KPMG Study: Media Execs Expect Digital Gains in 2011

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More than 9 of 10 media executives predict digital revenue will rise this year, with a third expecting gains of 10% or higher, according to KPMG's annual Communications and Media Industry Business Climate Survey.
In a survey of communications and media company executives across the country, 94% expect an increase in digital revenue in 2011, up from last year when 84% predicted gains. Of those surveyed, 37% expect their companies to grow digital revenue by more than 10%, compared to 31% in 2010.
The executives cited increased broadband access speeds, new distribution methods, social media platforms and online advertising as the most important drivers of overall revenue growth, according to the survey.
"It's clear from our survey that communications and media executives are more optimistic and their companies are placing bets that now is the time to position and invest for growth, despite an uneven economic recovery," said KPMG national sector leader for communications and media Paul Wissmann in a statement. "They're focused on investing in technology and products through both organic growth and mergers and acquisitions to beat the competition and grab emerging opportunities."
Almost three-quarters of the executives surveyed said they expected their companies' overall revenue to be higher one year from now, adding that in the next 12 months continued industry convergence resulting in new business opportunities like mobile commerce will have the greatest impact.
About 47% of the executives surveyed predicted an increase of between 1% and 5% in the next 12 months with 32% expecting a growth range of 6% to 20%, according to the survey.
"Communications and media companies are sensing industry momentum that is the result of leaner organizations coming out of the recession, combined with the opportunity offered by the development of and users rapid adoption of innovation such as tablets, high-speed wireless access and social networking platforms," said KPMG national account leader for communications and media Carl Geppert in a statement.
Over the next three years, new distribution methods and social media are seen as the keys to growth. About 44% of respondents ranked new distribution methods, including devices and access technologies, in the top three positions; 43% ranked social media among top drivers of growth and 37% placed online advertising, including search ads, in the top three.
Acquisitions are also expected to play a big role in growth. Nearly 70% of executives said they believed their companies would be involved in a merger or acquisition in the next two years - 58% as a buyer and 10% as a seller.
Those surveyed also said that access to new technology and products (53%), product synergies (38%), and access to new geographic markets (35%) will be the most important drivers of alliances, mergers and acquisitions over the next 12 months.
But the executives surveyed were less optimistic about headcount, with only 47% expecting to add personnel in 2011. Last year 57% of those surveyed expected to increase employment in the coming year.
Looking back, only 34% of the executives said they increased employment in the past year, 41% said they reduced headcount and 23% said they expected to cut employees over the next year.
About 22% of respondents said their headcount has reached or exceeded pre-recession levels, with 35% predicting they would return to pre-recession levels during the next 30 months. About 34% said that headcount will never return to pre-recession levels.
Part of that lack of optimism could be tied to fears that the overall economic recovery will take longer than expected.
According to the survey, although two-thirds of respondents expect improvement in the U.S. economy in the next 12 months, they believe that a national economic recovery won't take hold until 2013. Last year, they predicted the overall recovery would take hold in 2012.
The KPMG survey was conducted in the U.S. in May-June - 2011 and reflects the responses of 101 primarily C-level and senior executives at communications and media companies. Of the 101 respondents, 66 percent are in companies with revenues exceeding $1 billion and 34 percent are companies with revenues in the $100 million-$1 billion range.

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