DiPP - The app economy: a tale of two markets?

On 27 September DIGITALEUROPE hosted a ‘Digital in Practice Programme’ (DiPP) workshop on ‘The app economy: next driver for growth and jobs in Europe?’

The conversation conveyed a distinct feeling that there are two Digital Single Markets whose main actors move at different speed on two parallel tracks.

Mind the gap!

Bullet trains cannot ride effectively on tracks designed for steam engines in the 19^th century. Likewise, business models that power today’s startups can’t easily accommodate rules and regulations whose provisions betray a 18^th century legacy on occasion.

On one hand, the Commission is doing its best to deliver on its vision of an ambitious DSM strategy released on 6 May 2015: a flurry of consultations and other multi-stakeholders fact-finding actions have nurtured various Communications and legislative proposals. Arguably, a healthy debate is well on its way regarding key issues such as connectivity or copyright. Mission-critical data flows will be addressed in November. The resulting picture is complicated but every relevant voice has a chance to be heard in the process.

On the other hand, Europe’s thriving startup industry expects policy makers to keep on supporting them effectively, not to design a tighter straitjacket or to move regulations backwards. A different sense of urgency is the fly in the ointment: simply put, setting the regulatory environment right is a matter of incremental improvement for many policy makers, of life or death to most startups.

Attention deficit?

What makes European startups’ advocacy look so compelling? Nobody questions the fact that they are Europe’s best chance to create growth and jobs.  The tally of direct and indirect jobs involved in the European app business reached 1.64 million in January 2016, and growing. They generate close to $16.5 billion in revenues, i.e. 19% of the global app economy, and boast a 12% annual growth rate. The world’s top 5 apps downloaded by non-Europeans originate in Europe. In case these figures feel overly dry, think of Candy Crush Saga or other games developed by King (more than 400 million active players a day, mainly where customers are to be found, i.e. on Facebook), or music tailor-made by Musimap’s ‘humanized algorithms’, or ‘the sound of music’ fine-tuned to suit your own taste and hearing ability courtesy of Mimi Hearing Technologies.

As a result, European policy makers cannot but help Europe prosper and be competitive around the world whenever they set out to help startups to thrive and scale up. It follows that they would probably do an even better job at steering Europe towards a bright future if they listened to startups with more attention.

Brick walls and dead-ends on the way

Let’s take a few examples:

– the proposed digital content Directive seems to add a new layer of consumer law on top of the Directives on tangible goods and on consumer rights.

– copyright is another area where startups feel short-changed: neither the proposed provisions on text and data mining or the shaky attempt to make platform operators liable for spotting and erasing possibly illegal content or the creation of a new breed of ancillary rights for news links will enhance the competitiveness of European startups, let alone secure a fairer remuneration to creators.

The clock is ticking

Granted, this is only the beginning of a probably lengthy journey which will afford more than one chance to remedy possible inconsistencies with other legislation (ISPs’ liability in e-commerce Directive is but one example). But legal uncertainty takes a heavier toll on fledgling business than on bigger companies: under the same threat, the latter can mobilize legal firepower out of the former’s reach. Accordingly, policy makers should take a step back and ponder the upshot of their own impact assessments more carefully instead of rushing in new legislation as a panacea.

As it happens, startups have a clear notion of the key items – they have articulated a list of 15 priorities – likely to help them the most. Talent scout is one of them: not only do we need to bridge Europe’s e-skills deficit through concrete actions (e-skills campaigns, Grand Coalition) already taken by the Commission but intra-EU mobility needs a boost at the same time as talent should be made easier to flow in from third countries by revisiting our visa policy.

Eventually, time is of the essence: this is precisely why the perspective of a lengthy journey brings precious little comfort. As one leading start-upper submitted, one day in a startup feels like a month in a big company or a quarter in policy making circles. On average, US startups already get six times more money than their counterparts in Europe. This gap will only grow if not remedied shortly. Is being bought by a US company the best future a European startup can wish for?