MSOs are most profitable media companies
March 15, 2011
In a study on the growth and profitability of the media and entertainment industry released by Ernst & Young, cable operators showed the highest profitability among all media and entertainment sectors, and interactive media was the fastest growing sector within the industry. The report also reveals that, despite current perceptions, the media and entertainment industry as a whole is yielding greater profitability and growth than many other sectors.
“The data illustrates that despite a difficult operating environment, media and entertainment companies continue to show great resiliency,” said John Nendick, Global Media and Entertainment Leader at Ernst & Young. “Additionally, we believe that as advertising and consumer spending continues to rebound, and digital initiatives blossom, improved growth and profitability lie ahead.”
When looking at overall profitability during the period 2006-2010E, cable operators had the highest average profitability at 38 per cent, followed by interactive media 35 per cent; cable networks 31 per cent; satellite television 27 per cent; publishing 20 per cent; conglomerates 19 per cent; television broadcast 18 per cent and film and television production, electronic games and music, all at 11 per cent.
When looking at just estimated 2010 profitability, the media and entertainment sectors ranked nearly identical to the five-year average with cable operators placing first at 39 per cent; interactive media, 36 per cent; cable networks, 33 per cent; satellite TV, 27 per cent; publishing, 20 per cent; conglomerates, 18 per cent; TV broadcast, 16 per cent; electronic games and film and television production, both at 12 per cent; and music, 9 per cent.
An examination of the 2006-2010E average growth rate revealed that, in terms of EBITDA dollars, interactive media is the fastest growing media and entertainment sector at 15 per cent, followed by electronic games, 14 per cent; cable networks, 10 per cent; cable operators, 10 per cent; satellite TV, 9 per cent; film and television production, 7 per cent; conglomerates, 3 per cent; publishing, -1 per cent; television broadcast, -4 per cent; and music, -5 per cent.
The report also shows that the combined growth rate of all 10 media and entertainment sectors taken as a whole outperforms many other industries as measured by a comparison to key cross-industry stock market indices. The 2006-2009 growth rate for the Ernst & Young media and entertainment study group is 5 per cent, compared to the CAC 40 Index, -5 per cent; Nikkei Index, -5 per cent; S&P 500 Index, -13 per cent; DAX 30 Index, -14 per cent; and the FTSE 100 Index, -17 per cent.
“An improved advertising climate, combined with strong digital distribution strategies will be the key to growth among these media and entertainment sectors,” said Mark Besca, Ernst & Young Media & Entertainment Partner. “Media and entertainment companies are unbundling and repackaging content in new and innovative ways and recognising that the majority of future revenue will come from services rather than products.”