The media and entertainment business is among the most profitable industries, with earnings growing every year since 2010, a new report says.
Ernst & Young says that the 10 sectors of the global media and entertainment business are expected to have an average profit margin of 28%, outperforming the companies in the leading stock market indexes.
Earnings before interest, taxes, depreciation and amortization margins are expected to grow in 2014 as companies in the media and entertainment business “gain scale in content production and distribution, divest underperforming businesses and continue to benefit from the proliferation of digital platforms,” the report says.
Cable operators are expected to have the highest margins in the media and entertainment business, at 41%, resulting from growth in data and business-to-business services. The second highest profit margins are expected to be posted by cable networks, whose affiliate fee, syndication and licensing revenue continue to grow.
Media conglomerates are seeing growth from premium content, the report says. They are also divesting underperforming assets and focusing on their most profitable assets, such as cable networks.
Less profitable are satellite companies, which face rising programming costs, and TV broadcasters, which are consolidating to benefit from large-scale audiences that are attractive to advertisers and to grow retransmission revenue.
Film studios are investing in television production to improve their margins, the report adds.