD-ROM industry. To deal
with the opportunity first, CD-ROM is a natural file-server, and an
ideal tool to place at the hub of a distributed network. The threat

                   19

```

```
is the difficulty of establishing suitable pricing mechanisms and
the potential loss of revenue as many more users are able to access
the data (similar problems are faced by suppliers of software for
LAN-based applications). This issue is being addressed through
multi-user site licensing agreements. The main point is that LAN
technologies are here to stay and that the Industry must to learn
to adapt to new market conditions.

```

_**3.2.2**_ _**Slowdown in demand for online ASCII databases**_

```
  One notable development the European marketplace for electronic
information in 1991 was evidence of an apparent decline in
international demand for online ASCII database services. It is

difficult to establish the full extent to which the demand-side

suffered and whether this represented a slackening in the rate of
expansion of the market, or a real fall 1n market value over
previous years since, at this stage, the evidence is partial. There
were several reports in the trade press, for instance, which
indicated that international demand (as measured by total connect
hours) for a number of market leaders 1n the text and bibliographic
services area decreased by as much as 30 to 36 per cent 1n the first
six months of 1991, compared with the same period in 1990. A re```

**`analysis`** **`of the`** **`results`** **`of the`** _**CEC/EIIA**_ **`co-ordinated survey`** **`for`**
**`1989`** **`and 1990 by the`** **`UK-based`** _**Policy Studies Institute**_ **`revealed that`**
```
two Important factors contributed to the recent downturn in demand
experienced by EC-based suppliers between 1988/89 and 1989/90 - slow
growth in the UK market (compared with the EC as a whole) and
negative real growth in US sales.

   It is only possible to speculate what causal factors might
explain this slowdown. Certainly, general trading conditions were
far from ideal during 1991 and this may well have had a negative
effect on information purchasing behaviour. At the same time, there
is an argument that the recessionary pressures being felt 1n most
highly developed economies are likely to Increase the importance
attached to timely external information - early indications from the
financial services sector suggest that demand held up well in 1991
despite the recession. The growing recognition of the strategic
value of external information is likely to ensure the continuing
healthy growth of the online database sector as a whole.

```

_**3.2.3 Awareness of electronic information services by executives**_

```
  It is clear that the further use of electronic information

services will in the first instance be evident in the professional
and business sectors. Just as PCs were Initially regarded as being
of no or little use to executives, over time with more exposure and
with the development of more user-friendly Interfaces, a wide range
of information technology is now 1n daily use by the office
executive, across a wide range of industry sectors. Yet a survey
of a European panel of executives conducted by the IMO in 1991
Indicated that two-thirds of executives do not currently use
electronic information services. The reasons given for non-use

                  20

```

```
Table 9

Key characteristics of electronic information delivery media

          Online ASCII

          databases Videotex Audiotex CD-ROM

```

```
 DTMF
 telephone
 handset

online

low

n/a

touch

tone
/voice
recognition

```

```
PC plus
  disk

  drive

offline

 medium

  high

command
language

or menu

```

```
dedicated

terminal

or emulating PC

online

medium

medium

menu

```

```
medium

billing
from

kiosk

operator

```

```
Minimum

hardware
requirements

Mode of

access

Training
requirement

Graphics
capability

Typical
mode of
Interrogation

Frequency of
updating

Mode

of
delivery

Data volume

limits
(storage)

Data volume
limits (transmission)

Method

of
payment

Method

of
billing

```

```
PC
plus
modem

online

high

low

command
language

or menu

frequent

character

by

character

unlimited

high to
medium

Invoice

from

service
provider

```

```
frequent frequent infrequent

```

```
screen

by

screen

```

```
analogue
voice

```

```
unlimited limited

```

```
  character

      by

  character

   limited

  to 0.65Gb

   high to
   medium

  subscrip    tion

    basis

 fixed price
(1ndependent
  of usage)

```

```
very
limited

billing
from

kiosk

operator

usage
only

```

```
combination
of subscrip- usage
tion & usage only

```

_**Source: Information Market Observatory.**_

**21**

```
include the difficult access procedures for logging 1n to database
hosts and expensive data retrieval. In general, it seems that many
executives prefer to rely on traditional sources of information such
as reading hard-copy journals and attending trade fairs or
exhibitions in preference to new information technologies. This is
likely to shift in the future, however, since 87 per cent of
executives anticipated an increasing requirement for external
information services in the future. In fact, 73 per cent of the
non-users in the panel said that they intend to use online services
1n the future. While it can be said that European executives appear
to appreciate the usefulness of electronic information services
(especially in France), there is generally a considerable degree of
Ignorance of the opportunities presented by videotex, audiotex and
kiosk system facilities. If the market for professional and
business electronic information services is to expand beyond the
ranks of information professionals and documentalists, there is
clearly much to be done in terms of raising awareness among
executives of the benefits of using electronic information services.

               22

```

##### **A- . TRENDS IN THE** **`PRODUCTION AND SURRLY OF`** **`ELECTRONIC INFORMATION`**

```
4.1 Indicators of European supply

  In this section, Indicators of the supply-side of the European
Industries are presented, focusing on the direct contribution which
they make to the economy, as opposed to market size which Includes
European demand for foreign (non-EC) products and services. Table
10 presents a series of broad indicators of the level of database
production and distribution activity in each of the EC Member States
in mid-1991.

```

_**EC**_ _**and**_ _**World**_ _**Numbers**_

```
Table 10

Online ASCII database production / distribution; EC, 1991.

```

```
 Gateway
services

    3

    1

    2

   13

   26

   106

```

```
Database

producers

  23

  25

  121

  45

  173

   2

  32

   5

  32

   8

  185

  651

 2,158

```

```
Host

services

 5

 16

 20

 25

 63

 19

 2

 16

 9

 51

226

731

```

```
Belgium

Denmark

Germany
Spain

France

Greece(a)

Ireland

Italy
Luxembourg
Netherlands

Portugal
United Kingdom

EC

World

```

```
Databases

   47

   28

   233

   102

   275

    2

   110

   23

   51

    9

   400

  1,280
  5,026

```

```
(a)

```

**`Although`** _**Cuadra**_ **`does not`** **`Identify`** **`any Greek online ASCII`**
```
services, at least six organisations are known to be actively
Involved 1n the CD-ROM business (1992) as publishers or
```

**`information providers`** _**(EIIA).**_

_**Source:**_ _**Directory of**_ _**Online**_ _**Databases,**_ _**Cuadra/Elsevier,**_ _**July**_ _**1991.**_

```
  Although 1n recent years there has been a steady growth 1n the
European electronic Information Industry, supply-side activity

               23

```

```
remains highly concentrated in the more developed countries of
France, Germany and the United Kingdom. Nearly 74 per cent of EC
database producers are located in these three countries, similarly
54 per cent of host services and 69 per cent of gateway services.
Counts of databases and information Industry players may be useful
as broad indicators of the supply-side activity, but they are a
limited tool since they say little about the impact of database
supply on the economy, nor about the richness and diversity of
information services. Much more detailed and valuable information

about the size and shape of database supply can be obtained by means
of carefully designed industry surveys. Through the joint efforts
of the European Commission's Information Market Observatory and the
```

_European Information_ _Industry_ _Association_ _(EIIA),_ `a valuable base of`
```
supply-side data is being built up through an annual co-ordinated
```

**`survey`** **`of`** **`hosts`** **`and`** **`information providers.`** **`The`** **`latest`** _**CEC/EIIA**_
```
survey, provides highly comparable data for the two calendar years
1989 and 1990 and allows an analysis of European supply-side
activities in terms of human resources and turnover broken down by
delivery medium, subject Interest, service/product type, and
geographic distribution.

