Cable Operators Score High Profitability, Outpace Competitors

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Over the last four years, even with the problems of the recession, cable operators had the highest profitability among all media and entertainment businesses.

A new study by Ernst & Young on media and entertainment during the period from 2006 to 2010 showed cable operators had the highest average profitability: at 38%. This was followed by interactive media businesses at 35%; cable networks at 31%; satellite television at 27%; publishing at 20%; conglomerates at 19%; television broadcast at 18% and film and television production, electronic games and music, all at 11%.

When analyzing 2010 profitability, the results were much the same. Cable operators placed first at 39%; followed by interactive media ay 36%; cable networks at 33%; satellite TV at 27%; publishing at 20%; conglomerates at 18%; TV broadcast at 16%; electronic games and film and television production, both at 12%; and music at 9%.

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Overall, Ernst & Young believe the media and entertainment businesses will continue to thrive in the near term. John Nendick, global media and entertainment leader at Ernst & Young, stated: "We believe that as advertising and consumer spending continues to rebound, and digital initiatives blossom, improved growth and profitability lie ahead."

One major reason for media and entertainment growth comes from adapting to new digital demands by consumers through new digital devices, in addition to new services.

Mark Besca, media & entertainment partner at Ernst & Young, added: "Media and entertainment companies are unbundling and repackaging content in new and innovative ways and recognizing that the majority of future revenue will come from services rather than products."

During 2006 to 2010, keys to future growth -- cash flow, or earnings before interest, taxes, and depreciation and amortization (EBITDA) -- were also strong. Interactive media is the fastest-growing entertainment sector at 15%, followed by electronic games, 14%; cable networks, 10%; cable operators, 10%; satellite TV, 9%; film and television production, 7%; conglomerates, 3%; publishing, -1%; television broadcast, -4%; and music, -5%.

The survey says the profitable growth rate of 5% for all 10 media and entertainment sectors outperforms many other industries. This 5% compares to the Nikkei Index, -5%; S&P 500 Index, -13%; DAX 30 Index, -14%; and the FTSE 100 Index, -17%.

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