Most of the revenue for major media and entertainment (M&E) companies is about to go digital. That's the picture according to a new report from Ernst & Young, which found that revenue based on digital sources is about to exceed 50 percent, on average, for the first time.
The report, Digital Agility Now!, said that revenue from digital sources currently stands at 47 percent in the companies represented by the 550 senior executives who were surveyed. By 2015, digital revenue is expected to account for 57 percent. Represented industries included advertising, broadcasting and cable, filmed entertainment, interactive gaming, publishing and information services, music, social media and the technology industry.
The surveyed companies are definitely aware of the digital evolution, with more than 95 percent saying they are engaged in the transformation. Fifty-six percent said their top strategic priority is “creating a culture of innovation,” and 39 percent’s top digital transformation challenge is figuring out how to cope with new digital business models.
In addition to noting this changeover, the report identifies characteristics of what it describes as M&E “digital leaders.” These are companies that deliver digital products and services, but are also building “more agile organizations capable of sensing and responding far faster to shifting customer expectations and marketplace opportunities and risks.”
Digital leaders are also companies which have digital revenues that are already more than half of their total, have customer profile data integrated across at least two channels, and are using second-generation technology in at least two of four key areas -- smart mobility, social media, Big Data analytics and cloud computing.
Pat Hyek, Ernst & Young Global Technology Industry Leader, said in a statement that mobile/social/cloud and Big Data analytics technologies are “game changers for M&E firms” that can help those who “broke ahead of the package in the early stages of digital” extend their advantages, and provide opportunities to those who “fell behind to adapt quickly and catch up.”
The report highlights one major differentiator between digital leaders and other survey respondents -- a greater use of these digital technologies for internal collaboration.
For instance, digital leaders are 60 percent more likely than other respondents to emphasize the importance of social media for internal communications among employees, helping to break down departmental silos. Additionally, social listening programs, Big Data analytics and cloud-based infrastructure are enabling companies to rapidly deploy new products and resources, and to quickly learn from and fix their mistakes, all of which are helping them to respond to digital consumers’ quickly changing behavior.
Other characteristics of digital leaders include an emphasis on technology alliances rather than “going it alone,” with 51 percent of digital leaders ranking alliances with technology and other partners as being among their top three strategic priorities, compared with 30 percent of those not considered digital leaders.
Some digitally adventurous companies try new technologies and, even if the first batch of technologies are not completely successful, try to build on those lessons in subsequent generations. The report said that forty-nine percent of digital leaders were more likely to use second generation technologies after initial tech deployments, such as first and subsequent waves of mobile tech, versus 16 percent of others.
For seventy-four percent of digital leaders, hosting business tools in the cloud is important, compared with 43 percent of non-leaders who felt that way. And three times as many digital leaders are likely to use second-gen data analytics techniques for improving customer engagement, 26 percent compared with 9 percent.
Overall, the report is yet another verification of the importance of digital transformation, at least for companies in these industries, but it adds a critical guidepost -- revenues from sources that are not digital are becoming a minority portion of companies’ balance sheets. The tipping point is here.