Next time a cable operator complains about rising programming costs, studio execs should pull out the chart on page 6 of the report about media profitability out this morning from accounting and advisory firm EY (formerly known as Ernst & Young).
Cable operators collectively will end this year with cash flow (EBITDA) margins of 41.3%, up from 40.7% last year — not including Comcast, which is categorized as a conglomerate. It’s the best performance cable has generated in the last five years (the period covered in the report). To be fair, cable operators spend a lot on capital improvements that this financial measure overlooks. Still, the strong performance — driven in part by growing sales of broadband services — is way ahead of most in the pack of 10 media and entertainment sectors that EY tracked, which together should average 28%.
Even 28% is still pretty darn good: Assuming no dramatic changes, it would mean that investments in M&E outperformed leading markets including the London Stock Exchange’s FTSE 100, the S&P 500, the French CAC 40, and Japan’s Nikkei. EY says that industry’s profits improved as companies “gain scale in content production and distribution, divest underperforming businesses and continue to benefit from the proliferation of digital platforms.”
After cable operators, the most profitable sectors in media are: cable networks (37.0%, down from 37.2% in 2013), interactive media (35.8% from 34.8%), electronic games (28.8% from 27.3%), Big Media conglomerates (26.3% from 25.6%), satellite TV (25.0% from 25.7%), publishing and information services (20.9% from 19.7%), TV broadcast (19.4% from 18.4%), film and TV production (12.1% from 11.4%) and music (11.1% from 10.8%).