Study: Internet, Mobile to Drive Media Growth

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Nearly three-quarters of chief financial officers at top media companies said that despite current profit pressures, digital media and mobile offerings will drive future growth in the entertainment industry.
According to an Ernst & Young study to be released on June 25 - Poised for Digital Growth: Preserving Profitability in Today's Digital World - 73% of the CFOs at the top 75 media companies said that despite falling prices for content, there are opportunities in new products and bundling existing services.
Ernst & Young estimated that unit prices for online music and video will fall by nearly 25% between 2009 and 2012. That is on the heels of a 55% decrease in music prices and a 12% decline in video prices between 2006 and 2009. Total home video and music end-user spending is expected to total $28.5 billion in 2010, a 21.7% decline from $36.4 billion in 2006.
"Revenues are dropping due to the unbundling of media and the reduction of per unit pricing, challenging CFOs to identify innovative ways to reach their financial objectives," said Ernst & Young Global Media & Entertainment Leader John Nendick in a statement. "However, as the demand for digitally delivered entertainment continues to increase significantly, CFOs feel optimistic about revenue potential."
As prices decline, consumption is rising exponentially, according to Ernst & Young. According to the report, the number of U.S. households with both broadband connectivity and at least one 3G mobile device has quadrupled during the past five years. Worldwide, the rise is more than 600% during the same time frame. Global penetration of households with broadband is expected to reach 27% by the end of 2010 and 3G penetration should reach 55% by the end of the year. Ernst & Young estimates that the number of digital media users will rise to about 2.2 billion by 2011, more than double that of 2007.
"CFO's see growth in new distribution channels, products and services," said Ernst & Young senior partner Global Media & Entertainment Advisory Services Howard Bass, in a statement. "Publishers and similar content companies are embracing the fact there are almost 2 billion digital media users to leverage their content and core products and services to the web, mobile devices and electronic gaming globally."