A new report suggests media CEOs are optimistic about the digital future, and think that digital provides them an opportunity to significantly grow revenues and profits in the near term. The Ernst & Young study is based on interview with 34 CEOs from a range of global media and entertainment companies. The companies span many geographic areas and media and entertainment product markets, with combined revenues above $300 billion.Half of the CEOs they talked to predicted that digital would drive up revenue growth and profit margins by double digits within the next three years. But what's more interesting is which digital technologies and services they felt would drive that growth.
When asked what would be the biggest driver in terms of increasing content consumption over the near term, the CEOs unanimously named mobile devices. In contrast, 53% cited improved broadband and mobile infrastructure, 41% cited social media and other emerging networks, and 24% indicated that increases in online content availability would be a primary factor increasing online content consumption. Looking a bit deeper, the CEOs talked about mobile as creating expansive new markets and demand.
“The integration of media content, devices and networks creates self-sustaining digital ecosystems. The more users interact with content, the easier it is to learn about their habits and for content, advertising, and services within these ecosystems to evolve and grow,” said Howard Bass, Senior Partner, Global Media & Entertainment Advisory Services, Ernst & Young LLP.Mobile also led the list of digital technologies that would have the biggest overall impact on the Media & Entertainment industry - 79% of the CEOs said tablets would have a significant impact, and 62% thought smartphones would. Cloud technology was cited by 59%, Apps (as means of providing content and services) was identified by 56%, and 53% thought mobile broadband would have a big impact. Interesting, social media was the least mentioned of the technologies included in the survey, with 44% of the CEOs thinking that social media would have a big impact on the media and entertainment industry.
It wasn't that the CEOs didn't see the value of social media to the industry - it was more how they thought social media would be useful and potentially having an impact. The CEOs saw social media having an important role in terms of audience relations - 84% said social media's value and importance came with it's ability to connect with customers; 69% saw value in building audiences; and 63% thought social media would be helpful in building brands. Only half thought that social media might become an important distribution channel or revenue source.
It's important to note that the CEO's also recognized the challenges of the digital future for their firms. As might be expected, uncertainty about the future was at the core of many of their concerns - global economic uncertainty was the top concern given. In addition, CEOs felt that concerns about capturing the fair value of digital content was a critical concern. Some also identified structural and regulatory uncertainty, uncertainty about how marketing budgets would be allocated across media and platforms, and the viability of disintermediation efforts (i.e., could they eliminate the middleman and link content producers and consumers directly).
Most of the CEOs (56%) planned to focus short term efforts on pushing and expanding digital and online distribution efforts - putting themselves in a position to be able to take advantage of whatever specific opportunities emerge from the fog of digital market evolution. Another strategy might be to become more involved with social media and interactive media - 59% of the CEOs thought that companies in those areas were the best position to thrive in the future. I'm a little surprised that only 44% of the CEOs said that creatively differentiating content would be a priority. Repurposing existing content can create added value, and is a cheaper way to enter new markets than creating all-new content.
But I guess CEOs aren't omniscient.
Source - CEOs See Digital As The Driver, Research Brief blog
News release on the study (full reports can be requested)