For the first time in five years, the media and entertainment industry is expected to outperform the major stock market indices in 2013, according to a new report.

Overall revenue and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) dollars have continued to climb steadily for media and entertainment companies while many other industries are continuing to struggle through a difficult economic period, added the report Spotlight on Profitable Growth: Media and Entertainment, Vol. VI, released by EY, a global leader in assurance, tax, transaction and advisory services.

The report provides a performance comparison of the overall media and entertainment business to major stock market indices as well as a ranking of 10 media and entertainment industry sectors on both their profitability and profitability growth rate.

In 2013, it is estimated that the media and entertainment industry will outperform the major cross-industry stock market indices. The 10 sectors of the media and entertainment industry measured by EY are expected to have a 2013 estimated profit margin of 26 per cent followed by the S&P 500 Index, 24 per cent; FTSE 100 Index, 23 per cent; CAC 40 Index, 18 per cent; DAX 30 Index, 16 per cent; and the Nikkei Index, 12 per cent.

“Media and entertainment companies are maintaining and growing their businesses primarily by growing their digital revenues and scaling back overhead associated with traditional media,” said John Nendick, Global Media and Entertainment leader at EY.

“In emerging markets, increases in advertising, as well as rising incomes and media consumption, have also helped drive revenue and fuel long-term growth as consumers in mature markets continue to migrate toward digital.”

When looking at overall profitability of 10 media and entertainment sectors during the five years covered by the report, 2009-2013, cable operators have the highest average profitability at 41 per cent, followed by cable networks, 37 per cent, interactive media, 35 per cent; satellite television, 26 per cent; electronic games, 25 per cent; conglomerates, 23 per cent; content and information services, 19 per cent; television broadcast, 17 per cent; film and television production, 10 per cent; and music, 10 per cent.

For estimated profitability in 2013, media and entertainment sector rankings shifted from the five-year average with cable operators placing first at 41 per cent; cable networks, 38 per cent; interactive media, 33 per cent; electronic games, 26 per cent; satellite television, 25 per cent; conglomerates, 25 per cent; television broadcast, 19 per cent; content and information services, 19 per cent; film and television production, 12 per cent; and music, 10 per cent.

A review of the 2009-2013 compound annual growth rate shows that in terms of EBITDA dollars, interactive media is the fastest growing media and entertainment sector at 22 per cent, followed by electronic games, 14 per cent; film and television production, 11 per cent; cable networks, 10 per cent; conglomerates, 9 per cent; TV broadcast, 9 per cent; satellite television, 8 per cent; cable operators, 6 per cent; content and information services, 2 per cent; and music, 1 per cent.

The report also provides specific insight into each of the 10 media and entertainment sectors, identifying opportunities, challenges and outlook for future growth. Highlights include:

•    Interactive media companies are seeing strong growth from an increase in online advertising.

•    EBITDA dollars for electronic gaming companies are increasing due to rising consumption on social and casual gaming platforms.

•    Despite rising programming costs, satellite television companies show steady growth from cost controls and increasing revenue.

•    Advertisers still value the ability of television broadcast to reach large audiences despite the rise of competing platforms.

•    In 2012, global music revenues increased for the first time since 1999 due to the growth of licensed digital music services and paid digital downloads.

•    Newspaper and magazine companies continue to face challenging times from declining advertising and subscription revenues. However, business information services companies are reporting stable revenues and margins - TradeArabia News Service