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Its showtime!

Digital drives the agenda,


data delivers the insights
Media & Entertainment
Global Media & Entertainment Center
For the first time since the great recession
of 2008, media and entertainment (M&E)
chief financial officers (CFOs) have shifted
their primary focus from cost reduction and
operational efficiencies to optimizing the
organization for growth. Todays priority for
an overwhelming 74% of CFOs is the evolution
of digital using digital to drive their growth
agenda and data to deliver the insights that
enable game-changing decision-making.
In our sixth in a series of executive reports,
50 CFOs from leading M&E companies around
the world share these and other views on the
current and future direction of the industry.
The CFOs we interviewed represent M&E
companies with combined annual revenues
exceeding US$475b globally, spanning eight
media and entertainment industry sectors
and 10 geographies.
About this report
Figure 1
Company size annual revenues (in US$)
(numbers of participating companies*)
$500m$999m
Less than $500m
$1b$4.9b
$5b$9.9b
$10b$25b
Greater than $25b 6
4
8
14
6
9
5 10 15
face-to-face interviews completed
with the worlds leading media and
entertainment CFOs
50
* If more than one division or subsidiary participated, consolidated parent
company revenues have been included.
Its showtime! Digital drives the agenda, data delivers the insights
Figure 2
Headquarters of participating companies
United States
52%
India
12%
China
8%
Australia
8%
United
Kingdom
6%
France
4%
Russia
4%
Canada
2%
Japan
2%
Brazil
2%
Figure 3
Companies by sub-sector
Publishing
and
information
services
20%
Filmed
entertainment
18%
Broadcast
and cable
networks
16%
Media
conglomerates
14%
Music/radio
4% Cable/satellite
distributors
8%
Internet and
interactive media
10%
Advertising and
measurement
10%
countries
represented
billion of media and entertainment
revenue represented by participating
companies (approximately)
media and entertainment
sectors represented
8 10
Over
$
475
Figure 4
Geographic distribution of revenue of
participating companies
North America
48.1%
Europe
14.9%
Japan
9.3%
Asia Pacic
7.2%
Latin America
3.2%
Australia/
New Zealand
1.8% ROW
15.5%
To augment our interview findings, we have
used proprietary EY analyses and secondary
research to provide depth and context.
We promote an environment of openness and
candor during the interview process. As such,
none of the comments or quotes used in this
report is attributed to any participant. We would
like to take a moment to thank all participants
for their time and the insights they generously
provided. Their involvement was instrumental in
the creation of this report.
Participating CFOs and executives*
Global Media & Entertainment Center
Howard M. Averill
Executive Vice President
and CFO
Time Warner Inc.
Jimmy Barge
CFO
Lionsgate Entertainment
Corp.
Manuel Belmar
CFO
Globosat Programadora Ltda.
Gregoire Castaing
CFO
Canal+ Groupe
Nicholas Chong
CFO
Autohome Inc.
Lewis Coleman
President and CFO
Dreamworks Animation
SKG, Inc.
Laurence Debroux
Group CFO
JC Decaux
Patrick T. Doyle
Executive Vice President
and CFO
DIRECTV, Inc.
Bernard G. Dvorak
Executive Vice President
and Co-CFO
Liberty Global, plc
James Follo
CFO
The New York Times
Company
Sambasivan G
CFO
Tata Sky Limited
Ian Grifths
CFO
ITV plc
Joseph Gu
CFO
China Media Capital
Piyush Gupta
CFO
HT Media Ltd.
Andrew Heffernan
CFO
Eros International plc
David C. Hendler
Senior Executive
Vice President and CFO
Sony Pictures Entertainment
Andrew Hobson
Senior Executive Vice President
and CFO
Univision Communications Inc.
David Housego
CFO
Fairfax Media Limited
Simon Kelly
Chief Operating Ofcer
and CFO
Nine Entertainment Company
Steven E. Kober
Executive Vice President
and CFO
Sony Corporation of America
Mitch Koch
CFO Interactive
Entertainment Business
Microsoft Corporation
John Lo
Senior Vice President and CFO
Tencent Holdings Limited
Frank Mergenthaler
Executive Vice President and CFO
The Interpublic Group
of Companies
Patrick Milano
Executive Vice President, CFO
and Chief Accounting Ofcer
McGraw-Hill Education
Its showtime! Digital drives the agenda, data delivers the insights
* Two CFOs asked to remain anonymous.
Shoichi Nakamoto
Director, Senior Executive
Vice President and CFO
DENTSU INC.
John P. Nallen
Senior Executive Vice President
and CFO
21st Century Fox America Inc.
Shankar Narayan
CFO
Bennett Coleman & Co. Ltd
Maureen OConnell
Chief Accounting Ofcer, CFO
and Executive Vice President
Scholastic Inc.
Thomas C. Peddie
Executive Vice President
and CFO
Corus Entertainment Inc.
David Pendleton
Chief Operating Ofcer
Australian Broadcasting
Company
Nick Priday
CFO, Dentsu Aegis Network
& Aegis Media
Dentsu Aegis Network Limited
Julie Raffe
Finance Director
Village Roadshow Limited
Paul Richardson
Group Finance Director
WPP
Mitchell Scherzer
Senior Vice President and CFO
Hearst Corporation
Peter Seymour
Executive Vice President
and CFO
Disney ABC Television Group
Chris Shean
Senior Vice President and CFO
Liberty Media Corporation
Paul Shurgot
Senior Vice President and CFO
The Walt Disney Studios
Bedi A. Singh
CFO
News Corporation
Dene Stratton
CFO
Metro-Goldwyn-Mayer Inc.
