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Ernst & Young: in two years, digital products will account for 57% of media income

June 12th, 2013 |  Published in Big Data, Digital and Mobile Technology


  Graph above:  Agility Index by M&E segments, enabling technology and digital leaders*

12 June 2013 – We hang out a lot with the Ernst & Young folks, on several levels, in several specialties. Their crew has a wide-range of competencies and we have worked with them on a number of strategic initiatives for several TMT clients. It is a complex business environment out there and that means understanding the relationships between risk and performance improvement, and having subject matter knowledge. They have it all.

On the litigation side of life we stay in contact with those Forensic Gurus Sanjay Bhandari and Jonathan Maas.  On the TMT side there is Olivier Lemaire and his E&Y telecommunications colleagues which we meet at events such as the Mobile World Congress. And we meet other E&Y folks at numerous events through the year such as creative, cultural events like Forum D’Avignon which we attend every year. They are a brilliant pack.

So when one of their studies hits our desk we read it cover to cover.  Their latest is a report on the media industry and the crux seems to be “now … like right now … is the time for media firms to invest in digital products or face being left behind when earnings from traditional media lose out to digital sales”.

Following a survey of more than 550 senior executives at technology, gaming, publishing, film, broadcast media and social networking companies, Ernst & Young discovered that 47% of all revenues in media and entertainment companies currently comes from digital products. They then forecast 10% growth in these revenues over the next two years, reaching 57% of overall income by 2015.

So this “frantic shift” means that “traditional” media will be surpassed by digital media by 2015 although, interestingly, the report didn’t explicitly define “traditional media.” However, “digital media” is easier to pinpoint as researchers reiterated advancements made by smartphones, tablets, and other online services.

In this short time frame, media firms need to prepare themselves in order to stay ahead of the game. According to the survey, 50% of these companies are willing to lose money in the short term in order to develop digital products and services and 64% are already building up their digital staff faster than their digital revenue is growing.

In an interview about the report John Nendick, global head of media and entertainment at Ernst & Young, said “the media and entertainment industry has been on a digital journey for quite some time, but when you drill down into the data in advertising, in social media, in film and in broadcast and cable, you see that the digital transition isn’t this thing of tomorrow to keep in the back of the mind, it’s here”.

The study is packed with information. The report suggests that firms form industry alliances instead of trying to go it alone and recommends focusing on trends in cloud and mobile. And executives seem to agree on this: 83% of those surveyed predict that smart mobile technology will drive revenue growth over the next two to three years, and 74% say the same for cloud. The report also cites … SURPRISE!! … Big Data as a key driver of revenue for these companies in the near future, although 41% of those surveyed said they don’t currently gain any insight from their data. Those who identified themselves as embracing digital distribution, though, were three times more likely to use second-generation big data analytics techniques to improve relationships with customers.

Look, this ain’t rocket science ….

What’s new and profound today is an extraordinarily fast pace of change enabled by two characteristics of modern broadband networks: they connect us all at the speed of light (no matter where we go) and they are interactive. The former leads to the “anytime, anywhere” requirement for content ubiquity and content curation, to ensure the right content meets the right audiences, when and where they wish it. The latter empowers the audiences that comprise popular culture to talk back to their media providers, both explicitly in, for example, social media and implicitly through the big data “exhaust” generated by all their digital interactions.

From these simple initial conditions, mobile-social-cloud and big data analytics technologies are spinning out new digital M&E possibilities that are changing media consumers’ habits, preferences and, ultimately, demands at a dizzying pace.

The E&Y conclusions make perfect sense.  Companies that embrace mobile, social and cloud computing technologies, along with big data analytics internally, will have an advantage as consumer preferences change. Early adoption of new technology for employees will help companies adjust better to the fast-changing media and entertainment industry. These technologies can help M&E digital leaders who broke ahead of the pack in the early stages of digital to extend their advantages, as well as offer opportunities for those who fell behind to adapt quickly and catch up.


* The E&Y Agility Index ranks the relative organizational agility of different M&E (media and entertainment) segments as well as enabling technology and digital leaders. The average score of all respondents is indexed to 100. For example, a score of 110 denotes performance 10% above average; 90 is 10% below average.

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