In BRIC countries, the newspaper industry continues to expand due to increasing literacy and the growth of the middle class.
Summary: How do customers want our products delivered? That's the question the film and television, publishing and music industries must answer to increase EBITDA in the future.
Film and television production
Owners of both films and TV shows are making content available through a growing number of distribution platforms - including video on demand, mobile devices, game consoles and other online content aggregators.
Yet traditional distribution tracks aren't doing as well. DVD sales continue to decline, causing companies to look for other sources of revenue. Studios hope that the success of 3-D will help offset DVD declines. They also think that 3-D can help stem movie piracy, since counterfeiters can't replicate the 3D effect of films with a camcorder.
During the period between 2006 and 2010E, the sector's estimated EBITDA dollar growth (7%) landed it near the middle of the M&E group. However, its EBITDA margins are among the lowest of the sectors.
In 2010, analysts expect film and TV production EBITDA dollar growth to see a sharp rebound, while EBITDA margins are expected to rise slightly.
Declines in advertising revenues have hit the publishing sector hard. However, advertising dollars are recovering some now that the downturn is easing. In the BRIC (Brazil, Russia, India, and China) countries, the newspaper industry continues to expand due to increasing literacy and the growth of the middle class.
Additionally, new e-reader platforms offer publishing companies more profits. This isn't just a developed country phenomenon: E-readers are expected to boost publishing sales globally, especially in China. By 2015, China will outpace the US to become the biggest e-book market in the world¹.
Nevertheless, the publishing industry is still adjusting to the digital revolution. Between 2006-2010E, EBITDA dollars are expected to contract by a CAGR of 1%.
The music industry has been delivering content digitally longer than other M&E industries. Still, digital sales aren't making up for the loss of CD sales.
To increase profits, the music industry is focused on aggressive cost-cutting via digital distribution and new revenue opportunities.
These opportunities include:
- Ad-supported music
- Licensing music to music-themed video games
- Licensing content to mobile operators
- "360 degree business model" (e.g., labels gather revenue from live performances, merchandising and sponsorships)
The potential for digital growth is attractive, but the overall outlook is mixed.
For the period 2006-2010E, music EBITDA dollars are expected to contract by an estimated CAGR of 5%. Meanwhile, in 2010, analysts expect the sector to have the lowest EBITDA margins among the various M&E sectors.
1 "Magazines Post Gains in PIB Advertising Revenue and Pages in Q2," Targeted NewsService, 12 July 2010, via Dow Jones Factiva; Russell Adams, "Slide in Magazine SalesDecelerates," The Wall Street Journal, 10 August 2010, via Dow Jones Factiva;"This Year Next Year UK summer 2010," GroupM, June 2010.