Ganapathy Subramaniam
CFO
Hathway Cable and Datacom
N. Subramanian
CFO
Entertainment Network
(India) Limited
Thomas Summer
CFO
Advance Publications, Inc.
Nikolay Surikov
CFO
CTC Media, Inc.
Elena Verman
CFO
Prof-Media Management
Larry Wasserman
CFO
Dreamworks Studios
David Wells
CFO
Netix, Inc.
Kathy Willard
Executive Vice President
and CFO
Live Nation Entertainment, Inc.
Zhang Jazy Ying
CFO
Giant Interactive Group, Inc.
Global Media & Entertainment Center
The methodology
We met with each of the CFOs who
participated in the study, asking them
12 questions focused on the industry
as a whole, as well as on specific areas
within each CFOs organization, and
asked the CFOs to rank their top three
responses in order of importance. We
have summarized their responses in this
report, highlighting the key themes that
emerged from our discussions.
If you would like to see the complete
results of the study, please contact your
local EY representative.
1 Its showtime! Digital drives the agenda, data delivers the insights
C
o
n
t
e
n
t
s
2
Overview
4
Digital isnt the future its already here
8
Data analytics deliver insights that improve
decision-making
12
Transactions focus on what companies
already know
16
Better tax planning accelerates performance
18
Capturing todays talent will fuel
tomorrows growth
20
Conclusion
2 Global Media & Entertainment Center
After six years of driving cost reductions and business efficiencies to first survive
and then thrive amid economic uncertainty and disruptive markets, CFOs are
changing gears. In our 2012 CEO report,
1
62% of CEOs cited economic uncertainty
as their top challenge. Of the 50 M&E CFOs we interviewed for our 2014 CFO study,
only 26% highlighted economic uncertainty as a concern. This shift away from
retract and retrench reflects the sentiment of CFOs across sectors.
Overview
As M&E companies look to
grow, CFOs are focusing on
being strategic partners
to the business, providing
leadership and insight, and
helping to ensure the business
is moving fast enough to adapt
to and innovate in todays
digital world.
John Nendick
Global Media &
Entertainment Leader
EY
Figure 5
Economic uncertainty is no longer the
greatest challenge
of CFOs identied economic
uncertainty as a challenge for
their organization
of CEOs identied economic
uncertainty as a challenge for
their organization
Instead, organizations around the world
are turning their attention to growth.
M&E CFOs are no exception. And they
see digital and data analytics as the
means to achieve it.
For organizations seeking to accelerate
their growth trajectory, transactions
are making a comeback. For companies
that are looking to grow through
acquisitions, a majority of CFOs say
their organizations are focused on
expanding the geographic footprint
for existing businesses. Nearly half
report a willingness to take a risk on
new business ventures, such as games,
social media and online entertainment.
Although growth is now the number
one priority, CFOs are still seeking cost
reductions and business efficiencies.
And they see integrated tax planning
as a ripe opportunity, particularly as
organizations expand their geographic
footprint into emerging markets.
Although cost reduction and business efficiencies have played a role for several years,
as growth becomes the priority, CFOs are looking to digital and data analytics to shift
them into high gear.
3 Its showtime! Digital drives the agenda, data delivers the insights
As CFOs look to the future, they perceive
recruiting, developing and retaining
the right talent as critical to their
organizations success. Investments
in digital talent specifically are high
priorities across M&E subsectors.
Digital transformation, data analytics to
improve decision-making, transactions
to accelerate growth, optimizing tax
planning opportunities, and recruiting
and retaining the right talent these
are the priorities CFOs identified when
we interviewed them, and they are the
themes we explore in this report.
Study highlights
Digital isnt the future, its already here
Digital is transforming the M&E landscape. M&E companies best
advantage is to manage from within the digital and technology
disruptions that are transforming the market.
Data analytics deliver insights that improve
decision-making
To effectively align their organization for digital growth, CFOs are
placing significant emphasis on data analytics to improve decision-
making, systems and processes.
Transactions focus on what companies already know
As M&E companies look to grow, CFOs are most focused on deals
in core markets and geographies. But new opportunities are a
tempting option.
Better tax planning accelerates performance
Integrating tax planning that aligns to business and operational
strategy is more important than ever for CFOs as tax planning
moves into the digital age.
Capturing todays talent will fuel tomorrows growth
CFOs recognize the importance of attracting and retaining top
talent, and theyre pinning their success, in part, on their ability
to do it.
4 Global Media & Entertainment Center
Study participant says:
Online and digital distribution is not
the future anymore its already
happening.
Digital technology today pervades every aspect of our lives. Its no wonder
then that 74% of M&E CFOs see digital and online distribution as a top priority
for their organization. Reading, television, film, games, music its all online,
available across multiple platforms and eminently consumable. The difference
between today and years past is the intensity and the pace at which the digital
landscape is changing. It seems that each day we wake up to a new device,
platform or app that will transform how we think, work and live in the world.
EYs digital media platform saturation index suggests a 17% compound annual
growth rate (CAGR) between 2010 and 2017. In the same time frame, while
worldwide device penetration is growing at 20% annually, data consumption is
growing at 25%.
