The Straits Times ran a 4.5-page feature on 2 October highlighting the growth of Singapore’s Interactive Digital Media (IDM) sector. The figures were revealed in the light of the recently-concluded Deloitte study, which showed that our IDM sector grew an impressive 15% last year, despite the economic recession. IDM has also been identified as one of the 3 growth drivers for Singapore. The IDM R&D Programme Office was credited as one of the driving forces behind the growth of IDM in Singapore. The feature article – consisting of 6 stories – interviewed professionals in the IDM industry, giving an insight into the opportunities ahead and challenges faced.

On Target by Chuan Hian Hou, Daryl Chin & Tham Yuen-C

Singapore’s interactive digital media sector, singled out as one of the three key drivers of Singapore’s future growth, is right on target. It is also brimming with promise and profits, although challenges – such as a lack of entrepreneurship – abound. Last year, one small but burgeoning industry here was roaring ahead when almost every other sector was struggling to stay afloat in the middle of the worst financial crisis since the Great Depression. As many companies scaled back and retrenched workers, those in the budding digital media feld were busy adding staff to keep up with flourishing demand.

No global financial crisis was going to stand in the way of the world’s infatuation with a digital world enhanced by smartphones, super-fast broadband and the likes of Facebook and World of Warcraft. In fact, more than 60 companies – mostly start-ups – were born in the sector here last year, making everything from animated films to virtual online worlds to Apple iPhone applications. Indeed, Singapore’s interactive digital media (IDM) industry grew an eye-popping 15 per cent last year, far outstripping the tepid 0.8 per cent growth of the wider information technology (IT) sector.

It was one of just a handful of industries to register growth in a crushing recession during which Singapore’s gross domesitic product (GDP) shrank 3.3 per cent. And all the signs point to growth in the IDM sector – lots of growth – over the next few years. Consulting giant Deloitte’s regional managing director for telecommunications and media John Goeres is convinced the industry is a winner for Singapore. “IDM is growing bigger, quickly and reliably – revenues and hiring went up through the crisis without a blink. Within our lifetimes, IDM will be a significant contributor to Singapore’s GDP.”

He is not alone in his enthusiasm. The sector is one of the three singled out by the Government as a key growth driver for Singapore. The other two are biomedical science, and environmental and water technology. In 2006, the Governmnet set aside $500 million to jump-start the sector, of which about $100 million has been spent so far. Around that time, to see if its bet on IDM was paying off, the multi-agency Interactive Digital Media (IDM) Programme Office commissioned Deloitte to make a detailed study of the sector. Deloitte’s findings, published recently, were compiled over three years (2007 to last year) from data collected via surveys and in-depth interviews with various government agencies and 150 IDM firms.

Just last month, the sector won another strong vote of confidence from Prime Minister Lee Hsien Loong, who said it had “taken off very well”. He was speaking at a Research Innovation Enterprise Council (RIEC) briefing, where he announced a boost to research and development funding. The achievement to date is all the more remarkable given that Singapore had entered the game relatively late. In fact, as recently as 2006, there was no IDM sector here to speak of. Back then, there was no shortage of sceptics, even at the highest levels. A RIEC committee member, futurist Peter Schwartz, was one of those who believed Singapore’s foray into IDM was doomed to fail. “I didn’t think Singaporeans were creative, diverse or weird enough. I thought youth in Singapore had a convemtional narrow education,” said Mr. Schwartz, founder of San Francisco-based consultancy Global Business Network.

But Mr Lee said Singapore’s focus has begun paying dividends, with well-known companies such as Lucasfilm setting up offices here. Some local firms have also carved out a niche for themselves, for example, three-year-old Garena, which match-makes 52 million video gamers with one another across the globe. Faced with such impressive results, Mr Schwartz acknowledges that he has since “come to re-evaluate my conclusions”. He said: “I decided to spend some time here last year, and I’ve since seen remarkable diversity, creativity, exactly the right sort of people to create a digital media industry. The accomplishments of the IDM industry reflect this.”

