The economic footprint of the media sector in Europe

The media sector is changing significantly due to the digital transition trends boosted by the recent COVID-19 pandemic. While it is still in an adjustment mode, the EMFA is proposed bringing several challenges and changes to the current practices. The introduction of the EMFA could act as another catalyst and game-changer for the industry. However, it could also be a great challenge for the industry to adapt. Regulatory changes of this magnitude could impact the “doing business” of the sector and potentially some of the fundamentals. The Act could significantly influence the sector’s innovation, production, digital transformation and its sustainability in general.

To approach the potential economic impact of EMFA, we examine the overall economic footprint of the activities of the media industry in four southern European countries: Greece, Spain, Italy and Portugal utilizing Eurostat data. Advertising led the sector’s total turnover and employment in Greece during 2019, while publishing activities, and television broadcasting activities were also important. The leading subsector in Spain in terms of turnover in 2019 was similarly advertising, followed by motion picture, video and television program activities. Likewise, the greatest share of employment belonged to advertising which was more than double compared to publishing, or to motion picture activities. In Italy, advertising turnover was greater than in the other media sectors in 2019. However, the subsector with the second highest turnover was data processing and hosting activities. The advertising sector in Portugal also had the highest turnover in the media industry in 2019, followed by publishing activities, and television broadcasting.

The overall economic footprint of the media industry includes both the economic activity of the media industry itself and the multiplier effects that this activity has across the sectors of each national economy. Apart from the value added, employment and tax contributions generated by the activities of the media enterprises themselves, the media industry stimulates activity in many other sectors of a country’s economy, as the media enterprises use products and services from various other economic sectors as inputs (such as machinery, marketing services, transportation services etc.) Moreover, the increased economic activity of the suppliers of the media industry stimulates economic activity in sectors producing inputs used by these suppliers, and so on. The aggregate effect of these interactions is the indirect effect of the activities of the media industry on the economy.

Furthermore, the activities of the media industry generate revenues for the workers employed in the media businesses, in the form of salaries and wages, and therefore cause an increase in household disposable income and thus to consumer demand, which in turn causes further stimulation of economic activity. In a similar manner, multiplier effects also appear along this path of economic interactions, as this stimulation of economic activity causes a further increase in household income, thus a further increase in consumer demand, and so forth. The aggregate effect of this type of interactions is called the induced effect of the activities of the media industry on the economy.

The overall economic footprint of the media industry in each country, including the indirect and induced effects of the activities of the media industry, is calculated using Leontief’s economic impact assessment methodology (Input-Output analysis) for the set of activities constituting the media industry, using data from Eurostat’s National Accounts and Structural Business Statistics databases for the year 2019.

The results of the analysis highlight that the media industry is a strong contributor to GDP creation in the national economies of Greece, Spain, Italy and Portugal, with total contributions in the range of 2.1-2.4% of each country’s annual GDP in 2019. The economic impact of the activities of the media industry is particularly high in Italy, at 2.4% of the Italian annual GDP in 2019, exceeding €43 billion. In absolute terms, the impact of the media industry on annual GDP in Spain approaches €26 billion, while in Portugal and in Greece it stands at €4.4 billion and €3.9 billion respectively. The media industry is a reliable engine for job creation in each of these southern European countries, contributing around 2% of total employment in each country. In absolute terms, the activities of the media industry support more than half a million (518,000) jobs in Italy, around 330,000 jobs in Spain, as well as about 90,000 jobs in Portugal and 100,000 jobs in Greece.  Moreover, the activities of each country’s local media industry are robustly supporting the collection of public revenue, with total contributions to the government coffers ranging between 2% and 2.5% of each country’s overall annual government revenue in 2019 (€16 billion in Italy, €8 billion in Spain, €1.5 billion in Portugal and €1.3 billion in Greece). In addition, each country’s local media industry significantly contributes to the generation of the social product (in the sense of the sum of labour income, public revenue and investment) in the country’s economy.

Regulatory changes like the ones introduced by the EMFA could alter significantly the relevant industries. Therefore, careful examination of the macroeconomic effects induced by regulatory interventions of such magnitude is recommended in order to assist the sector’s GDP contribution and support a sustainable digital transition in the long run.

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