Ernst & Young shines spotlight on major risks for media and entertainment industry



    TORONTO, June 17 /CNW/ - Rapid consolidation, expanding markets, emerging
business models and growing consumer demand are taking centre stage and
creating real turmoil in the media and entertainment (M&E) industry, Ernst &
Young says.
    "This industry is moving fast - extremely fast," says Neal Clarance,
Ernst & Young's Canadian media and entertainment leader. "If you're trying to
succeed in the Canadian media and entertainment industry, you've absolutely
got to understand the risks you're facing, and how to handle them."
    To help Canadian M&E firms navigate these waters, Ernst & Young has
identified the Top 10 strategic business risks for media & entertainment for
the next five years:

    
    1.  M&A activity and private equity
          -  Through 2008, mergers and acquisitions volume in M&E was
             US$129.8 billion.
          -  Private equity firms have brought speed and rigor to the M&A
             process and some industry veterans are voicing concern that
             traditional artistic considerations and strategic rationale are
             giving way to focused financial engineering.
    2.  Backlash against globalization
          -  The balance between regional tastes and increased globalization
             of culture needs to be carefully considered as part of an M&E
             sales strategy.
    3.  Asset protection risks including piracy and digital intellectual
        property rights
          -  Firms that own vast creative assets may be unable to adapt to
             the change from analogue to digital.
          -  Piracy is a key uncertainty but just as it relates to
             asset/content protection; the risk is linked to the brand.
    4.  Business model innovation
          -  The breakdown of standard formats will result in fundamental
             changes in the way businesses compete in M&E.
    5.  Consumer demand shifts
          -  Advances in technology have shifted content delivery to
             consumers. This touches everything from business strategy to
             structure and execution. It has also meant separating the
             production of experience from the consumption of experience. It
             raises the question of whether traditional business models are
             still viable in the M&E industry.
    6.  Emerging markets
          -  China and India are the markets for future media growth - yet,
             some of the largest global M&E firms are making less than 5% of
             their global sales from emerging markets. These markets can see
             growth of 40 to 50% per year.
    7.  Corporate governance and internal controls
          -  The pace of growth, innovation and competition has created
             concerns the internal controls and corporate governance models
             may be overrun if not made a true priority.
    8.  Inability to control costs
          -  Film production costs are on the upswing. Technology is also
             adding to costs - especially the costs for digital storage.
    9.  Managing the infrastructure to new business models
          -  The M&E industry is constantly changing but the scale of the
             most recent shift is as significant as the invention of the
             printing press. The rate of change may be too rapid to make
             accurate financial forecasts that substantiate large long-term
             investments or acquisitions.
    10. Maturation of key markets
          -  As the industry evolves and radical new initiatives require
             large investments, companies may face market saturation in key
             areas. Is there a saturation point for the consumption of media
             and entertainment in the home?
    

    About Ernst & Young

    Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide our 130,000 people are united by our shared
values and an unwavering commitment to quality. We make a difference by
helping our people, our clients and our wider communities achieve potential.
For more information, please visit www.ey.com/ca.





For further information:

For further information: or to speak to an Ernst & Young spokesperson,
please contact: Amanda Olliver, amanda.olliver@ca.ey.com, (416) 943-7121;
Julie Fournier, julie.fournier@ca.ey.com, (514) 874-4308


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