Broadcaster Magazine
News

Major Risks for Media & Entertainment Industry: E&Y

  • el
  • pt

  • Rapid consolidation, expanding markets, emerging business models and growing consumer demand are taking centre stage and creating real turmoil in the media and entertainment (M&E) industry, Ernst & Young says.

    “This industry is moving fast ¿ extremely fast,” says Neal Clarance, Ernst & Young’s Canadian media and entertainment leader. “If you’re trying to succeed in the Canadian media and entertainment industry, you’ve absolutely got to understand the risks you’re facing, and how to handle them.”

    To help Canadian M&E firms navigate these waters, Ernst & Young has identified the Top 10 strategic business risks for media & entertainment for the next five years:

    1. M&A activity and private equity
    ¿ Through 2024, mergers and acquisitions volume in M&E was US$129.8 billion.
    ¿ Private equity firms have brought speed and rigor to the M&A process and some industry veterans are voicing concern that traditional artistic considerations and strategic rationale are giving way to focused financial engineering.

    2. Backlash against globalization
    ¿ The balance between regional tastes and increased globalization of culture needs to be carefully considered as part of an M&E sales strategy.

    3. Asset protection risks including piracy and digital intellectual property rights
    ¿ Firms that own vast creative assets may be unable to adapt to the change from analogue to digital.
    ¿ Piracy is a key uncertainty but just as it relates to asset/content protection; the risk is linked to the brand.

    4. Business model innovation
    ¿ The breakdown of standard formats will result in fundamental changes in the way businesses compete in M&E.

    5. Consumer demand shifts
    ¿ Advances in technology have shifted content delivery to consumers. This touches everything from business strategy to structure and execution. It has also meant separating the production of experience from the consumption of experience. It raises the question of whether traditional business models are still viable in the M&E industry.

    6. Emerging markets
    ¿ China and India are the markets for future media growth ¿ yet, some of the largest global M&E firms are making less than 5% of their global sales from emerging markets. These markets can see growth of 40 to 50% per year.

    7. Corporate governance and internal controls
    ¿ The pace of growth, innovation and competition has created concerns the internal controls and corporate governance models may be overrun if not made
    a true priority.

    8. Inability to control costs
    ¿ Film production costs are on the upswing. Technology is also adding to costs ¿ especially the costs for digital storage.

    9. Managing the infrastructure to new business models
    ¿ The M&E industry is constantly changing but the scale of the most recent shift is as significant as the invention of the printing press. The rate of change may be too rapid to make accurate financial forecasts that substantiate large long-term investments or acquisitions.

    10. Maturation of key markets
    ¿ As the industry evolves and radical new initiatives require large investments, companies may face market saturation in key areas. Is there a saturation point for the consumption of media and entertainment in the home?

    Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide our 130,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve potential. For more information, please visit www.ey.com/ca.