Key findings in the Entertainment and Media industry www.pwc.com/ceosurvey January 2013 PwC Welcome Far-reaching changes are taking place, and theyre taking place faster than ever. In this new era of stable instability, risks that once seemed improbable and even remote have become the norm and for CEOs across the world, expect the unexpected has become the mantra. The only solution is to build organisations that can thrive amidst disorder: organisations that are agile and adaptable, able to cope with disruption and emerge stronger than before.
We polled 1,330 CEOs in 68 countries, and talked face-to-face with another 33 CEOs, in our 16th Annual Global CEO Survey, to find out how theyre creating resilient organisations that can flourish under stress. Dealing with disruption shows that CEOs are focusing on a few carefully selected initiatives to stimulate organic growth; explore new ways to attract and keep customers; and balance efficiency with agility. And to succeed in these three goals, CEOs are recognising the role that trust plays, and that theyll have to work hard to repair the bridges between business and society.
This report is a summary of our key findings in the Entertainment and Media (E&M) sector, based on interviews with 56 E&M CEOs in 23 countries, as well as an in-depth interview with Peter Tortorici, CEO of GroupM Entertainment Global. To see the full results of the 16th Annual Global Survey, please visit www.pwc.com/ceosurvey. 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 2 PwC Contents Page Introduction 4 The disruptive decade 6 What worries CEOs the most 9 How are CEOs responding? Targeting pockets of opportunity 15 Concentrating on the customer 18 Improving operational effectiveness 21 3 January 2013 16th Annual Global CEO Survey Key findings in the Entertainment and Media industry PwC Introduction 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 4 PwC Introduction
E&M CEOs are a lot like their peers across industries. They remain confident about revenue growth over the next three years though theyre less confident this year and theyre worried about threats like Government responses to fiscal deficit and debt burden, and volatile economic growth.
But there are some key differences too. For example, a lot more E&M CEOs see the shifting behaviour of consumers as a potential problem 75% are concerned, compared to just 49% of the total sample. And 61% are concerned about the speed of technological change, 19% above the global cross-industry total a reflection of the need for E&M companies to keep apace with consumers rapidly evolving demands.
E&M CEOs arent just waiting for issues like these to disappear before changing how their companies do business. Theyre taking action around pockets of opportunity, improving operational effectiveness and forging a new social contract.
Lets take a look at how.
16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 5 PwC The disruptive decade 80% of E&M CEOs are confident about their companys prospects for revenue growth over the next three years 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 6 PwC E&M CEOs remain confident over the next three years E&M CEOs overall confidence in revenue growth over the next three years remains resilient with 80% feeling very or somewhat confident, with a year-on-year dip in confidence over the coming year, from 84% to 70% reflecting a slight recalibration of expectations of the time that a return of investment will take.
Q: How confident are you about your companys prospects for revenue growth over the next three years?
14 8 2 1 41 44 39 46 40% 20% 0% 20% 40% 60% 80% 100% Entertainment and media Total sample Not very confident Not confident at all Somewhat confident Very confident Base: All respondents (Total sample, 1330; E&M Sector, 56) Source: PwC 16th Annual Global CEO Survey 2013 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 7 PwC What worries E&M CEOs the most? In an interconnected world you are exposed to a greater number of vulnerabilities and externalities. So, whether disruptions occur as a result of geopolitical, climate, or economic conditions, the consequences can ripple through the system and theres no place to hide. Peter Tortorici, CEO GroupM Entertainment Global, US 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 8 PwC Threats to growth are looming
Of E&M CEOs are concerned about new market entrants 12% higher than the total CEO sample Of E&M CEOs cite government responses to fiscal deficit, debt burden as a major threat to growth Of E&M CEOs are concerned about volatile or uncertain economic growth 52% 75% 84% 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 9 PwC Continuing focus on shifting consumer spending and behaviours
The impact of shifting consumer spending and behaviours on growth continues to be a key concern for E&M CEOs, with 75% concerned or extremely concerned higher than almost any other industry. And 88% of E&M CEOs anticipate some or major changes to their customer growth, retention or loyalty strategies, in response to this. 73% of E&M CEOs expect to increase their investments in technology over the coming year, while 61% are concerned about the speed of technological change, 19% above the global cross-industry total showing that technology remains a key enabler for E&M companies to keep apace with consumers rapidly evolving demands.
Q: How concerned, if at all, are you about:
35 35 52 40 39 58 62 49 42 37 34 27 30 30 52 52 57 73 75 61 55 59 0% 10% 20% 30% 40% 50% 60% 70% 80% Security of supply chain Inadequacy of basic infrastructure Energy costs New market entrants Inability to finance growth Availability of key skills Increasing tax burden Shift in consumer spending and behaviours Speed of technological change Lack of trust in your industry Inability to protect Intellectual Property and customer data Entertainment and media Total sample Base: All respondents (Total sample, 1330; E&M, 56) Note: Respondents who stated extremely or somewhat concerned. Source: PwC 16th Annual Global CEO Survey 2013 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 10 PwC So what are E&M CEOs doing? 11 January 2013 16th Annual Global CEO Survey Key findings in the Entertainment and Media industry PwC Targeting pockets of opportunity 52% of E&M CEOs say growing their customer base is their top investment priority in the coming year 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 12 PwC E&M CEOs much more focused on new product or service development
38% of E&M CEOs see new product or service development as the key way to grow their business over the coming year, 13% above the global average for all industry CEOs surveyed.
