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Cable, Media Industry to Beat Stock Market

30 Oct, 2013 By: Doug McPherson

NEW YORK – The media and entertainment industry is expected to outperform the major stock market indices in 2013 for the first time in five years, according to Ernst & Young’s “Spotlight on Profitable Growth: Media and Entertainment,” a new report just released.

Overall revenue and EBITDA (earnings before interest, taxes, depreciation and amortization) dollars have continued to climb steadily for media and entertainment companies while many other industries are continuing to struggle through a difficult economic period.

Key findings include:

  • Cable operators are expected to be the most profitable media and entertainment sector, with a 41-percent profit margin.
  • The interactive media sector boasts highest EBITDA dollar growth rate: 22 percent.
  • The film and TV sector lowers production costs by releasing less product and sees increasing revenue from digital streaming platforms, resulting in 11-percent annual compound growth.

The report compares performance 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 profitability and profitability growth rate.

The 10 sectors of the media and entertainment industry Ernst & Young measured are expected to have a 2013 estimated profit margin of 26 percent, followed by: the S&P 500 Index, 24 percent; FTSE 100 Index, 23 percent; CAC 40 Index, 18 percent; DAX 30 Index, 16 percent; and the Nikkei Index, 12 percent.

John Nendick, the global media and entertainment leader at Ernst & Young, said media and entertainment companies are maintaining and growing their businesses primarily by growing their digital revenues and scaling back overhead associated with traditional media.

“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 said.

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 percent, followed by: cable networks, 37 percent, interactive media, 35 percent; satellite television, 26 percent; electronic games, 25 percent; conglomerates, 23 percent; content and information services, 19 percent; television broadcast, 17 percent; film and television production, 10 percent; and music, 10 percent.

The 2009-2013 compound annual growth rate shows that in terms of EBITDA dollars, interactive media is the fastest-growing media and entertainment sector at 22 percent, followed by electronic games at 14 percent, and film and television production at 11 percent.

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