Interactive media is the fastest-growing segment of the media and entertainment industry, according to a recent report from Ernst & Young, Spotlight on profitable growth (PDF). Its rise to the top of the heap is fuelled by a renewed push to provide consumers with access to information and entertainment content through a variety of Internet-based formats.
“It’s all about content, and while that’s nothing new in the industry, this time, it’s becoming clear that the majority of future revenue both from advertisers and consumers will come from services rather than products. So everyone ? from venerable newspapers to social media networks to conglomerates ? is scrambling to find new and innovative ways to marry content with distribution channels,” says Neal Clarance, leader of Ernst & Young’s Media and Entertainment practice.
Interactive media continues to benefit from consumers’ ongoing shift away from traditional media and towards online platforms. A good example is companies that provide streaming video services, which are changing the way people watch television. These companies in particular are pushing hard to find a wealth of content to entice users. Newspapers are trying new subscription models to push readers to their online content. Internet retailers also want in on the content action.
“To be sure, there is increased competition for established media conglomerates, but in spite of a difficult operating environment, media and entertainment companies continue to show resiliency,” says Clarance. “With advertising and consumer spending on the rebound, and digital initiatives gaining speed, improved growth and profitability lie ahead for the industry.”
Spotlight on profitable growth is a five-year study on the growth and profitability of the media and entertainment industry, based on earnings before interest, taxes, depreciation, and amortization of margin percentage and dollars. The new report ranks the top 10 media and entertainment industry sectors on both their profitability and profitability growth rate, and provides a performance comparison of the overall media and entertainment business to other stock market indices.
The ranking of overall average profitability during a five-year period according to margin percentage:
1) Cable operators, 37.6%
2) Interactive media, 34.6%
3) Cable networks, 31.4%
4) Satellite television, 27%
5) Publishing, 20%
6) Conglomerates, 18.8%
7) Television broadcasts, 17.6%
8) Film and television productions, 10.6%
9) Electronic games, 10.6%
10) Music, 10.6%