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Cable Tops Media Sector Profitability: E&Y Forecast
Cable operators are expected to be the most profitable companies in the media and entertainment sector this year, with 41% profit margins, according to Ernst & Young’s 2013 “Spotlight on Profitable Growth: Media and Entertainment.”
Cable programming networks come up right behind with 38% estimated profitability. The free report evaluates industry performance from 2009 to 2013.
The accounting and advisory firm’s study also expects interactive media to achieve the industry’s highest EBITDA (earnings before interest, ttaxes, depreciation, and amortization) growth rate: 22% five-year compound annual growth rate (CAGR). Cable networks have 10% CAGR, and cable operators 6% CAGR, according to EY estimates.
Overall, EY expects the media and entertainment industry to outperform the major stock market indices in 2013.
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%.
A review of the 2009-2013e compound annual growth rate (figure 2) shows that in terms of EBITDA dollars, interactive media is the fastest growing media and entertainment sector at 22%, followed by electronic games, 14%; film and television production, 11%; cable networks, 10%; conglomerates, 9%; TV broadcast, 9%; satellite television, 8%; cable operators, 6%; content and information services, 2%; and music, 1%.
EY’s study also observes that the film and television sector is seeing increased digital streaming revenues accompanied by lower production costs (mainly from releasing fewer shows). Together these developments are generating 11% CAGR in this sector, EY concludes.
“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 EY.