Average broadband penetration speed, which has doubled globally from
1.9 megabits per second (Mbps) to 3.8 Mbps between 2010 and 2013, is one
factor. Consumers having more devices and doing more with them is another.
see the evolution of digital
and online distribution as a
priority for the organization
74%
selected the evolution of
digital and online distribution
as their #1 priority
25%
Figure 6
The evolution of digital and online distribution
Study participants say:
Without digital, we cannot survive.
Media companies are still grappling
with getting a digital monetization
model in place.
M&E CFOs no longer see
digital as a new media play.
They see it as an essential
and fundamental component
of their organization in every
dimension.
Howard Bass
Global Media & Entertainment
Advisory Services Leader
EY
Digital isnt the future
its already here
Digital is transforming the M&E landscape. M&E companies best advantage is to manage
from within the digital and technology disruptions that are transforming the market.
5 Its showtime! Digital drives the agenda, data delivers the insights
Figure 7
Rise in connected devices is outpaced by higher consumer levels
2
Worldwide consumer internet-enabled device growth index
Worldwide consumer IP data trafc growth index
0
1
2
3
4
5
6
7
Index is based on the household penetration of xed and wireless
broadband connections and consumer internet-enabled devices.
Index = (broadband penetration + consumer device penetration) / 200%
Index is based on the growth rates for consumer internet-enabled
devices and consumer internet data trafc.
50
100
150
200
250
300
350
400
450
500
2010 2011 2012 2013 2014e 2015e 2016e 2017e
2010
2.77
2011 2012 2013 2014e 2015e 2016e 2017e
3.53
4.22
4.82
5.33
5.72
6.01
6.63
1.29
1.61
1.99
2.30
2.73
3.11
3.48
3.96
Worldwide US
100
127
162
206
255
313
384
468
100
126
163
189
230
268
304
356
Between 2010 and 2014, the average broadband speed
globally doubled from 1.9 Mbps to 3.8 Mbps.
20102017e CAGR
Worldwide: 17%
US: 13%
20102017e CAGR
IT trafc: 25%
Devices: 20%
EY digital media platform saturation index EY worldwide digital media consumption growth index
In the US, between 2010 and 2013, consumers increased their use of social
networking by 37% and online video by 94%. Over the same time period,
traditional media continued to decline, with newspapers and magazines down
16% and 11%, respectively.
6 Global Media & Entertainment Center
The speed at which digital technology is evolving, combined
with voracious consumer consumption rates, is fundamentally
changing the business landscape for M&E companies. The
telephone, a ground-breaking communications tool invented
amid a wave of innovation during the industrial revolution,
took 75 years to connect 50 million people globally. Imagine
presenting a business case today that suggested a 75-year
time frame for reaching 50 million customers. The business
case would never be approved. Four years ago, from the
time it was introduced in 2010, it took Apples iPad less
than two years to reach the same number of customers.
Rovio Entertainments game Angry Birds reached 50 million
customers in about 30 days.
Figure 8
Disruptive technology is changing the M&E landscape
3
10 20 0 30 40 50 60 70 80
Number of years to reach 50m global customers
75.0
38.0
13.0
6.5
4.0
3.6
3.0
3.0
2.9
2.8
2.5
2.3
1.8
0.2
0.1 Angry Birds
Google+
iPad
Snapchat
AOL
iPhone
MySpace
iPod
Twitter
Facebook
www
LinkedIn
Television
Radio
Telephone
It took about 75 years for
the telephone to connect
50 million people. Today,
technologies reach that
milestone in around a month.
7 Its showtime! Digital drives the agenda, data delivers the insights
Study participant says:
Its unknown where technology is going
and how disruptive it will be, thus, the
need for a flexible business model.
of CFOs cite platform and
technology disintermediation
as the greatest challenge
64%
58%
of CFOs cite the inability to
persuade consumers to pay
fair value for content
Given that M&E organizations are unable to predict the direction or the speed of
the next wave of digital innovation, their best advantage is to create flexibility
across the organization to adapt and capitalize on the digital and technology
disruptions that are transforming the market.
In addition to platform and technology disintermediation, 58% of M&E CFOs cite
losing control of the customer relationship and persuading consumers to pay
fair value for content as another significant challenge. Part of the issue is that
fair value is in the eye of beholder. Looking through the lens of the consumer, fair
value means something quite different from what content producers or creators
see. As celebrities and other consumers continue to produce free content, M&E
companies are having to prove that their content is worth its price.
Figure 9
M&Es greatest challenges
The ability to achieve mass scale in a matter of weeks or months instead of years
represents an enormous and enticing opportunity for M&E companies. Yet it also
means that a new slew of competitors can be just around the corner. Its also
important to note that mass scale in the short term does not guarantee long-
term success. The speed at which a companys star rises can also be the speed at
which it falls. It is for these reasons that 64% of CFOs cite platform and technology
disintermediation as their greatest challenge over the next three years.
Fair value is tough to address
because consumers and
content producers have very
different perspectives on
what fair value means.
Jean-Benoit Berty
UK Technology,
Media & Telecommunications
Market Leader
EY
8 Global Media & Entertainment Center
Data analytics deliver insights
that improve decision-making
Study participant says:
Were confident we can win when we
understand and can predict the rules.