```

_**4.1.1**_ _**Structure of the European**_ _**supply-side**_

**`The results`** **`of the`** _**CEC/EIIA**_ **`co-ordinated survey confirm that`**
```
online ASCII databases are still the most dominant (and fastest
growing) component of the European online information services
sector, accounting for revenues worth 2,054 MECU in 1990 or 78 per
cent of total online revenue. Professional videotex services are

also a significant area, and are estimated to account for between
16 and 18 per cent of all online service revenues in EC countries
(the remaining 5 per cent is attributable to a range of
'unclassified' online services).
```

**`A significant finding`** **`of the`** _**CEC/EIIA**_ **`survey,`** **`highlighted`** **`1n`**
```
Table 11, is the contribution of offline services, including such
activities as optical publishing, document delivery, consultancy and
information brokerage services to the revenues earned by electronic
information industry players. Turning to the sources of revenue by
subject (Table 12 and the accompanying pie chart), it is clear that
finance and business-oriented information services together
accounted for nearly 96 per cent of the value of EC electronic
services industry. Finance alone accounted for more than two-thirds
of the Industry value. As regards growth, finance enjoyed a growth
rate higher than that of the Industry as a whole, but it is
interesting that one of the smaller sectors, government, also grew
at a faster rate than the average. This may Indicate that some
small niche operators may have achieved some success. The growth
of business-oriented services, as opposed to financial information
services, appears to have levelled out, Indicating that this market
might be approaching maturity. The STM subject area also displays
relatively weak growth. Again, STM 1s a market which may be close
to maturity, with a high proportion of academic and public sector
users, many of whose budgets were under pressure over the period.

                  24

```

_**EC**_ _**MECU and percentages**_

```
Table 11 ^
Professional hosts and Information providers 1n the EC; turnover by
service or product type, 1989/90.

```

```
1990
turnover
MECU

```

**1,545**
**1,068**

**24**
**2,638**

**35**
**31**

**13**
**119**
**119**
**491**

```
Growth
 90/89
   %

```

**14.8**
**10.5**
**20.0**
**13.1**

**12.9**
**30.9**
**8.1**
**3.3**
**1.5**
**5.4**

```
Online services

```

**Real-time**
**Retrospective**

**Other** **online**
**Total EC** **online**

**Offline** **products**
**and** **services**

**Magnetic** **media**

```
1989
turnover
MECU

```

**1,346**

**967**

**20**
**2,333**

**31**
**23**

**12**
**115**
**117**
**466**

**Optical media**
**Document** **delivery**

**Consultancy**
**Other** **offline**
**Total EC offline**

**TOTAL EC REVENUES** **2,799** **3,149** **12.5**

_**Source: CEC / European Information Industry Association, 1992.**_

_**EC**_ _**MECU and percentages**_

```
Table 12
Professional hosts and Information providers 1n the EC; turnover by
subject Interest, 1989/90.

```

```
1989 Share of
turnover total
MECU %

```

```
1990

turnover
MECU

1,929
 689
  52
  43
  17

```

```
Share of
total

70.7
25.2
 1.9
 1.6
 0.6

```

```
Growth
 90/89
   %

 15.2
  3.4
  5.3
 14.1
  8.6

```

```
68.5
27.3
 2.0
 1.5
 0.6

```

```
Finance
Business
STM
Government
Other

EC SUB-TOTAL(a)

Representing
of survey total

```

```
1,674
 666
  49
  38
  15

```

```
2,442 100.0

87.2%
2,799 MECU

```

```
2,728 100.0

86.6%
3,149 MECU

```

```
(a) This sub-total relates only to those survey respondents who
   were able to provide a breakdown of turnover by subject.

```

_**Source: CEC /**_ _**European**_ _**Information Industry Association, 1992.**_

```
                25

```

_**4.1.2**_ _**Trends in supply-side**_ _**growth**_

**`One`** **`of the`** **`most interesting findings`** **`of the`** _**CEC/EIIA**_ **`survey`** **`is`**
```
an indication that the growth in turnover for host organisations is
showing signs of slowing down, confirming the demand-side evidence
presented in the previous section. In 1990, the total turnover of
EC-based host organisations was 3,149 MECU, representing a growth
of 12.5 per cent over the 1989 figure of 2,799 MECU. While still
higher than the growth in the economy as a whole, this is a
significantly lower rate of growth than attributed to previous
years, for which estimates in the region of 20-30 per cent are
frequently cited. A number of factors may account for this apparent
slackening of growth, not least the generally difficult trading
conditions in the second half of 1990 (especially in the United
Kingdom). New industries, especially those 1n technology-related
areas, have typically shown very high initial growth rates from a
small base, followed sooner or later by an Inevitable slowing down
as the demand base becomes established. Whatever the explanation,
there is evidence to suggest that this slowdown is a global
phenomenon. For example, a questionnaire survey conducted by the
```

_Japanese Database Promotion_ _**Centre**_ _(DPC)_ `in` **`September 1990 indicated`**
```
that the Japanese information industry players had scaled down its
own estimates of annual growth over the next five years from more
than 30 per cent to between 10 and 20 per cent.

#### Database distribution; EC, 1990
```

**Staffing by function (%)**

Editorial Managerial

```
  In 1989, the EC-based electronic information services industry
provided employment for a total of more than 21,000 people in the
database dissemination sector. In 1990, this figure had risen to
almost 22,000. It is difficult to estimate how many additional
staff are employed in 'pure' database creation activities, but these
probably account for a further 10,000 jobs. The chart shows

               26

```

```
human resources in 1990 by function and confirms that database
creation constitutes an Important part of the activities of multifunctional, composite information industry organisations. Although
the numbers employed in the sector grew by only 3.5 per cent between
1989 and 1990, it should be noted that there were considerable
productivity gains. Average turnover per employee 1n the database
dissemination sector rose by 8.9 per cent over the period, from ECU
138,262 in 1989 to ECU 150,573 1n 1990.
  A further interesting feature of database distribution activity
```

**`as indicated by the`** _**CEC/EIIA**_ **`survey was the`** **`small,`** **`almost`**
```
insignificant part of the whole, played by gateway services. These
remain something of a specialist feature of the electronic
information services industry, accounting for turnover worth only
9.5 MECU 1n 1990. At the same time, the survey indicated that
gateway activities enjoyed a 21.8 per cent rate of growth between
1989 and 1990.

4.2 Online ASCII database services

  The biggest sector of European value added data services, online
ASCII databases, is more than 20 years old. The origins of the
online ASCII database sector can be traced back to the 1960s when

publishers of printed abstracting and indexing services began to
rationalise their production methods by adopting the new technology
of computer typesetting. A by-product of these activities were
copies of the parallel printed publications on magnetic tape. These
were destined to become the first online databases as suitable

hardware platforms and retrieval software were developed to provide
remote interactive access to text-based information. At the same

time the number of personal computers and networked terminals has
increased, and hence the market potential for online services across
Europe and throughout the world.

  The market for online ASCII database services divides into two

very different sectors, real-time and retrospective databases.
Real-time databases provide Instant access to continuously updated
Information. Traditionally, the main commercial applications for
real-time database services has been within the financial sector

for monitoring fluctuations in international currency and equity
markets. The added value of real-time database services is derived

from the timeliness of the Information delivered as much as its

quality. Retrospective databases are those for which the real-time
updating constraint is not applicable. The pie chart shows the
relative proportions of real-time and retrospective services within
the European online services industry in 1990. Evidence from the
```

_**CEC/EIIA**_ **`co-ordinated surveys suggests that there has been very`**
```
little change in these relative proportions since 1988. If
anything, real-time services are slowly gaining market share at a
rate of about one percentage point per annum.

                27

```

#### ASCII databases; EC-based supply

1990 revenues by type (%)

Source:CCC.I MA. 1992.

_EC_ _MECU and_ _percentages_

```
Table 13

Online ASCII databases; geographic distribution of turnover(a),
1989/90.
           1989 Share of 1990 Share of Growth
          turnover total turnover total 90/89
```

**`MECU`** **`%`** **`MECU`** **`%`** _**%**_

```
National

Intra-EC

EC sales(b)

```

North America

Rest of World

Export sales(b)

Sub-total(b)

Representing
of survey t o t a l

15.3

26.1

21.5

1.6

9.2

6.0

15.5

524.3

777.1

454.9

616.1

1,071.0

289.6

395.3

**684.9**

1,755.9

62.7%
2,799 MECU

25.9

35.1

**61.0** **1,301.4**

25.9

38.3

**64.2**

14.5

21.3

35.8

16.5

22.5

**39.0**

294.2
431.6

725.8

2,027.2

64.4%
3,149 MECU

(a) Online delivery only, o f f l i n e products/services excluded.
(b) These figures relates only to those survey respondents who
were able t o provide a breakdown of turnover by geographic

area.

