Acquisitions and awards – investment wins from the last 12 months
// creative growth finance // investment
The Spring Budget has sprung but what are the implications for investments and businesses in the Creative Industries? Creative sector companies will find some solace in changes to R&D tax reliefs and Capital Expenditure rebates, but what about everything else that’s been happening this month? Read on for insights from Creative UK Head of Investment, Matt Browning. He’ll be covering:
Matt Browning, Creative UK Head of Investment
What are three things happening in the investment space that are relevant to creative businesses?
1. The collapse of Silicon Valley Bank
The first thing to talk about is the collapse of Silicon Valley Bank. This bank was voted as the 20th best bank in the US and is known for its support of tech start-ups. Over 50% of VCs (venture capitalists) report that their portfolio clients bank with SVB, so this collapse is very significant. In the UK there are over £7 billion in deposits and this announcement has spiked fear among both financial commentators and clients of the bank.
While there is a lot still to learn about this collapse, the good news is that we’ve seen HSBC swoop into save the day with a rescue deal. It does open up a big question as to why this happened and what this could mean for the bank sector in general. With Credit Suisse now in trouble, there are worries that this could be part of a wider problem. But, top line is that this turn of events will catalyse a lot of business leaders into thinking more deeply about what they can do in terms of cash control, company governance and ensuring that they can prevent or mitigate for something like this happening in the future.
2. A new version of Chat GPT is launched
Open AI have released GPT-4 as the successor to Chat GPT and this new version has greater capacity and more accurate generative data and text. Now able to process up to 25,000 words and to respond to images, GPT-4 has been informed by feedback from usage since November 2022 when the original Chat GPT was launched. The creative side of GPT-4 is more dynamic than its predecessor, but security and ethical questions are big concerns for Open AI who have reported spending six months on safety features.
Generative AI offers opportunity for many sectors within the Creative Industries, with obvious applications for health tech. Here at Creative Growth Finance we’re keen to support the industry and broaden out our portfolio.
3. Microsoft is partnering with games providers
We have big news from Microsoft who have been in the process of acquiring Activision Blizzard for the last 12 months, which has had a major impact on the wider sector and resulted in an (as yet unresolved) investigation by the Federal Trade Commission. Over the last month, Microsoft has been writing up a huge number of licensing contracts with other games providers which tells us that they are looking to monetize from the IP that they’ve acquired through Activision Blizzard.
This activity has resulted in them signing a licensing deal with Nintendo, which is huge as it means Nintendo users on the Switch platform are able to access games such as Call of Duty. There’s also been a ten-year deal signed with Japanese developer, Ubitus, and a deal with another cloud-based streaming platform, Boosteroid which is based in Ukraine.
These are interesting moves from Microsoft and I’m keen to see how they continue down this acquisition and partnership road. Hopefully these deals will give the games industry a bit of a boost after the slowdown that resulted from the initial Activision Blizzard fallout.
Did the Spring Budget provide any support for investment-seeking creative businesses?
The obvious thing that stood out for the Creative Industries in the Spring Budget was the adjustment to the R&D tax credits. There was no big surprise with the changes to deduction for development expenditure, which we’ve known for some time was going to come down to 80% from 130%. The generosity of these adjustments is not ground-breaking, but there have been some good improvements in the audiovisual (AV), animation and game spaces, where qualifying amounts have increased.
Another announcement that could bring benefits to businesses in the Creative Industries were the improvements made to Capital Expenditure rebates. While we are typically an industry of intangibles, there are plenty of companies within creative sectors that do have tangible assets and for those companies a 100% allowance on business capital spending for three years could have a major impact.
More broadly, the move towards supporting working people through extended funded childcare hours and the scrapping of work capability assessments, has been something of a light at the end of the tunnel. These changes are impactful for working people across all industries, but this makes them no less relevant for the companies and individuals from our creative sectors. While questions remain about the funding of these schemes, they at the very least evidence a change in tack from the government and a willingness to move towards incentives and away from penalties.
What are the big movers and shakers we need to know about?
American Media Fund, APX has just acquired the controlling stake of Twickenham Film Studios, a major studio in south west London that has been around for over 100 years. This is a major move for a studio whose heritage is evidenced by the fact of it having been the location for iconic films from The Italian Job right through to the most recent instalment of Top Gun. For these studios to essentially be controlled by an investment fund is laden with implications. APX has stated that it will expand the Twickenham Film Studios brand with further studio acquisitions planned under the Twickenham name.
It will be interesting to watch that space and see what happens in terms of the films coming out of the studios and the other studios joining its cabal.
Another interesting move is in the games landscape and this is Sony’s announcement that it has $5 billion to spend on strategic investments in gaming and entertainment services this year. This sizeable sum is what’s left from the $18 billion earmarked back in 2021 for strategic investments. With the ongoing saga of Microsoft’s acquisition of Activision Blizzard rumbling on, many in the industry are assuming that spending will be targeted towards Playstation in a bid to keep pace with its rival.
The fact that there is now money floating around might push the game space into a more conscious space for investment in new content. As I’ve mentioned, this activity is coming off the back of a lengthy ‘pause period’ where no big releases have really happened. This spending spree could have a trickle-down effect for the rest of the industry.
What’s the latest in… advertising & marketing?
Likely to be welcome to advertising and marketing companies across the land are new data laws designed to reduce paperwork and cookie woes for businesses.
The drive towards improved data protection has been one fraught with struggles for businesses from across all industries but has especially impacted on the advertising and marketing sectors. Many people working in these sectors have spent the last 12 to 18 months planning for and refining their cookie policies under pressure of being seen as non-compliant.
The new laws are designed to simplify the GDPR framework and should – in theory at least – free people up to get on with some of the more creative elements of their jobs.
I think this could lead to some great opportunities in the advertising marketing space with new platforms emerging such as VR and the ability to advertise more effectively within the burgeoning metaverse world. One of the government’s claims of the new bill is that it will:
“Increase public and business confidence in AI technologies by clarifying the circumstances when robust safeguards apply to automated decision-making”
With rapid development of the likes of generative AI (as seen in the release of GPT-4), the opportunities for application to advertising and marketing are expansive. A combination of a friendlier compliance landscape and game-changing technological developments could well mean that we will see those in the adtech and martech spaces doing some really exciting things.
What are the new programmes and events that businesses need to know about?
- Liverpool Business Fair, 28 March
- Creative UK North of Tyne Investment 360 Webinar, 28 March 11am-12.30pm
- London Games Week, 29 March to 8 April
- The Good Work Review – major report into job quality across the Creative Industries
If you’d like to learn more about the investment offerings available through Creative UK, visit our Investment web pages here.
