Report: Media & Entertainment CFOs Bullish on Digital Revenues

NEW YORK: A newly released Ernst & Young report found that 73 percent of CFOs from the world’s largest media and entertainment companies are optimistic about revenue opportunities presented by online and mobile platforms.

Ernst & Young surveyed CFOs from 75 leading media firms for its report, Poised For Digital Growth: Preserving Profitability In Today’s Digital World.

“The phenomenal proliferation of digital entertainment among consumers continues to challenge media and entertainment companies,” said John Nendick, global media and entertainment leader for Ernst & Young. “Revenues are dropping due to the unbundling of media and the reduction of per unit pricing, challenging CFOs to identify innovative ways to reach their financial objectives. However, as the demand for digitally delivered entertainment continues to increase significantly, CFOs feel optimistic about revenue potential.”

The consensus among CFOs is that the industry must decide if and how much they can bundle media content and then settle on appropriate pricing. By 2012, the report notes, the average per unit price of video and music content will decrease by almost 25 percent from the 2009 price. This follows a 12-percent price reduction in video (and 55 percent in music) from 2006 to 2009. As of now, the average unit price for video is $6. This year, total home video and music end-user spending, including digital and physical products, is estimated to be $28.5 billion compared to US$36.4 billion in 2006.

"CFO’s see growth in new distribution channels, products and services," said Howard Bass, senior partner of global media and entertainment advisory services. "Publishers and similar content companies are embracing the fact there are almost 2 billion digital media users to leverage their content and core products and services to the web, mobile devices and electronic gaming globally."

The report also notes that CFO are continuing to cut costs in a bid to improve profitability, including outsourcing more activities. Of those surveyed, 56 percent indicated that process improvement would be the greatest opportunity for savings during the next one to two years. Technology was frequently identified as a way to produce content faster and less expensively. In addition, companies need to assess business-heavy costs such as content production, acquisition and distribution, and increase shared processes for finance, IT, research, call centers and content development.

In addition, EBooks and mobile content will have the greatest impact on the media and entertainment industry during the next two to three years, according to 66 percent of CFOs surveyed.