Media and entertainment business forecast to outperform major stock market indices in 2013
Los Angeles, 24 October 2013
For the first time in five years, the media and entertainment industry is expected to outperform the major stock market indices in 2013, according to Spotlight on Profitable Growth: Media and Entertainment, Vol. VI, a new report just released by EY. Overall revenue and EBITDA dollars have continued to climb steadily for media and entertainment companies while many other industries are continuing to struggle through a difficult economic period.
- Cable operators expected to be most profitable media and entertainment sector with 41% profit margin
- Interactive media sector boasts highest EBITDA dollar growth rate of 22%
- Film and television sector lowers production costs by releasing less product, sees increasing revenue from digital streaming platforms, resulting in 11% annual compound growth
The report provides a performance comparison of the overall media and entertainment business to major stock market indices as well as a ranking of 10 media and entertainment industry sectors on both their profitability and profitability growth rate.
In 2013, it is estimated that the media and entertainment industry will outperform the major cross-industry stock market indices (figure 1). The 10 sectors of the media and entertainment industry measured by EY are expected to have a 2013 estimated profit margin of 26% followed by the S&P 500 Index, 24%; FTSE 100 Index, 23%; CAC 40 Index, 18%; DAX 30 Index, 16%; and the Nikkei Index, 12%.
“Media and entertainment companies are maintaining and growing their businesses primarily by growing their digital revenues and scaling back overhead associated with traditional media,” said John Nendick, Global Media and Entertainment Leader at EY. “In emerging markets, increases in advertising, as well as rising incomes and media consumption, have also helped drive revenue and fuel long-term growth as consumers in mature markets continue to migrate toward digital.”
When looking at overall profitability of 10 media and entertainment sectors during the five years covered by the report, 2009-2013e, (figure 2), cable operators have the highest average profitability at 41%, followed by cable networks, 37%, interactive media, 35%; satellite television, 26%; electronic games, 25%; conglomerates, 23%; content and information services, 19%; television broadcast, 17%; film and television production, 10%; and music, 10%.
For estimated profitability in 2013, media and entertainment sector rankings shifted from the five-year average with cable operators placing first at 41%; cable networks, 38%; interactive media, 33%; electronic games, 26%; satellite television, 25%; conglomerates, 25%; television broadcast, 19%; content and information services, 19%; film and television production, 12%; and music, 10%.
A review of the 2009-2013e compound annual growth rate (figure 2) shows that in terms of EBITDA dollars, interactive media is the fastest growing media and entertainment sector at 22%, followed by electronic games, 14%; film and television production, 11%; cable networks, 10%; conglomerates, 9%; TV broadcast, 9%; satellite television, 8%; cable operators, 6%; content and information services, 2%; and music, 1%.
The report also provides specific insight into each of the 10 media and entertainment sectors, identifying opportunities, challenges and outlook for future growth. Highlights include:
- Interactive media companies are seeing strong growth from an increase in online advertising.
- EBITDA dollars for electronic gaming companies are increasing due to rising consumption on social and casual gaming platforms.
- Despite rising programming costs, satellite television companies show steady growth from cost controls and increasing revenue.
- Advertisers still value the ability of television broadcast to reach large audiences despite the rise of competing platforms.
- In 2012, global music revenues increased for the first time since 1999 due to the growth of licensed digital music services and paid digital downloads.
- Newspaper and magazine companies continue to face challenging times from declining advertising and subscription revenues. However, business information services companies are reporting stable revenues and margins.
About EY’s Global Media & Entertainment Center
In an industry synonymous with creativity and innovation, the bar for business excellence is set high. You need to embrace new technology, develop new distribution models and satisfy the demands of a voracious and outspoken consumer. At the same time it’s important to manage costs, exceed stakeholder expectations and comply with new regulations. There’s always another challenge just around the corner. EY’s Global Media & Entertainment Center can help. We bring together a high-performance, worldwide team of media and entertainment professionals with deep technical experience in providing assurance, tax, transaction and advisory services to the industry’s leaders. Our network of professionals collaborate and share knowledge around the world, to provide exceptional client service and leverage our leading market share position to provide you with actionable information, quickly and reliably.
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