The UK media and entertainment sector is booming business with the top 100 companies accounting for £96 bn in revenue in 2016, an 11% increase on the previous year. Liberty moves up from second place to first as the top media company by revenue displacing WPP.
If this is a tale of two halves, revenue generation is one and the other is the sector's plunge in profit by more than 50% to £4.8 bn. An acute decline that is primarily down to the poor performance in the information publishing and events sub sector, its profitability fell more than £5 bn from 2015.
Despite the declining profitability, individual companies within this sub sector were able to increase their profit margins substantially. Auto Trader increased its profit margin from 56% to 70%.
TV production and distribution sub sector however generated combined profits of £2.6bn, up 57% year-on-year.
Deloitte & Touche annual Media Metrics research report ranks the sector's top 100 companies and analyses three-year financial performance, highlighting key trends.
A falling pound has helped media companies which generate a large proportion of their revenues in other currencies and particularly, the dollar.
In fact, Deloitte & Touche says that 55% of revenue generated is earned abroad by companies in its review.
WPP, according to its 2016 annual report, showed revenue growth of 17.6%. But given the impact of 'strong currency tailwinds' if it excluded the impact of currency movements revenue was only up 7.2%.
The impact of foreign exchange on media and entertainment companies which necessarily trade globally in assets such as television programming and sports rights will have to come up with a coping mechanism for the constant that is currency fluctuation.
Dan Ison, Deloitte & Touche's lead partner, said: “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."
Heavy at the top
The ten largest media and entertainment companies in the UK account for 70% of revenues (£68 bn).
The top three sub-sectors generated 80% of industry revenue: TV production (41%), advertising (21%), and information publishing and events (18%).
Social media is also the fastest growing media sub sector with a compound annual growth rate (CAGR) of 83%.
Top ten media companies by revenue
Company and recent annual revenue (£m)
- Liberty Global plc 14,768
- WPP plc 14,389
- Sky plc 11,965
- RELX Group plc 6,895
- British Broadcasting Corp 4,827
- Pearson plc 4,552
- Sony Interactive Entertainment Europe Ltd 3,388
- ITV plc 3,064
- Daily Mail and General Trust plc 1,917
- The Walt Disney Company Ltd 1,836
On trend: I want my Live events
While the world is connected digitally, the report spots a growing trend which is the use of events from business conferences through to live music and live transmission on radio and TV.
People still want to connect face to face and this is borne out by the data. Paul Lee, head of technology, media and telecommunications research at Deloitte, commented:
Paul Lee, head of technology, media and telecommunications research at Deloitte said, “Demand for live experiences has remained vibrant and valuable for both businesses and consumers. Whilst digital technology, such as streaming and video, has improved dramatically over the last few years, our research has found that people still like to attend live events."
Global trade show revenue has risen every year since 2010 and is forecast to continue growing, with the industry expected to generate about $40 bn (£35.5 bn) by the end of the decade.
Live music too is undergoing a renaissance as demand grows not just in the UK but is a $25 bn industryworldwide. In the UK, music concerts and festivals have seen striking growth with live audience numbers in 2016 at 277. 7 million which generated £904 mn in revenue a 36% increase since 2012.
In a sign of the shifting landscape, Amazon is also trying to penetrate the market with its live music business for its Amazon Prime subscribers.
Where does media go from here?
Given the continual evolution of the sector and its end-users' interaction with media, more interesting is how companies are able to react and adapt to the constant of change.
Media companies are bucking trends in two ways. One is a laser focus on the domestic market or a business line. The second is choosing to diversify their lines of business and expand into other markets.
Brexit still casts a long shadow over the industry given the level of uncertainty about the planned exit strategy and implications for companies. However, the UK media and entertainment sector is clearly thriving both at home and globally.