Media

Media executives see digital revenues on the rise

About 94 percent of media executives polled say they expect an increase in digital revenues this year, according to a survey of media and communications executives by KPMG.

More than a third of those media executives believe that their digital revenues will increase more than 10 percent. About three-quarters believe overall revenues — both digital and traditional combined — will be higher a year from now. That’s more optimism than in the past from executives who have seen their traditional media businesses eroded by the internet. In the past, media executives have seen an unrelenting decline of their businesses because the digital side of the business was so small.

The 94 percent expecting an increase in digital revenue compares to just 83 percent in 2010. About 37 percent expect their companies to grow digital revenues by over 10 percent, compared to 31 percent in the 2010 survey.

The survey results come from the annual Communications and Media Industry Business Climate Survey by KPMG, the audit, tax, and advisory firm. Companies interviewed include newspapers, magazines, internet publications, cable TV companies, and other media and communications firms.

The respondents this year said that the important drivers for their revenue growth over the next three years are increasing broadband access speeds, new distribution methods, social media platforms and online advertising. The toughest challenges are maximizing digital media revenue growth, managing subscriber growth, and managing customer churn.

“It’s clear from our survey that communications and media executives are more optimistic and their companies are placing bets that now is the time to position and invest for growth, despite an uneven economic recovery,” said Paul Wissmann, KPMG’s National Sector Leader for Communications and Media.

In an interview, Wissmann said the survey did not focus on the erosion of traditional revenues for the media. But digital media such as tablet apps offer hope that traditional media can be competitive in the new era of competition.

The executives are investing in technology and products through both organic growth and deal making. About 21 percent of those surveyed see a 7 percent to 10 percent increase, compared to 15 percent in 2010. About 20 percent see a 4 percent to 6 percent gain.

Mobile commerce and other new convergences of business opportunities are expected to have the greatest positive impact on the business. About 47 percent expected a 1 percent to 5 percent growth rate for the industry in the next year, while 32 percent expect growth of 6 percent to 20 percent.

“Communications and media companies are sensing industry momentum that is the result of  leaner organizations coming out of the recession, combined with the opportunity offered by the development of — and users’ rapid adoption of — innovation such as tablets, high-speed wireless access and social networking platforms,“ said Carl Geppert, KPMG’s national account leader for communications and media.

Social media is scoring high in strategy for media companies. In the survey, 43 percent ranked new distribution methods as the top business driver. About 37 percent said that online ads were in the top three drivers. And 75 percent said that cloud computing would have a slight to moderate transformational impact on their businesses in the next few years.

Seven of 10 executives believe their companies will be involved in a merger or acquisition during the next two years. About 58 percent will likely be a buyer and 10 percent will be a seller. The reasons include access to new tech and products, product synergies, and access to new geographic markets. Wissmann says that media companies feel a need to grab market share through deals or get left behind in the shift to digital services.

Some 47 percent of media companies expect their headcount to rise over the next year, lower than the 57 percent in the previous year. In fact, looking back, only 34 percent said they actually increased headcount in the past year. About 41 percent said they reduced headcount in the past year, while 23 percent said they expect to cut headcount in the next year. About 22 percent said their headcount has reached pre-recession levels, while 35 percent said their headcount would return to pre-recession levels over the next 30 months. And 34 percent said headcount would never return to those levels.

Some two-thirds expect the U.S. economy to improve within the next year, but they believe a full national economic recovery has been pushed out until 2013. Last year, respondents said the recovery would take hold by 2012. The survey was conducted from May to June and it includes responses from 101 executives at communications and media companies. About 66 percent are from companies with revenues exceeding $1 billion, and 34 percent are from companies with revenues in the $100 million to $1 billion range.

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