CFOs to play bigger role in media and entertainment business: E&Y

MUMBAI: Media and entertainment companies are redifining the role of their finance executives in the changing landscape of convergence and competition, according to a report by Ernst & Young.

"As companies scale up, the chief financial officer's role is becoming increasingly critical both in capital raising for growth and management of risks," the survey said.

Driving this change are the advances in mobile technologies and increasing public expectations as on-demand content gains in the marketplace. The key agents for change in the industry are changing content and distribution models as well as mobile entertainment devices.

The survey, "Center Stage: CFOs and Finance Executives In The Spotlight Of An Industry In Transition," was released in Mumbai today by Ernst & Young global head - media & entertainment practice John Nendick. The interview covered over 200 finance executives including views of 46 CFOs (six from India) and 140 online participants from major media and entertainment (M&E) companies across the world.

Says John Nendick, "We are delighted to release this global survey in Mumbai, which is home to one of the most vibrant and fastest-growing M&E markets in the world today. Several Indian M&E players are in the midst of rapid transition, brought on by a booming consumer base and the twin forces of convergence and competition."

Finance executives are playing a larger role in the media and entertainment industry, which includes moving beyond handling the plain vanilla finance function to assisting the CEO in strategic decision-making, including scenario analysis, customer product analysis and investment optimisation.

"Maintaining a risk-reward balance, rapid changes in the M&E industry have made it more complex and unpredictable. While this has brought many opportunities, there are risks that also have to be considered. This has placed the CFO function in a critical position. CFOs in the M&E space have to analyse how enterprise can derive more value from existing investments and operations," the study points out.

CFOs play a key role in mergers and acquisitions activity, starting from assessment, evaluation and integration. This includes post merger performance tracking of an acquired entity against original investment criteria.

CFOs interviewed in the study also feel that they are prone to missing out on opportunities to reduce taxes. According to the study, 76 per cent of the CFOs believe tax planning should be a key priority for executives.

Anytime Anywhere Entertainment

Changing content and distribution models will have a severe impact on the industry over the next two to three years, 86 per cent of participants felt.

Adoption of personal entertainment and communication devices (MP3 players, mobile telephones etc.) will have the greatest impact, according to 79 per cent of the participants. Expanding global universe of mobile wireless subscribers ensures that the 'anytime, anywhere' entertainment will continue.

According to the study, finance executives of global M&E companies believe that the businesses that will emerge as winners are those that welcome the new distribution channels and are capable of identifying the right content for the specific delivery vehicle.

The Future is Internet

To the question of business models for media and entertainment companies most likely to thrive in future, 77 per cent of the study participants consider Internet media providers as the most likely market winners, whereas only 24 per cent view cable operators as thriving businesses in the future. New (independent or cable channel) content creation and electronic gaming are rated as second and third business models in a best position to thrive.

Radio broadcasting, newspapers and periodical publishing are not thriving business models, CFOs and finance heads of global M&E companies said. Whiler only 11 per cent favoured radio, 13 per cent were keen on publishing businesses as best positioned to thrive in next two to three years.

The survey is a continuation of Ernst & Young's series of studies exploring strategic issues and trends transforming the media and entertainment industry worldwide.

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