Figure 10
Top priorities for the finance team
60%
of CFOs feel it is
a top priority to
improve their
decision analytics
capabilities
54%
of CFOs feel it is a
top priority to
improve efciency
of systems and
processes
To effectively align their organization for digital growth, CFOs are placing significant
emphasis on data analytics to improve decision-making, systems and processes.
9 Its showtime! Digital drives the agenda, data delivers the insights
To enrich existing data strategies and drive insights into the business, CFOs
are focusing on four components:
Simplify rear-view reporting. Companies are now using
modern tools and data analytics techniques to simplify
the collection, storing and analysis of data.
Develop predictive modeling techniques. Predictive
modeling enables organizations to shift gears on data
from collection and reporting to taking a forward-looking
view of the issues and challenges that may impact the
business in the future.
Democratize access to the data. By leveraging mobile
and cloud-based technologies, organizations can provide
easy access to the data to stakeholders at the time and
place where it is relevant.
Consolidate customer, audience and platform data.
Consolidation enables organizations to develop a single
view of the customer. It also simplifies data outputs,
enabling both standardization of data across the
enterprise and customization to better target customers.
Eliminate manual,
Excel-based reporting
Automate performance
metrics collection and
distribution
Reduce complexity and
volume of internal
reporting
Standardize content
information across
business units
Identify vital key levers
that drive the business ...
sort through the big data
noise
Create models that predict
performance and variance
before they happen
Enable data-driven,
real-time decision-making
Provide mobile-ready
analytics solutions
Develop visualization
techniques that make it
easy to consume
information
Enable stakeholders to
develop their own custom
insights from common
standards
Develop single view of
customer
Develop insights that
enable better targeting
and customization
Simplify third-party tools
and own more customer
data
Consolidate
customer, audience
and platform data
Democratize access
to the data
Develop predictive
modelling capabilities
Simplify rear-view
reporting
Organizational agility
Utilizing data to drive
insights into M&E businesses
Figure 11
CFOs are focusing on four initiatives
CFOs want the ability to efficiently analyze their
data to gain insights into context, consumers
and community, and to drive commerce and
create incremental value ... ultimately elevating
this conversation within their organizations.
Ekta Singh
US Innovation & Digital Strategy Leader
EY
10 Global Media & Entertainment Center 10 Global Media & Entertainment Center
A majority of CFOs (59%) believe their organization is doing a good or very
good job of using data for responding and upselling to existing customers and
identifying trends. Similarly, 52% of CFOs see their organization as doing a good
job of using data to determine production rights and content investments as part
of the creative process. And yet, only about a third (33%) of CFOs think that their
company is doing a good job of using data to effectively generate new leads or
find new customers.
In fact, CFOs acknowledge that real-time access to data is their greatest area
for improvement. Just over half of the CFOs feel that they have the appropriate
tools and processes in place to gather insights and information. Yet they are less
confident about managing data in real time and sharing it effectively around the
organization. Only 39% believe they can access management information and
data in real time when needed. Similarly, only 39% believe their organization is
good or very good at sharing data.
Study participants say:
Its not clear yet which tools to use, what
data is valuable and how to use the data.
We havent yet cracked that code.
For our production and content
choices, we use high levels of data
plus CEO gut feel.
Figure 12
How well CFOs are using their data
do a good or very good
job of using data for responding
and upselling to existing customers
and identifying trends
59%
do a good job of using
data to determine production
rights and content investments
as part of the creative process
52%
do a good job of using
data to effectively generate new
leads or nd new customers
33%
are good or very good at
sharing data around their
organization
39%
have the appropriate
tools and processes to gather
insights and information
52%
can access management
information in real time
39%
Figure 13
How well CFOs are tracking, accessing and communicating their organizations performance
11 Its showtime! Digital drives the agenda, data delivers the insights
As the global big data market for M&E continues to grow
41.1% CAGR estimated between 2012 and 2018
4
finding
meaningful insights among the exabytes of data becomes
increasingly difficult. For example, in 2010, approximately
1,100 exabytes of unstructured data were stored in
databases. By 2015, we expect that number to rise to nearly
8,000 exabytes, 68% of which consumers will create primarily
through social networks.
Study participant says:
We make this work through brute force. Investment in IT is
needed to make it easier to make data- and insights-driven
business decisions.
Figure 14
The exponential rise in data makes it harder to find meaningful insight
5
To make sense of the data and take full advantage of the
insights they gather, and to improve the effectiveness of
the organization as a whole, collaboration is key. When
asked, 58% of CFOs cited greater collaboration between
business units and/or teams as a means of improving their
organizations overall effectiveness. Yet, only 30% intended
to make it their top priority.
Facebook
LinkedIn
Twitter
Instagram
Google+
Pinterest
90% of all
data was
unstructured
68% of all unstructured
data in 2015 will be
created by consumers
Unstructured
data (91%)
0
200
400
600
800
1,000
1,200
0
2,000
4,000
6,000
8,000
10,000
2008 2009 2010 2011 2012 2013
2010 2015e
Between 2012 and 2018, the global big data market for
media and entertainment will grow 41.4% CAGR.
