Mobile To Be Biggest Revenue Driver

[Techtaffy Newsdesk]

Media and telecommunications executives expect the burgeoning transition to digital and the rapidly growing mobile–related markets to supply the biggest revenue growth drivers during the next one to three years, according to the results of the annual Media and Telecommunications Industry Business Outlook survey by KPMG.  This marks a departure from KPMG’s survey a year ago when executives cited social media platforms, online advertising, and increased Internet access speeds and availability as the key revenue drivers.

In a survey of U.S.-based media and telecommunications company management, executives said emerging digital distribution methods will be the biggest revenue growth drivers between now and 2015. The most significant market opportunities include sales of applications and content over smartphones, tablets and other mobile devices.

“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,” said Paul Wissmann, KPMG’s National Sector Leader for Media and Telecommunications. The findings show that media and telecommunications executives believe in significant digital and mobile opportunity, and expect their companies to aggressively pursue these markets.”

Wissmann notes the turnaround from a year ago.  “These survey results are quite a switch from a year ago when applications and content sales over smartphones, and tablets, ranked 10th and 8threspectively on the projected list of the biggest revenue drivers.” he said.  And social media platforms, online advertising, and increased Internet access speeds and availability were among the projected top four in the 2011 survey, yet ranked between 4th and 8th in this year’s survey.”

In this regard, more than 90 percent of those surveyed expect their companies to grow their activities around digital devices, services, and content distribution.

Therefore it may come as no surprise that for the second year in a row, nearly three-fourths of the media and telecommunications executives expect higher revenue one year from now with 67 percent anticipating moderately higher revenue and 6 percent expecting significantly higher revenue. Moreover, half of them said that the growth rate in their industry would be one to five percent over the next year, and another 21 percent said six to 10 percent, while 12 percent anticipated a decrease.

But as telecommunications and media companies watch their revenues rise, they should also be on the lookout for increased tax risk as cash-strapped jurisdictions seek what they see as their fair share of the mobile commerce marketplace, according to KPMG.

“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,” says Tony Castellanos, National Tax Leader, Media and Entertainment. Moreover, the evolution of new business models and resulting shifts in business and consumer relationships may shift the burden of taxation among various parties. Castellanos points to the need for “businesses to carefully evaluate emerging tax issues and other regulatory considerations in this area as new digital products and services are brought to market.”

Additional revenue is a priority for most telecommunications executives when assessing the most significant affect of cloud computing on their organization. Fifty-five percent of the telecommunications execs and said it would provide medium or high revenue growth in the next few years. Another 7 percent said cloud computing would provide low revenue growth. Media respondents were more evenly split – 36 percent said revenue growth would be cloud computing’s most significant affect and 37 percent said cost reduction, while 27 percent said none.

“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 Carl Geppert, KPMG U.S. National Account Leader, Media and Telecommunications. 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.”

The respondents also said the most significant growth barriers for their companies over the next year are lack of customer demand, pricing pressures, and staying on top of emerging technologies — the exact reverse order from last year.

Meanwhile, headcount is moving in the opposite direction of revenues, as only 40 percent of those surveyed, down from 47 percent in 2011 and 53 percent in 2010, anticipated an increase in their U.S. headcount 12 months from now. Regarding the rate of change, 28 percent, compared to 20 percent last year, projected a one to six percent decrease in headcount and 27 percent, compared to 36 percent in 2011, expected a one to six percent increase.

“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,” said KPMG’s Wissmann. They’re spending on technology and products to compete and drive revenue that may require fewer employees than in the past.”


Other findings of the survey:

  • 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.

[Image Courtesy: Facebook]

Upload: 10-01-12

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