Ernst & Young’s global media and entertainment survey, ‘Center Stage’, has put the spotlight on the new hero of the corporate world in the media and entertainment (M&E) industry – the Chief Financial Officer.
‘Center Stage: CFOs and Finance Executives in the Spotlight of an Industry in Transition’ was released here by John Nendick, Global Head - Media & Entertainment Practice, Ernst & Young.
Advances in mobile technologies and increasing public expectations mean that the ‘consumer is king’ in the content on demand marketplace, according to the survey of more than 200 finance executives, which includes views of 46 CFOs, six from India, and 140 online participants from major media and entertainment companies around the globe. The study shows that changing content and distribution models, as well as mobile entertainment devices, will be the key change drivers for the industry.
Nendick said, “We are delighted to release this global survey in Mumbai, which is home to one of the most vibrant and fastest-growing M&E markets in the world today. Several Indian M&E players are in the midst of rapid transition, brought on by a booming consumer base and the twin forces of convergence and competition. As companies scale up, the CFO’s role is becoming increasingly critical both in capital raising for growth and management of risks.”
The report discusses a larger role played by the finance executives in the media and entertainment industry, which includes moving beyond handling the plain vanilla finance function to assisting the CEO in strategic decision-making, including scenario analysis, customer product analysis and investment optimisation in the dynamic media and entertainment segment.
Some of the points raised include maintaining a risk-reward balance. Rapid changes in the media and entertainment industry have made it more complex and unpredictable. While this has brought many opportunities, there are risks that also have to be considered. This has placed the CFO’s function in a critical position; as the study findings point out, CFOs in the M&E space have to analyse how enterprise can derive more value from existing investments and operations.
CFOs also play a key role in mergers and acquisitions activity, starting from assessment, evaluation and integration. This also includes post-merger performance tracking of an acquired entity against original investment criteria. CFOs interviewed in the study also feel that they are prone to missing out on opportunities to reduce taxes. Seventy-six pr cent of the CFOs interviewed opined that tax planning should be a key priority for executives.
According to the study report, 86 per cent of study participants consider changing content and distribution models as having the greatest impact on the industry over the next two to three years, whereas adoption of personal entertainment and communication devices (MP3 players, mobile telephones, etc.) is considered to have the greatest impact by 79 per cent of the participants. The study notes that expanding global universe of mobile wireless subscribers ensures that the ‘anytime, anywhere’ entertainment will continue.
According to the study, finance executives of global M&E companies believe that the businesses that will emerge as winners are those that welcome the new distribution channels and are capable of identifying the right content for the specific delivery vehicle.
Needless to say, this survey too quotes that the ‘Future is Internet’. To the question of business models for media and entertainment companies most likely to thrive in future, 77 per cent of the study participants consider Internet media providers as the most likely market winners, whereas only 24 per cent view cable operators as thriving businesses in the future. New (independent or cable channel) content creation and electronic gaming have been rated as second and third business models in a best position to thrive, respectively.
Interestingly, CFOs and finance heads of global M&E companies do not consider radio broadcasting and newspapers and periodical publishing as thriving business models, with only 11 per cent favouring radio and 13 per cent favouring publishing businesses as best positioned to thrive in next two to three years. The study is a continuation of a series of studies by Ernst & Young exploring strategic issues and trends transforming the media and entertainment industry worldwide.