_Source:_ _CEC / European_ _Information_ _Industry_ _Association,_ _1992._

28

```
  Table 13 breaks down European revenues from the sale of online
ASCII database services by geographic region. In 1990, nearly twothirds of all revenue (64.2 per cent) came from national sales (25.9
per cent) or from 'trade' with other EC countries (38.3 per cent).
The remaining sales were in the form of exports, to markets in North
America (14.5 per cent) or other parts of the world (21.3 per cent).
  These results confirm that national demand continues to be an

important source of revenue for European online distributors.
However, when the results for 1990 and 1989 are compared, it can be
seen that the most striking growth (21.6 per cent) has come from a
greater level of trade with other EC countries. The results suggest
relatively little growth in export earnings, especially to North
America (up 1.6 per cent), but to some extent, this may be partly
attributable to fluctuations in the ECU-dollar exchange rate
(figures from EUROSTAT show that the relative value of the ECU
fluctuated considerably over the period of the survey, from a low
of US$1.074 to a high point of US$1.367).

4.3 Videotex

  Public videotex systems began to appear in Europe in the second
half of the 1970s. With the entry of Eire and Greece into the
marketplace, videotex services now exist in all the Member States
of the European Community. In almost every case, the services are
provided by the national telecommunications operator. In early 1991
there were 6.6 million terminals 1n the European marketplace and the
penetration of users in the Community's professional sector was of
the order of 3.120 million. However, the European videotex market
is still very much dominated by France, with nearly 87 per cent of
all videotex terminals and 80 per cent of service provider revenues,
although there are now efforts by other Member States, to match the
```

**`mass`** **`dissemination`** **`of`** **`videotex terminals`** **`as`** **`achieved`** **`by`** _**France**_
_**Telecom.**_ **`The success of`** _**France Telecom's**_ _**Télétei**_ **`network is in part`**
```
due to the wide and free distribution of Minitel terminals.

  One of the key trends in the European videotex market has been
the growth in demand in the professional and business sectors. A
major stimulus to videotex market development has been the creation
of access and billing facilities through premium rate access points.
These 'kiosk' facilities have stimulated the use of information and

transactional services, both by professionals (notably in SMEs) and
by consumers. The diversity of tariffs and the ability to charge
higher rates for value added services (ECU 20 to 70 per hour), have
both had a direct effect on the variety of services, especially in
the supply of professional information services. Such kiosk
facilities, available 1n France since 1986, are operational or
planned for 1992 in Belgium, Ireland, Italy, Luxembourg, Portugal
and Spain.
  The extent of cross-border traffic within Europe in respect of
videotex Information services remains very modest. To a large
extent, this is because the European videotex market has been
characterised by separate national approaches to service
development. This applies to standards, transmission networks,

                  29

```

```
policies for the distribution of terminals, as well as the
procedures for billing customers. An agreement has not been reached
among the twelve EC Member States on a common European videotex
standard. Currently, three different videotex standards are 1n
operation within the EC:

```

**`o`** **`CEPT1,`** **`derived`** **`from`** **`the`** **`German`** _**Bildschirmtext**_ _**(Btx)**_
```
   specifications;

```

**`o`** **`CEPT2, derived from the French`** _**Télétei**_ **`specifications;`**

**`o`** **`CEPT3, derived from the British`** _**Prestel**_ **`specifications.`**

```
  One approach to overcoming these standards barriers has been to
develop gateways between national services. As Table 14 shows, only
most national videotex networks had adopted multi-standard services
by 1991 (including Belgium, Denmark, Ireland, Italy, Luxembourg, The
Netherlands and Portugal).

Table 14

International videotex standards; EC Member States, 1991.

          Service CEPT1 CEPT2 CEPT3 ASCII

```

```
Belgium
Denmark

France

Germany
Greece(a)

Ireland

Italy
Luxembourg
Netherlands

Portugal
Spain

UK

```

```
RTT VIDEOTEX

TELEDATA
TÉLÉTEL

BILDSCHIRMTEXT

HELLASTEL

MCL

VIDEOTEL

VIDEOTEX

VIDEOTEX

 NEDERLAND

SVP

IBERTEX

PRESTEL

```

```
Y

Y

N

Y

n/a

N

Y

Y

N

Y

Y

N

```

```
Y

Y

Y

N

n/a

Y

Y

Y

Y

Y

N

N

```

```
Y

Y

N

N

n/a

Y

Y

Y

Y

Y

N

Y

```

```
Y

Y

Y

N

n/a

Y

N

N

Y

Y

N

N

```

**`(a)`** **`The`** _**HELLASTEL**_ **`network 1s due to be launched in 1992.`**

_**Source:**_ _**CEPT,**_ _**1991.**_

```
  By April 1991, there were 26 interconnections of national
videotex networks. Of these, 14 corresponded to two-way gateways,
notably: France-Italy; France-Belgium; Germany-France; FranceLuxembourg; Luxembourg-Germany; Germany-Netherlands; and FranceSpain. A further 26 interconnections are planned up to 1993,
bringing the total number of agreements to 52. The already

                30

```

```
extensive and growing number of links between national networks
raises the possibility of the development of a pan-European videotex
system. However, despite the considerable work to establish
connections and overcome protocol and standards differences, the
volume of International traffic remains low, exemplified by France's
Minitelnet export traffic of 242,500 hours for 1991, representing
```

**`less than`** **`0.3 per`** **`cent`** **`of`** **`total`** _**Té le**_ _**tel**_ **`traffic.`**
```
  Besides this, the question mark over the French service and the
```

**`time`** **`it`** **`will take`** _**France**_ _**Telecom**_ **`to`** **`recover`** **`its`** **`investment, have`**
**`also cast doubts`** **`on`** **`such`** **`a`** **`system.`** **`At the`** **`request`** **`of`** _**France**_
_**Telecom, Coopers & Lybrand International**_ **`was commissioned to review`**
```
the financial performance and outlook for French videotex services
over the period 1984 to 2000. The report anticipates that it will
```

**`not`** **`be`** **`before`** **`1998`** **`that`** **`the`** _**Télétei**_ **`service will reach break-even`**

```
point, the position at which the cumulative costs of offering the
service are exceeded by cumulative receipts.

   The success of videotex as an information network in the future

will depend on a number of factors, notably increased access
facilities and the supply of interesting new information services.
In the early stages of market development, there is often a 'chicken
and egg' situation where both the supply- and demand-sides need to
be stimulated if a viable market is to develop. One way in which
videotex markets can be established is through subsidising the
distribution of terminals, although this subsidy may not necessarily
be recovered in the long run. The lesson to be learnt from the
```

_**Télétei**_ **`experience`** **`is`** **`that`** **`a`** **`major factor attractive`** **`to`** **`both users`**
```
and Information providers is the central management of the system
by France Telecom, with regard to billing, distribution of terminals
and the transmission of signals.
  The videotex technology currently 1n use is to a large extent
outdated, but the basic concept is still valid. New opportunities
exist for information service providers who can harness the power
of second generation telematics based on ISDN. The post-production
videotex standardisation undertaken at the demand of industry, faced
with a fragmented market, has unfortunately not led to a single
European voluntary standard. This needs to be avoided in the next
generation of telematic services, based on broadband data
communications, which will eventually be able to integrate complex
animations, high quality still pictures, and sound.

4.4 Audiotex services

  The recent waves of telecommunications deregulation across
Europe have allowed a new range of Premium Rate Services (PRS) to
be made available by telephone, enabling users to interact, by means
of voice or touch-tone recognition, with remote databases. Like
videotex, audiotex is very simple to use and 1t requires for touch
tone recognition only the purchase of a suitable DTMF handset.
These characteristics enable a wide range of mass market
applications, directed not only to the consumer but also to the
business community. Audiotex 1s beginning to find a variety of
professional applications. Voice access is currently being provided

                  31

