UK media & entertainment sector in rude health despite digital disruption

• New Deloitte report, Media Metrics, reveals top 100 UK media & entertainment companies have a combined revenue of £87bn, up 21% from 2011;
• Creative economy continues to drive UK Plc growth;
• TV on the right channel: television is the largest sub-sector in UK M&E, comprising 40% of revenue in the top 100;
• Ad-vancing quickly: advertising profits have grown eight per cent annually over the last three years;
• Content still king: content-creators are seven times more profitable than those focused on distributing content, proving that IP ownership drives profit margin;
• Balancing diversity in UK creativity: Two thirds of top 100 revenue is generated by the 10 largest media conglomerates.

The 100 largest media and entertainment companies in the UK have a combined revenue of £87bn, and will likely break £100bn within the next five years, according to a new ‘state of the sector’ report from Deloitte that evaluates the financial health of the industry. The top 100 have grown six per cent annually in the last three years, outstripping UK GDP.

Media Metrics 2016 evaluates the three-year financial performance of the 100 largest M&E organisations in the UK, highlighting the main trends and issues facing the industry in 2016 and beyond.

The top 100 list includes companies from a range of sub-sectors, including advertising, publishing, television, film production, music and video gaming. Television represents the largest sub-sector, accounting for 19 of the top 100 companies and generating a combined revenue of £35bn.

The research also reveals that the ten largest media and entertainment organisations in the UK account for more than two thirds (68%) of the top 100’s total revenue, equating to £59bn.

Dan Ison, lead partner for media and entertainment, comments: “Our analysis has found the UK media sector to be in rude health. TV in particular is riding high despite digital entrants and uncertainties around public broadcasting in the UK.

“Physical products are currently the dominant source of revenue, but this is likely to change as consumers’ adoption of and appetite for digital content grows. Whilst a number of organisations have seen their investment in digital start to pay off, media executives need to ensure their business strategies can adapt to further digital disruption.

“The top 10 UK media companies should be commended for quickly achieving large scale and, in many cases, enviable global presence. The industry will need to consider how to best preserve diversity in the UK’s creativity in the years ahead.”

Advertising accelerates

Advertising is the second-largest sub-sector, with 18 organisations generating a total of £18bn in revenue. This is greater than film, music, video gaming, magazines and news publishing combined. However, while the advertising market is booming, the industry is not immune to threats such as ad-blocking and changing consumer habits, which have led to online media owners increasingly moving towards transactional or subscription-based models.

Ison adds: “Some facets of the media industry, such as news publishing, fear diminishing revenues from ad-funded content. Whilst this impact has not yet shown through in the financial performance of the advertising sector, which has grown by eight per cent annually over the last three years, ad companies may need to consider multiple sources of revenue in order to attract business from the digital and social media giants that have emerged in the sector.”

Content still king in the end-to-end game

According to the report, 71% of the top 100 media companies started life as ‘content creators’, with a fifth (19%) as ‘content distributors’, and a just handful doing both. Today, almost half (47%) of companies in the top 100 are ‘hybrids’ - creating and owning the intellectual property of original content and delivering it direct to consumers through their own platforms and channels, rather than through a third party.

Ison concludes: “It is clear from our research that the industry is moving towards an end-to-end game when it comes to content. Not only do media organisations want to engage with the consumer directly by owning the point of transaction, but they also want to own the IP of the content they create.

“There is an obvious financial motive for this: distribution-only companies have an average profit margin of just 1.2%, whereas content creators typically generate average margins of 9%, and are seven times more profitable. The old adage of ‘content is king’ has never been more relevant.”

End

Notes to editors

About Media Metrics 2016
Media Metrics is a new report that identifies the 100 largest media and entertainment organisations in the UK, and examines their performance to provide a snapshot of the market today. The report evaluates the financial performance of companies across the TV, film, music, books, magazines, news publishing, B2B information and events, video gaming and advertising sectors, based on their UK Standard Industry Classification (SIC) codes, as defined by their registration at Companies House.

The ranking of companies by size is based on their most recent annual results, available as at 30 April 2016. Only media and entertainment organisations that have a UK registered entity are included, and their position is based purely upon revenue that is generated in the UK.

For more information visit www.deloitte.co.uk/mediametrics

Top 100 by sub-sector: total annual revenue (£m) and number of companies by sector

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.