KPMG Annual Survey: Digital Content Distribution is Key Growth Driver

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 distribution."

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 geographic expansion.
  • 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 sellers.
  • 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 later.

Written by Kevin Kutcher at 09:00
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