32
6
8
55
90
145
26
150
500
202
277
555
500
1,000
1
10
80
150
150
350
608
845
1,060
1,150
70
12
Average number of likes
4.7b May 2013
2.7b August 2012
Tweets per day
500m 2013
5k 2007
5,300 exabytes of unstructured digital consumer data to be stored in
databases by 2015, out of which a large share to be generated by
social networks
The rising availability of data
Number of registered users (in millions)
Volume of digital data stored in databases
(in exabytes*)
* One exabyte equals one million terabytes (TB)
1,104
123
2,531
5,379
758
Volume Structure
12 Global Media & Entertainment Center
Transactions focus on what
companies already know
Study participant says:
We want to be in big creative markets.
As if channeling the twin mantras of bigger is better and if you cant beat them,
buy them, transactions are making a comeback in M&E. Specifically, organizations
are looking to grow in areas that they know. From both geographic and investment
perspectives, M&E companies are focusing first on existing markets and businesses.
Their second choice for growth is new markets and businesses.
Figure 15
How CFOs expect their organizations to expand in the market
The focus on existing or core markets makes sense given that the US ranks as the
most attractive region in EYs Digital Media Attractiveness Index. It continues to
represent both scale and maturity in all areas. Chinas scale and growth in a still-
emerging market make it attractive, but the regulatory and business environment
makes it a less attractive investment for some M&E companies. Similarly, although
Brazil, India and Russia offer vast potential, they too struggle with systemic risk
and regulatory issues. Finally, even though Japan, the UK, France and Germany
are safe core markets with relatively low costs of entry, their relatively modest
size makes them less attractive for M&E companies looking to significantly scale
their customer base.
Study participants say:
70% of our business is from core
markets, but the other 30% will be
driving our growth.
Its much harder now to differentiate
between developed and emerging
markets.
72%
are focused on existing/
core markets
67%
seek bolt-on deals to
expand geographically in
existing businesses
64%
are looking at opportunities
in emerging markets
50%
are looking to invest
in new business
In terms of M&E, in existing
core markets, we expect
the focus to be on size. In
emerging markets, we expect
the focus to be on volume.
Either way, M&E is an
industry on the move.
Tom Connolly
Global Media & Entertainment
Transaction Advisory
Services Leader
EY
As M&E companies look to grow, CFOs are most focused on deals in core markets and
geographies. But new opportunities are a tempting option.
13 Its showtime! Digital drives the agenda, data delivers the insights
United States
China
Japan
Germany
UK
France
Australia
South Korea
Mexico
South Africa
Saudi Arabia
India
Brazil
Russia
Indonesia
Argentina
1
4
3
2
Market costs
High
Low
High Low
M
a
r
k
e
t

b
e
n
e

t
s
Size of bubble represents the total weighted score of
benets and costs and is an indicator of earnings potential
Figure 16
EY Digital Media Attractiveness Index
6
The index blends
and weights over 20
indicators from media
and entertainment to
the wider market.
Benefits
Macroeconomic and socio-
demographic: economic growth
and technology adoption
Market value and monetization:
e-commerce and online payments
Costs
Macro ease of doing business and risk
factors (e.g., political and regulatory risk
and piracy)
Media and entertainment environment:
foreign ownership, licensing and
censorship
Index highlights
The US continues to
be the most attractive
market, representing
scale and maturity in
all areas.
1
Chinas scale and growth
make it attractive, but
the regulatory and
business environment
remains an issue.
2
Brazil, India and Russia
offer vast potential
but also struggle
with wider risk and
regulatory issues.
3
Japan, UK, France
and Germany are core
markets with relatively
low costs of entry.
4
14 Global Media & Entertainment Center
For many M&E organizations, the preferred approach to acquisition is to have
a majority ownership so that they can control their own destiny. They want to
control their brand and the content or intellectual property. At the same time,
they understand the value of local knowledge and local customer insights,
making local partnerships and alliances their second most preferred choice for
acquisitions and their primary rationale for any transaction. Yet for many CFOs
there is an indication that their organization is willing to go it alone.
Figure 17
CFOs prefer deals that give them more local knowledge and enable them to
better control content, brand and destiny
Percentage of respondents
(up to three responses provided)
0% 20% 40% 60%
61%
Acquisitions/
majority ownership
Local partnerships/
alliances
Go it alone/greeneld
Investments/
minority ownerships
Content sales/
licensing/franchising
Local market knowledge/
customer insight
Content/IP ownership
Brand control
Achieve competitive
advantage
Access to talent
55%
48%
34%
30%
56%
44%
34%
29%
26%
Ranked #1 Ranked #2 Ranked #3
Percentage of respondents
(up to three responses provided)
Ranked #1 Ranked #2 Ranked #3
0% 20% 40% 60%
Preferred approach Rationale
15 Its showtime! Digital drives the agenda, data delivers the insights
Study participant says:
Were looking for young businesses ...
its all about their potential for growth.
Although the big deals seem to be occurring among cable operators, CFOs
continue to believe, as CEOs did two years ago, that the big winners three
years from now will be interactive media companies.
Figure 18
Global media and entertainment M&A deals by sub-sector
Number of announced deals with disclosed transaction values
7
*Deals announced through 19 May 2014
2008 2009 2010 2011 2013 2012 1H 14*
100
0
200
300
400
500
600
700
800
900
1,000
574
397
425
546
493
567
188
$61
$194
$189
$153
$157
$220
$939
Average deal value (US$m)
Publishing and information services
Broadcasting and cable
Film and entertainment
Digital
Given increases in their market value, some
M&E companies are able to access capital
markets and use their stock as currency to
more aggressively pursue acquisitions in the
future which they need to do as both an
offensive and defensive strategy. Companies
need to expand to grow. If they dont, they
could become targets.