This has been a dazzling start, no doubt, but some context is important. For starters, the sector is still a minnow alongside other industries here. IDM’s $867 million output was just 0.3 per cent of Singapore’s $258 billion GDP last year. By comparison, the manufacturing sector, despite a 7 per cent fall, contributed some $47 billion to Singapore’s GDP. And even at the cuurent explosive growth rates that are expected to propel IDM to a $1.7 billion contribution to GDP in 2015, that figure will still be a fraction of the smallest sector traced by the Ministry of Trade and Industry: the hotels and restaurants sector, which contributed $5 billion to GDP last year.

Some of the sector’s biggest triumphs have also run into problems. For instance, The Straits Times understand that video games giant Electronic Arts, which in 2005 – to great fanfare – announced plans to hire hundreds of game developers for new studios here, has since quietly closed down its studios. Souces say that its now-defunct Singapore development team worked on titles such as Need for Speed Online and Fifa Online. Another setback: Second Life developer Linden Lab’s Singapore office, opened in 2008, closed in March this year. It was to have done some development work for the well-known virtual world operator. Both companies declined to speak to The Straits Times.

Other big names like Google and Facebook have set up offices here to use Singapore as an administrative site, attracted by strong logistics links and infrastructure in the Republic. However, they do not plan as yet any significant development work – work that could boost the IDM sector here.

But industry giants of the future may already be taking their first baby steps at home.  So far, the IDM Programme Office has given out grants of $50,000 apiece to about 160 local firms. Not many of them can yet be called successful in the conventional sense, with a good and growing market share and proftable bottom line. But IDM Programme Office executive director Michael Yap said posting profits can take time. This is not unusual, given that most start-ups tend to fail, he said. Some might see this as a waste of public money, but neglecting to support such efforts would be a greater failure, he added. Mr. Yap, also the Media Development Authority of Singapore’s deputy chief executive, urged patience. He said that till today, both online video-sharing service YouTube and social networking site Facebook have yet to post big profits. This does not mean that these two giants are not successful, he said, pointing to their tremendous global impact. That said, he acknowledged that there remain significant challenges for the IDM industry. The sector is very talent-centric, because its products are the result of a left-brain (creative) and right-brain (science) combination,” said Mr. Yap.

In the Deloitte survey, lack of talent, especially skilled technology professionals, was singled out as one of the industry’s biggest problems. The government has been working with various educational institutions to boost the talent supply, but the sector’s growth is limited by how many talented individuals it can attract, either locally or from abroad. Another issue is Singaporean’s well-known aersion to entrepreneurship. “Risk-taking, entrepreneurship, it doesn’t come naturally to Singaporeans,” said Mr. Yap, who used to head the National Computer Board (now the Infocomm Development Authority of Singapore) before quitting to start his own company. He later sold his firm to rejoin the civil service. “Talented Singaporeans have so many options. They can work for a multinational company (MNC), enjoy a good salary. This is unlike, say, Taiwan, where many kids go off and do their own thing because there are fewer MNCs to work for.” Society is chaging, albeit slowly, with parents more supportive of risk-taking and allowing children to “take a year off to pursue their passions”, he noted.

Venture capital firm Jafco’s associate director for South Asia, Mr. R.J. Shridhar, said he has seen an increasing number of young, driven entrepreneurs with good ideas. Many, however, fall short on one count. “They don’t think global or at least regionally. They just focus on the local or ASEAN market,” he said. This tunnel vision swiftly torpedoes any chance of support from professional investors such as JAFCO, a subsidiary of Japanses equity giant Nomura. JAFCO has  invested in just one IDM company, Mozat, in the last two years. Ideas and entrepreneurs aside, there is also a dearth of seasoned managers. “Google needed (its chief executive) Eric Schmidt to ake it what it is today,” Mr Yap noted. Most of these problems, however, will evaporate with “one big success story. It takes time, some luck, but I think this may happen quite soon. Some (local IDM firms) are quite close”, said Mr. Shridhar. When this happens, more entrepreneurs, venture capital firms and seasoned exectuvies will then become “believers” in Singapore’s IDM sector, he said.