Media and telecommunications executives are
looking to the digital transition and fast-growing mobile markets
to drive revenue growth over the next one to three years, according
to KPMG's latest annual "
Media and Telecommunications Industry Business Outlook Survey."
According to KPMG's 2012 survey results, emerging digital
distribution methods will generate the highest revenue growth from
this year to 2015. Sales of applications and content via
smartphones, tablets and other mobile devices were identified as
the most significant market opportunities by survey respondents.
More than 90% of respondents said they "expect their companies to
grow their activities around digital devices, services, and content
The Digital Content Opportunity
"Industry executives are dealing with dramatic transformational
changes and, consequently, we may see shifts in emphasis and focus
as they move quickly to capture resulting new opportunities,"
commented KPMG's National Sector Leader for Media and
Telecommunications Paul Wissmann. "The findings show that
media and telecommunications executives believe in
significant digital and mobile opportunity, and expect their
companies to aggressively pursue these markets."
These sentiments represent a dramatic shift in thinking. Results
from the 2011 survey ranked "…applications and content sales over
smartphones, and tablets…" 10th and 8th respectively on the
projected list of the biggest revenue drivers.
New Tax Risks
Telecom and media companies should be watching out and planning
for increased tax risk, KPMG analysts add, as revenue-strapped
jurisdictions search for ways to meet shortfalls and avoid
additional budget cuts.
"As a greater share of transactions move to mobile devices and
other nontraditional channels, not only revenues but also taxes can
be expected to rise, as states, and at some point perhaps even the
Federal government, lay claim to sales tax revenue for all
transactions," KPMG National Tax Leader, Media and Entertainment
Tony Castellanos said.
The Rise of the Cloud
When it comes to the affect of fast-growing cloud computing on
their organizations, generating additional revenue is the priority
for most telecom execs and companies, according to KPMG. Fifty-five
percent of telecom execs surveyed and responding said cloud
computing would yield medium or high revenue growth in the next few
years. Another 7% said it would provide low revenue growth.
"While Cloud computing continues to
mean different things to different people, the survey findings
point out that telecommunications companies see Cloud as a revenue
growth platform," said KPMG U.S. National Account Leader, Media and
Telecommunications Carl Geppert. "And though telecom companies are
well positioned as a primary distribution channel into the cloud,
many are aggressively moving into the data hosting/cloud services
provider space, oftentimes via strategic acquisitions. As the
survey highlights, opportunities to transform business models and
customer/supplier interactions are potentially significant."
Impact on Headcount
While respondents expect revenue to increase, they expect
headcounts to fall. Only 40% foresee an increase in their U.S.
workforce 12 months from now. That's down from 47% in 2011 and 53%
in 2010. Asked for an estimate on the rate of the decrease, 28%
said it would be between 1%-6%, higher than the 20% of those
surveyed last year who said the same. Another 27% expect a 1%-6%
increase in headcount a year from now as compared to the 36% that
said the same in 2011.
"Media and telecommunications companies are settling into a new
normal - being as or more efficient with less resources -- since
they continue to reduce headcount regardless of expected revenue
increases," Wissmann commented. "They're spending on technology and
products to compete and drive revenue that may require fewer
employees than in the past."
Additional findings in KPMG's annual survey of media and
telecoms execs include:
- In this year's survey only 49 percent expected capital spending
in their company to increase over the next year, compared to 56
percent last year. The two areas where more respondents expect
spending to increase the most are new products and services, and
information technology. In addition, this year a significantly
greater number (22 percent) than last year (9 percent) cited
- More than 80 percent of media and telecommunications executives
surveyed in the U.S. said that technology or capacity limitations
would impact their companies' potential annual revenue five percent
or more, while 72 percent cited access to talent with the right
skills, and 36 percent said pirated products and services.
- While more than 6 out of 10 media and telecommunications
executives believe their companies will be involved in a merger or
acquisition during the next two years, 46 percent, less than last
year's 57 percent, said their company would likely be a buyer,
while 19 percent, up from10 percent, said they would likely be
- More than half believe the economic recovery won't be
substantially completed until the end of 2014 or beyond. Last year
about the same number projected a substantial recovery by 2013 or