Farokh Balsara
India Media & Entertainment Sector Leader
EY
Better tax planning
accelerates performance
Study participant says:
Tax has a key role to play in creating
value for shareholders.
As M&E businesses seek to grow across geographies and evolve to address
disruptive markets and technology, a more closely integrated tax planning strategy
that aligns to the organizations digital strategy becomes more important than ever.
Figure 19
In what ways could your organization enhance its current tax strategy to take it
to the next level?
For 40% of CFOs, integrating tax planning within the business and operations
was their number one priority. They see it as a strategic opportunity to drive
growth through increased operational efficiencies and improved processes.
They also see it as a means of managing the risks of an increasingly cross-
jurisdictional tax landscape. Integrating tax planning into the business enables
M&E companies to gain a better understanding of where key management,
supply chains and intellectual property are located internationally. This enables
organizations to then centralize key parts of the business in tax-advantaged
jurisdictions by securing rulings with tax authorities on an agreed legal structure
and operating model.
Study participant says:
Tax is not only a burden; it can bring
rewards and recognition.
16 Global Media & Entertainment Center
Integration of tax planning
within the businesses and operations
Optimizing tax planning to take
advantage of international opportunities
Improved/more consistent
levels of compliance
Migration to global accounting
and tax systems and software
Improved relationships with tax
authorities, including in regions where
the organization is looking to grow
10 0 20 30 40 50 60 70
70%
65%
40%
33%
18%
Percentage of respondents
(up to three responses provided)
Ranked #1 Ranked #2 Ranked #3
Integrating tax planning that aligns to business and operational strategy is more
important than ever for CFOs as tax planning moves into the digital age.
17 Its showtime! Digital drives the agenda, data delivers the insights
Study participant says:
We need to do a better job of integrating
tax planning into our contract
negotiations.
By improving relationships with tax authorities, organizations can reduce risks
and unwanted exposure. They can also gain certainty and potential tax benefits or
incentives that can improve these relationships.
CFOs looking for an integrated, long-term approach to tax planning may want to
consider a multipronged strategic approach that uses the transition to digital to
offset tax liabilities; positions senior stakeholders and head office in tax-efficient
jurisdictions; provides detailed insight into the supply chain in terms of how
customers, devices and platforms are changing; and understands the breadth,
depth and value of the organizations intellectual property.
Ten years ago, CFOs focus
around tax was on financial
statement risk. Today, CFOs
would add that integrating
tax with their business
strategies can create
tremendous value for the
organization.
Alan Luchs
Global Media & Entertainment
Tax Services Leader
EY
18 Global Media & Entertainment Center
Capturing todays talent
will fuel tomorrows growth
Study participant says:
Its all about the talent of today and
tomorrow.
According to EYs Sustaining digital leadership, 64% of the M&E executives
surveyed said their companies overall are investing in digital staff faster than digital
revenue is growing.
8
In the gaming and publishing sub-sectors, the percentage is
even higher.
Figure 20
Percentage of M&E executives who say they are investing in digital staff faster
than digital revenue is growing
9
While it makes sense that digitally focused M&E companies are hiring faster than
revenue is growing, for more traditional media companies, such as publishing,
placing such emphasis on recruiting and retaining digital talent is more surprising.
This seems to speak to the fundamental transformation that is occurring in the
more traditional sub-sectors of the industry in the case of publishing, moving
away from print to digital publications.
Study participant says:
Having the right resources is important
(back office and creative). You cant do
both with the same people.
79%
Gaming
71%
Publishing
63%
Technology
63%
Music
62%
Social media
59%
Advertising
59%
Film
58%
Broadcast
CFOs recognize the importance of attracting and retaining top talent, and theyre
pinning their success, in part, on their ability to do it.
19 Its showtime! Digital drives the agenda, data delivers the insights
Figure 21
Recruiting, attracting and retaining talent
Although creative skills differ from finance skills, CFOs echoed the importance of
talent, with 58% indicating that their organizations ability to attract and retain
top talent will enable them to improve their organizations effectiveness; 47% say
recruiting and retaining the right talent will be a determining factor in the success
of their performance three years from now. For CFOs, the right talent means
finding people that have more than technical accounting skills. Todays finance
resources must also possess excellent communication skills and commercial and
entrepreneurial acumen.
Study participant says:
My personal priority is talent. The
talent I am seeing doesnt align with
needs and expectations ... hard to find
people with the right digital skills to
help us transform.
Yet, for all the desires CFOs have to recruit, train and retain talent, many are
finding it difficult to identify the right resources to fill their digital talent gaps.
Many of the people they are interviewing do not have the right skills to fit the
needs of the organization. As one CFO put it, I cant find the blend of skills,
experience and background that I think we need to transform.
say recruiting and retaining the right talent will be
a determining factor in the success of their
performance three years from now
47%
say attracting and retaining talent would
make their organization more effective
58%
say capturing talent, skills and expertise makes a
M&A deal more attractive
43%
That traditional businesses
such as publishing are
investing almost as much
in digital staffing as gaming
companies underscores
the huge transformation
that M&E companies
are experiencing across
sub-sectors.
