• by Jack Loechner , Staff Writer @mp_research, October 4, 2012

According to Ernst & Young’s latest CEO study Opportunity and optimism: How CEOs are embracing digital growth released today, global media and entertainment CEOs expect digital revenue will be a rapidly increasing percentage of overall revenue for companies, The report reveals that approximately half of all CEOs surveyed believe digital will increase their overall revenues and margins by at least 10% within the next three years.

Global media and entertainment CEOs see digital media as a significant driver of future growth:

• The technologies that enable double-digit growth are creating new digital ecosystems
• Mobile devices to be the biggest driver of growth in content consumption
• Ability to persuade customers to pay fair value for digital content among top CEO challenges

Surveys with CEOs from global media and entertainment companies with combined annual revenues exceeding US$300 billion found that 84% feel that the role social media plays within their companies allows them to connect with customers, while 69% said social was a tool to build audiences. Additionally, 63% highlighted how social helped with brand building and 50% said it served as a distribution platform or channel, and also as a source of revenue.

While social media helps businesses connect with customers and audiences, it is the mobile-based technologies that CEOs think will have the greatest effect on the media and entertainment industry in the next three years, says the report. 79% of CEOs said tablets would have the greatest impact, while 62% said smartphones would also be influential. Social media came in at the bottom of the list.

John Nendick, Global Media and Entertainment Leader at Ernst & Young, says “... CEOs are undeterred about the role digital will play in their futures... a heightened optimism from a few years ago... All of the CEOs... understand that digital is the single most important factor...  impacting ability to grow both revenues and margins... ”

Ranking the three biggest drivers of growth in content consumption during the next three years, CEOs were unanimous in their response. All of them believe mobile devices (including tablets) are the key to spurring demand for content. CEOs are especially bullish about emerging markets, where growing mobile device availability coupled with an improving wireless broadband infrastructure are creating significant opportunities for media companies to grow.

Queried about the greatest challenges facing the media and entertainment industry during the next three years, CEOs overwhelmingly agreed that global economic uncertainty and an inability to persuade consumers to pay fair value for digital content were the top two concerns. Also, the elimination of intermediaries between their companies and the end-user, resulting in increased direct business-to-consumer relationships; structural and regulatory ambiguity; and reduction and/or reallocation of marketing budgets.

Interesting insights from the report:

• 84% of CEOs believe the role of social networking for their company is to connect with customers; building audiences and brands are secondary.
• 76% of CEOs said the objective of an “app” is to be part of a bundle of new or enhanced content and services.
• The top priority for CEOs remains the evolution of digital and online distribution (56%), followed by creatively differentiating content (44%).
• Social and interactive media companies are best positioned among all media and entertainment companies to thrive in the future, according to 59% of CEOs. 

For additional information from Ernst & Young, including access to the complete PDF file including charts and graphs, please visit here.