```

**`to various online database services, such`** **`as the`** _**British**_ _**Library's**_
_**BLAISE**_ **`service.`** **`The`** **`European Commission`** **`has`** **`conducted experiments`**
```
with Max, a talking 'robot' to provide information on the ECHO
Online Service; the exchange rates for the ECU; the programmes and
institutions of the European Commission; and technical terms used
in information technology.
  The market for audiotex services in the European Economic Space
(EC plus the EFTA countries) has shown very rapid growth in Its
early stages. In 1990, the value of the market was estimated at
MECU 530, with growth over the previous year of 83 per cent,
admittedly from a very low initial base. The United Kingdom, France
and The Netherlands are the most highly developed markets,
accounting for more than 90 per cent of 1990 revenues. Other
European countries, especially Germany, are expected to extend their
market share as the processes of telecommunications liberalisation
and new service developments begin to have an Impact. In
comparison, various estimates of the US market for audiotex services
```

**`(in`** **`1991)`** **`have been made, ranging from MECU`** **`400`** _**(Information**_
_**Industry Association)**_ **`to MECU 720`** _**(US Department of**_ _**Commerce).**_
```
  The European market for audiotex services is currently dominated
by the UK, but this is expected to change quickly as other European
countries install lines and develop new services. However, in such
a new and emerging area, it is difficult to predict at this early
stage whether significant levels of demand will emerge for audiotex
services. Neither is it possible to say with confidence whether
stable market conditions will prevail, as this will depend on the
regulatory environment, such as controls on the types of service
allowed in different markets, or restrictions on the length of
calls. Audiotex represents the least developed pan-European
information market. Future market development is dependent on
progress in three main areas:

o the policies adopted by PTOs in respect of tariffication and
    billing;

o the digitalisation of the networks and the availability of
    DTMF handsets;

o commercial initiatives.

   Perhaps the most important of these issues is the last one.
Unless commercial operators come to the audiotex marketplace with
an attractive range of services, demand will be limited. This is
a classic 'chicken and egg' situation and one where an imaginative
operator could make a considerable difference to the way that
audiotex services develop in the future. Naturally, the tariff
structures which are formulated for Premium Rate Services will have

a considerable bearing on market development. The current range of
PRS tariffs across different EC countries is shown in Table 15. An

Important point to note is that PRS tariffs are set by PTOs, who
are therefore in an extremely powerful position to control and
determine the market for audiotex and other kiosk services.

                  32

```

_**EC Member States**_ _**Prefix numbers and ECU**_

```
Table 15

Premium Rate Services; prefixes and tariffs(a), EC, 1 May 1992(b).

```

```
Peak rate charge
  per minute(c)

```

```
Belgium

Denmark

Spain

France

Ireland

Italy

Netherlands

Portugal
UK (British Telecom)
UK (Mercury)

```

```
Prefix

077

901

902

903

903

3665

3664

3666

3667

3670

0300

```

```
144

06

506 TPL/0670 CTT

0898

0839/0660

0881

```

```
    0.42

    0.14

0.14 0.95

0.14 2.84

    0.47

    0.18

    0.11

    0.21

    0.32

    0.53

    0.62

     (d)
  0.22(e)

    0.93

    0.58

    0.58

    0.47

```

```
(a) Excluding value-added taxes.
(b) Data for Germany, Greece and Luxembourg unavailable.
```

`(c)` `Exchange rates used:` _Financial_ _Times_ `4 June` `1992.`
```
(d) Tariffs in preparation.
(e) Base rate only, range of tariffs applicable on 06 number.

```

_**Source:**_ _**Logica,**_ _**1992.**_

```
  An important feature of the emerging market for audiotex
services lies in the technical possibilities for linking audiotex
with other electronic information services. Increasingly,
information publishers are employing database creation and retrieval
technology which permits individual end users to obtain specific
information needed by them or, indeed, which permits the publisher
to provide services tailored to the individual user's requirements.
Electronic mall, fax, and encrypted satellite broadcasting all
permit such customised services to be delivered with security.
  In the US, some service providers have created new applications
for business-oriented audiotex services. One example of an
```

`interesting development in audiotex is that of` _Searchcraft,_ `a`
```
service which offers a voice/fax gateway to a series of online
databases. By means of a pay-per-call number, a user can call an
automated voice response number, choose an online database service

               33

```

```
and have the results delivered by fax. Industry analysts see great
growth potential in this medium, known as 'audiofax'. The
advantages of audiofax are considerable. As well as overcoming the
very limited amount of information which can be delivered in a
classical audiotex system, the fax medium allows the possibility of
transmitting non-ASCII information such as pictures and graphics.
  Fax-based information delivery may create new opportunities for
existing electronic information services by offering new forms of
delivery. There are now more fax machines in the world than there
```

**`are personal computers.`** **`A study by the London-based`** _**Electronic**_
_**Publishing Services Ltd**_ **`projected that 8.5`** **`million`** **`fax machines`** **`will`**
```
be installed in Europe by the end of 1992. According to another
```

**`consultancy,`** _**BIS,**_ **`the number of messages transmitted in Europe in`**
```
1990 by e-mail was 350 million, compared with 6 billion transmitted
by fax. The ease of use of facsimile makes it an important feature
of the electronic information landscape, particularly if it is used
for the selective filtering of information, including personalised
newsletters and services combining fax with audiotex.

4.5 Optical Information media

  There is some uncertainty over the future use of CD-ROM and
multimedia information products in the face of competition from
'electronic books' (handheld devices which store text information,
such as dictionaries). A rapid growth in the number of electronic
books is forecast over the next five to six years. An early
indicator of the market acceptability of electronic books may be
```

**`seen in the example of`** _**Franklin,**_ **`the USA's largest dictionary`**
**`publisher.`** _**Franklin**_ **`sold more than 3`** **`million`** **`units in the two years`**
```
to the end of 1991. Growth in professional multimedia applications
using optical media is likely, but there is still much uncertainty
over its penetration of home consumer markets. In the next two or
three years there is a possibility that CD-ROM may be partially
replaced or complemented, either by WORM discs or by discs with
added capability, like the CD-ROM extended Architecture (CD-ROM/XA)
standard. At the same time, there is likely to be an increase in
the number of drives used for 1n-house applications and also for CDROMs to be produced in-house for data archival purposes. At the
present time, the rate of increase of mastering for publication on
optical disc far outstrips the growth of any other publishing

sector.

  European revenues from the sale of professional information on
optical media (predominantly CD-ROM) were of the order of MECU 30.5
1n 1990 and seem to be exhibiting fast growth rates, albeit from a
low initial base (turnover grew by 30.9 per cent between 1989 and
1990). Whilst in absolute terms, the European professional optical
publishing sector is quite small, although 1t should be pointed out
that the figures presented are for the sales of information media
only - often figures for the optical publishing marketplace bundle
together hardware, search software, in-house, and publicly-available
titles.

               34

```

_**4.5.1**_ _**CD-ROM**_

```
  CD-ROM offers a particularly attractive medium for professional
information. The medium is characterised by high data capacity,
durability, and agreed technical standards (notably ISO 9660). The
question which remains is largely one of market acceptance and
penetration. Worldwide, the production of new 'public' CD-ROM
titles is growing at an extraordinary pace. Each month of 1991 saw
the addition of around 100 new CD-ROM titles. The most reliable

figures available for European CD-ROM title output are probably
```

**`those produced`** **`by`** **`London-based`** _**TFPL Publishing,**_ **`in the`** **`form`** **`of`** **`their`**
_**Annual CD-ROM Directory.**_ **`In a booklet entitled`** _**CD-ROM Facts and**_
_**Figures**_ _**1992,**_ **`European CD-ROM title output`** **`for the`** **`period`** **`1989 to`**
```
1992 was as follows (Table 16):

```

_**EC**_ _**Numbers**_

```
Table 16

CD-ROM titles published by EC-based players, 1989-1992.

              1989 1990 1991 1992

               89 237 487 698

```

_**Source: CD-ROM Facts and Figures 1992 (TFPL Publishing).**_

```
  A notable feature of European CD-ROM production has been the
continuing entry of new players from outside the 'traditional'
online ASCII sector, mostly traditional print publishers. Scale
economies now mean that the costs of mastering and duplication are
now relatively low, which means low entry costs (of the order of
ECU 30,000) to the CD-ROM marketplace. However, CD-ROM market
development has been rather slow, possibly due to the initially high
prices attached both to CD-ROM disk drives and titles.

  Meanwhile, in terms of European sales, CD-ROM is making steady,
if not dramatic, progress 1n a number of vertical markets with law,
medicine and business being the dominant application areas. CD-ROM
has a substantial foothold in the area of bibliographic services  most of the major commercial providers of bibliographic services
have ventured into the medium - and its future as a library
reference medium seems pretty well secure. A further stimulus to
this market segment has come from various CEC Initiatives to develop
joint ventures between European national libraries. These have
```

**`included`** **`the`** **`publication`** **`of a`** **`bibliographic`** **`CD-ROM`** **`by the`** _**British**_
_**Library**_ **`working`** **`in`** **`collaboration with`** **`the`** **`French`** _**Bibliothèque**_
_**Nationale.**_

```
  The 1991 installed base of CD-ROM disk drives within the

European Community and the countries of EFTA has been estimated, by
Link Resources, to be around 176,000 units and to be exhibiting

                  35

```

```
average annual growth rates of 41 per cent. Table 17 provides a
breakdown of the situation in four selected EC Member States.

