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Spotlight on profitable growth 2011 - Survey results - film and television production, publishing, music - EY - Global

Spotlight on profitable growth 2011

Survey results: film and television production, publishing, music

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In 2010, US advertisers spent $25.8 billion on newspapers' print and digital editions — the lowest amount since 1985.

Film and television production

The film and TV production sector is seeing mixed operating conditions.

Virtually all of the growth in 2010 came from the international market, which grew by 13%. In 2010, North American box office receipts were flat at $10.6 billion.

The film and TV production sector saw EBITDA dollars grow by 53% in 2010, after falling by 32% in 2009. However, during the period between 2007 and 2011E, the sector's EBITDA dollar growth is expected to be fl at. This largely reflects the segment's difficulties in the 2008-2009 period. In 2011, analysts expect EBITDA dollars to fall by 3%.

Some of the trends hurting the sector include rental growth coming from lower-cost Kiosk and DVD-mail channels3, and consumers' decisions not to replace their DVD libraries in high-definition as they replaced VHS tapes with DVDs.

In response, studios are making content available through a variety of channels to offset DVD sales and continuing to restructure operations to protect margins.

Publishing

Newspaper advertising revenue has deteriorated significantly since December 2007.

While the ad environment is improving, the core newspaper business remains challenged. During the 2007-2011E period, EBITDA dollars are expected to contract by a CAGR of 1%.

However, due to cost-cutting efforts, EBITDA margins have been relatively constant during the period. In 2011, EBITDA margins are expected to be 21% — up from 19% in 2010.

In 2010, US advertisers spent $25.8 billion on newspapers' print and digital editions — the lowest amount since 1985.

In response to weak industry conditions, newspapers in developed countries have cut costs in an attempt to right-size their businesses.

While the industry is certainly challenged in its traditional realm, it is making headway online. As a portion of the total, digital revenue continues to rise for most newspapers, but digital advertising sales remain lower than print advertising sales.

The growth of e-readers presents a significant opportunity for newspapers, magazines and books to increase consumption, and grow revenues while reducing publishing costs.

Music

In the last seven years, there has been a 31% decline in the value of the global recorded music industry4.

For the 2007–2011E period, music EBITDA dollars are expected to be fl at. Meanwhile, in 2011, analysts expect the sector to have the lowest EBITDA margins among the various M&E sectors.

Music companies are working to improve EBITDA margins through aggressive cost-cutting.

Yet, there are some areas of growth. The digital music market has grown 1,000% since 2004, and was worth an estimated $4.6 billion in 2010.

In contrast to the recorded music business, the music publishing business is a healthier and much more stable business.

Additionally, industry executives hope that new cloud-based music services will drive music industry growth.



3Tuna N. Amobi, "Industry survey, movies & entertainment," Standard & Poor's, 17 March 2011.

4Michael Gubbins, "Digital: IFPI Report reveals disquiet over digital sustainability," Music Week, 29 January 2011, via Dow Jones Factiva © 2011 CMP Information Ltd.



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