The media and entertainment business is expected to outperform other industries for the first time in five years, according to a report on the profitability of the media and entertainment industry from Ernst & Young.
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 E&Y in a release.
“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,” Nendick says.
Cable operators are expected to be most profitable media and entertainment sector with a 41% profit margin. The interactive media sector boasts the highest earnings before interest, taxes, depreciation and amortization dollar growth rate of 22%. The film and television sector lowers production costs by releasing less product, and sees increasing revenue from digital streaming platforms, resulting in 11% annual compound growth.
When looking at overall profitability of 10 media and entertainment sectors during the five years covered by the report, 2009-2013, 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%.
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, according to “Spotlight on Profitable Growth: Media and Entertainment, Vol. VI.”
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.
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%.