Q: Which one of these do you see as the main opportunity to grow your business over the next 12 months?
18 38 20 16 7 17 25 32 17 8 0 5 10 15 20 25 30 35 40 New M&A/joint ventures and/or strategic alliances New product/service development Organic growth in existing domestic market Organic growth in existing foreign market New operations in foreign markets Entertainment and media Total sample Base: All respondents (Total sample, 1330; E&M, 56) Source: PwC 16th Annual Global CEO Survey 2013 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 13 PwC Concentrating on the customer If we want a relationship with the consumer through media, we have to deliver content to them thats relevant to where they are and what they're doing at any given time... We have to constantly be considering the end user focus - what theyre seeing, how theyre interacting with the content, what it means to them, and what reason do they have to come back to it again? Peter Tortorici, CEO GroupM Entertainment Global, US 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 14 PwC The power of customers, clients and social media users Customers, clients and social media users are influencing business strategy and E&M CEOs are responding by strengthening their engagement programmes with these groups. 100% of E&M CEOs say customers and clients somewhat or significantly influence their business strategy, with 93% strengthening their engagement programmes with this stakeholder group. 70% report users of social media as being somewhat or significantly influential, with 95% of these CEOs strengthening their engagement programmes to this stakeholder group 17% above the global cross-industry total.
Q: How much influence do the following groups have on your strategy?
70 34 29 50 18 38 9 30 11 0 23 27 22 25 39 34 48 39 32 12 5 38 48 23 41 21 41 29 55 88 80% 60% 40% 20% 0% 20% 40% 60% 80% 100% Non Governmental Organisations (NGOs) The media Users of social media Local communities Providers of capital (e.g. Creditors and investors) Your supply chain partners Employees (including trade unions/ work councils) Government and regulators Industry competitors and peers Customers and clients Little or no influence Some influence Have significant influence Base: All respondents (Entertainment & Media, 56) Source: PwC 16th Annual Global CEO Survey 2013 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 15 PwC Using social media to drive creativity at GroupM 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry 16 January 2013 We use social network data the way we use research generally - as a guide to tell us about whats working and what isnt working. But then we take that data and use it to help drive our creativity and our imagination, which is the true source of breakthrough content. In the end, you have to be prepared to take risks. Peter Tortorici, CEO GroupM Entertainment Global, US
PwC Improving operational effectiveness 84% of E&M CEOs anticipate changes to their companys strategy over the coming year 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 17 PwC E&M CEOs are changing how they manage their organisations Of E&M CEOs expect an increase in technology investments to keep apace with customer demands Of E&M CEOs anticipate changes to their customer growth/retention/loyalty strategy over the coming year Of E&M CEOs expect changes to their talent management strategies over the coming year talent scarcity, employee succession and retaining talented employees remain key priorities 73% 88% 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 18 88%
PwC Cost reduction remains a key priority
77% of E&M CEOs have implemented a cost-reduction initiative over the past 12 months - and 70% expect to repeat this over the coming year. Q: Which, if any, of the following restructuring activities have you initiated in the past 12 months? 16 19 19 19 24 31 36 77 20 23 21 20 29 29 48 77 0% 10% 20% 30% 40% 50% 60% 70% 80% Ended an existing strategic alliance or joint venture Completed a cross-border M&A Divested majority interest in a business or exited a significant market Insourced a previously outsourced business process or function Completed a domestic M&A Outsourced a business process or function Entered into a new strategic alliance or joint venture Implemented a cost-reduction initiative Entertainment and media Total sample Base: All respondents (Total sample, 1330; E&M, 56) Source: PwC 16th Annual Global CEO Survey 2013 . 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 19 PwC Building innovation into the organisational culture 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry 20 January 2013 For me, the key word is reinvention. You must constantly take what you have and find new ways of assembling it, packaging, and putting it back together to create greater value... So, the most important characteristic we look for in people is their ability to embrace change. Peter Tortorici, CEO, GroupM Entertainment Global, US
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Acknowledgements PwC gratefully acknowledges the contribution to the 16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry provided by: Peter Tortorici, CEO GroupM Entertainment Global, US Download the main report, access the results and explore the CEO interviews from our 16th Annual Global CEO Survey online at www.pwc.com/ceosurvey.
Marcel Fenez Global and Asia Leader, Entertainment and Media Ken Sharkey US Leader, Entertainment Media and Communications
16th Annual Global CEO Survey: Key findings in the Entertainment and Media industry January 2013 21 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 2013 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.