Despite major disruptions in how consumers access entertainment, media leaders are feeling more optimistic about their businesses than they were a year ago.
Sixty-eight percent of media and entertainment executives believe the global economy is on the upswing, according to a new survey by EY, the professional services firm formerly known as Ernst & Young. That’s a sharp contrast from 12 months ago, when a mere 26 percent of executives believed that the economy was improving.
Today, 23 percent of the 56 CEOs, CFOs and other execs surveyed by the firm believe the economy is on firm ground, 4 percent feel it is modestly declining and 5 percent maintain that it is severely declining. Seventy-three percent are expecting some growth in the economy during the next 12 months.
The reasons for this buoyancy are manifold, ranging from the continued growth of foreign markets like China and Brazil to the strong stock performances of media conglomerates like Time Warner and the Walt Disney Co.
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“This reflects the emergence of a different mindset,” Tom Connolly, global media & entertainment transaction advisory services leader at EY, said. “There’s a sense that there are more opportunities in front of us, and there’s a lack of fear.”
The study indicates that the sense of hopefulness is wide-spread. Fifty-seven percent of executives thought employment would increase compared to 20 percent last year; 52 percent expected improved corporate earnings, up from 15 percent; and 43 percent believed that credit would be more readily available, up from 10 percent.
Connolly said that another major factor is growing understanding about new technologies such as streaming video to internet radio — and their revenue potential. Netflix, for example, has signed several high-profile content deals with the likes of Disney and DreamWorks Animation, and hardly a week goes by without the announcement of some new pact between legacy media companies and Silicon Valley players like Twitter, Amazon and Facebook.
“A number of executives talked about the fear factor in terms of models being disrupted in a way that they didn’t fully have their arms around,” Connolly said. “Well, they’re becoming more predictable now and in many cases the revenues companies like Spotify or Pandora are generating are additive.”
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“You go through a displacement process, which first results in a a loss of revenue, but as the Netflixes and the Hulus continue to expand, that displacement becomes incremental growth,” he added.
When it comes to gray clouds on the horizon, 42 percent of executives were most concerned by the impact that political chaos in foreign countries like Egypt and Syria would have on the global economy, 24 percent cited the fallout from the Euro crisis currently roiling European countries like Greece and Portugal, while 19 percent were troubled by the possibility that China’s business growth and consumer spending would slow.
The period of belt-tightening the greeted the recession also appears to be wearing off, with only 13 percent of executives indicating they plan to reduce their workforce compared to 26 percent a year ago. That doesn’t necessarily translate into a hiring binge. While 32 percent of executives plan to add jobs, that’s down from the 35 percent of executives who said they wanted to add talent a year ago.
Deal-making is also more attractive. Seventy-four percent of executives expect more mergers and acquisitions to take place over the next 12 months, with only 5 percent predicting it will decline. It’s not entirely clear where those new purchases will be coming from, however, as only 25 percent of media and entertainment executives expect their company to pursue acquisitions.
“There is a sense of nimbleness,” Connolly said. “Media companies are acting like they’re on the offensive, not the defensive in terms of global strategy.”