```

_**Thousand units and percentages**_

```
Table 17

CD-ROM disk drives; Installed base and projections:
selected EC Member States, 1990-1994.

                                Annual

                                growth
        1990 1991 1992 1993 1994 rate (%)

Germany 15 23 35 54 85 54
France 17 27 40 60 95 54

Italy 60 90 115 140 170 30
UK 17 25 37 50 80 47

```

_**Source: Link Resources, 1991.**_

```
  It is not possible to distinguish from Link's figures whether
users are acquiring CD-ROM disk drives to access external
information or for their own inhouse applications (according to one
Industry estimate, only 80,000 CD-ROM drives were being used to
search 'public titles' in 1991).

```

_**4.5.2 Multimedia information products**_

```
  Multimedia information products which combine text, sound, still
and moving images, and comprise a new breed of information products
which are more engaging and attractive to the consumer than
traditional character-based Information products. The significance
of multimedia products and services is that they signify a change
of attitude to information and the way that it 1s presented and
used. Instead of large amounts of text which must be searched by
means of complex query languages, information can be presented and
manipulated in ways that relate more directly to users' experience.
As used currently, the term multimedia implies that the delivery
medium is an optical disc, either a videodisc or a compact disc.
This is a purely technical limitation, a feature of the very large
amounts of data which are required to deliver sound and graphic
Information, combined with the low data transfer rates which are
available to most users of online and videotex services.

  There is a growing number of multimedia titles in areas such as
education, health and safety, business and finance. Currently, this
is a market segment where traditional online simply cannot compete
at present because of current limitations for the average user 1n
data compression, storage requirements, data transfer rates, and
display characteristics. The emergence of multimedia titles is an

                 36

```

```
important trend to monitor because of its potential implications not
only on the volume and price characteristics of CD-ROM publishing,
but on the impact these factors will have on professional, library
and other information markets. In Europe, a number of encyclopedia
```

**`publishers,`** **`including`** _**Esselte**_ _**Forlag,**_ **`have begun to`** **`establish`** **`large`**
```
text and image banks which will allow parallel output either as
print and optical disc output. The entry of large traditional
publishers into the multimedia arena could well mean that print
archives, previously unavailable in electronic form, will become
transformed and enable previously underdeveloped markets to be
exploited.
  The potential of multimedia technologies, which perhaps could
or should be exploited by the online information industry is not
being developed by members of that industry, but rather by members
of a parallel information industry comprising computer hardware,
software and peripherals companies, the television and film
industries, and the music industry. The traditional information
industry, more often than not, is not even Involved at the design
stage. Multimedia applications will evolve with the introduction
of: capture and authoring tools, more powerful and less expensive
microcomputers capable of supporting the more demanding
applications, content which is not a direct transfer from existing
applications, but is newly created or has a significant value-added
over existing collections; and distribution channels which introduce
and integrate CD-ROM and related CD-based products into the mass
market.

  The trend towards international information content and markets

is being accelerated by the emergence of multimedia. Linguistic
differentiation in particular will be reduced for information
products which are more graphical in nature and subject and less
textual. The setting of international standards will play a
continuing role in making available tools, technologies and
platforms which have a common nature across national boundaries.
In multimedia today, standards are working for market growth in some
respects and against it in others. Compressed image standards are
a positive factor, including CCITT Group 3 and 4 facsimile page
image compression standards and ISO JPEG (Joint Photographic Expert
Group) and MPEG (Motion Picture Expert Group) colour still and
motion picture compression standards. Interestingly, these
standards are being developed more for telecommunications
applications than for optical publishing. However, the different
formats, platforms and systems with which optical publishers may
soon deliver multimedia to the customer (CD-ROM for the PC, Apple
and Commodore systems, CD-ROM/XA, CD-ROM/Multimedia Windows, DVI,
CD-I and CDTV) are numerous and not likely to be addressed by any
standards body except by the market Itself over a period of time.
Before CD-I or DVI can achieve any level of success, however,
questions of price and the availability of development systems and
the cost, timescale and ease of application development must be
answered, as well as the availability and price of end-user systems.
   Interplays will continue between consumer electronics products
and professional workstations, between institutional and private

                   37

```

```
education and training applications, between analogue video-based
and digital computer-based entertainment and leisure time
applications and between retail sales and represented sales. Such
phenomena have already been observed in the extension of CD-Audio
to CD-ROM, and 1n the base represented by professional CD-ROM
products in the US and mass markets in Japan, and will likely be
observed in the next few years between local (Interactive)
multimedia and online multimedia over broadband networks.

```

_**4.5.3**_ _**Geographic information systems**_

```
  Geographical information systems (GIS) first appeared over a
decade ago and have exhibited dramatic growth ever since. They were
conceived for numerous purposes: natural resource management,
management and prevention of natural disasters, urban planning, land
management, the development of public sector projects, such as
hospitals. Geographic information systems can be used as a new
access mode to other statistical and factual databases. Geographic
interfaces represent a powerful and universal language. By
combining geographical and other databases it becomes possible to
develop radical new applications: tourist-oriented databases
providing Information about routes, restaurants, hotels and sites
of interest; marketing databases combining demographic data,
consumer behavioural data, and address files.
  The point emphasised here is that of the role of catalyst that
GIS developments are likely to play for the wider Information
services market.

                38

```

#### `5- DYNAMICS OR THE EUROPEAN`
##### `INFORMATION INDUSTRIES`

```
  To fully understand the dynamics of the European Information
Industries, it is important to realise that the electronic
Information services marketplace 1s formed at the point where
intellectual property (information) telecommunications services,
hardware, and software meet. This means that the electronic
information services marketplace is open to many external Influences
and pressures, especially in the form of technological change.

 5.1 Structural change 1n the Information industries

  The Information services sector in Europe is characterised by
continuing growth at rates generally faster than those 1n the
economy as a whole. At the same time, driven by the challenge of
North American and, increasingly, Japanese competition the sector
is subject to processes of Industrial change and restructuring.
  The traditional publishing sector in Europe 1s highly
fragmented, consisting mainly of small competitors, many of whom
face the same commercial problems, including shorter runs per title,
decreasing margins, and under-investment. As a result, most
publishing, even by the year 2000, will continue to be in printed
form - even today, only a small proportion of the larger European
publishers are actively involved 1n electronic publishing. However,
print media will Increasingly be processed and produced by
electronic means, creating new opportunities for 'traditional'
publishers to become Involved in the provision of electronic
information services. The key issues facing publishers will be the
extent to which the new opportunities represent: a 'natural'
replacement of their existing business; a logical product line
extension; or simply an opportunity to diversify.
  Compared with the computer services sector as a whole, turnover
in the electronic Information services market 1s currently at a
relatively low level. However, there 1s evidence of a significant
and growing market for electronic Information within and across the
Community. Intra-EC 'trade' 1n online ASCII databases, for example,
accounted for 38.3 per cent of all revenues to EC-based hosts and
distributors 1n 1990. By comparison, distribution within the
'domestic' markets of the Member States accounted for only 25.9 per
cent of all EC revenues.

5.2 Concentration of ownership: mergers and acquisitions

  The structure of the electronic information services sector 1s

highly dynamic and 1s characterised by Intense mergers and
acquisition activity, coupled with a tendency towards
diversification. These forces are leading to an Increasing
concentration of ownership 1n the hands of a few major players.
Mergers and acquisition are spread across all-functional areas of
the Information services marketplace: database production;
distribution; and network operations. Notable European acquisitions
```