Ian Eddleston
Global Media & Entertainment
Assurance Services Leader
EY
20 Global Media & Entertainment Center
Conclusion
Study participant says:
Anything that is a commodity should be
outsourced. Strategy should never be.
Digital transformation, data analytics that turn insights into action, M&A
activity in core and emerging markets, tax planning that optimizes operational
efficiencies, and recruiting, training and retaining the right talent are the areas
M&E CFOs identified as being important to their organization.
When we asked CFOs how they would measure their own success three years
from now, their responses revealed that CFOs are no longer content to focus their
personal performance on financial management and hindsight reporting. For
57% of CFOs, meeting or exceeding the companys financial performance is still
important. However, 65% of CFOs were more interested in looking forward. They
want to use their role to enable their organization to develop a more competitive
and successful business strategy. Most of the time, I try to look to the future,
design new strategies and ways to grow and deliver what consumers demand,
remarked one CFO. Another stated; You need to have a deep understanding of
the market trends this should drive your strategy. CFOs see participating in the
development of a competitive business strategy and aligning the organization to
that strategy as fundamental to their role.
As digital continues to drive the agenda, CFOs are looking forward strategizing,
planning and executing in ways that enable their organizations to grow and sustain
market leadership.
CFOs are still managing a
changing business landscape,
regulatory compliance and
tax strategies and maximizing
shareholder value. At the
same time, their focus is
shifting more and more
toward driving better data,
better analytics and better
reporting.
Jennifer Walsh
Northeast Media &
Entertainment Market
Segment Leader
EY
21 Its showtime! Digital drives the agenda, data delivers the insights
Study participant says:
My personal priority is to enable
my organization to develop a
more competitve and successful
business strategy.
To achieve their performance goals three years
from now, CFOs plan to:
Manage the transition to digital by helping to shape digital business and revenue
models with the flexibility to withstand a constantly changing digital landscape
Evolve analytics and reporting capabilities to enable real-time insights that
improve strategic decision-making
Support transaction opportunities into new markets or geographies
Maximize tax planning opportunities that support growth initiatives
Attract, develop and retain top digital talent with the right skills and experience
to position their organization for success now and in the future
Its showtime for CFOs. As digital continues to drive the agenda, their role as
strategic advisors, data wranglers, tax planners and talent purveyors will enable
them to deliver the insights their organizations need to grow and sustain market
leadership in a constantly and rapidly evolving digital M&E landscape.
As CFOs look to the future, they see the critical role analytics has to play that by moving toward data
visualization and real-time data, they become more valuable partners to the business. Delivering real
insights in real time results in more responsive decision making. The new insights digitization can bring
will fundamentally change the way CFOs drive the business.
David McGregor
Asia-Pacific Technology, Media & Telecommunications Market Leader
EY
22 Global Media & Entertainment Center
Endnotes
1
EYs 2012 CEO Study: Opportunity and optimism: how
CEOs are embracing digital growth.
2
Pivot Table: Worldwide Consumer Market Model, 2010
2017, Version 2, IDC, February 2014, Doc #246993;
Global Multichannel Comparison Table, SNL Kagan, April
2014, 2014 SNL Kagan, a division of SNL Financial
LC, estimates; All rights reserved; State of the Internet
Q4 2010 Akamai Technologies, Inc., 2011; State of the
Internet Q4 2013, Akamai Technologies, Inc., 2014; Cisco
Visual Networking Index: Forecast and Methodology, 2010
2015, Cisco Systems, Inc., 1 June 2011; Cisco Visual
Networking Index: Forecast and Methodology, 20112016,
Cisco Systems, Inc., 30 May 2012; Cisco Visual Networking
Index: Forecast and Methodology, 20122017, Cisco
Systems, Inc., 29 May 2013.
3
Bicentennial Edition: Historical Statistics of the United
States, Colonial Times to 1970, US Census Bureau
website, census.gov/prod/www/statistical_abstract.html,
accessed 13 May 2014; General Telephone Statistics:
1948, International Telecommunication Union website, itu.
int/en/history/Pages/HistoricalStatistics.aspx, accessed
13 May 2014; Challenges to the network: Internet for
development, International Telecommunication Union
website, itu.int/ITU-D/ict/publications/inet/1999/chal_
exsum.pdf, accessed 13 May 2014; Reaching 50 Million
Users, Visual.ly website, visual.ly/reaching-50-million-
users, accessed 20 May 2014; Google Plus vs Facebook
Infographics, Visual.ly website, visual.ly/google-plus-
vs-facebook-infographics, accessed 20 May 2014; iPad
Races Towards 50 Million, 9Clouds website, 9clouds.
com/2010/05/13/ipad-races-towards-50-million-users-
chart/, accessed 20 May 2014; Google+ Hits the 50 Million
Users Mark in Record Time, Dazeinfo website, dazeinfo.
com/2011/09/27/google-hits-the-50-million-users-mark-
in-record-time/, accessed 20 May 2014; What are iPads
Sales All Time, About.com website, ipod.about.com/od/
ipadmodelsandterms/f/ipad-sales-to-date.htm, accessed
20 May 2014; The Inside Story of Snapchat: The Worlds
Hottest App or A $3 Billion Disappearing Act?, Forbes
website, forbes.com/sites/jjcolao/2014/01/06/the-inside-
story-of-snapchat-the-worlds-hottest-app-or-a-3-billion-
disappearing-act/, accessed 20 May 2014.
