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Media Metrics 2016

The state of UK media and entertainment 2016

Combined revenue for the top 100 UK media companies is more than £87bn, up 21% from 2011.

We’ve identified the top 100 UK media companies and examined their performance to provide a snapshot of the UK media market today.

Overview

  • Combined revenue for the top 100 UK media companies is more than £87bn, up 21% from 2011
  • TV on the right channel: television is the largest sub-sector in UK M&E, comprising 40% of revenue in the top 100;
  • Content still king: content-creators are more than seven times more profitable than those that focus on distributing content, proving that IP drives margin;

Our new report, Media Metrics 2016, evaluates the five-year financial performance of the largest UK media organisations, highlighting the main trends and issues facing the industry in 2016 and beyond.

The research found that the media sector in the UK is thriving, the top 100 media companies have a combined revenue of £87bn. TV production and distribution is the largest sector in the UK media industry, with 19 of the top 100 organisations and a combined revenue of over £34bn. However, as our Top 100 listing reveals, profitability is hard to come by in the online era with nearly a fifth of the largest 100 media and entertainment companies currently unprofitable.
 

Our key findings

What’s the value of the end-to-end trend?

Our research illustrates the value of content in today’s media and entertainment market: distribution-only companies in our ranking have an average profit margin of just over 1%. By contrast, content creators generate average margins of 9%. Those with both have a margin of 13%, suggesting that distributors should consider investing in content if they want to boost profitability.

Developing a primary distribution channel can be an attractive option to connect with a loyal paying customer base but companies should recognise that customers are often only willing to engage in direct paying relationships with the largest and most trusted content brands.
 

Diversify for revenue, focus for profit

The leading media and entertainment companies in the UK are a diverse bunch. The majority of the top ten have business interests outside their ‘core’ media market. In contrast, the ten most profitable generate almost all of their revenue from one core market.

Decisions to invest and diversify should be balanced by a desire for profitability and an awareness of shareholder demands regarding stable, low risk returns versus maximising profit.

Physical pounds to digital pennies, or online liberation?

The pivot to online that is underway across UK media is by no means complete. Across most media sub-sectors, physical revenues continue to represent a significant proportion of overall income. In our top ten by revenue, only two information publishing representatives generate two-thirds or more of their revenue from digital sources.

There are two clear challenges with moving from a legacy physical business model to an online-focused one. The first is finding a digital business model that is profitable, be that advertising funded, transactional or subscription, or a mix of all three. The second is managing the transition from an operating model focused on physical or linear products to a digital one, and the inherent complexities of operating in two worlds.

Advertising accelerates?

The advertising sector is buoyant, as evidenced by the fact that nearly one fifth of the companies in our Top 100 ranking are advertising businesses.  Moreover our data shows profits growing in the advertising sector at a compound annual rate of 8% over the last three years. However online media owners are moving away from advertising as a core business model, towards transactional or online subscription revenue from consumers.

Subscriptions can be a highly profitable source of revenue but tend to appeal to the most regular and loyal customers, which may only be a small proportion of the total audience. For many businesses, subscription may therefore always be just one source of income, coexisting alongside transactional sales and advertising.

There’s no place like home

Across our ranking, approximately two thirds of revenues are generated in the UK, but 85% of the country’s top 100 media and entertainment companies also generate revenues in other geographies. Among the top ten most profitable companies in our list, four generate revenues solely in the UK. A further two generated almost 90% of their revenues here.

For those companies seeking new revenue opportunities, improving connectivity and the continued growth in smartphone use are likely to drive demand for media content in developing markets. To be successful, media companies need to navigate challenges around managing and protecting their Intellectual Property (IP), as well as finding ways to establish a foothold in those markets, such as local partnerships or by acquiring existing businesses in those markets.

Top 100 UK media & entertainment companies

Our expert says…

“Our analysis has found the UK media sector to be in relatively good health. This is significant, particularly when considering that many media organisations are still grappling with the challenges of the online era. 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. 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.”

Dan Ison, Lead Partner, Media

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