The report, “Poised for digital growth: Preserving profitability in today's digital world”, offers insights from CFOs on the future of digital distribution, the internet, mobile devices and the impact on their companies.
“The phenomenal proliferation of digital entertainment among consumers continues to challenge media and entertainment companies,” said John Nendick, Global Media & Entertainment Leader for Ernst & Young LLP.
“Revenues are dropping due to the unbundling of media and the reduction of per unit pricing, challenging CFOs to identify innovative ways to reach their financial objectives. However, as the demand for digitally delivered entertainment continues to increase significantly, CFOs feel optimistic about revenue potential,” he continued.
Given the discrepancy between increasing consumption of digital content and falling revenues, CFOs surveyed agreed that the industry must determine if and how much they can bundle media content and then settle on appropriate pricing.
Ernst & Young analysis indicates that by 2012, the average per unit price of video and music content will decrease by almost 25% from the per unit price in 2009. This would be on the heels of the 55% decrease of the price of music and the 12% decrease of the price of video between 2006 and 2009.
Currently, the average per unit price of music is US$3 and US$6 for video.
Additionally, total home video and music end-user spending for 2010, including digital and physical products, is estimated to be US$28.5 billion compared to US$36.4 billion in 2006.
“Publishers and similar content companies are embracing the fact there are almost 2 billion digital media users to leverage their content and core products and services to the web, mobile devices and electronic gaming globally,” said Howard Bass, Senior Partner, Global Media & Entertainment Advisory Services, Ernst & Young LLP.
Digital media consumption is also set to continue at a rapid pace. The number of US households with both broadband connectivity and at least one 3G mobile device has quadrupled during the past five years, and increased more than 600% on a worldwide basis, according to the report.
66% of CFOs expect eBooks and mobile content to have the greatest impact on the media and entertainment industry over the next three years.
Global penetration of households with broadband is predicted to reach 27% by the end of 2010 and 3G mobile devices are predicted to reach 55% by the end of this year.
Ernst & Young’s index of digital media users, which is increasing by an annual rate of 32%, is expected to reach 2.2 billion by 2011 – more than double than in 2007.
For more information, visit the Ernst & Young page here.
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