`1n 1991 Included` `the purchase of` _Pergamon_ _Press_ `by` _Elsevier_ `and the`

```
                 39

```

```
acquisition of interests 1n both the French and Italian markets
(through the purchase of information providers in the legal and
```

**`taxation areas) by`** _**Wolters**_ _**Kluwer.**_ **`Typically, information providers`**
```
have sought to strengthen their role 1n distribution (either by
means of self-hosting or publishing their data on optical media)
against a background of increasingly fierce competition, while
network operators are tending to move increasingly into Information
service provision through the acquisition of Information providers.

  The best estimate of the number of local EC-based firms active

in the European electronic information marketplace 1n 1991 1s about
7,000 (EIIA figures). While this is a large number, many European
vendors continue to operate primarily at national level, with, at
best, a limited Involvement in two or three adjacent countries.
Europe has probably less than one hundred Indigenous pan-European
operators, although to this figure should be added a significant
number of US providers who maintain a presence at European level.
Typically, the average European company 1s smaller, less vertically
Integrated, and more nationally-oriented than Its US counterparts,
although this 1s slowly changing.
  Analysis by Link Resources indicates that takeover and mergers
activity 1n the European market during the period 1990-91 was less
intense than had been anticipated. Contributory factors appear to
have been the unfavourable economic climate and the possibility that
companies were taking a longer-term view (in which 1992 was not
necessarily a key date). Another factor 1s that cross-border
cooperation has never been a common feature of the European
publishing sector. The EIIA has projected that the number of
vendors active in the European market 1s declining and will probably
drop to no more than 5,500 by 1995. This is likely to be as the
result of a growing emphasis on takeovers and mergers rather than
company failures or withdrawal from the marketplace.
  While the European information services marketplace 1s dominated
by larger players, especially by large Information conglomerates,
```

**`like`** _**Bertelsmann,**_ **`there appears to be a fairly stable`** **`two-layer`**
```
Industry structure with small- and medium-sized enterprises (SMEs)
existing alongside the industry giants. These smaller operators are
exploiting niche markets, as packagers and providers of specialised
information services. If what has happened in the computer services
sector 1s a pointer to future developments in the Information
services sector, then mergers and acquisition activity may lead to
the greatest competitive pressures being felt amongst medium-sized
players in regional markets.

5.3 Corporate strategies 1n the information business

   From a single act of database creation, it 1s possible to derive
a wide range of complementary products; from printed media to
videotex services and online ASCII databases. This characteristic

of database publishing enables producers to develop multiple
commodities, and so create larger but more segmented markets. In
Europe, corporate strategies are evolving to exploit these
opportunities for product diversification, while developments 1n
marketing and pricing policies, delivery systems and advances in
retrieval software are being Introduced in an attempt to create and

                  40

```

```
stimulate greater demand for electronic Information.

```

_**5.3.1**_ _**Diversification and cross-media ownership**_

```
  Database creation and maintenance are highly labour-intensive
and therefore expensive operations. However, a peculiar economic
feature of information is that subsequent reproduction costs are
very low. The low marginal costs of generating information products
have encouraged this process of product diversification. The
contents of many national newspapers are often published
electronically, as online information services of CD-ROMs, as well
as traditional printed copy, making it possible for the newspaper
to position different delivery systems and formats for different
market segments. At the same time, advances in telecommunications
are extending the geographical reach of information markets,
permitting information goods and services to be distributed 1n
different regional markets at insignificant marginal costs. These
developments are stimulating the creation of a pan-European
Information marketplace 1n which there is potential for a range of
parallel Information products and services to co-ex1st. The high
first copy costs of Information products, combined with low
reproduction costs, creates a strong incentive for sales
maximisation so as to minimise unit costs. This economic logic
tends to especially favour large publishers and media companies,
where advertising revenues and competitive positioning are
determined by circulation and audience share. As a result,
information business monopolies are emerging 1n specific information
markets, a process which tends to exclude smaller producers.

  Diversification is a key feature of the Information marketplace.
It is motivated by defensive strategies to protect market share and
the realisation of scope economies through the joint production of
information commodities (thus spreading costs over several different
products). The privatisation of the audiovisual industry in Europe,
in particular, has led to higher levels of cross-media ownership.
For example, newspaper and magazine publishers have emerged as
dominant players in the German audiovisual industry, similar
patterns of cross-media ownership are evident in Italy and France
where broadcasting has been progressively deregulated. The
expansion of the pan-European marketplace is also beginning to
create 'transnational' Information products, whereby the same
television programme, for example, is broadcast simultaneously to
national and regional audiences in several countries. While this
development is aimed at maximising audiences and reducing
programming costs, there 1s a danger that, left unchecked, it might
eventually undermine Europe's rich cultural diversity.

```

_**5.3.2 Broadening the professional user base**_

```
  The major costs of electronic publishing lie in sales and
distribution, largely because there are few established channels
for electronic publications 1n the same way that there are retail
bookshops for printed media. Furthermore, consumers tend to need
a high level of support and after-sales service because of the
complexity of many electronic Information products and services.

                  41

```

```
In order to begin to recover these costs, the stimulation of greater
levels of demand 1s essential to the future development of the
marketplace for professional electronic information 1n Europe. In
the second phase of the IMPACT programme, beginning 1n 1991, the
European Commission has accordingly shifted the emphasis from the
supply to the demand side of the market, adopting 'INFO EURO ACCESS'
as Its central strategic theme. INFO EURO ACCESS 1s concerned with
improving the accessibility of Information at the European level for
all interested parties. A variety of corporate and Industry level
initiatives, running concurrently with the Commission's IMPACT
programme, are attempting to establish the Information business as
a mass production and distribution sector.
  There are signs that European firms are beginning to place more
emphasis on Improving the balance between technological development
and market development, the latter being more directly oriented
towards the requirements of users. As part of this greater
marketing effort, there is increasing attention to promotional
activities and improvements to training, customer services, and
support documentation. A further welcome development is the
restructuring of pricing structures in online ASCII database
markets, the result of not only more intense market competition but
also of new and cheaper telecommunications options which have become
available. Traditional online pricing practices, based on charging
for time spent connected, are being redefined and firms are seeking
to define new pricing formulae which more satisfactorily reflect the
effective market demands of users,Information providers, and service
```

**`operators.`** **`For example, both`** _**ESA/IRS**_ **`and`** _**Maxwell Online**_ **`began`**
```
experimenting with new pricing mechanisms 1n 1991, signalling a
shift away from connect time to charging for the information
actually delivered (using a mix of print pricing, command-based
pricing, and fixed fee or subscription arrangements).

  Finally, the stimulation of the demand-side will be encouraged
by the creation of more user-friendly access systems and innovative
value-adding features by the host services. Recent examples of
these innovations include: intelligent interfaces and gateways;
multi-file searching; ; post-processing of search results by means
of text processing, personal database, spreadsheet, statistical and
graphical tools.

5.4 Completing the Internal market: challenges and opportunities

  On the whole, European companies have been less successful than
North American and Japanese companies 1n converting their research
and technological development (RTD) activities into Inventions and
their inventions into market shares and profits. From the mid1980s, European industry has become less competitive globally. As
indicated in earlier sections of this Report, the EC has a
significant trade deficit with the USA 1n the electronic information
services sector, and the challenge from the Japanese is expected to
Intensify through the latter half of the 1990s. Therefore, there
1s a need for considerable effort in applying market-driven
approaches to research and technological development (RTD) 1n the
information services sector. This may Involve balancing the needs
for priority technological research with more Intensive and

                  42

