UK media and entertainment industry grows on back of low pound

03 July 2017 Consultancy.uk

Changes to the global Media and Entertainment sectors continues to create new dynamics sometimes demanding new ways of working. A new study explores the top 100 players in the UK, in terms of growth and current trends - the top players in the segment saw growth of 11% last year to around £100 billion, largely on the back of currency fluctuations, while 70% of revenues generated remain in the hand of 20% of companies.

The Media and Entertainment sector in the UK continues to face challenges as consumer behaviour changes, the number of screens increase and measurement becomes more challenging. Various sectors, such as publishing, continue to face challenges in light of outsiders such as Facebook and loss of print revenues, while for TV production, OTT and changing advertising models, create uncertainty.

Deloitte‘s latest ‘Media Metrics 2017’ study aims to shed light on key trends within the current market, from simple economic indicators to wider trends that underlay them. The research looks at the top 100 companies in the sector, including 581 frim publishing of books, periodicals and other publishing activities; 59 motion picture, video and television programme production, sound recording and music publishing activities; 60 programming and broadcasting activities (includes radio and TV); and 731 from advertising.

Overall the research finds that revenues of the top 100 biggest players have increased by around 11%, hitting £96 billion, although profits saw a decrease of around 52% to £4.8 billion.

Top 100 by sub-sector

The research finds that TV production and distribution is the biggest segment, by almost double the revenues of the next biggest segment, advertising. The former had revenues of almost £39.8 billion last year across 19 players in the segment, Advertising, meanwhile, had revenues of £20 billion, also across 19 companies. Information Publishing and Events came third, with 15 companies accounting for around £17.7 billion in revenues.

Smaller segments include News Publishing, with 12 companies generating revenues of almost £6 billion, Video Gaming, with 4 companies generating revenues of £3.7 billion and one social media company registering revenues of £211 million last year.

Three year CAGR for top ten players

Top players

Liberty Global, an international TV and broadband company, is the biggest contributor to the top ten, in terms of both revenues, at £14.7 billion and growth at 24% CAGR over the past three years. WPP, an advertising, marketing and communication company, comes second with revenues of £14.3 billion but smaller growth of 6% CAGR over the same period. The Daily Mail and General Trust have a relatively poor 2% growth rate over the past three years, while Sony Interactive Entertainment Europe saw strong growth of 21% over the past three years.

The RELX Group, the BBC and Pearson saw declines over the past three years, at -1%, -2% and -3% respectively.

Top 100 revenue concentration

The study notes that the distribution of revenues is, like many of the global revenues of corporates, skewed towards the top end of the spectrum – with the ten largest companies generating 70% of total revenues up for grabs, with the next 11-50 companies picking off 22% of the remainder. The smallest companies account for a mere 8% of total revenues.

The research notes that while revenues saw strong growth, the changing value of the sterling was in part the key driver for that growth – the firm finds that around 55% of total revenue growth stemmed from currency fluctuations, although for the top ten there was only around an 11% increase.

While revenues rose significantly, the research noted a fall in profit in various segments, including Film Publishing and Distribution, where the average profit margin was 1%, Music Publishing and distribution where the profit margin was 7%, and News Publishing, which was hit particularly hard with negative profit of -£144 million and a -2% profit margin.

Profit margins in UK Media and Entertainment sector

Top performing segments saw considerable profit margins, including Book Publishing at 11%, Magazine Publishing, also at 11% and Advertising, with a more modest 8%. Paul Lee, head of technology, media and telecommunications research at Deloitte, commented, “The UK is a global player in the media sector, which is partly why currency movements, and in particular a weakened pound, played a significant role in boosting year-on-year revenues by £10 billion. Managing foreign exchange risk will be an ever more important management skill in the coming years. The UK’s creative economy continues to be a valued export market, and punches above its weight when it comes to sating the global appetite for media content. The future success stories in the world of film, TV, video gaming and music will be dependent on the continued preservation of the UK’s creativity.”

A recent separate survey of the entertainment industry by Deloitte’s Big Four rivals PwC meanwhile marked out growth in Virtual Reality (VR) technology as a driving force within the expanding market, with the number of headsets in use in Britain set to surpass 16 million by 2021.

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