Media and entertainment industry looks to digital for growth

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Wednesday 27 August 2014  - Accelerating digital and online distribution will dominate the agenda of three quarters of the media and entertainment (M&E) industry in the coming year.

According to a recent EY global survey of Chief Financial Officers (CFOs) of the major M&E companies, 74% say growing digital and online distribution is their top priority for growth for the year ahead.

Further down the list of priorities for M&E companies are: cost reduction and business efficiencies (34%), creatively differentiating content (32%), extending brands globally (32%) and growth in new market segments (30%).

The report found that Australian M&E companies, much like their global counterparts, were well-positioned to grow by capitalising on digital opportunities and investing in technology, digital talent and infrastructure, as well as smaller bolt-on acquisitions and partnering deals.

Ernst & Young Oceania M&E Leader David McGregor said the focus for the M&E sector had shifted back to driving revenue and investing in new business models, which represented the best opportunities for growth. And, a forward-thinking, integrated data analytics approach would provide the right insights for companies to take the next leap forward.

“Advancing digital capability and real-time data should be business-as-usual, but to maximise opportunities and stay ahead of the curve, organisations must take it to the next level.

“The sector needs to be at a point where data is integrated across all customer touch-points and they are incorporating relevant third party intelligence to enable a richer, more accurate picture of the customer,” Mr McGregor said.

“Capturing data from all areas of an organisation - that’s the ongoing battle everyone is waging.”

The report found that while 59% of CFOs feel their companies successfully use data to respond to and upsell existing customers, only 33% said their companies do a good job of using data to generate new business. Only 39% of CFOs believe their organisation is good at sharing data internally, and importantly, 58% said that sharing data between business units would improve their organisation’s overall effectiveness.

Of course, as data analytics becomes more essential to business operations, growing concerns over effectiveness and data overload also increase. Globally, the industry expects its data storage to increase from 1,100 exabytes of available data in 2010 to 8,000 exabytes by 2015. CFOs expressed concern over the increasing difficulty of identifying any meaningful insight within this massively expanding amount of data.

“While digital disruption is a force that every industry is contending with, arguably the M&E sector is feeling the heat more than other areas given the constant need to remain relevant to a very savvy and fickle consumer,” Mr McGregor added.

Concerns over economic uncertainty dropped significantly for the first time in six years, with only 26% of senior executives surveyed saying that global economic uncertainty would be a challenge during the next three years. This compares to 62% two years ago which shows a dramatic decrease in concern over the economy.

“The economy is no longer an obstacle for growth, whether that growth is organic or via acquisitions, however, the local industry is still facing many challenges specifically scarce digital talent, continuous innovation and the need to disrupt themselves or be disrupted.

“Competition over advertising dollars is intensifying driven by large global digital brands and placing pressure on local companies to innovate or perish. It’s no longer local vs local it’s local vs global,” Mr McGregor said.

The majority of CFOs identified the greatest obstacles for the industry during the next three years as technology and platform disintermediation (64%), and an inability to persuade consumers to pay fair value for content (58%). Still others identified structural and regulatory uncertainty (42%) and reductions/reallocations of marketing budgets (26%) as major challenges for the future.

Other key findings of the survey include:

  • Seventy-two percent chose interactive media businesses as being best positioned to evolve and thrive in the future, followed by cable television networks and channels (42%), conglomerates (36%), film and television production (30%) and content and information services (30%). 
  • The top actions identified to make companies more effective are attracting/retaining talent (58%), improved IT capabilities (42%), deeper understanding of market trends, customers and competitors (38%) and getting new products to market faster (30%). 

“Recruiting and retaining talent is a key concern for almost every CFO we surveyed. All agreed that talent, as well as establishing better collaboration between teams and business units, are the most important factors for efficiently running their companies. The right talent means finding people who have the technical skills but are also savvy digitally,” Mr McGregor added.

For a copy of the report visit ey.com

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About the survey

The survey was conducted among 50 CFOs of some of the largest global media and entertainment companies, headquartered in 10 countries and representing almost half a trillion dollars in media and entertainment revenue. The survey spanned industry sectors including filmed entertainment; broadcast and cable networks; music/radio; media conglomerates; advertising; internet and interactive media; publishing and information services; and cable/satellite distributors. Thirteen percent of companies surveyed have annual revenue greater than US$25 billion; 9%, US$10-$25 billion; 17%, US$5-$9.9 billion; 30%, US$1-$4.9 billion; 13%, US$500-$999 million; and 18%, less than US$500 million.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This news release has been issued by Ernst & Young Australia, a member firm of Ernst & Young Global Limited. Liability limited by a scheme approved under Professional Standards Legislation.

Contact:
Katherine Meier
Ernst & Young Australia
03 9655 2620 or 0417 859 323