```

```
proactive measures toward demand-stimulâtion, matching user
acceptance with product design, and reducing some of the legal and
regulatory barriers to market growth and development.
  In this latter area, the Commission has made an Important
contribution through IMPACT and the activities of the Legal Advisory
Board (LAB). The lack of a comprehensive legal framework relating
to the electronic Information services sector presents many
difficult issues for the industry, not least 1n the area of
Intellectual property rights. Traditional literature and published
written information have long benefitted from copyright protection
as a safeguard against copying and re-use, thereby protecting the
time, expense, and Intellectual effort invested in their creation.
Yet in the database domain, piracy 1s particularly easy as some or
all of the contents can be downloaded and reproduced quickly and at
low cost using modern communication networks. Similar problems
emerge in relation to the protection of computer software. Without
adequate protection, European companies are reluctant to Invest 1n
new database technologies if action 1s not taken to provide a secure
and stable legal framework. The LAB contributed to this debate by
Its preparatory work. In May 1991, on the basis of a study
providing an overall view on the legal status of protection for
'Informational compilations', the LAB's majority opinion suggested
```

**`to the Commission that a mere`** _**droit**_ _**d'auteur**_ **`protection would not be`**
```
sufficient and that additional means of protection should be sought.
Similarly, the LAB has recognised the diversity of approaches to
personal data protection in Member States as a significant obstacle
to the free flow of data within the Commnulty and contributed to a
draft Directive on this Issue, proposed by the Commission 1n 1990.

  As well as facing up to some of the legal and administrative
problems already mentioned, there 1s a further challenge 1n the form
of the linguistic and cultural differences which constrain
Information market development at European level. These barriers
lead to market fragmentation and mean that the creation of a single
Internal market based on economies of scale is difficult to achieve.

This places the Community at a strategic disadvantage compared with
North America, whose domestic markets are very largely monolingual.
The challenge ahead 1s therefore to develop a co-ordinated and
balanced approach to developing the electronic information sector,
reconciling the conflicting goals of Increasing global
competitiveness while maintaining national and cultural diversity.
   The major Impetus to the electronic Information marketplace
will, of course, come from the general expansion of cross-border
business activity after the Single European Market is consolidated
over the next few years. As businesses 1n all sectors adjust to the
new realities of pan-European market competition and regulation,
they will require a great variety of Information to function
effectively and efficiently, and a greater share of this
information will need to be accessible across national borders.

Clearly, the markets for electronic information services will play
a central role 1n these major transformations of the European
Economic Area, by providing the technologies and services needed for
Integration and competitiveness at the level of firms and
industries.

                43

```

**C O N C L U S I O N S**

**The Information** **Market Observatory** **has continued** **to make**
**progress in the collection and analysis of** **Indicators** **relating to**
**the European electronic** **information services marketplace.** **The**
**estimates which follow represent possibly the most accurate measures**
**of industry value so far available:**

**-** _**In**_ _**1990,**_ _**turnover by EC-based producers and distributors of**_
_**electronic Information services was around BECU**_ _**3.1,**_ _**providing**_
_**employment for an estimated 32,000 people (full-time**_ _**equivalents)**_
_**In**_ _**7,000**_ _**firms.**_ _**These figures place the sector on a roughly**_
_**equivalent basis**_ _**with**_ _**two other strategically**_ _**Important**_ _**sectors:**_
_**market research (BECU 1.9) and management consultancy (BECU**_
_**3.5).**_

**This third Annual Report of the IMO underlines four significant**
**trends** **and** **structural** **features** **of** **the** **European** **electronic**
**Information services marketplace identified in the previous Report:**

**-** _**The United States continues to dominate international markets**_
_**for professional electronic information services.**_ _**US**_ _**Industry**_
_**value in 1990 was around BECU 6.9, more than twice the**_ _**size**_ _**of**_
_**total EC-based activity**_ _**(BECU 3.1).**_ _**Typically, the average**_
_**European company**_ _**Is**_ _**smaller, less vertically**_ _**Integrated,**_ _**and**_
_**more**_ _**nationally-oriented**_ _**than**_ _**Its**_ _**US counterparts.**_ _**Disparities**_
_**continue to exist beween the US and the Community**_ _**In**_ _**terms of**_
_**database production and total Industry value.**_

_**- Significant differences exist between the Member States**_ _**In**_
_**relation to information market development. Particular problems**_
_**are faced in the Community's 'less favoured' regions**_ _**In**_ _**relation**_
_**to**_ _**demand,**_ _**local**_ _**supply,**_ _**and**_ _**the**_ _**telecommunications**_
_**Infrastructure.**_ _**These problems are being ameliorated by**_
_**Community**_ _**actions, notably under the Télématique and IMPACT**_
_**programmes.**_

_**- Most Information providers operate on a predominantly national**_
_**basis, delivering professional Information services to their own**_
_**national communities.**_

**44**

**-** _**Technical, linguistic,**_ _**administrative,**_ _**and**_ _**legal obstacles**_
_**continue to hamper the development of a common market**_ _**In**_
_**information**_ _**services.**_ _**Despite the opportunities presented by**_
_**the SEM, few truly pan-European**_ _**Information services have**_
_**been brought to the marketplace.**_ _**This**_ _**reinforces the need for**_
_**market**_ _**broadening**_ _**and**_ _**awareness**_ _**raising**_ _**activities,**_ _**as**_
_**supported by the INFO EURO**_ _**ACCESS**_ _**central strategic concept**_
_**of the IMPACT programme.**_

**Since the** **publication** **of the previous IMO Annual Report, three**
**Important** **new trends and developments have become apparent:**

**-** _**Evidence from both supply-**_ _**and demand-side**_ _**Indicators**_
_**collected by the IMO points to a slowdown**_ _**in**_ _**the rate of growth**_
_**of International markets for online Information, beginning**_ _**In**_ _**the**_
_**second**_ _**half**_ _**of**_ _**1990 and**_ _**continuing**_ _**throughout**_ _**1991.**_
_**Recessionary pressures In the global economy appear to have**_
_**depressed demand**_ _**In**_ _**EC, North American, and Japanese markets.**_

_**-**_ _**Intra-EC**_ _**'trade'**_ _**In**_ _**online ASCII databases was the fastest**_
_**growing market segment between 1989 and 1990**_ _**with**_ _**an growth**_
_**rate of 26.1 per cent**_ _**(In**_ _**absolute terms) while exports to**_
_**destinations outside the Community grew by only 6.0 per**_ _**cent.**_

_**- Merger and acquisition activity is a significant force in the**_
_**European Information**_ _**market**_ _**as industry**_ _**actors**_ _**seek to**_
_**integrate**_ _**Information**_ _**product/on**_ _**and distribution**_ _**activities.**_
_**The number of vendors active**_ _**In**_ _**the European market**_ _**Is**_
_**gradually declining and**_ _**Is**_ _**predicted to fall from**_ _**7,000**_ _**firms**_ _**In**_
_**1991 to no more than**_ _**5,500**_ _**by 1995.**_

**45**

#### **`Annex I: Definitions`**

_**AUDIOTEX.**_ **`Audiotex`** **`1s a new`** **`electronic information medium`** **`with`** **`applications`**
```
both 1n consumer (home user) and business markets. Audiotex services are
directly accessible by means of a suitable (Dial Tone Multi-Frequency or DTMF)
telephone handset.

```

_**BROADCAST SERVICES.**_ **`Services where`** **`no`** **`Interactivity`** **`is`** **`possible`** **`on the`**
```
part of the customer in selecting what is sent by the service provider.

```

_**DATABASE PRODUCER.**_ **`An`** **`organisation which holds`** **`the`** **`Intellectual`** **`property`**
```
rights relating to the content of electronic information products and services
and which licences host services or distributors to use that content which
those hosts/distributors make available 1n electronically usable form.
Usually the database producers perform the editorial tasks of collection and
organisation of the Information contained In electronic information services.

```

_**DISTRIBUTOR.**_ **`An`** **`organisation which performs`** **`a`** **`function similar`** **`1n`** **`nature`** **`to`**
```
that of a host service, but 1n relation to unitized electronic Information
products (such as magnetic tapes or disks, or CD-ROMS) rather than Information
services delivered via telecommunications.

```

_**DOCUMENT**_ _**DELIVERY.**_ **`Primary documents ordered`** **`as a`** **`direct result`** **`of`** **`using`**
```
electronic information services.