23 Its showtime! Digital drives the agenda, data delivers the insights
4
The Growth of Social Media, Search Engine Journal
website, searchenginejournal.com/growth-social-media-
2-0-infographic/77055/, accessed 20 May 2014;
LinkedIn Corp: CQ2: Impressive Results, Downgrading
on Valuation, Morgan Stanley, 5 August 2011, via
ThomsonOne; LinkedIn Corp: Awaiting an Inection,
Morgan Stanley, 28 April 2014, via ThomsonOne; Social
Medias New Big Data Frontiers, Business Insider website,
businessinsider.com.au/social-medias-new-big-data-
frontiers-articial-intelligence-deep-learning-and-predictive-
marketing-2014-2, accessed 20 May 2014; Big Data
Market to Reach $48.3B by 2018, Enterprise Apps Today
website, enterpriseappstoday.com/data-management/
big-data-market-to-reach-48.3b-by-2018.html, accessed
20 May 2014.
5
Ibid.
6
EY analysis of data from Ovum, eMarketer, IHS Insight,
MAGNA GLOBAL, Oxford Economics, Excipio, The World
Bank, OECD, IFPI and WAN-I.
7
EY analysis of Capital IQ data.
8
EY, Sustaining digital leadership, (pg. 9), 2014.
9
Sustaining digital leadership!, EYGM Limited, 2014.
www.ey.com/mediaentertainment
Mobile app: eyinsights.com
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Connect with us
Global Media & Entertainment Center 24
Telephone Email
Global Media & Entertainment sector leader
John Nendick, Global M&E Leader (Los Angeles, US) +1 213 977 3188 john.nendick@ey.com
Media & Entertainment service line leaders
Howard Bass, Global M&E Advisory Services Leader (New York, US) +1 212 773 4841 howard.bass@ey.com
Thomas J. Connolly, Global M&E Transaction Advisory Services Leader
(New York, US)
+1 212 773 7146 tom.connolly@ey.com
Ian Eddleston, Global M&E Assurance Services Leader
(Los Angeles, US)
+1 213 977 3304 ian.eddleston@ey.com
Alan Luchs, Global M&E Tax Services Leader (New York, US) +1 212 773 4380 alan.luchs@ey.com
Media & Entertainment regional contacts
Farokh Balsara (Mumbai, India) +91 22 6192 0280 farokh.balsara@in.ey.com
Jean-Benoit Berty (London, England) +44 20 7951 0256 jberty@uk.ey.com
Mark Besca (New York, US) +1 212 773 3423 mark.besca@ey.com
Mark J. Borao, (Los Angeles, US) +1 213 977 3633 mark.borao@ey.com
Peter YF Chan (Hong Kong, China) +852 2846 9936 peter-yf.chan@hk.ey.com
Peter Lennartz (Munich, Germany) +49 30 25471 20631 peter.lennartz@de.ey.com
David McGregor (Melbourne, Australia) +61 3 9288 8491 david.mcgregor@au.ey.com
Yuichiro Munakata (Tokyo, Japan) +81 3 3503 1100 munakata-ychr@shinnihon.or.jp
Bruno Perrin (Paris, France) +33 1 46 93 65 43 bruno.perrin@fr.ey.com
Michael Rudberg (London, England) +44 20 7951 2370 mrudberg@uk.ey.com
Ekta Singh (New York, US) +1 212 773 8432 ekta.singh@ey.com
Jennifer Walsh (New York, US) +1 212 773 7168 jennifer.walsh@ey.com
Global Media & Entertainment center team
Katie Ackerman, M&E Advisory Services Resident (New York, US) +1 212 773 2571 katie.ackerman@ey.com
Sylvia Ahi Vosloo, M&E Marketing Leader (Los Angeles, US) +1 213 977 4371 sylvia.ahivosloo@ey.com
Karen Angel, M&E Implementation Director (Los Angeles, US) +1 213 977 5809 karen.angel@ey.com
Matt Askins, National Accounting M&E Resident (New York, US) +1 212 773 0681 matt.askins@ey.com
Ray Cheng, M&E Tax Resident (New York, US) +1 212 773 4412 ray.cheng@ey.com
Raghav Mani, M&E Knowledge Leader (Los Angeles, US) +1 213 977 5855 raghav.mani@ey.com
Martyn Whistler, M&E Lead Analyst (London, England) +44 20 7980 0654 mwhistler@uk.ey.com
EY Global Media &
Entertainment key contacts
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How EYs Global Media & Entertainment Center can help
your business
In an industry synonymous with creativity and innovation, the bar for
business excellence is set high. You need to embrace new technology,
develop new distribution models and satisfy the demands of a
voracious and outspoken consumer. At the same time its important to
manage costs, exceed stakeholder expectations and comply with new
regulations. Theres always another challenge just around the corner.
EYs Global Media & Entertainment Center can help. We bring together
a high-performance, worldwide team of media and entertainment
professionals with deep technical experience in providing assurance, tax,
transaction and advisory services to the industrys leaders. Our network
of professionals collaborate and share knowledge around the world, to
provide exceptional client service and leverage our leading market share
position to provide you with actionable information, quickly and reliably.
2014 EYGM Limited.
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