Keep this in mind the next time you hear cable operators bemoan their rising programming costs, and networks sigh about their need to raise prices: Cable operators overall will have cash flow profit margins of 41% this year, and networks will be right behind at 38% — returning them to the head of the media and entertainment pack — according to a report on industry profitability out today from consulting firm Ernst & Young’s Global Media & Entertainment Center. They’re followed by interactive media (33%), electronic games (26%), satellite television (25%), conglomerates (25%), broadcast TV (19%), content and information services (19%), film and TV production (12%), and music (10%). The margins are measured as a percentage of EBITDA, which stands for Earnings Before Interest, Tax, Depreciation, and Amortization. Media and entertainment that EY monitors will stand out from the pack in other fields, the researchers say. Collectively their average margin of 26% will make them more profitable than the average for companies in the London Stock Exchange’s FTSE 100 Index in 2013 for the first time since 2009. The sector also will beat average profits in companies that comprise major stock indexes including the Standard & Poors’ 500, France’s CAC 40, Germany’s DAX 30, and Japan’s Nikkei Index. “Media and entertainment companies are maintaining and growing their businesses primarily by growing their digital revenues and scaling back overhead associated with traditional media,” says EY Global Media and Entertainment Leader John Nendick.
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