```

_**GA TEW A**_ _**Y**_ _**SERVICE.**_ **`A`** **`gateway operator provides specialised`**
```
telecommunications links to online Information services provided by third
parties. 'Pure' gateway services are not hosts in their own right.

```

_**HOST SERVICE.**_ **`An`** **`organisation which offers`** **`its`** **`customers direct access`** **`to`**
```
computer-held information via a telecommunications link. This definition
includes services delivered in videotex mode.

```

_**INFORMATION SERVICES INDUSTRIES.**_ **`The term 'information services`**
```
industries' embraces a range of commercial and non-commercial activities
relating to the creation; publication; and distribution of Information goods
and services. In the context of this Report, the term carries a rather more
precise meaning, relating solely to a subset of those Industries which
delivers Information services to professional (1e non-consumer) markets on a
commercial basis across a range of information media, from print-on-paper to
optical disk.

```

_**MAGNETIC MEDIA.**_ **`Tapes`** **`and`** **`disks`** **`of`** **`various`** **`sizes`** **`and`** **`formats`** **`(Including`**
```
diskettes for personal computers) which use magnetic storage technology.

                46

```

_**ONLINE ASCII DATABASES.**_ **`The`** **`term 'online'`** **`1s`** **`deemed`** **`to`** **`cover`** **`all`**

```
Interactive information services delivered by hosts (directly or through
gateways) via telecommunications links. Services delivered character by
character, rather than page by page or screen-full by screen-full, are
distinguished by reference to the Internationally recognised ASCII convention
for character coding.

```

_**OPTICAL MEDIA.**_ **`Various types`** **`of`** **`disk`** **`which`** **`use`** **`optical storage technology,`**
```
the most common format being CD-ROM.

```

_**REAL-TIME INFORMATION SERVICES.**_ **`Online services which are updated`**
```
immediately as new data becomes available.

```

_**RETROSPECTIVE DATABASE SERVICES.**_ **`Online services`** **`which`** **`are not`** **`updated`**
```
in real time.

```

_**TRANSACTION SERVICES.**_ **`Services where`** **`the`** **`principal objective`** **`1s a`**
```
transaction rather than the delivery of information, such as EDI services.

```

_**VIDEOTEX.**_ **`Online services delivered page`** **`by`** **`page`** **`or`** **`screen-full`** **`by`** **`screen-`**
```
full, rather than character by character.

                 UT

```

**A n n e x** **I I :** **A c r ~ o n y i** **`and`**
**at>fc>** **r * o v** **i a t i** **o n s**

```
ASCII American Standard Code for Information Interchange
AT&T Atlantic Telephone & Telegraph
BLAISE British Library Automated Information Service
BT British Telecom

Btx Bildschlrmtext

CAS Chemical Abstracts Service
CCITT Comité Consultatif International Télégraphique et Téléphonique
CD-I Compact Disk - Interactive
CD-ROM Compact Disk - Read Only Memory
CD-ROM/XA Compact Disk - Read Only Memory/eXtended Architecture
CDTV Commodore Dynamic Television
CEC Commission of the European Communities
CEPT Conférence Européenne des Postes et Télécommunications
CIT Communications & Information Technology Research
CMEA Council for Mutual Economie Assistance

DG-XIII CEC Directorate-General for Information Technologies and
       Industries, and Telecommunications
DG-XVI CEC Directorate-General for Regional Development
DPC Database Promotion Centre (Japan)
DTMF Dial Tone Multi-Frequency
DVI Digital Video Interactive
EC European Community
ECU European Currency Unit
ECHO European Commission Host Organisation
EFTA European Free Trade Association
EIIA European Information Industry Association
ESA/IRS European Space Agency / Information Retrieval Service
EUROLUG EURopean OnLine User Group
Eusidlc European Association of Information Services
GIS Geographical Information Systems
IBC Integrated Broadband Communications
IBM International Business Machines

ICT Information and Communication Technologies
IIA Information Industries Association (US)
IMO Information Market Observatory
IMPACT Information Market Policy ACTIons
INSPEC INformation Services for the Physics and Engineering Communities
ISDN Integrated Services Digital Network
ISO International Standards Organisation
JAPIO JApan Patent Information Office
JICST Japan Information Centre for Science and Technology
JPEG Joint Photographic Expert Group (ISO)
LAB Legal Advisory Board
LAN Local Area Network

LFR Less Favoured Regions
MCC Maxwell Communication Corporation
MDC Mead Data Central

MITI Ministry of International Trade and Industry (Japan)
MPEG Motion Picture Expert Group (ISO)

                     'I*

```

```
NSF National Science Foundation (US)
OECD Organisation for Economic Co-operation and Development
ONP Open Network Provision
PC Personal Computer
PRS Premium Rate Services

PSTN Public Service Telephone Network
PTO Public Telephone Operators
RACE Research & development in Advanced Communications in Europe
RBOC Regional Bell Operating Company
RTD Research and technological development
SDI Selective Dissemination of Information

SEM Single European Market
SME Small and Medium Enterprises
STAR Special Telecommunications Action for Regional development
STM Science, Technology and Medicine
TFPL Task Force Pro Libra Ltd (UK)

VADS Value Added Data Services

VANS Value Added Network Services

WORM Write Once Read Many (optical disk standard)

                 ivl

```

**A n n e x** **I** **I** **I** **:** **L i e - f c .** **o - p** **p u b l** **i c a t i o n s**

**Arnold,** **Steven A.** _**The Information factory: a profile of Japan's**_ _**information**_ _**and**_
_**database**_ _**Infrastructure.**_ **Infonortics Ltd, 1991.**

_**Analysis of**_ _**Industry**_ _**prospects for optical storage compact**_ _**disk**_ _**products**_
_**(volume 4 draft).**_ **Understanding** **&** **Solutions, August 1991.**

**Can the hosts make money? [Videotex special** **report].** _**Videotex International**_
**15 January 1992, page 1.**

**CD-ROM** **databases: a survey of commercial** **publishing** **activity.** _**Database**_
**February 1992.**

_**CEC/EIIA**_ _**co-ordinated**_ _**survey of professional hosts and information providers in**_
_**the European Communities 1989/90 (final report).**_ **European Information Industry**
**Association, April 1992.**

**Les chiffres 1991** **In** _**La Lettre de Télétei.**_ **Supplement,** **April** **1992.**

_**CMEA**_ _**90 (final report).**_ _**Frank-Michael**_ _**Bahr,**_ _**Political Consulting and Technology**_
_**Assessment, June 1991.**_

_**Databases**_ _**in**_ _**Japan.**_ **IMO Working Paper 91/3, December 1991.**

_**Directory of online databases.**_ **Cuad ra/E 1 sev 1er ( b 1 enn** **i** **a 1** **).**

_**EUSIDIC/EUROLUG survey of public data networks**_ _**In**_ _**Europe 1991.**_ **EUSIDIC,**
**1991.**

_**Information UK 2000: an overview of the European information scene.**_ **Electronic**
**Publishing Services Ltd for the British Library, March 1990.**

_**New opportunities for publishers in the Information**_ _**Industry:**_ _**a strategic study**_
_**(interim report).**_ **Consulting Trust GmbH, June 1992.**

_**Overview of the EC videotex market 1990/91.**_ **IMO Working Paper 92/4, April**
**1992.**

_**Les services videotex professionnels en Europe:**_ _**Impact**_ _**sur le marché des bases**_
_**des**_ _**données**_ _**(rapport final).**_ **Quadrature, October 1991.**

_**Summary results of**_ _**1991**_ _**executive panel.**_ **IMO Working Paper 92/1, January**
**1992.**

_**Understanding information: business, technology and geography**_ _**(ed.**_ _**K. Robins).**_
**Belhaven** **Press,** **1992.**

_**Value added services**_ _**In**_ _**Western Europe 1992.**_ **CIT** **Research, 1991.**

**5 o**

**ISSN** **0254-1475**

##### **COM (93) 156 final**

# **DOCUMENTS**

## **EN 15**

#### **Catalogue number : CB-CO-93-181-EN-C** **ISBN 92-77-54781-2**

**Office for Official Publications of the** **European Communities**

**L-2985** **Luxembourg**

**M**