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M&E CFOs shift their primary focus from cost-cutting to growth

M&E CFOs shift their primary focus from cost-cutting to growth

Author | exchange4media News Service | Tuesday, Aug 19,2014 8:25 AM

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M&E CFOs shift their primary focus from cost-cutting to  growth

The media and entertainment industry (M&E) has moved past the economic uncertainty of the global recession and shifted their primary focus from cost-cutting to growth, according to EY’s survey of CFOs of leading global M&E companies. The report, It’s Showtime! Digital drives the agenda, data delivers the insights, which surveyed 50 large global M&E companies, shows CFOs are no longer worried about the global recession and are well-positioned to grow their companies through capitalizing on digital opportunities and through investments in technology, digital talent and infrastructure, as well as acquisitions and other deals. Only 26% of senior executives surveyed said global economic uncertainty would be a challenge during the next three years, compared to 62% two years ago, showing a dramatic decrease in concern over the economy. 

John Nendick, Global Media & Entertainment Leader at EY says, “The CFOs told us in no uncertain terms that the economy is no longer an obstacle and now is the time for media and entertainment companies to invest in growth and focus on building their businesses. The industry is now poised to deliver on the promises it has been making the past several years but has been unable to achieve because of the economy. The CFOs recognize the recession is over and it’s showtime.” 
 

Farokh Balsara, India Media & Entertainment Head at EY says, “As digital becomes a reality in India, Indian CFOs will need to increasingly start looking to digital and data analytics to improve decision making, systems and processes. Recognizing and retaining top talent will also be a key focus area.” 

Despite the opportunities for growth, the industry still faces many challenges. A majority of CFOs identified the greatest obstacles for the industry during the next three years as technology and platform disintermediation (64%), and an inability to persuade consumers to pay fair value for content (58%). Still others identified structural and regulatory uncertainty (42%) and reductions/reallocations of marketing budgets (26%) as major challenges for the future. 

CFOs are positioning for growth and they see data analytics as the means to achieve it. They are placing significant emphasis on data to improve decision-making, systems and processes. But much work remains to be done. While 59% of CFOs feel their companies successfully use data to respond to and upsell existing customers, only 33% said their companies do a good job of using data to generate new business. And while only 39% of CFOs believe their organization is good at sharing data, 58% indicated that sharing data between business units would improve their organization’s overall effectiveness.   

Conversely, as data analytics become more essential to business operations, growing concerns over effectiveness and data overload also increase. The industry expects its data storage to increase from 1,100 exabytes of available data in 2010 to 8,000 exabytes by 2015. CFOs expressed concern over the increasing difficulty of identifying any meaningful insight within this massively expanding amount of data.   

Other key findings of the survey include: 
•        Top priorities for the year ahead are the evolution of digital and online distribution (74%), cost reduction and business efficiencies (34%), creatively differentiating content (32%), extending brands globally (32%) and growth in new market segments (30%). 
•        Emerging markets are no longer the top geographic focus for growth; 72% of M&E companies indicated their focus is on existing/core markets. 
•        Seventy-two percent chose interactive media businesses as being best positioned to evolve and thrive in the future, followed by cable television networks and channels (42%), conglomerates (36%), film and television production (30%) and content and information services (30%). 
•        The top actions identified to make companies more effective are attracting/retaining talent (58%), improved IT capabilities (42%), deeper understanding of market trends, customers and competitors (38%) and getting new products to market faster (30%). 
•        CFOs prefer deals that give them either complete or majority ownership (61%) instead of making investments or having a minority interest (34%). 
•        The average deal value during the first half of 2014 was US$939m, compared with US$220m in 2013 and US$157m in 2012, with cable operators driving the rise.

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