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Media takes heart from mobiles and emerging markets

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Media companies are, finally, shedding their digital phobia, and ready to embrace the future.

We have seen many signs of it over the past several months – notably in the form of newspaper publishers, led by The New York Times, successfully installing paywalls. But validation of the mood comes from Ernst & Young, which surveyed 34 media CEOs across the world.

The title of the accounting firm’s report, “Opportunity and optimism: How CEOs are embracing digital growth,” tells it all. Just as telling is a comment by a CEO: “Everything we do (now) is digital.”

At the heart of this new optimism is the mobile device, fueled additionally by the expected surge of these devices in emerging markets.

Nearly four-fifths (79%) of the CEOs see a shiny future in tablet computers, whereas 62% see the same in smartphones; and a full 100% agree mobile devices would drive both content and business.

Recent data overwhelmingly back the CEOs.

Just last month, NPD Group’s DisplaySearch group predicted a billion smartphone shipments starting in 2016, from 450 million last year; the U.K. research firm Ovum said over 1.7 billion smartphones will be sold annually in the next five years, a whopping 53% of them in China and Russia; and finally, business intelligence software maker MicroStrategy’s CEO Michael Saylor predicts there will be five billion smartphones and ten billion tablets in the next five years.

Consumerisation of IT

Over the past decade, the media, notably print publishers and television companies, have struggled to come to terms with the onslaught of the Internet. What changed this doom and gloom? The consumerisation of IT, in the form of smartphones and tablets. Devices led by the iPhone and iPad have led to mass adoption, and additionally enabled a variety of payment options.

“CEOs are undeterred about the role digital will play in their futures,” said John Nendick, global media and entertainment leader at Ernst & Young. “There is a heightened optimism from a few years ago when industry leaders were more tentative about the potential of digital. All of the CEOs we spoke with understand that digital is probably the single most important factor – impacting their ability to grow both revenues and margins.”

Ernst & Young’s study covered diverse media companies across the world. Of them, 23% are traditional publishers like Fairfax Media; 20% are conglomerates, and others included filmed entertainment, television, music, electronic games, entertainment services, cable networks and channels, cable and satellite operators, Internet and interactive media and advertising. The surveyed companies operate predominantly (48%) in the United States, but 21% have business in the Asia-Pacific region and 20% in Europe. Represented in the survey were the CEOs of Fairfax Media (Gregory Hywood) and Village Roadshow (Graham Burke).

Following are some other findings of the survey:

  • Evolution of digital and online distribution (56%) was the top priority for CEOs, followed by creatively differentiating content (44%).
  • A majority expects digital to account for 21% of their revenues in 2015, up from 11% in 2011, reflecting a CAGR of 18%
  • New distribution and new content are considered “most attractive” investments
  • Top concerns were global economic uncertainty and an inability to persuade consumers to pay fair value for digital content
  • 84% believe the role of social networking is to connect with customers; building audiences and brands are secondary.
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